U S VISION INC, 424B1, 1997-12-03

U S VISION INC
424B1, 1997-12-03
RETAIL STORES, NEC

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Prospectus

2,500,000 Shares

[LOGO]

Common Stock
($.01 par value)

All of the 2,500,000 shares of Common Stock, par value $0.01 per share
("Common Stock") of U.S. Vision, Inc. ("U.S. Vision" or the "Company") being
offered hereby are being offered by the Company. Of the proceeds to be
received from the sale of Common Stock by the Company, $8,501,000 will be used
to repay the outstanding indebtedness owed to certain affiliates of directors
and former directors of the Company. See "Use of Proceeds" and "Principal
Stockholders."

Immediately prior to this offering, there has been no public market for the
Common Stock of the Company. See "Underwriting" for information relating to
the factors to be considered in determining the initial public offering price.

The Common Stock has been approved for listing on the Nasdaq National Market
under the symbol "USVI".

See "Risk Factors" beginning on page 7 for a discussion of certain factors
that should be considered by prospective purchasers of the Common Stock
offered hereby.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

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- --------------------------------------------------------------------------------
Price to Underwriting Proceeds to
Public Discounts (1) Company(2)
Per Share ...... $9.00 $0.63 $8.37
Total (3) ...... $22,500,000 $1,575,000 $20,925,000
- --------------------------------------------------------------------------------

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company which are estimated to be
$550,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
375,000 additional shares of Common Stock on the same terms as set forth
above solely to cover over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discounts, and Proceeds to the Company will be $25,875,000, $1,811,250 and
$24,063,750, respectively.

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

The shares are offered subject to receipt and acceptance by the Underwriters,
to prior sale and to the Underwriters' right to reject any order in whole or
in part and to withdraw, cancel or modify the offer without notice. It is
expected that delivery of the shares will be made at the office of Smith
Barney Inc., 333 West 34th St., New York, New York, 10001 or through the
facilities of The Depository Trust Company, on or about December 5, 1997.

Salomon Smith Barney Janney Montgomery Scott Inc.

The date of this Prospectus is December 1, 1997.

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[MAP]

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The Company's retail optical centers operate under various trade names,
including Royal Optical, Service Optical, Wall and Ochs, and also operate in
numerous department stores under the following names:

o J.C. PENNEY OPTICAL CENTER o SEARS OPTICAL CENTER

o MARSHALL FIELDS OPTICAL o LAZARUS OPTICAL

o BERGNER'S OPTICAL o L.S. AYRES OPTICAL

o BURDINES OPTICAL o KAUFMANN'S OPTICAL

o CARSON PIRIE SCOTT OPTICAL o RICH'S OPTICAL

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMONS STOCK,
INCLUDING BY OVER-ALLOTMENT, ENTERING STABILIZING BIDS EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
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[GRAPHIC]

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[GRAPHIC]

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PROSPECTUS SUMMARY

Unless otherwise indicated, all information in this Prospectus (i)
assumes no exercise of the Underwriters' option to purchase up to 375,000
shares of Common Stock that may be sold by the Company to cover
over-allotments, if any, and (ii) is adjusted to reflect the 64-for-1 stock
dividend with respect to the Common Stock effected in September 1997. Pursuant
to amendments to the preferred stock designations adopted in September 1997,
the Series A Cumulative Preferred Stock (the "Series A Preferred Stock") and
the Series C Cumulative Preferred Stock (the "Series C Preferred Stock") of
the Company provide for conversion by the holder of the face amount (including
accrued but unpaid dividends) into Common Stock at the price at which the
Common Stock is offered to the public. In connection with this offering,
1,872,592 and 885,412 shares, respectively, of Common Stock are issuable
upon conversion of the Series A Preferred Stock and the Series C Preferred
Stock. The following summary is qualified in its entirety by the more detailed
information, financial statements, and related notes included elsewhere in
this Prospectus.

Prior to January 31, 1996, the Company's fiscal year ended on March 31.
The Company has changed its fiscal year end to January 31. References herein
to "fiscal 1992", "fiscal 1993" and "fiscal 1994" refer to the Company's
fiscal years ended March 31, 1993, 1994 and 1995, respectively. Similarly,
references to "fiscal 1995" and "fiscal 1996" refer to the ten months ended
January 31, 1996, and the fiscal year ended January 31, 1997, respectively.
The differences in period durations must be considered in making
period-to-period comparisons. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

The Company

U.S. Vision is a retailer of optical products and services primarily
through licensed retail optical departments located in national and regional
department stores. U.S. Vision's retail optical departments are generally
full-service retail vision care stores that offer an extensive selection of
designer brands and private label prescription eyewear, contact lenses,
sunglasses and accessories with an on-premises, independent optometrist who
performs complete eye examinations and prescribes eyeglasses and contact
lenses.

As of July 31, 1997, the Company operated 558 locations in 48 states,
consisting of 495 licensed retail optical departments and 63 freestanding
stores. The Company currently operates 368 J.C. Penney Company, Inc. ("J.C.
Penney") retail optical departments and is J.C. Penney's primary optical
licensee. In addition, the Company operates 57 Sears Roebuck and Co. ("Sears")
retail optical departments and 70 retail optical departments in regional
department stores such as Federated (Rich's, Burdines and Lazarus), May
(Kaufmann's, Famous Barr and L.S. Ayres), Marshall Fields and Carson Pirie
Scott, among others. The Company's freestanding stores are generally located
in malls and shopping centers.

In each of the last six quarters, the Company has experienced strong
growth in revenue in existing stores. Comparable store sales for the year
ended January 31, 1997 increased by 8.3% when compared to sales for the same
stores for the year ended January 31, 1996. Comparable store sales for the six
months ended July 31, 1997, increased by 6.4% when compared to the sales for
the same stores for the six months ended July 31, 1996. For the six months
ended July 31, 1997, the Company's operating income increased by 14.1% over
the comparable prior year period from $3.6 million to $4.1 million.

According to a report published by the Jobson Optical Group, U.S. retail
optical sales grew at a 4.9% compound annual growth rate from $11.5 billion in
1991 to $14.6 billion in 1996. This same

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industry source projects that total nationwide optical revenues in 1997 will
reach $15.4 billion. The Company's management believes that the factors
contributing to the steady growth in the U.S. retail optical industry include:
(i) the aging of the U.S. population; (ii) an increase in penetration of
managed vision care; (iii) increased emphasis on fashion and brand names in
prescription eyewear; and (iv) continuing advancements in product technology.
According to the Jobson Optical Group, approximately 162.4 million people, or
61% of the total U.S. population, required some form of vision correction in
1996.

Competitive Positioning

The Company's objective is to be the leading operator of retail optical
departments in host store environments. Management believes the Company has
several competitive advantages over other optical retailers that will allow it
to achieve its business objective. See "Business -- Competitive Positioning."

Strong Position with Leading Host Stores. Management believes that the
Company's relationships with its host stores provide several competitive
advantages such as: (i) low operating expenses; (ii) low initial capital
investment; (iii) loyal host store customer base; (iv) established host store
advertising and marketing programs; (v) one-stop shopping convenience; and
(vi) access to the host store's private label credit card.

Emphasis on Managed Vision Care. The Company is a participating provider
in Vision One, a national vision care program, which offers comprehensive
eyewear benefits to over 40 million covered lives through a network of over
2,000 optical locations. The Company currently generates approximately 27% of
its revenues from its participation in vision benefit programs.

Enhanced Merchandise Selection. The Company offers an extensive selection
of designer and private label branded eyewear which allows it to tailor its
merchandise selection to meet the needs of host store customers. The Company
also offers branded eyeglass lenses, as well as contact lenses, sunglasses and
accessories.

Centralized Laboratory Operation. Management believes that the Company's
central facility provides it with several operating efficiencies including the
ability to: (i) utilize its labor force more efficiently; (ii) monitor and
control the quality of production and finished products; (iii) reduce
inventory levels; and (iv) provide greater flexibility in developing and
adopting new product technologies.

Vertical Integration. Through its subsidiary, Styl-Rite Optical Mfg. Co.,
Inc. ("Styl-Rite"), the Company designs and manufactures plastic frames and
sources and imports metal frames for sale primarily in its own stores, as well
as to third parties.

Growth Strategy

From fiscal 1993 to fiscal 1995, the Company's existing management team
designed and implemented a repositioning plan to emphasize retail optical
departments within host stores, close unprofitable freestanding stores and
consolidate its laboratory operations. Also in fiscal 1996, the Company began
establishing infrastructure and systems designed to support future growth by:
(i) extending its licensing agreement with J.C. Penney through 2003; (ii)
extending its Vision One agreement through 2002; and (iii) designing and
beginning the implementation of an integrated management information system.
The Company's growth strategy is to capitalize on these initiatives by opening
new retail optical departments within existing and new host stores and
exploring new retail and medical host environments. See "Business -- Growth
Strategy."

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Pursue Relationships with New Host Department Stores. Management believes
that future growth opportunities exist in many department stores for its
retail optical departments and is pursuing relationships with a number of
department store chains with which it does not currently have an existing
relationship. See "Business - Competition."

Explore New Retail Environments. The Company is exploring opportunities to
expand its operations to include optical departments in other non-mall retail
environments.

Evaluate Acquisition Opportunities. According to the Jobson Optical
Group, the retail optical industry is highly fragmented, with the top ten
retail optical chains accounting for only 18% of total optical industry sales
in 1996. Retail chains accounted for 35% of all eyewear sales in 1996, while
independent retailers accounted for 63%. Management believes the Company is
well positioned to take advantage of the consolidation currently taking place
in the optical retailing sector. Although the Company has no definitive
agreements or letters of intent with regard to acquisitions at this time, it
intends to selectively evaluate opportunities to acquire retail optical stores
in the future.

The Offering

Common Stock being offered ............. 2,500,000 shares(1)

Common Stock to be outstanding after the
offering .............................. 7,761,544 shares(1)(2)

Use of proceeds ........................ To repay outstanding indebtedness
and for working capital and general
corporate purposes, including
store openings and remodelings.
See "Use of Proceeds."

Nasdaq National Market
symbol .............................. USVI

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(1) Does not include up to 375,000 shares of Common Stock that may be sold by
the Company pursuant to the Underwriters' over-allotment option. See
"Underwriting."

(2) Based on the number of shares of Common Stock outstanding as of August 31,
1997. Includes 1,872,592 and 885,412 shares, respectively, of Common Stock
issuable upon the conversion of the face amount of the Series A Preferred
Stock and the Series C Preferred Stock, including accrued but unpaid
dividends through October 31, 1997. See "Description of Capital Stock --
Conversion Rights of Series A Preferred and Series C Preferred." Excludes
736,190 shares of Common Stock issuable upon the exercise of options
outstanding as of July 31, 1997. See "Management -- Stock Option Plan."

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Summary Consolidated Financial Data

<TABLE>
<CAPTION>
Six Months
Ended July 31,
Year Ended Ten Months Ended Year Ended --------------------------
March 31, 1995 January 31, 1996 (1) January 31, 1997 1996 1997
---------------- ---------------------- ------------------ ---------- --------------
(In thousands, except share, per share and selected operating data)
<S> <C> <C> <C> <C> <C>

Statements of Operations Data:
Net sales ........................... $ 112,283 $ 91,172 $ 111,544 $ 57,372 $ 62,053
Gross profit ........................ 77,144 61,520 77,271 39,627 42,615
Selling, general and
administrative expenses ............ 70,506 61,598 68,366 34,391 36,612
Depreciation and amortization ...... 3,654 2,608 3,271 1,599 1,855
Unusual charges ..................... 2,100(2) 19,845 (3) -- -- --
---------- ----------- ----------- --------- -----------
Operating income (loss) ............ 884 (22,531) 5,634 3,637 4,148
Net income (loss) .................. $ (96) $ (22,886) $ 2,135 $ 2,085 $ 2,934
========== =========== =========== ========= ===========
Net income per share --
supplemental(4)(5) ................ $ .40 $ .55
=========== ===========
Shares used in computing net income
per share -- supplemental (5) ...... 5,368,700 5,368,700
=========== ===========
Net income per share --
pro forma (6) ....................... $ .60 $ .52
=========== ===========
Shares used in computing net income
per share -- pro forma (6)......... 7,868,700 7,868,700
=========== ===========
Selected Operating Data:
Stores open at end of period:
Licensed departments ............... 452 467 488 471 495
Freestanding stores ............... 143 73 66 69 63
---------- ----------- ----------- --------- -----------
Total stores ........................ 595 540 554 540 558
Comparable store sales increase (7) 10.4% 6.3% 8.3% 7.6% 6.4%
Net sales per store (8) ............ $ 178,000 $ 185,000 $ 200,000 $105,000 $ 110,000
Net sales per square foot: (9)
Licensed departments ............ $ 349 $ 355 $ 394 $ 200 $ 220
Freestanding stores ............... 186 217 223 124 120
Total stores ........................ 278 311 355 184 199
</TABLE>

July 31, 1997
-------------
Actual As Adjusted (10)
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Balance Sheet Data:
Cash ........................... $ 428 $ 428
Working capital ............... 7,323 17,302
Total assets .................. 61,834 61,534
Long-term debt (including current
portion) ..................... 27,008 6,633
Stockholders' equity ............ 16,744 36,819

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(1) The difference in duration of this period must be considered in making
period-to-period comparisons. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(2) Represents the writedown of the Dallas laboratory which was closed by the
Company in connection with its plan to consolidate its laboratories into
a single facility.
(3) Represents the $8,067 write-off of goodwill, an additional writedown of
the Dallas facility of $1,305 and a charge of $10,473 to record store
closings and disposals.
(4) Historical per share data in accordance with Accounting Principles Board
Opinion No. 15, "Earnings Per Share," is excluded from the Company's
financial statements since such per share data is not indicative of the
continuing capital structure of the Company. See Note 12 to the
Consolidated Financial Statements.
(5) Net income per share -- supplemental has been computed using the weighted
average number of shares outstanding after giving effect to the 64-for-1
stock dividend and the conversion of all outstanding Series A Preferred
Stock and Series C Preferred Stock into Common Stock upon the closing of
the Company's initial public offering as described in Note 12 to the
Consolidated Financial Statement. In addition, common share equivalents
such as warrants and options are included in the computation for the year
ended January 31, 1997 and the six months ended July 31, 1997,
respectively.

(6) Net income per share -- pro forma is calculated by dividing net income
after adjustment for applicable interest expense, net of tax ($2,625,000
and $1,122,000 for the fiscal year ended January 31, 1997 and the six
months ended July 31, 1997, respectively) by the adjusted number of
weighted average shares outstanding after giving effect to the estimated
number of shares that would be required to be sold at the initial public
offering price to repay $20,375,000 of debt (unaudited).

(7) Comparable store sales reflect existing stores that were open on the
first day of the prior fiscal period.
(8) Net sales per store is determined by dividing net sales by the average
number of stores in operation at the beginning and end of each fiscal
period. For the ten months ended January 31, 1996, this figure has been
calculated on an annualized basis.
(9) Net sales per square foot is determined by dividing net sales by the
average estimated total square footage at the beginning and end of each
fiscal period. For the ten months ended January 31, 1996, this figure has
been calculated on an annualized basis.

(10) As adjusted to give effect to the sale of the 2,500,000 shares of Common
Stock offered by the Company hereby, the application of the estimated
net proceeds therefrom as described in "Use of Proceeds" and the
conversion of the Series A Preferred Stock and the Series C Preferred
Stock for Common Stock.

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RISK FACTORS

Before purchasing any shares of Common Stock offered by this Prospectus,
prospective investors should consider carefully the following factors relating
to the Company and this offering, together with the other information and
financial statements appearing elsewhere in this Prospectus. This Prospectus
contains certain forward-looking statements covering its plans, goals and
anticipated financial performance. These forward-looking statements may
generally be identified by introductions such as "outlook" for a future period
of time, or words and phrases such as "should", "expect", "hope", "plans",
"projected", "believes", "forward-looking" (or variants of those words and
phrases) or similar language indicating the expression of an opinion or view
concerning the future, with respect to the financial condition, results of
operations, prospects and business of the Company. The Company's actual
results may differ significantly from the results discussed in such
forward-looking statements. Certain factors that might cause such differences
include, but are not limited to, the following risk factors.

Dependence on Host Stores; Reliance on Continued Relationship with J.C. Penney
and Sears

The Company is dependent on its relationships with department stores. For
the year ended January 31, 1997, 85% of U.S. Vision's net sales were derived
from sales in retail optical departments located within department stores. For
the same period, sales attributable to retail optical departments located
within J.C. Penney and Sears stores represented 63% and 10%, respectively, of
the Company's sales. U.S. Vision anticipates that it will continue to obtain a
significant portion of its revenues from retail optical departments located
within J.C. Penney and Sears stores and, as part of its growth strategy,
intends to increase the number of retail optical departments it operates
within these stores. There can be no assurance, however, that the Company will
be able to maintain its relationships with its host stores on favorable terms,
if at all.

The Company is also indirectly dependent on the operations and financial
success of its host department stores. A decline in the sales, customer
traffic or overall financial performance of one or more of U.S. Vision's host
department stores could have a material adverse effect on the Company's
business, financial condition or results of operation. In addition, the
Company's future expansion plans depend, to a large extent, on the expansion
plans of its host department stores, primarily J.C. Penney. A substantial
change in J.C. Penney's expansion or remodeling plans could have a material
adverse effect on the Company's planned growth strategy and future financial
performance and results of operations.

Risks Related to Short-Term Leases

The Company's optical departments within J.C. Penney stores are subject
to a master lease that expires in December 2003 and provides that no more than
40 of the Company's J.C. Penney optical departments may be closed by J.C.
Penney in any calendar year without cause; provided, however, that this
limitation does not apply if J.C. Penney closes an entire J.C. Penney
department store, either temporarily or permanently. Each of the Company's
retail optical departments within Sears stores are subject to an individual
lease which provides for a year-to-year term, subject to earlier termination
by either party, without cause, on thirty-days prior written notice. One of
the Company's principal competitors operates most of the Sears optical
departments. The Company's retail optical departments located within other
department stores are subject to lease arrangements which contain short notice
lease termination provisions. There can be no assurance that any lease between
the Company and a host store will not be terminated or its terms adversely
changed. A substantial change in the Company's relationship with one or more
of its host department stores resulting in the termination or change of
optical center leases could have a material adverse effect on the Company's
business, financial condition or results of operations.

Highly Competitive Industry

The retail optical business is highly competitive, and several of the
Company's competitors have greater financial and other resources than the
Company. These additional resources may enable

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competitors to pursue more aggressive pricing and promotional strategies at
the expense of profits for longer periods of time than the Company and may
enable them to pursue such strategies through an extended downturn in the
optical market. The Company competes with other national, regional and local
retail optical chains and independent optical retailers. Optical retailers
generally serve individual or local markets and, as a result, competition is
fragmented and varies substantially among locations and geographic areas. The
principal competitive factors affecting the Company's retail operations are
merchandise selection, quality and consistency of products and services,
price, location within the host store, convenience, availability of on-site
professional eye examinations and access to a host store's private label
credit card. The retail optical industry engages in price-related promotional
offers as a standard marketing practice. Periods of intense price competition
resulting from such offers could materially affect the Company's
profitability.

Additionally, the Company faces competition from advances in vision
correction technologies, including laser surgery and other surgical vision
correction procedures. This could result in decreased demand for eyeglasses
and contact lenses, which could have a material adverse effect on the
Company's business, financial condition or results of operations.

To the extent U.S. Vision's customers may not be covered by its eye care
benefit plans, the Company may compete with other vision care benefit plans
and retailers who provide alternative vision care plans. As the number of
national and regional managed vision care programs increase, competition for
customers will intensify among the various vision care programs.

Aggressive Growth Strategy; Dependence on Host Stores for Growth

U.S. Vision intends to pursue a strategy of growth through internal
expansion and acquisitions, as opportunities arise. This strategy is likely to
place significant demands on the Company's capital, operational and management
resources and may expose the Company to a variety of risks, including the risk
that the Company will be unable to retain personnel or acquire other resources
necessary to service such growth adequately. The Company's expansion strategy
will be predominantly dependent upon its expansion within its current host
stores, particularly J.C. Penney. Because the Company has a strong
relationship with its existing host stores and many of its hosts have numerous
locations which do not yet contain optical departments, the Company believes
that a significant portion of its future growth will come from existing host
stores. Although as a part of its growth strategy the Company anticipates the
opening of a significant number of new retail optical departments, the Company
is under no obligation to do so and there can be no assurance that the Company
will open these locations. Furthermore, none of the Company's agreements with
its host department stores require the host stores to offer the Company
additional optical center leases. Failure to open new stores as anticipated
would materially and adversely affect the Company's future results of
operations. Although the Company is looking at new host store formats,
including non-mall retail environments, in which to open retail optical
departments, there can be no assurance that the Company will open any such
departments or if it does, that such departments will be profitable. See
"Business - Competition."

Dependence on Single Managed Vision Care Provider

Since 1991, U.S. Vision has been a national provider of managed vision
care through Vision One. Vision One is a third party vision care plan owned by
Cole National Corporation ("Cole National"), one of the Company's principal
competitors. U.S. Vision currently generates approximately 27% of its revenues
from sales to members of Vision One and other vision care benefit plans, and
the Company anticipates that this percentage will increase over the next
several years. The Company's contract with Cole National expires in 2002,
subject to being terminated earlier under certain circumstances. There can be
no assurance that the Company will be able to maintain its relationship with
Cole National. A substantial change in the Company's relationship with Cole
National could have a material adverse effect on the Company's business,
financial condition or results of operations.

Dependence on Key Personnel

The Company's future success will depend largely on the efforts and
abilities of its senior management, particularly William A. Schwartz, Jr., the
Company's Chairman, President and Chief Executive Officer. The loss of his
services could have a material adverse effect on the Company's business,

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financial condition and results of operations. Mr. Schwartz's employment
agreement terminates in October 2000, at which time it automatically renews for
one-year periods thereafter unless terminated by the Company or Mr. Schwartz on
not less than ninety-days notice prior to the end of the then current one year
term. See "Management -- Employment Agreements."

History of Losses in Freestanding Stores

As a result of poor financial operations relating to freestanding stores,
the Company commenced a program to identify and close unprofitable
freestanding stores from fiscal 1990 through fiscal 1995. During that six-year
period, the Company closed 356 unprofitable freestanding stores. Since January
31, 1996, the Company's remaining freestanding stores have generated positive
store contribution. There can be no assurance, however, that this trend will
continue. Should certain freestanding locations generate less than desired
operating results, the Company may decide to close additional locations, the
result of which could have a material adverse effect on the Company's
business, financial condition or results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Background."

Implementation of New Information Systems

In order to enhance operating efficiencies and customer service, the
Company currently is upgrading its information system by installing an
integrated management information system which will be "year 2000 compliant."
The Company may experience unanticipated delays, complications and expenses in
implementing, integrating and operating such a system. Further, the system may
require modifications, improvements or replacements as the Company expands or
as new technologies become available. Such modifications, improvements or
replacements may require substantial expenditures and interruptions in
operations during periods of implementation. There can be no assurance that
the Company will be able to implement and operate this information system
effectively or that the system will produce the expected benefits. The failure
to successfully implement and maintain this management information system
could have a material adverse effect on the Company's business, financial
condition or results of operations.

Risks Related to Government Regulation

The field of optical retailing is regulated by many of the states in
which the Company does business. Certain states require the presence of
licensed opticians in vision centers where eyeglasses or contact lenses are
fitted or dispensed. Any difficulties or delays in securing the services of
such optical professionals could adversely affect the business of the Company
and its relationship with the host stores. The Company is subject to a variety
of federal, state and local laws, rules and regulations affecting the health
care industry and the delivery of health care services. State and local legal
requirements vary widely among jurisdictions and are subject to change, as are
federal legal requirements.

The legality of the Company's relationships with independent optometrists
in the states in which it operates may be challenged in the future, and if
challenged, the Company may be required to alter the manner in which it
conducts its business. Any such alteration could adversely affect the
Company's business and its relationships with its host stores. Failure to
comply with existing laws and regulations or the adoption of new laws and
regulations could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Government
Regulation."

Dependence on Centralized Laboratory Facility

The Company finishes 100% of its merchandise at its main optical
laboratory, distribution and lens grinding facility. An interruption in
production at that facility could have a material adverse effect on the
Company's business, financial condition or results of operations.

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Other Factors Affecting Future Operating Performance

The Company's future quarterly results may be materially affected by a
variety of factors, some of which may be beyond the control of the Company,
including, but not limited to: (i) the Company's ability to select and stock
merchandise attractive to customers; (ii) the Company's ability to efficiently
fill customer orders; (iii) the mix of products sold, pricing and other
competitive factors; (iv) the seasonality of the Company's business; (v)
weather factors affecting retail operations; and (vi) general economic cycles
affecting consumer spending. Accordingly, results of operations for any
particular quarter may not be indicative of results of operations for future
periods.

Potential Adverse Effect of Shares Eligible for Future Sale

Sales or the availability for sale of a substantial number of shares of
Common Stock in the public market following this offering could adversely
affect the market price of the Common Stock. The Company, its directors, its
executive officers, and certain of its stockholders, have agreed to execute
agreements (the "Lockup Agreements") pursuant to which they will agree not to
offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or any securities exercisable, exchangeable or convertible into shares
of Common Stock without the prior consent of Salomon Smith Barney for a period
of 180 days from the date of this Prospectus (the "Lockup Period"). See
"Shares Eligible for Future Sale."

No Prior Market for Common Stock

Immediately prior to this offering, there has been no public market for
the Common Stock. Although the Common Stock has been approved for listing on
the Nasdaq Stock Market's National Market, there can be no assurance that an
active trading market will develop or, if developed, that it will be sustained
following this offering.

Possible Volatility of Stock Price

The initial public offering price has been determined by negotiations
among the Company and representatives of the Underwriters and is not
necessarily related to the Company's asset value, net worth or other
established criteria of value or necessarily indicative of future market
prices. In addition, general market fluctuations in the future may adversely
affect the market price of the Common Stock. Further, the trading price of the
Common Stock could be subject to significant fluctuations in response to
variations in quarterly operating results and other factors. There can be no
assurance that the market price of the Common Stock will not decline below the
initial public offering price.

Control by Principal Stockholders

Upon completion of this offering, the Company's directors, executive
officers and affiliates will own, in the aggregate, approximately 61.0% of the
outstanding shares of Common Stock. Such stockholders may be able to control
the outcome of actions requiring stockholder approval, including the election
of the entire Board of Directors of the Company and the outcome of any
stockholder vote concerning a merger, asset sale, or other major corporate
transaction affecting the Company. Such control could adversely affect the
market price for the Common Stock. See "Principal Stockholders" and
"Description of Capital Stock."

Adverse Impact of Anti-Takeover Provisions

Certain provisions of the Company's Certificate of Incorporation and of
Delaware law could have the effect of delaying, deterring or preventing a
change of control involving the Company. See "Description of Capital Stock --
Certain Provisions of the Company's Certificate of Incorporation and Delaware
Law."

Substantial Dilution

The public offering price is substantially higher than the net tangible
book value per share of the Common Stock. Accordingly, investors purchasing
shares of Common Stock in this offering will incur immediate dilution of $4.64
per share. See "Dilution."

10
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from sale of the 2,500,000 shares of
Common Stock offered by the Company hereby are approximately $20,375,000
($23,513,750 if the Underwriters' over-allotment option is exercised in full),
after deducting the estimated underwriting discount and offering expenses. The
Company intends to use the estimated net proceeds to repay indebtedness
totaling approximately $19,000,000, $8,800,000 of which will be used to repay
outstanding Subordinated Debentures ("Subordinated Debt"), $7,200,000 of which
will be used to retire a bank term loan (the "Term Loan") and a portion of
which will be used to repay the total outstanding balance due under terms of
the Company's revolving credit facility (the "Revolving Line of Credit"). At
November 25, 1997, the Company had borrowings of $3,000,000 outstanding under
the revolving Line of Credit. The balance of the net proceeds, if any, will be
used for working capital and general corporate purposes.

Of the $8,800,000 which will be used to repay the Subordinated Debt,
$8,501,000 will be paid to the following affiliates of directors and former
directors of the Company in the indicated amounts: Grotech Partners IV, L.P.
($3,588,000); Keystone Ventures IV, L.P. ($753,000); Stolberg Partners, L.P.
($2,803,000); Richard K. McDonald ($460,000); and Constitution Partners I, L.P.
($897,000). The balance of the Subordinated Debt is held by Needham Capital
Partners, L.P. and Penn Janney Fund, Inc. The following directors are
affiliated with the following entities: Dennis J. Shaughnessy and
J. Roger Sullivan, Jr. (Grotech Partners IV, L.P., Grotech Partners III, L.P.,
Grotech III Companion Fund, L.P. and Grotech III Pennsylvania Fund, L.P.);
Richard K. McDonald (M&M General Partnership and Constitution Partners I,
L.P.); and G. Kenneth Macrae (Keystone Ventures IV, L.P.).

The Subordinated Debt is subordinate to the Term Loan and the Revolving
Line of Credit. See "Certain Transactions." The Subordinated Debt bears
interest at the rate of 12% per annum and is due and payable in full on March
1, 1998.

The Term Loan, which is owed to Commerce Bank, N.A., carries a floating
rate of 1.5% above the prime rate, which was 8.5% on July 31, 1997. Payments
under the Term Loan are due quarterly, with a final payment due December 31,
2001. The Term Loan is secured by substantially all the assets of the Company.

The Revolving Line of Credit, which is also owed to Commerce Bank, N.A.,
carries a floating interest rate of 1% above the prime rate and is due in
December 1998 subject to certain renewal provisions. The Revolving Line of
Credit is secured by substantially all the assets of the Company.

Upon repayment of the Term Loan and the Revolving Line of Credit
concurrent with the offering, the Company will record a one-time write-off of
unamortized loan fees which total approximately $300,000 as of July 31, 1997.

The Company intends to seek acquisitions of retail optical stores that
are complementary to the Company and a portion of the net proceeds may be used
for such acquisitions. Although the Company from time to time engages in
discussions regarding potential acquisitions and strategic affiliations, the
Company is not currently a party to any letter of intent or definitive
purchase agreement with respect to any material acquisition.

Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds in short-term, interest bearing investment
grade securities.

DIVIDEND POLICY

The Company does not intend to pay cash dividends on its Common Stock in
the foreseeable future. The Company currently intends to retain future
earnings to finance its operations and fund the growth of its business. Any
payment of future dividends will be at the discretion of the Board of
Directors of the Company and will depend upon, among other things, the
Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual and other restrictions in respect of the payment of
dividends, and other factors that the Company's Board of Directors deems
relevant. Under the terms of the Revolving Line of Credit, the Company is
prohibited from paying cash dividends to its stockholders.

11
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company at July
31, 1997, and as adjusted to give effect to the conversion of all shares of
the Series A Preferred Stock and the Series C Preferred Stock into 1,872,592
and 885,412 shares, respectively, of Common Stock, to the sale by the Company
of the 2,500,000 shares of Common Stock offered hereby and the application of
the estimated net proceeds therefrom as described in "Use of Proceeds."

<TABLE>
<CAPTION>
At July 31, 1997
--------------------------------
Actual As Adjusted
------------ ------------------
(In thousands)
<S> <C> <C>

Cash ..................................................................... $ 428 $ 428
========= ============
Short-term debt and current portion of long-term debt (1) .................. $ 10,224 $ 245
========= ============
Long-term debt (excluding current portion):
Revolving Line of Credit ................................................ $ 6,399 $ 2,289
Term Loan ............................................................... 6,286 --
Other long-term debt ................................................... 4,099 4,099
--------- ------------
Total: .................................................................. 16,784 6,388
Stockholders' equity:
9%Series A Cumulative Preferred Stock, $100,000 face value per share; 200
shares authorized; 165 shares issued and outstanding, actual; and no
shares issued and outstanding, as adjusted ........................... 16,483 --
9% Series C Cumulative Preferred Stock, $63.50 face value per share;
300,000 shares authorized; 122,730 shares issued and outstanding, actual;
and no shares issued and outstanding, as adjusted ..................... 7,793 --
Common stock, $.01 par value per share; 15,000,000 shares authorized;
2,503,540 shares issued and outstanding, actual; and 7,761,544 shares
issued and outstanding, as adjusted (2) ................................. 25 78
Additional paid-in capital ................................................ 70,914 115,512
Accumulated deficit ...................................................... (78,471) (78,771)(3)
--------- ------------
Total stockholders' equity ............................................. 16,744 36,819
--------- ------------
Total capitalization ................................................ $ 33,528 $ 43,207
========= ============
</TABLE>

- ------------
(1) Short-term debt includes current maturities of long-term debt. See Notes 1
and 6 of Notes to Consolidated Financial Statements for a description of
the Company's indebtedness.

(2) Excludes 736,190 shares issuable upon the exercise of outstanding options
with a weighted average exercise price of $7.69 per share. See "Management
-- Stock Option Plan" and "Description of Capital Stock."

(3) Includes effect of $300,000 write-off of unamortized loan fees.

12
<PAGE>

DILUTION

The pro forma net tangible book value of the Company at July 31, 1997,
was $13,486,000, or $2.56 per share of Common Stock. Pro forma net tangible
book value per share is determined by dividing the net tangible book value
(total tangible assets less total liabilities) of the Company by the number of
shares of Common Stock outstanding, giving pro forma effect to the conversion
of all outstanding shares of the Series A Preferred Stock and the Series C
Preferred Stock into 1,872,592 and 885,412, shares, respectively, of Common
Stock. See "Capitalization." Without taking into account any changes in the
pro forma net tangible book value of the Company, other than to give effect to
the sale of the 2,500,000 shares of Common Stock offered by the Company hereby
and receipt of the net proceeds therefrom, the pro forma net tangible book
value of the Company at July 31, 1997, would have been $33,861,000, or $4.36
per share. This represents an immediate dilution in net tangible book value of
$4.64 per share to the new investors purchasing shares in this offering and an
immediate increase in net tangible book value of $1.80 per share to existing
stockholders. The following table illustrates this per share dilution.

Initial public offering price per share. .......................... $9.00
Pro forma net tangible book value per share at July 31, 1997. ...... $2.56
Increase per share attributable to new investors .................. 1.80
-------
Pro forma net tangible book value per share after this offering. ... 4.36
------
Dilution per share to new investors . .............................. $ 4.64
======
</TABLE>
The following table sets forth on a pro forma basis as of July 31, 1997
(giving pro forma effect to the conversion of all outstanding shares of Series
A Preferred Stock and Series C Preferred Stock into 1,872,592 and 885,412
shares, respectively, of Common Stock) the number of shares of Common Stock
purchased from the Company or its affiliates, the total consideration paid and
the average price per share paid by existing stockholders and by new
investors.

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
----------------------- ------------------------- Average Price
Number Percent Amount Percent Per share
----------- --------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C>

Existing stockholders ...... 5,261,544 67.8% $25,119,373 52.8% $ 4.77
New investors ............... 2,500,000 32.2 22,500,000 47.2 9.00
--------- ------ ------------ ------
Total ........................ 7,761,544 100.0% $47,619,373 100.0%
========= ====== ============ ======
</TABLE>

The foregoing tables assume no exercise of outstanding options. At July
31, 1997, there were outstanding options to purchase 736,190 shares of Common
Stock at a weighted average exercise price of $7.69 per share. To the extent
any of these options are exercised, there will be future dilution to
investors. See "Management -- Stock Option Plan" and Note 11 of Notes to
Consolidated Financial Statements.

13
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below as of January
31, 1996 and 1997, and for the year ended March 31, 1995, the ten months ended
January 31, 1996, and the year ended January 31, 1997, have been derived from
the consolidated financial statements of the Company included elsewhere
herein, which have been audited by Ernst & Young LLP, independent certified
public accountants. The selected consolidated financial data as of March 31,
1993, 1994 and 1995 and for each of the years in the two-year period ended
March 31, 1993 and 1994, have been derived from the consolidated financial
statements of the Company, which have been audited by Ernst & Young LLP, but
are not included herein. The selected consolidated financial and operating
data presented below as of and for the six months ended July 31, 1996 and 1997
have been derived from the unaudited consolidated financial statements of the
Company which in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth therein. The results as of and for the six months
ended July 31, 1997, are not necessarily indicative of the results to be
achieved for the full fiscal year. The selected consolidated financial data
set forth below should be read in conjunction with the consolidated financial
statements of the Company and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.

<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------
1993 1994 1995
--------------- ---------- ----------
(In thousands, except share and per
share data)
<S> <C> <C> <C>
Statements of Operations Data:
Net sales ........................ $ 122,015 $116,468 $112,283
Cost of sales .................. 37,467 34,851 35,139
------------ -------- --------
Gross profit ..................... 84,548 81,617 77,144
Operating expenses:
Selling, general and
administrative ............... 81,684 77,741 70,506
Depreciation and amortization 5,862 4,563 3,654
Write-off of goodwill ............ 37,528(2) -- --
Writedown of Dallas facility (4) -- -- 2,100
Store closings and
disposals (5) .................. 4,224 272 --
------------ -------- --------
Total operating expenses ....... 129,298 82,576 76,260
------------ -------- --------
Operating income (loss) ......... (44,750) (959) 884
Other income (expense):
Other income .................. 461 355 16
Interest expense ............... (6,788) (211) (1,459)
------------ -------- --------
Income (loss) before income tax
(benefit) ..................... (51,077) (815) (559)
Income tax (benefit) ............ -- 175 (463)
------------ -------- --------
Net income (loss) before
extraordinary item ............... (51,077) (990) (96)
Extraordinary item-gain on
restructuring of debt ......... 11,397 -- --
------------ -------- --------
Net income (loss) ............... $ (39,680) $ (990) $ (96)
============ ======== ========
Net income per share --
supplemental(6)(7)................
Shares used in computing
net income per share --
supplemental (7)...................
</TABLE>

<PAGE>

Ten Months Year Six Months Ended
Ended Ended July 31,
January 31, January 31, --------------------------
1996 (1) 1997 1996 1997
------------- ------------- ----------- -------------
data)
<S> <C> <C> <C> <C>

Statements of Operations Data:
Net sales ........................ $ 91,172 $ 111,544 $ 57,372 $ 62,053
Cost of sales .................. 29,652 34,273 17,745 19,438
---------- ----------- --------- -----------
Gross profit ..................... 61,520 77,271 39,627 42,615
Operating expenses:
Selling, general and
administrative ............... 61,598 68,366 34,391 36,612
Depreciation and amortization 2,608 3,271 1,599 1,855
Write-off of goodwill ............ 8,067(3) -- -- --
Writedown of Dallas facility (4) 1,305 -- -- --
Store closings and
disposals (5) .................. 10,473 -- -- --
---------- ----------- --------- -----------
Total operating expenses........ 84,051 71,637 35,990 38,467
---------- ----------- --------- -----------
Operating income (loss) ......... (22,531) 5,634 3,637 4,148
Other income (expense):
Other income .................. 59 18 14 2
Interest expense ............... (2,100) (3,517) (1,566) (1,216)
---------- ----------- --------- -----------
Income (loss) before income tax
(benefit) ..................... (24,572) 2,135 2,085 2,934
Income tax (benefit) ............ (1,686) -- -- --
---------- ----------- --------- -----------
Net income (loss) before
extraordinary item ............... (22,886) 2,135 2,085 2,934
Extraordinary item-gain on
restructuring of debt ......... -- -- -- --
---------- ----------- --------- -----------
Net income (loss) ............... $ (22,886) $ 2,135 $ 2,085 $ 2,934
========== =========== ========= ===========
Net income per share --
supplemental(6)7) ................ $ .40 $ .55
=========== ===========
Shares used in computing
net income per share --
supplemental (7) ................. 5,368,700 5,368,700
=========== ===========
Net income per share --
pro forma (8)..................... $ .60 $ .52
=========== ===========
Shares used in computing net income
per share -- pro forma (8)........ 7,868,700 7,868,700
=========== ===========
</TABLE>

Footnotes on following page.

14
<PAGE>
<TABLE>
<CAPTION>
Ten Months Six Months
Year Ended March 31, Ended Year Ended Ended July 31,
------------------------------------ January 31, January 31, ---------------------
1993 1994 1995 1996 (1) 1997 1996 1997
----------- ---------- ----------- ------------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Operating Data:
Stores open at end of period:
Licensed departments ............... 532 440 452 467 488 471 495
Freestanding stores ............... 222 202 143 73 66 69 63
---------- --------- -------- --------- --------- --------- ---------
Total stores ........................ 754 642 595 540 554 540 558
Comparable store sales (decrease)
increase (9) ........................ (2.8%) 2.9% 10.4% 6.3% 8.3% 7.6% 6.4%
Net sales per store (10) ............ $150,000 $162,000 $178,000 $185,000 $200,000 $105,000 $110,000
Net sales per square foot: (11)
Licensed departments ............... $ 291 $ 321 $ 349 $ 355 $ 394 $ 200 $ 220
Freestanding stores ............... 159 165 186 217 223 124 120
Total stores ........................ 222 248 278 311 355 184 199

March 31, January 31,
--------------------------------- -------------------- July 31,
1993 1994 1995 1996 1997 1997
---------- ------- ------- ------- ------- ---------
(In thousands)
Balance Sheet Data:
Cash ................................. $ 3,689 $ 588 $ 3,528 $ 1,529 $ 374 $428
Working capital ..................... 13,649 14,351 20,617 12,252 11,321 7,323
Total assets ........................ 68,978 61,310 64,587 53,033 54,403 61,834
Long-term debt (including current
portion) ............................ 32,106 17,281 17,363 22,239 23,463 27,008
Stockholders' equity ............... 21,754 29,161 35,287 11,897 13,810 16,744
</TABLE>

(2) Represents write-off of goodwill related to the 1990 acquisition of Royal
International Optical. The write-off was determined based upon a
measurement of the remaining discounted operating cash flows of the
Company.

(3) Represents additional write-off of goodwill related to the 1990
acquisition of Royal International Optical. The goodwill was attributed
to the closing of the Dallas facility and closed or otherwise liquidated
stores described in notes (4) and (5) below, respectively.

(4) Represents the writedown of the Dallas facility which was closed by the
Company in connection with its plan to consolidate its laboratories into
a single facility.

(5) Represents lease termination costs, write-off of leasehold improvements
and other related costs associated with the closing and disposal of
stores during fiscal 1992 through 1995.

(6) Historical per share data in accordance with Accounting Principles Board
Opinion No. 15, "Earnings Per Share," is excluded from the Company's
financial statements since such per share data is not indicative of the
continuing capital structure of the Company. See Note 12 to the
Consolidated Financial Statements.

(7) Net income per share -- supplemental has been computed using the weighted
average number of shares outstanding after giving effect to the 64-for-1
stock dividend and the conversion of all outstanding Series A Preferred
Stock and Series C Preferred Stock into Common Stock upon the closing of
the Company's initial public offering as described in Note 12 to the
Consolidated Financial Statements. In addition, common share equivalents
such as warrants and options are included in the computation for the year
ended January 31, 1997 and the six months ended July 31, 1997,
respectively.

(8) Net income per share -- pro forma is calculated by dividing net income
after adjustment for applicable interest expense, net of tax ($2,625,000
and $1,122,000 for the fiscal year ended January 31, 1997 and the six
months ended July 31, 1997, respectively) by the adjusted number of
weighted average shares outstanding after giving effect to the estimated
number of shares that would be required to be sold at the initial public
offering price to repay $20,375,000 of debt (unaudited).

(9) Comparable store sales reflect existing stores that were open on the
first day of the prior fiscal period.
<PAGE>

(10) Net sales per store is determined by dividing net sales by the average
number of stores in operation at the beginning and the end of each fiscal
period. For the ten months ended January 31, 1996, this figure has been
calculated on an annualized basis.

(11) Net sales per square foot is determined by dividing net sales by the
average estimated total square footage at the beginning and end of each
fiscal period. For the ten months ended January 31, 1996, this figure has
been calculated on an annualized basis.

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Background

In 1990, the Company completed a leveraged buyout of Royal International
Optical Corporation ("Royal"), a publicly traded retail optical company which
operated 658 retail stores, 258 of which were in host department stores and
400 of which were freestanding stores. The Company also acquired Royal's main
prescription laboratory facility, four regional laboratories and Styl-Rite,
which manufactured, imported and distributed optical frames and sunglasses
principally for sale in Royal's retail optical stores, as well as for sale to
third party optical retailers. As a result of the acquisition, the Company
operated 201 J.C. Penney retail optical departments, 244 retail optical
departments located in other host department stores, 422 freestanding stores,
seven manufacturing facilities and Styl-Rite.

At the time of the acquisition, Royal was J.C. Penney's primary domestic
optical licensee. Management believed, as part of the Company's growth
strategy, that it could expand the J.C. Penney relationship by acquiring
Royal. Since the acquisition, the Company has expanded its relationship with
J.C. Penney by opening 167 new J.C. Penney locations. However, the Company
incurred net operating losses following the acquisition as a result of: (i)
the poor operating performance of the Company's freestanding stores, 205 of
which were closed through the end of fiscal 1992; (ii) interest payments
related to the debt incurred by the Company in connection with the Royal
acquisition; and (iii) the economic recession of the early 1990s.

From fiscal 1993 to fiscal 1995, the Company's existing management team
focused on: (i) restructuring its existing debt, (ii) closing unprofitable
freestanding stores; and (iii) consolidating its manufacturing operations.
During that three-year period, the Company closed an additional 151
unprofitable freestanding stores, sold its Montgomery Ward licensed
departments, terminated its unprofitable host store relationship with Kmart
and consolidated its prescription laboratory operations from seven facilities
to two.

After completing its repositioning plan in January 1996, management began
establishing infrastructure and systems to support future growth by: (i)
further expanding its relationship with J.C. Penney; (ii) expanding its role
as a national provider of vision care primarily through Vision One; (iii)
completing the consolidation of its manufacturing operations into a single
facility; and (iv) exploring new retail environments. In December 1996, the
Company extended its license agreement with J.C. Penney through 2003 and in
June 1997 extended its Vision One agreement through 2002. In 1997, the Company
began to implement an integrated management information system which includes
an automated order entry system at each retail optical department and new
manufacturing and financial computer systems in the Company's corporate
headquarters.

The majority of the outstanding Common Stock of the Company was acquired
by Royal Associates Acquisition Partnership ("RAA") in December 1994 and, in
May 1995, the Company effected a 1,000-for-1 reverse stock split and
deregistered its Common Stock under the Securities Exchange Act of 1934. See
Note 1 to Notes to Consolidated Financial Statements.

General

The Company's net sales consist primarily of retail sales of prescription
eyewear and contact lenses, net of refunds and allowances for customer
returns. The Company's sales are heavily influenced by customer traffic in its
host department stores, the successful implementation of its promotional
programs and its participation in various third-party vision care plans. The
principal components of the Company's cost of sales include the cost of
materials, including eyeglass frames and lenses, as well as manufacturing,
assembly, labor and overhead costs associated with operating the Company's
centralized optical laboratory. Prices of frames vary widely, from the very
inexpensive to high-end designer brands.

The Company's selling, general and administrative expenses include
primarily labor-related expenses at the store level, rent and occupancy costs,
managed vision care costs, advertising and administrative expenses. The
Company's rent paid to the host store is calculated as a percentage of

16
<PAGE>

net sales within each retail optical department. Freestanding store rent is
generally a fixed monthly payment plus, in many cases, a percentage of net
sales above certain revenue levels. Flat fees per transaction are paid to
Vision One and other vision care providers.

Unusual charges, resulting from the Company's restructuring from fiscal
1993 through fiscal 1995, include the write-off of goodwill, writedown of the
closed Dallas optical laboratory and former corporate headquarters and
reserves for lease terminations and other costs associated with store closings
and disposals. Management believes that the Company has adequately reserved
for all previous store closing costs. The Company's other expenses include
principally interest paid or accrued on outstanding indebtedness.

Results of Operations

The following table sets forth selected statement of operations items
expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>

Ten Months Year Six Months
Ended Ended Ended July 31,
Year Ended January 31, January 31, -------------------------
March 31, 1995 1996 1997 1996 1997
---------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales ........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales ........................ 31.3 32.5 30.7 30.9 31.3
--------- --------- ------- ------- -------
Gross profit ..................... 68.7 67.5 69.3 69.1 68.7
Operating expenses:
Selling, general and administrative. 62.8 67.6 61.3 59.9 59.0
Depreciation and amortization ...... 3.2 2.8 2.9 2.9 3.0
--------- --------- ------- ------- -------
Operating income (loss), excluding
unusual charges ..................... 2.7 (2.9) 5.1 6.3 6.7
Unusual charges ..................... 1.9 21.8 -- -- --
--------- --------- ------- ------- -------
Operating income (loss) ............ 0.8 (24.7) 5.1 6.3 6.7
Other expense ........................ 1.3 2.2 3.2 2.7 2.0
Net income (loss) .................. (0.1%) (25.1%) 1.9% 3.6% 4.7%
</TABLE>

Six Months Ended July 31, 1997, Compared to Six Months Ended July 31, 1996

Net sales increased by $4.7 million, or 8.2%, from $57.4 million for the
six months ended July 31, 1996 to $62.1 million for the six months ended July
31, 1997. A 6.4% increase in comparable store sales accounted for $3.5 million
of the increase in net sales and new store openings accounted for the
remaining $1.2 million of the increase. The increase in comparable store sales
was principally the result of an increase in the number of eyeglasses sold.

Cost of sales increased by $1.7 million, or 9.5%, from $17.7 million for
the six months ended July 31, 1996 to $19.4 million for the six months ended
July 31, 1997. The increase was due to the $4.7 million increase in net sales.
As a percentage of net sales, cost of sales increased slightly from 30.9% in
the six months ended July 31, 1996, to 31.3% in the comparable 1997 period due
to variations in the mix of products sold.

Selling, general and administrative expenses increased by $2.2 million,
or 6.5%, from $34.4 million for the six months ended July 31, 1996, to $36.6
million in the comparable 1997 period. The dollar increase was primarily
attributable to an increase in compensation associated with new store openings
and greater department store rents which are tied directly to sales volume.
However, as a percentage of net sales, selling, general and administrative
expenses decreased from 59.9% for the six months ended July 31, 1996 to 59.0%
for the six months ended July 31, 1997 as revenue increases enabled the
Company to take advantage of operating efficiencies.

17
<PAGE>

Depreciation and amortization increased by $0.3 million, or 16.0%, from
$1.6 million for the six months ended July 31, 1996 to $1.9 million for the
six months ended July 31, 1997 due to the increase in capital expenditures
associated with the implementation of the new management information systems.

Other expense, representing principally interest expense, decreased by
$0.4 million, or 21.8%, from $1.6 million for the six months ended July 31,
1996 to $1.2 million for the six months ended July 31, 1997. The decrease was
due to a reduction of the interest rate on the Company's Subordinated Debt
from an accrual rate of 20% in fiscal 1996 to 12% in fiscal 1997 when the
Company agreed to make cash interest payments.

Fiscal 1996 Compared to Fiscal 1995 (ten month period)

Net sales increased by $20.4 million, or 22.3%, from $91.2 million for
fiscal 1995 to $111.5 million for fiscal 1996. This increase was due to: (i)
$21.1 million in net sales in February and March 1995 not included in fiscal
1995 due to the change in year end; (ii) an $8.1 million increase in
comparable store sales resulting from a higher number of eyeglasses sold; and
(iii) a $3.6 million increase attributable to new stores, offset by: (i) a
$12.2 million decrease due to store closings; and (ii) a $0.2 million decrease
in third-party sales at Styl-Rite in fiscal 1996.

Cost of sales increased by $4.6 million, or 15.6%, from $29.7 million in
fiscal 1995 to $34.3 million in fiscal 1996. The $20.4 million increase in net
sales accounted for $6.1 million of the increase in cost of goods sold, which
was offset by a one-time inventory write-off of $1.5 million recorded in
fiscal 1995. This write-off was taken on merchandise that was rendered
unsalable due to the closing of 87 underperforming freestanding stores and 52
Super Kmart optical departments. As a percentage of sales, cost of sales
decreased from 32.5% in fiscal 1995 to 30.7% in fiscal 1996 due primarily to
the write-off.

Selling, general and administrative expenses increased by $6.8 million,
or 11.0%, from $61.6 million in fiscal 1995 to $68.4 million for fiscal 1996.
This net increase was attributable to $12.3 million in February and March 1995
operating expenses not included in fiscal 1995 due to the change in year end,
which was offset by a $5.5 million decrease in fiscal 1996 in salaries, rent
and advertising due to the closure of non-performing stores in fiscal 1995. As
a percentage of net sales, selling, general and administrative expenses
decreased from 67.6% for fiscal 1995 to 61.3% for fiscal 1996. The decrease,
as a percentage of sales, was primarily due to: (i) the leverage achieved by
the 8.3% increase in comparable store sales in fiscal 1996; and (ii) the
elimination in fiscal 1996 of expenses relating to the 138 unprofitable stores
that were open for most of fiscal 1995.

Depreciation and amortization increased by $0.7 million, or 25.4%, from
$2.6 million in fiscal 1995 to $3.3 million in fiscal 1996 due principally to
the change in year end and resulting ten-month period in fiscal 1995.

Unusual charges for fiscal 1995 included the write-off of $8.1 million in
goodwill caused by the cumulative effect of the closure of 194 stores over the
last three years and the closure of the Dallas production facility. Also in
fiscal 1995, the Company recorded a charge of $10.5 million related to the
closure of 140 stores in fiscal 1995 and an additional $1.3 million writedown
of the Dallas facility to reflect a revision to its estimated net realizable
value.

Other expense, representing principally interest expenses, increased by
$1.5 million, or 71.4%, from $2.0 million for fiscal 1995 to $3.5 million for
fiscal 1996. The increase was caused principally by: (i) the $1.6 million in
additional interest in fiscal 1996 accrued as a result of the Subordinated
Debt that was put in place in the beginning of fiscal 1996; and (ii) a $0.4
million fee paid in connection with the renewal of the Subordinated Debt in
January 1997, offset by a $0.7 million reduction in fiscal 1996 of interest
paid on bank debt related to a decrease in total borrowings.

Fiscal 1995 (ten month period) Compared to Fiscal 1994

Net sales decreased by $21.1 million, or 18.8%, from $112.3 million in
fiscal 1994 to $91.2 million in fiscal 1995. This decrease was due to: (i)
$20.2 million in net sales in February and March 1996 not

18
<PAGE>

included in fiscal 1995 due to the change in year end; (ii) a $7.1 million
decrease attributable to the stores which were closed, (iii) a $0.6 million
increase in refunds offset by: (i) a $2.4 million increase from sales at new
stores and (ii) a $4.4 million or 6.3% increase in comparable store sales.

Cost of sales decreased by $5.4 million, or 15.6%, from $35.1 million in
fiscal 1994 to $29.7 million in fiscal 1995. The principal reason for the
decrease in cost of sales was the $6.0 million in costs associated with sales
in February and March 1996 which were not included in fiscal 1995 due to the
change in year end. As a percentage of sales, cost of sales increased from
31.3% in fiscal 1994 to 32.5% in fiscal 1995 due to the write-off of $1.5
million of inventory during fiscal 1995 that was previously discussed.

Selling, general and administrative expenses decreased by $8.9 million,
or 12.6%, from $70.5 million in fiscal 1994, to $61.6 million in fiscal 1995.
This decrease was attributable to the $12.1 million in expenses for the months
of February and March 1996 that were not included in fiscal 1995 due to the
change in year end, offset in part by a $3.2 million increase in fiscal 1995
in costs principally associated with the Super Kmart stores that were opened
in fiscal 1995. As a percentage of net sales, selling, general and
administrative expenses increased by 4.8% from 62.8% of net sales in fiscal
1994 to 67.6% for fiscal 1995. This increase as a percentage of sales was due
to the 140 unprofitable stores that were open for most of fiscal 1995 which,
due to their low sales volume, had the effect of increasing fixed expenses as
a percentage of sales.

Depreciation and amortization decreased by $1.1 million, or 28.6%, from
$3.7 million in fiscal 1994 to $2.6 million in fiscal 1995 due principally to
the change in year end.

Other expense, representing principally interest expense, increased by
$0.6 million, or 41.4%, from $1.4 million in fiscal 1994 to $2.0 million for
fiscal 1995. The difference was caused primarily by $0.5 million of interest
expense incurred in the months of February and March of 1996 that were not
included in fiscal 1995 due to the change in year end.

Quarterly Fluctuations

The Company's financial position and results of operations are affected
by seasonal fluctuations in sales and operating profits. The Company's sales
and operating profits are generally lower in the fourth quarter, due to the
Christmas season, which has historically been a period of reduced sales of
prescription optical products. This trend has been mitigated somewhat by the
increase in vision care sales under plans which are on a calendar year basis
and require participants to use or lose their benefits annually. Quarterly
sales can also be affected by the timing and amount of sales contributed by
new stores. Accordingly, the results of operations for interim periods are not
necessarily indicative of results for the entire fiscal year.

The following tables set forth certain unaudited financial data for the
quarters indicated:
<TABLE>
<CAPTION>
Fiscal 1996 Quarter Ended Fiscal 1997 Quarter Ended
----------------------------------------------------- -------------------------
April 30, July 31, Oct. 31, Jan. 31, April 30, July 31,
1996 1996 1996 1997 1997 1997
----------- ---------- ---------- ---------------- ----------- ------------
(In thousands, except percentages)
<S> <C> <C> <C> <C> <C> <C>
Net sales ............... $ 29,616 $27,756 $27,972 $ 26,200 $ 31,239 $ 30,814
Gross profit ............ 20,370 19,257 19,504 18,140 21,597 21,018
% of net sales ......... 68.8% 69.4% 69.7% 69.2% 69.1% 68.2%
Operating income ...... $ 2,169 $ 1,468 $ 1,484 $ 513 $ 2,369 $ 1,779
% of net sales ......... 7.3% 5.3% 5.3% 2.0% 7.6% 5.8%
Net income (loss) ...... $ 1,385 $ 700 $ 681 ($ 631)(1) $ 1,780 $ 1,154
% of net sales ......... 4.7% 2.5% 2.4% (2.4%) 5.7% 3.7%
</TABLE>
- ------------
(1) Includes $0.4 million fee paid in connection with the renewal of the
Subordinated Debt.

Income Taxes

19
<PAGE>

approximately $11,400,000 of these carryforwards are significantly limited
(the "Restricted NOLs") due to ownership changes experienced by the Company
prior to 1997. As a result of these limitations, approximately $780,000 of the
Restricted NOLs will become available for use each year through the year 2008.
The remaining Restricted NOLs in the amount of $3,400,000 are expected to
expire unutilized. A valuation allowance has been established to fully reserve
the future benefit of all the net operating loss carryforwards.

The amount of the Company's net operating loss carryforwards may be
further limited if the Company has further ownership changes after this
offering as a result of subsequent sales of Common Stock. The amount of any
such further limitations will depend on numerous factors, some of which are
not determinable at this time.

Liquidity and Capital Resources

The Company's capital requirements are generally related to new store
openings, remodeling of existing stores and upgrading product for existing
stores. Starting in fiscal 1996 and continuing through fiscal 1998 the Company
has required and will require additional capital to fund the development and
implementation of an integrated management information system. The Company's
working capital requirements are also seasonal and traditionally peak at the
end of the fourth quarter and the beginning of the first quarter. Cash and
working capital at July 31, 1997 were $428,000 and $7.3 million, respectively,
compared to $374,000 and $11.3 million, respectively at January 31, 1997 and
$1.5 million and $12.3 million, respectively at January 31, 1996. The decrease
in working capital as of July 31, 1997 is primarily attributable to the
reclassification of $8,837,000 of Subordinated Debt from a long-term liability
to a current liability which matures in March 1998.

For the six months ended July 31, 1997, cash used in operating activities
was $0.3 million compared to cash provided by operating activities of $1.4
million for the same period in fiscal 1996. The decrease was due principally
to a $3.7 million increase in accounts receivable due to: (i) an increase in
billable Vision Care sales and the resulting receivable; (ii) an increase in
the receivable from host department stores relating to new store openings; and
(iii) a temporary increase in receivables due to a payables centralization by
one of the Company's host department stores. For the year ended January 31,
1997, cash provided by operations was $4.2 million compared to cash used in
operations of $1.5 million for the ten months ended January 31, 1996. The
increase was due to the increase in profitability in fiscal 1996.

With respect to cash flows from investing activities, the Company's
capital expenditures in fiscal 1996 were $4.5 million compared to $4.8 million
in fiscal 1995 and $4.4 million in fiscal 1994. The capital expenditures in
fiscal 1996 were primarily for new store openings and the initial development
work on the integrated management information system. The Company estimates
that the capital expenditures for fiscal 1997 will be approximately $6.2
million, of which $3.5 million has been spent as of July 31, 1997.
Approximately 50% of the capital expenditures in fiscal 1997 will be for the
integrated management information system, 30% for new store openings and 20%
for new laboratory equipment and other capital expenditures. In fiscal 1998,
the Company expects to spend approximately $5.4 million on capital
expenditures of which 40% will be for the integrated management information
system, 40% for new store openings and 20% for new laboratory equipment and
other capital expenditures. Historically, the Company has funded capital
expenditures through a revolving line of credit, debt financing activities,
including capital leases, and operating cash flow.

The Company's principal external source of liquidity is its $7.0 million
Revolving Line of Credit with Commerce Bank, N.A. The Revolving Line of Credit
facility carries a floating interest rate of 1.0%

20
<PAGE>

above the prime rate, which was 8.5% on July 31, 1997, is due in December 1998
and renews automatically for a two-year period, subject to either party's
right to terminate by notice of non-renewal. As of July 31, 1997, the Company
had $6,399,000 outstanding under its Revolving Line of Credit and $601,000 of
availability. The loan agreement prohibits the payment of dividends to common
stockholders and contains customary covenants. The Company must also maintain
certain financial ratios pertaining to its net worth, current ratio, ratio of
debt to net worth and ratio of cash to fixed charges. See Note 6 to Notes to
Consolidated Financial Statements. The Company is currently in compliance with
all financial covenants and management does not believe that the financial
covenants set forth in its Revolving Line of Credit will have an adverse
impact on its operations or future plans.

Regarding other financing activities engaged in by the Company, in
January 1996 and December 1996, the Company borrowed $7,200,000 and
$8,000,000, respectively, through the placement of the Subordinated Debt and
the Term Loan. The Subordinated Debt, which is held primarily by certain
affiliates of directors and former directors of the Company, is subordinate to
the Term Loan and the Revolving Line of Credit. The Subordinated Debt bears
interest at the rate of 12.0% per annum and is due and payable in full on
March 1, 1998. The balance of the Subordinated Debt as of July 31, 1997, was
$8,837,000. The Term Loan, which is owed to Commerce Bank, N.A., carries a
floating rate of 1.5% above the prime rate, which was 8.5% on July 31, 1997.
Payments under the Term Loan are due quarterly with a final payment due
December 31, 2001. The Term Loan is secured by substantially all the assets of
the Company. The balance of the Term Loan as of July 31, 1997, was $7,428,000.

In addition, in fiscal 1994 and 1995, the Company invested $5.6 million
in capital expenditures related to the consolidation of the Company's
laboratory operations and the purchase of its current corporate headquarters
in New Jersey. These expenditures were partially financed with a 2% term loan
provided by the Delaware River Port Authority ("DRPA"). The first DRPA term
loan, which had a balance of $1,133,000 as of July 31, 1997, is due in
February 2010 and is secured by the real property and building in which the
Company maintains its corporate headquarters. The second DRPA term loan, which
had a balance of $2,152,000 as of July 31, 1997, is due in February 2010 and
is secured by the real property and building in which the Company maintains
its optical laboratory and distribution facility. The third DRPA term loan.
which had a balance of $950,000 as of July 31, 1997, is due in June 2005 and
is secured by certain equipment located in the Company's optical laboratory
and distribution facility. See Note 6 to Notes to Consolidated Financial
Statements.

The Company plans to use the net proceeds of this offering to: (i) retire
$7,200,000 outstanding under the Term Loan, (ii) repay the total outstanding
balance due under the Revolving Line of Credit ($3,000,000 at November 25,
1997); (iii) retire $8,800,000 in Subordinated Debt; and (iv) use the balance,
if any, for working capital and general corporate purposes. Upon repayment of
the Term Loan and the Revolving Line of Credit concurrent with the offering,
the Company will record a one-time write-off of unamortized loan fees which
total approximately $300,000 as of July 31, 1997. See "Use of Proceeds." Based
upon its current operating and new store opening plans, the Company believes
that it can fund its working capital and capital expenditure needs for the
foreseeable future through borrowings under the Revolving Line of Credit, cash
generated from operations and proceeds from this offering.

21
<PAGE>

BUSINESS

General

The Company is a retailer of optical products and services through
licensed retail optical departments within national and regional department
stores and through a limited number of freestanding retail locations. As of
July 31, 1997, the Company operated 558 locations in 48 states, consisting of
495 licensed departments and 63 freestanding stores. The Company currently
operates 368 J.C. Penney retail optical departments and is J.C. Penney's
primary optical licensee. In addition, the Company operates 57 Sears retail
optical departments and 70 retail optical departments in regional department
stores such as Federated (Rich's, Burdines and Lazarus), May (Kaufmann's,
Famous Barr and L.S. Ayres), Marshall Fields and Carson Pirie Scott, among
others. The Company's freestanding stores are generally located in malls and
shopping centers.

U.S. Vision's retail optical departments are generally full-service
retail vision care stores that offer an extensive selection of designer brands
and private label prescription eyewear, contact lenses, sunglasses and
accessories with an on-premises, independent optometrist who performs complete
eye examinations and prescribes eyeglasses and contact lenses. The Company's
extensive selection of designer and private label branded eyewear allows the
Company to tailor its merchandise selection to meet the needs of the Company's
host store customers. Designer branded eyeglass frames offered include Guess,
Nautica, Halston and Perry Ellis, among others and, at certain stores, Giorgio
Armani, Calvin Klein and Polo Ralph Lauren. Similarly, private label eyeglass
frames include Hunt Club, Arizona, Ashley Stewart, Oliver Winston and Rascals,
among others. The Company also offers branded lenses such as Kodak progressive
lenses and Bausch & Lomb contact lenses, as well as a variety of options and
accessories.

U.S. Vision operates a single, modern optical laboratory, distribution
and lens grinding facility where it fills customer orders for prescription
eyewear and maintains a central inventory of frames. Customer orders are
placed at the retail stores and are phoned or electronically transmitted into
the central optical laboratory daily, where the lenses are ground, cut,
finished and custom fitted to optical frames in the size and style selected by
the customer. The finished eyewear is then shipped to the retail store for
delivery to the customer within one day upon request, otherwise generally
within two to three days. Through its Styl-Rite subsidiary, the Company
manufactures, imports and distributes optical frames and sunglasses
principally for sale in its Company optical stores and to a lesser extent for
sale to third party retailers.

Since 1991, the Company has been a national provider of managed vision
care benefits primarily through Vision One, a national vision care program,
which offers comprehensive eyewear benefits to over 40 million covered lives
through a network of over 2,000 optical locations. Vision One is marketed
directly to employers, employee benefit plan sponsors and insurance companies
such as Metropolitan Life, Aetna, Cigna, John Hancock and Blue Cross/Blue
Shield. The Company currently generates approximately 27% of its revenues from
its participation in Vision One and other vision benefit programs. According
to the Jobson Optical Group, by 1998 as much as 40% of the U.S. eyecare
patient base may be covered by managed vision care programs.

U.S. Vision, Inc. is a Delaware corporation which maintains its corporate
headquarters at 1 Harmon Drive, Blackwood, New Jersey, 08012. The Company's
telephone number is (609) 228-1000.

Industry

According to a report published by the Jobson Optical Group, U.S. retail
optical sales grew at a 4.9% compound annual growth rate from $11.5 billion in
1991 to $14.6 billion in 1996. This same industry source projects that total
revenues in 1997 will reach an estimated $15.4 billion. Management believes
that the factors contributing to the continuing growth in the U.S. retail
optical industry include: (i) the aging of the U.S. population; (ii) increase
in penetration of managed vision care; (iii) emphasis on fashion and brand
names in prescription eyewear; and (iv) continuing advancements in product
technology.

22
<PAGE>

Aging of U.S. Population. Management believes the aging of America's
population will continue to drive the growth of the optical industry.
According to the Jobson Optical Group, in 1996, 95% of people between the ages
of 45 and 64 required some type of corrective eyewear and 61% of the total
population required some type of corrective eyewear, as indicated in the
following table:

Population Number of Users (1)
Age Group (in millions) (in millions) Percent
--------- --------------- -------------------- --------
14 and under ...... 58.0 9.0 16%
15 - 24 ............ 35.9 18.3 51
25 - 44 ............ 83.7 52.6 63
45 - 64 ............ 53.7 51.0 95
65 and over ...... 33.9 31.5 93
------ ------ ---
Total ............ 265.2 162.4 61%
====== ====== ===
- ------------
(1) People requiring some form of vision correction in 1996.

Increase in Penetration of Managed Vision Care. According to the Jobson
Optical Group, approximately 25% of the U.S. eyecare patient base may be
covered by a third-party vision care plan. That same industry source estimates
that by 1998, approximately 40% of the U.S. population may be covered by a
managed vision care program. Many vision care plan participants have vision
examinations on a regular basis and, as a result, may become more frequent
customers of optical retailers. Management believes that optical retailers who
have a national network of stores and provide attractively priced, high
quality eyewear will have a competitive advantage as the optical industry
continues to move towards managed vision care.

Emphasis on Fashion and Brand Names. Eyewear is increasingly being used
as a fashion accessory for dress, casual and recreational activity. In
addition, a number of leading fashion designers such as Giorgio Armani, Calvin
Klein, Guess, Nautica, Halston, Polo Ralph Lauren and Perry Ellis, among
others, are leveraging the appeal of their brand names by offering lines of
ophthalmic frames and sunglasses. As the emphasis on eyewear shifts from
function to fashion, the offerings of shapes and colors has been expanded,
creating more eyewear choices and increasing the frequency of purchases by
customers.

Continuing Advancements in Product Technology. New products and
technologies are continually introduced in the optical industry to improve the
quality and durability of eyeglass frames and lenses. Advances include (i)
lightweight, virtually unbreakable, polycarbonate lenses for better comfort
and safety, (ii) scratch resistant coatings for longer lasting lenses, (iii)
anti-reflective coatings to reduce glare and eyestrain, improve visual clarity
and cosmetic appeal and (iv) disposable contact lenses which virtually
eliminate the daily or weekly care and supplies required for other types of
contact lenses. These innovations are increasing the overall range of products
in the vision care industry as well as, in many cases, profit margins.

At the same time that the retail optical industry has been growing, it
has also been consolidating. The retail optical industry in the United States
is highly fragmented, with the top ten retail optical chains accounting for
only 18% of total optical industry sales in 1996. Consolidation in the
industry is due primarily to a shift in consumer buying patterns toward retail
optical chains and superstores from independent retailers. Management believes
this shift has occurred as a result of better product selection, quality and
consistency, pricing and convenience offered by retail optical chains. The
retail optical chains are able to offer better pricing and promotional
practices as a result of greater purchasing power due to size. According to
the Jobson Optical Group, independent retailers (optometrists, opticians and
opthamologists) accounted for 63% of the total optical industry sales in 1996,
with optical chains, optical superstores and mass merchandisers accounting for
21%, 11% and 4% of total industry sales, respectively. Management believes
independent optical retailers will continue to lose market share to optical
chains and superstores, creating consolidation opportunities.

23
<PAGE>

Competitive Positioning

U.S. Vision's objective is to be the leading operator of retail optical
departments in host store environments. Management believes the Company has
several competitive advantages over other optical retailers that will allow it
to achieve its business objective:

Strong Position with Leading Host Stores. The Company is well positioned
as the primary domestic optical licensee for J.C. Penney and the second
largest domestic optical licensee for Sears. The Company has developed strong
relationships with the host stores in which the Company operates. Management
believes that the Company's relationships with its host stores provide several
competitive advantages such as: (i) low operating expenses; (ii) low initial
capital investment; (iii) loyal host store customer base; (iv) established
host store advertising and marketing programs; (v) one-stop shopping
convenience; and (vi) access to the host store's private label credit card.

Emphasis on Managed Vision Care. According to the Jobson Optical Group,
approximately 25% of the U.S. eyecare patient base currently is covered by a
third-party vision care program and this percentage is expected to increase to
approximately 40% by the year 1998. The Company is a participating provider in
Vision One, a national vision care program, which offers comprehensive eyewear
benefits to over 40 million covered lives through a network of over 2,000
optical locations. Vision One's basic program gives employers the opportunity
to offer their employees a group discount at optical locations within the
managed vision care network with minimal direct cost to the employer.
Consequently, many Vision One participants have vision examinations on a
regular basis and, as a result, may become more frequent customers of U.S.
Vision. In addition, Vision One participants frequently apply their discounts
and allowances toward the purchase of premium eyeglass products and related
accessories. The Company currently generates approximately 27% of its revenues
from its participation in Vision One and other vision benefit programs and
intends to expand its participation in such programs in order to take
advantage of these industry dynamics.

Enhanced Merchandise Selection. The Company offers an extensive selection
of designer and private label branded eyewear, which allows it to tailor its
merchandise selection to meet the needs of host store customers. Designer
branded eyeglass frames offered include Guess, Nautica, Halston and Perry
Ellis, among others and, at certain stores, Giorgio Armani, Calvin Klein and
Polo Ralph Lauren. Similarly, private label eyeglass frames offered include
Hunt Club, Arizona, Ashley Stewart, Oliver Winston and Rascals, among others.
The Company also offers branded eyeglass lenses such as Kodak, as well as,
contact lenses, sunglasses and accessories. The Company plans to license
additional brand names in the future and to offer additional lenses, options
and accessories.

Centralized Laboratory Operation. U.S. Vision assembles, finishes and
distributes its products from a centralized, modern optical laboratory,
distribution and lens grinding facility. Management believes that the
Company's central facility provides it with several operating efficiencies
compared to competitors who operate either in store laboratories or multiple
optical laboratories, including the ability to: (i) utilize its labor force
more efficiently; (ii) monitor and control the quality of production and
finished products; (iii) reduce inventory levels; and (iv) provide greater
flexibility in developing and adopting new product technologies. Management
believes it has the manufacturing capacity in its laboratory to accommodate
all of the projected growth anticipated by the Company for the foreseeable
future.

Vertical Integration. Through its subsidiary, Styl-Rite, the Company
designs and manufactures plastic frames and sources and imports metal frames
for sale primarily in its own stores, as well as to third parties. The ability
to manufacture and import enables the Company to respond quickly to changes in
fashion trends and acquire frames for resale at favorable prices.

Growth Strategy

The Company's growth strategy is to continue to open new retail optical
departments and medical host environments within existing and new host stores
and to continue to evaluate new retail environments. To achieve this strategy
the Company intends to:

24
<PAGE>

Open New Retail Optical Departments in Existing Host Stores. The Company
expects to open approximately 35 new retail optical departments in fiscal 1997
(28 of which have been opened to date) and expects to open approximately 40
new retail optical departments in fiscal 1998, conditions permitting. The
majority of these retail optical departments are expected to be located in
J.C. Penney stores. Since the Company currently operates within only 30% of
J.C. Penney's approximately 1,200 stores, management believes significant
opportunities are available to expand within J.C. Penney's existing store
network. In addition, as J.C. Penney expands and updates its store base, the
Company plans to seek retail optical departments in all new or remodeled J.C.
Penney stores. The remainder of the new stores are expected to be opened in
host stores with which the Company has existing relationships such as Sears,
Marshall Fields and Lazarus. See "Business - Competition."

Pursue Relationships with New Host Department Stores. Management believes
that future growth opportunities exist in department store locations. The
Company's 70 retail optical departments in traditional department stores
represent the nation's largest concentration of licensed optical departments
in this category. The Company is pursuing relationships with a number of
department store chains with which it does not currently have an existing
relationship. See "Business - Competition."

Explore New Retail Environments. The Company is exploring opportunities to
expand its operations to include optical departments in other non-mall retail
environments.

Evaluate Acquisition Opportunities. According to the Jobson Optical
Group, the optical industry is highly fragmented with the top ten retail
optical chains accounting for only 18% of total optical industry sales in
1996. Retail chains accounted for 35% of all eyewear sales in 1996, while
independent retailers accounted for 63%. Management believes the Company is
well positioned to take advantage of the consolidation currently taking place
in the optical retailing sector. Although the Company has no definitive
agreements or letters of intent pertaining to acquisitions at this time, it
intends to selectively evaluate opportunities to acquire retail optical stores
in the future.

Unit Economics

The Company's licensed retail optical departments typically occupy 500 to
800 square feet of space, with the 488 licensed retail optical departments
that were in operation during fiscal 1996 generating average net sales per
square foot in that year of $394. Management believes that its licensed
optical departments historically have generated significantly higher sales per
square foot than that generated in most other departments of its host stores.
Furthermore, since the Company's licensed optical departments pay rent based
on a percentage of their net sales and have little or no associated costs for
the department store, the Company believes they are one of the most profitable
areas of a typical host store.

Both operating and start-up costs associated with licensed retail optical
departments are typically below those of freestanding stores. For example,
because licensed departments have the advantage of an established traffic
base, the Company historically has not conducted expensive advertising
campaigns, instead conducting joint promotions with its department store
hosts. Furthermore, since rent expense varies as a percentage of net sales, it
provides flexibility in the early years of a licensed department's operation.

The Company's freestanding stores typically occupy 900 to 1,400 square
feet of space, with the freestanding stores that were in operation during
fiscal 1996 generating average net sales per square foot of $223. The typical
required investment, including leaseholds, optical equipment, initial
inventory and working capital, in a freestanding store is significantly higher
than the typical investment for those same items in a licensed retail optical
department.

25
<PAGE>

Store Locations

As of July 31, 1997, U.S. Vision operated 558 locations in 48 states,
consisting of 495 licensed retail optical departments and 63 freestanding
stores. The following table sets forth the number of U.S. Vision retail stores
by state:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Alabama....... 10 Indiana ....... 20 Montana ......... 2 Pennsylvania........ 38
Alaska ....... 1 Iowa........... 6 Nebraska ........ 4 South Carolina...... 3
Arizona ..... 11 Kansas......... 3 Nevada........... 2 South Dakota........ 2
Arkansas .... 3 Kentucky ...... 8 New Hampshire ... 5 Tennessee .......... 15
California.... 44 Louisiana ..... 8 New Jersey ...... 11 Texas............... 42
Colorado ..... 10 Maine ......... 6 New Mexico....... 4 Utah ............... 10
Connecticut .. 4 Maryland....... 16 New York ........ 10 Vermont ............ 1
Delaware ..... 1 Massachusetts . 3 North Carolina .. 4 Virginia ........... 7
Florida ...... 50 Michigan ...... 14 North Dakota ... 6 Washington.......... 9
Georgia....... 13 Minnesota...... 8 Ohio ............ 42 West Virginia ...... 4
Idaho ........ 2 Mississippi ... 4 Oklahoma ........ 3 Wisconsin .......... 15
Illinois...... 43 Missouri ...... 24 Oregon .......... 4 Wyoming............. 3
</TABLE>

Merchandising

U.S. Vision's merchandising strategy emphasizes merchandise selection,
style, quality and consistency of products and services, competitive pricing,
convenient locations, availability of on-site professional eye examinations,
customer service, customer oriented store design and product displays,
knowledgeable sales associates and a broad range of quality products.

Merchandise Selection. U.S. Vision carries a full selection of men's,
women's and children's eyeglass frames, a complete line of contact lenses,
sunglasses and ancillary products for eyeglasses and contact lenses.
Prescription eyewear accounted for 86% of the Company's sales during fiscal
1996. The Company offers an extensive selection of designer and private label
branded eyewear. Designer eyeglass frames offered include Guess, Nautica,
Halston and Perry Ellis, among others and, at certain stores, Giorgio Armani,
Calvin Klein and Polo Ralph Lauren. The Company also offers private label
branded eyeglass frames such as Hunt Club, Arizona, Ashley Stewart, Oliver
Winston and Rascals, among others. The Company carries a complete line of
contact lenses by major contact lens manufacturers such as Bausch & Lomb,
Wesley Jessen, and Johnson & Johnson, including daily wear and extended wear
soft contact lenses and cosmetic tinted lenses. During fiscal 1996, contact
lenses accounted for approximately 14% of the Company's sales. U.S. Vision
offers a wide variety of value-added eyewear features and services on which it
realizes a higher gross margin such as lightweight, virtually unbreakable
polycarbonate lenses, including Kodak progressive lenses and plastic
photochromic lenses, as well as scratch resistant and anti-reflective
coatings. The ability to manufacture and import enables the Company to respond
quickly to changes in fashion trends and acquire frames for resale at
favorable prices.

Pricing. U.S. Vision maintains a promotional pricing strategy which
stresses a quality product delivered with superior service at a competitive
price. The Company's frames and lenses are generally competitively priced,
with prices varying based on geographic region. While the Company earns a
higher gross margin on its private-label lines, designer frames generally
command premium prices, resulting in higher gross profit dollars per
transaction.

Full Customer Service. The Company places great emphasis on providing
attentive professional service to its customers. U.S. Vision strives to
provide its customers with exceptional care and value by combining the
personal service typically associated with a private optometrist with the
broad product selection and competitive prices of a large optical retailer.
Management believes that providing superior customer service from
knowledgeable and courteous employees complements the customer-oriented
policies of its department store hosts.

26
<PAGE>

Managed Vision Care

Since 1991, U.S. Vision has been a participating provider of managed
vision care benefits primarily through Vision One, a national vision care
program which offers comprehensive eyewear benefits to over 40 million covered
lives through a network of over 2,000 optical locations. Vision One is
marketed directly to employers, employee benefit plan sponsors and insurance
companies such as Metropolitan Life, Aetna, Cigna, John Hancock and Blue
Cross/Blue Shield. Vision One's basic programgives employers the opportunity
to offer their employees a group discount at retail optical locations of
participating providers with minimal direct cost to the employer. The
discounts vary under the plans from fixed percentage discounts to fixed dollar
amounts with the balance paid by the subscriber. As a result of these
benefits, management believes that many Vision One participants have vision
examinations on a regular basis and may become more frequent customers of U.S.
Vision. In addition, Vision One participants frequently apply their discounts
and allowances toward the purchase of premium eyeglass products and related
accessories. Under the terms of the Company's contract with Cole National, a
competitor of the Company and the owner of the Vision One program, the Company
pays an administrative fee for each Vision One member transaction. The
Company's contract with Cole National expires in 2002. The Company retains the
right, though it has not exercised it in the past, to refuse to participate in
particular Vision One programs under which it cannot profitably provide goods
and services, and to participate in other managed care vision plans under
certain conditions. The Company currently generates approximately 27% of the
Company's revenues from its participation in the Vision One and other vision
benefit programs and intends to expand its participation in such programs.

Store Operations

The Company's retail optical departments are generally full-service
retail vision care stores that offer designer brands and private label
prescription eyewear, contact lenses, sunglasses and accessories with an
on-premises, independent optometrist who performs complete eye examinations
and prescribes eyeglasses and contact lenses.

Location and Layout. U.S. Vision operates most of its stores on the
premises of national and regional department stores. These stores generally
operate under names such as "J.C. Penney Optical Center" and "Sears Optical,"
which associate the departments with the host store. The Company's retail
optical departments generally operate under a lease or license arrangement
through which the host store collects the sales receipts, retains an agreed
upon percentage of sales, which is recorded as rent expense by the Company,
and remits the remainder to the Company on a regular basis. The Company's
leased retail optical departments typically range in size from 500 to 800
square feet. The Company's retail optical departments are located within the
host department store near the host store's other licensed departments such as
the beauty salon and photography studio. Management believes that the location
of its retail optical departments within a host store is essential to its
ability to take full advantage of the host store's customer traffic.

Each store follows a uniform merchandise layout plan which is designed to
emphasize fashion, invite customer browsing and enhance the customer's
shopping experience. All of the Company's stores are similar in appearance and
are operated under certain uniform standards and procedures. In connection
with the J.C. Penney expansion and new store design, the Company has recently
developed a modern new store prototype which the Company refers to as its
"concept 2000" store. All of the Company's new retail optical departments are
designed in accordance with this concept, and the Company intends to convert
its existing stores to this concept as they are remodeled over time.

U.S. Vision's freestanding stores operate under various trade names such
as Royal Optical, Service Optical and Wall & Ochs and are located in malls and
shopping centers. A limited number of these stores are housed in freestanding
buildings with adjacent parking facilities. The Company's freestanding stores
generally range in size from 900 to 1,400 square feet.

27
<PAGE>

Store Management. The Company's store management structure consists of
field managers and store managers. The store managers, along with two to three
associates known as Optechs, are responsible for the day-to-day operations of
each of the Company's retail optical departments. Optechs undertake a
comprehensive training program that familiarizes them with the Company's
product lines, customer services, store procedures and automated systems. The
Company's national director of training is responsible for overseeing the
training of the Optechs and updating the Company's training materials.
Management believes that providing knowledgeable and responsive customer
service is an important element of its success and, accordingly, has developed
and implemented a variety of employee training and incentive programs.

On-Site Independent Optometrist. The Company has made arrangements with
licensed optometrists to provide eye examination services at or adjacent to
its retail locations in those states where it is permitted. The independent
optometrists sublease space and equipment from the Company or from the host
store. The Company and the optometrists do not share in each other's revenues.
Management believes the presence of the optometrists at the stores leads to
repeat customers and reinforces the quality and professionalism of each store.

Relationship with Host Stores

Most of the Company's stores operate as licensed optical departments
within a host department store such as J.C. Penney, Sears, Federated (Rich's,
Burdines and Lazarus), May (Kaufmann's, Famous Barr and L.S. Ayres), Marshall
Fields and Carson Pirie Scott, among others. Management believes that the
Company's relationships with its host stores provide several competitive
advantages such as: (i) low operating expenses; (ii) low initial capital
investment; (iii) loyal host store customer base; (iv) established host store
advertising and marketing programs; (v) one-stop shopping convenience; and
(vi) access to the host store's private label credit card. Management believes
its hosts' reputation of quality, trust and value further enhances the
Company's customer relations.

Management believes it has developed excellent relationships with the
host stores in which it operates. Management strives to continue to enhance
these relationships. The Company routinely consults with the host stores about
the size and placement of the Company's optical departments within newly
opened or remodeled host stores.

The Company's retail optical departments within J.C. Penney stores are
subject to a master lease that expires in December 2003 and provides that no
more than 40 of the Company's J.C. Penney optical centers may be closed by
J.C. Penney in any calendar year without cause; provided, however, that this
limitation does not apply if J.C. Penney closes an entire J.C. Penney
department store, either temporarily or permanently. The lease also provides
that J.C. Penney will reimburse the Company for certain costs relating to the
closed department. The Company's optical departments within Sears stores are
each subject to a lease which provides for a year-to-year term, subject to
early termination by either party, without cause, on thirty-days prior written
notice. The Company's retail optical departments located within other
department stores are subject to lease arrangements which contain short notice
lease termination provisions. These leases provide for monthly lease payments
based upon a percentage of the Company's sales at each location. See "Risk
Factors -- Risks Related to Short-Term Leases."

Marketing and Advertising

U.S. Vision engages in a variety of marketing and promotional efforts to
maintain and strengthen its customer base. The Company's advertising program
is targeted at the department store consumer and is designed to convey a
message of value, fashion, convenience and trust to its customer base. The
Company works with each of its host stores to design advertising programs that
convey this message in a manner consistent with that of the host store and are
targeted at the specific targeted customer base. For example, the Company
works with J.C. Penney to develop targeted catalog inserts which advertise the
Company's J.C. Penney optical departments. These advertising promotions
generally mention the availability of on-site professional eye examinations
and the Company's acceptance,

28
<PAGE>

as a participating provider of managed vision care benefits, of the discounts
and allowances offered by managed vision care plans. These targeted inserts
are mailed to selected customers based on previous spending patterns at the
host store. The Company actively supports its stores by providing local
advertising in individual geographic markets. U.S. Vision has an in-house
advertising department which permits it to respond quickly to fashion trends,
competitor advertising and promotional initiatives.

Optical Laboratory and Distribution

U.S. Vision operates a 60,000 square foot modern optical laboratory,
distribution and lens grinding facility adjacent to its headquarters in
Blackwood, New Jersey. Management believes that the Company's central facility
provides it with several operating efficiencies compared to competitiors who
operate in store laboratories or multiple optical laboratories, including the
ability to: (i) utilize its labor force more efficiently; (ii) monitor and
control the quality of production and finished products; (iii) reduce
inventory levels; and (iv) provide greater flexibility in developing and
adopting new product technologies.

Customer orders for prescription eyewear, sunglasses and contact lenses
are phoned in or, as stores are brought on-line with the Company's new
managment information system, electronically transmitted daily from each of
the Company's store locations to its central laboratory. Customer orders
generally are processed and shipped to stores within two to three working days
and can be completed overnight if requested by the customer. Most prescription
lenses are completed from semi-finished polycarbonate or plastic lenses
obtained from third-party suppliers. These lenses are finished in a highly
technical process that grinds the surface of the lens to fit the prescription
utilizing modern grinding equipment, much of it computer-guided. The lenses
are then custom fitted to optical frames in the size and style selected by the
customer. Other prescriptions, including many standard prescriptions, can be
manufactured by cutting and edging a prefinished lens, also purchased from a
third-party supplier, to fit the frames selected. Contact lenses, accessories
and non-prescription sunglasses orders are filled from available stock and
shipped to the Company's retail optical departments.

In 1995, the Company spent approximately $4.6 million to purchase,
renovate and equip its central laboratory with new machinery. This new
machinery is capable of custom grinding, polishing, cutting, edging,
tempering, tinting and coating prescription lenses. In 1997, the Company also
purchased new anti-reflective coating equipment for the laboratory to improve
the turnaround time for this specialty coating. Management believes it has the
manufacturing capacity in its laboratory to accommodate all of the Company's
projected growth for the foreseeable future.

Purchasing

The Company's relationships with its vendors and Styl-Rite's
manufacturing and importing capability have enabled the Company to gain access
to a wide array of brand name product offerings. As a leading retailer of
eyewear in the United States, U.S. Vision purchases significant quantities of
frames, lenses and contact lenses from its suppliers. In most cases, such
purchases are not made under long-term contracts. In fiscal 1996, no single
supplier or manufacturer accounted for 10% or more of total purchases. All raw
materials for products manufactured by the Company are available from numerous
suppliers.

Through Styl-Rite, the Company manufactures, imports, and distributes
optical frames and sunglasses for use primarily in its own eyewear products,
and for sale to third party optical retailers. Through various licenses and
sublicenses, Styl-Rite imports metal frames and manufactures plastic frames
which bear the designer, brand name and private label names sold by the
Company.

Management Information Systems

In 1997, the Company began to implement an integrated management
information system, which includes an automated order entry system at each of
its optical stores, and new manufacturing and financial computer systems in
the Company's corporate headquarters. This new integrated system is

29
<PAGE>

designed to provide the Company with improved order pricing and costing
capability and better control of laboratory and store inventories, and is
designed to give the stores access to the status of each order. This new
system is also designed to provide the stores with the capability to capture
sales and customer information, including prescription data, enhancing the
Company's ability to monitor sales and merchandise trends and to improve
customer service after the sale. In addition, the automated order entry system
is designed to enable the stores to validate, at the time of sale, whether a
particular frame selected by the customer is in stock and whether the
combination of the customer's prescription, selected lenses and frame is
within manufacturing tolerances. The integrated information system is expected
to enhance the Company's operating efficiencies by permitting all orders to be
electronically transmitted from the stores to the laboratory at any time,
providing real-time order profile information for the laboratory, daily sales
results for the Company and will be "year 2000 compliant." In April 1997, the
Company completed its implementation of the new financial accounting and
reporting systems in its corporate headquarters and commenced the
implementation of the integrated manufacturing systems in its laboratory,
including the automated connection with the order entry system for the stores.
In July 1997, the Company commenced a pilot store test of the automated order
entry system and the national roll out is expected to begin in late 1997 and
be completed in early 1999. There can be no assurance that the Company will be
able to implement and operate this information system effectively or that the
system will produce the expected benefits.

Currently, customer prescription orders for the Company's optical
products are prepared by the stores on order forms and the details of each
order are phoned in daily to the Company's centralized laboratory. These
orders are then manually entered into the laboratory's order entry system
which, for lenses, also makes the necessary optical calculations to grind and
finish the lenses to the correct prescription and shape them to the dimensions
of the frame selected by the customer. The present laboratory order entry
system also tracks each order through every step of the manufacturing process
until the finished product is shipped to the retail optical department.

Competition

The Company competes with other national, regional, and local retail
optical chains and independent optical retailers. Optical retailers generally
serve individual or local markets, and, as a result, competition is fragmented
and varies substantially among locations and geographic areas. Although the
retail optical industry is highly competitive, management believes none of the
Company's competitors has more than a 6% market share based on revenue. The
principal competitive factors affecting the Company's retail operations are
merchandise selection, quality and consistency of products and services,
price, location within the host store, convenience, availability of on-site
professional eye examinations and access to a host store's private label
credit card. The retail optical industry engages in price-related promotions
as a standard marketing practice. Several of the Company's competitors have
greater financial and other resources than the Company. These additional
resources may enable competitors to pursue more aggressive pricing and
promotional strategies at the expense of profits for longer periods of time
than the Company and may enable them to pursue such strategies through an
extended downturn in the optical market.

The ability of the Company to achieve its growth strategy by opening new
retail optical departments in existing and new host stores is dependent on the
Company's ability to obtain suitable optical locations within existing and new
host stores. The Company faces competition for suitable locations in host
stores from other national, regional and local retail optical chains and
independent optical retailers, a few of which already operate optical
departments in host stores. Management does not believe that the Company's
growth strategy will be adversely effected by the fact that Cole National
operates more retail optical departments in host stores (principally through
Sears locations) than the Company. In addition, the Company's ability to
obtain locations within host stores is dependent on whether or not the host
store's management decides to include an optical department within a
particular host store.

Facilities

The Company owns a 20,000 square foot facility in Blackwood, New Jersey,
which serves as the Company's corporate headquarters and a neighboring 60,000
square foot optical laboratory and distribution facility. The real property on
which these facilities are located, as well as the buildings and

30
<PAGE>

certain equipment located therein, secure the Company's obligations under the
DRPA Term Loans. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations--Liquidity and Capital Resources."
Styl-Rite, the Company's frame manufacturing and importing operation, owns and
operates a 40,000 square foot facility in Miami, Florida. The real property on
which this facility is located, as well as the building, secure the Company's
obligations under the Revolving Line of Credit and Term Loan.

Employees

As of July 31,1997, the Company had approximately 2,500 full-time and
part-time employees, of which: (i) approximately 1,960 were employed in the
Company's retail outlets; (ii) 350 were employed in manufacturing and
distribution in the Company's laboratory in Blackwood; (iii) 100 were employed
at the Company's Styl-Rite manufacturing center in Miami; and (iv) 90 were
employed in administrative, marketing and managerial positions at the
Company's headquarters in Blackwood.

Approximately 60 of the Company's employees at the Styl-Rite facility are
subject to a collective bargaining agreement with the United Optical Workers
that expires in 2000. The Company has never experienced a work stoppage or
other organized labor dispute and considers its labor relations to be good.

By providing its employees with extensive training and a positive,
employee-friendly work environment, the Company believes that it has
successfully retained quality employees and, accordingly, improved operating
efficiencies. In June 1997, the Company opened a daycare facility to provide
affordable child care for children of its employees. Management believes
innovative employee programs have had a positive effect on full and part-time
labor productivity, especially for working parents.

Government Regulation

The Company is subject to a variety of federal, state and local laws,
rules and regulations affecting the health care industry and the delivery of
health care services. State and local legal requirements vary widely among
jurisdictions and are subject to frequent change. Federal legal requirements
are also subject to change.

Relationships between the Company and independent optometrists and
ophthalmologists are subject to federal, state and local laws and regulations.
State laws generally prohibit the practice of medicine and optometry by
unlicensed practitioners. In addition, many states prohibit medical
practitioners and optometrists from splitting fees with business corporations
such as the Company and prohibit the practice of medicine and optometry by
corporate entities. Some states have enacted laws governing the ability of
ophthalmologists and optometrists to enter into contracts to provide
professional services with business corporations or lay persons. Some states
prohibit the Company from computing its fee for rent, equipment leases and
management services provided by the Company based on a percentage of the gross
revenue of the ophthalmologists and the optometrists. Such requirements are
particularly comprehensive in California and Texas, where the Company operates
a significant number of stores. Further, some states restrict the location of
optometric offices in relation to optical stores, such as the Company's, and
regulate advertising and the solicitation of prospective patients.

Relationships between the Company and independent ophthalmologists and
optometrists are also subject to the fraud and abuse provisions of the federal
Social Security Act which include the "anti-kickback" laws. The anti-kickback
laws prohibit the offering, payment, solicitation or receipt of any direct or
indirect remuneration for the referral of Medicare or Medicaid patients or for
the ordering or providing of Medicare or Medicaid covered services, items or
equipment. Violations of these laws may result in substantial civil or
criminal penalties for individuals or entities and exclusion from
participation in the Medicare and Medicaid programs. Several states, including
states in which the Company operates, have adopted similar laws that cover
patients with private health insurance coverage as well as those covered by
government programs. Although management believes it is not in violation of
the

31
<PAGE>

anti-kickback laws, the applicability of these provisions has been subject to
only limited judicial and regulatory interpretation. In addition, certain of
the Company's products, specifically frames manufactured by Styl-Rite, must
comply with standards set by the United States Food and Drug Administration.

The Company, as well as the independent optometrists providing services
in or adjacent to the Company's stores, from time to time receive inquiries
from regulatory bodies regarding its compliance with applicable state and
local regulations. If the Company's relationships with ophthalmologists and
optometrists are challenged, the Company may be required to alter the manner
in which it conducts its business. There can be no assurance that a review of
the Company's business by courts or regulatory authorities will not result in
determinations that could adversely affect the operations of the Company or
that new laws, regulations or interpretations of current laws and regulations
will not have a material adverse effect on the Company's business, financial
condition or results of operations.

Legal Proceedings

The Company is subject to various pending and threatened litigation from
time to time in the ordinary course of business. Although all litigation
involves some degree of uncertainty, in the opinion of management,
liabilities, if any, arising from such litigation or threat thereof are not
expected to have a material adverse effect on the Company.

32
<PAGE>

MANAGEMENT

Executive Officers and Directors

The following table sets forth certain information with respect to
executive officers, directors and key employees of the Company as of July 31,
1997.

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
William A. Schwartz, Jr. 56 President, Chief Executive Officer and Director
Reid V. Eikner 54 Executive Vice President, Finance and Administration
George T. Gorman 46 Executive Vice President, Retail
James M. McGrath 57 Executive Vice President, Retail Operations
Gayle E. Schmidt 45 Executive Vice President, Manufacturing
George E. McHenry, Jr. 45 Secretary, Treasurer and Chief Financial Officer
G. Kenneth Macrae 66 Director
Richard K. McDonald 49 Director
Dennis J. Shaughnessy 50 Director
J. Roger Sullivan, Jr. 54 Director
David M. Tracy 73 Director
Peter M. Troup 54 Director
</TABLE>

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

William A. Schwartz, Jr. has served as the President, Chief Executive
Officer and Director of the Company and its predecessors since 1967. Mr.
Schwartz has been involved in the optical retail industry for more than 30
years. Mr. Schwartz is married to Ms. Schmidt.

Reid V. Eikner has served as the Executive Vice President, Finance and
Administration of the Company since November 1995. Prior to joining the
Company, Mr. Eikner was President and Chief Executive Officer of Best Way
Distributing Company from 1989 to 1995. From 1982 to 1989, Mr. Eikner was
employed by CRI International, Inc. in various managerial capacities.

George T. Gorman has served as the Executive Vice President, Retail of
the Company since September 1996. From 1975 until joining the Company, Mr.
Gorman was a senior retail officer with Strawbridge & Clothier, a full line
department store.

James M. McGrath has served as the Executive Vice President, Retail
Operations of the Company since 1990. From 1967 to 1990, Mr. McGrath served in
various managerial capacities with the Company.

Gayle E. Schmidt has served as the Executive Vice President, Manufacturing
of the Company since 1988. From 1970 to 1990, Ms. Schmidt served in various
managerial capacities with the Company. Ms. Schmidt is married to Mr. Schwartz.

George E. McHenry, Jr. has served as the Secretary, Treasurer and Chief
Financial Officer of the Company since 1990. He served as Vice President,
Finance from 1987 to 1990. Prior to joining the Company, Mr. McHenry was an
accountant with the firms of Touche Ross & Co. (now Deloitte & Touche) and
Main Hurdman (now KPMG Peat Marwick) from 1974 to 1987.

G. Kenneth Macrae has been a Director of the Company since 1990. Mr.
Macrae has been the President of Keystone Venture Capital Management Co., a
venture capital firm in Philadelphia, Pennsylvania, since 1983, and the
President and Director of KVM IV MCGP, Inc., the general partner of Keystone
Venture IV Management Company, L.P., the general partner of Keystone IV. From
1983 through 1992, Mr. Macrae and certain of his affiliates failed to file
timely ownership reports on Forms 3 and 4 and to file timely and amend
promptly Schedules 13D. As a result, the Securities and Exchange Commission
entered an order on August 17, 1993, pursuant to which Mr. Macrae and certain
of his affiliates agreed to permanently cease and desist from committing or
causing any violations of the requirements of Section 13(d) and 16(a) of the
Securities Exchange Act of 1934 and certain of the rules promulgated
thereunder.

Richard K. McDonald has been a Director of the Company since 1994. Since
1988, Mr. McDonald has served as the President and Director of Constitutional
Capital Corporation, a general partner of RAA; a general partner of M&M; and a
general partner of RKM Investment Company, the general partner of Constitution
Capital Corporation. From 1990 to 1993, he served as a Senior Vice President
of Westinghouse Credit Corporation.

33
<PAGE>

Dennis J. Shaughnessy has been a Director of the Company since 1994. Since
September 1989, Mr. Shaughnessy has served as the Managing Director, Treasurer
and Director of Grotech Capital Group, Inc., the general partner of Grotech
III, Grotech Companion and Grotech Pennsylvania; and Managing Director,
Treasurer and Director of Grotech Capital Group IV, Inc., the general partner
of Grotech IV. He served as the President and Chief Executive Officer of CRI
International, Inc. from 1985 to September 1989. Mr. Shaughnessy currently
serves on the board of Tesseco Technologies, Inc., Secure Computing, Inc. and
Forensic Technologies, Inc.

J. Roger Sullivan, Jr. has been a Director of the Company since 1994.
Since March 1994, Mr. Sullivan has served as a special partner of Grotech
Capital Group, Inc., the general partner of Grotech III, and Group IV, Inc.,
the general partner of Grotech IV. From 1993 to March 1994, he was self
employed as a consultant. From 1979 to 1992 he served as a Senior Vice
President of First National Bank of Maryland.

David M. Tracy has been a Director of the Company since 1994. Mr. Tracy
has extensive experience in the textile and home furnishing industries, having
served as the former Vice Chairman of J.P. Stevens and Co. and the past
president of Fieldcrest Mills, Inc. Mr. Tracy currently serves on the board of
International Executive Service Corps, Stonehill College, the Educational
Foundation for the Fashion Industries and Decorative Home Accents. For the last
three years, Mr. Tracy has been the Chairman of Calvin Klein Home, Inc. and the
Vice Chairman of Decorative Home Accents. For the two years prior to serving in
such capacities. Mr. Tracy was the Vice Chairman of Home Innovations, Inc.

Peter M. Troup became a Director of the Company in November 1997. Since
1996, Mr. Troup has served as a management consultant to the retail industry.
From 1994 to 1995 he served as the vice president of international marketing
of E&J Gallo Winery. From 1991 to 1994, Mr. Troup was the general manager of
Proctor & Gamble's cosmetics and fragrances operations in the United Kingdom.

Following this offering, the board of directors intends to consider other
unaffiliated individuals for nomination to the board.

Board Meetings and Committees of the Board

The Company's Board of Directors has a standing Executive Committee,
Audit Committee, Compensation Committee and Stock Option Committee. The
principal responsibilities and membership of each committee are described
below.

Executive Committee. The Executive Committee has the authority to
exercise substantially all of the powers of the Company's Board of Directors
in the management and business affairs of the Company, except it does not have
the authority to declare dividends, authorize the issuance of shares of Common
Stock, modify the Company's Certificate of Incorporation or its Bylaws, adopt
any agreement of merger or consolidation or recommend to the stockholders the
sale, lease or exchange of all or substantially all of the Company's assets or
the dissolution of the Company. The members of this committee are Messrs.
Macrae, McDonald and Schwartz.

Audit Committee. The Audit Committee is responsible for reviewing the
Company's accounting and financial practices and policies and the scope and
results of the Company's audit. The Audit Committee is also responsible for
recommending the selection of the Company's independent public accountants.
This committee is presently comprised of Messrs. McDonald and Sullivan.

Compensation Committee. The Compensation Committee reviews the
compensation of executive officers, except members of the committee, and makes
recommendations to the Board regarding executive compensation. This committee
is presently comprised of Messrs. Shaughnessy, Macrae and Schwartz.

Stock Option Committee. The Stock Option committee administers the
Company's existing stock option plan. This committee is presently comprised of
Messrs. Shaughnessy and Macrae.

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<PAGE>

Executive Compensation

The following table summarizes the compensation earned by the Company's
Chief Executive Officer and its four other most highly compensated executive
officers (whose compensation exceeded $100,000 in fiscal 1996), collectively,
the "Named Officers," for services rendered in all capacities to the Company
during the fiscal year ended January 31, 1997.

Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
1996 Compensation Compensation
-------------------- -------------
Securities
Underlying
Options/ All Other
Salary Bonus SARs Compensation
Name and Principal Positions ($) ($) (#) ($)(1)
- ------------------------------- --------- -------- ------------- -------------
<S> <C> <C> <C> <C>
William A. Schwartz, Jr ...... 230,900 60,000 228,735 --
President, Chief Executive
Officer and Director
Reid V. Eikner ............... 179,800 40,000 76,050 --
Executive Vice President,
Finance and Administration
George T. Gorman(2) ......... 43,400 15,000 15,665 --
Executive Vice President,
Retail
Gayle E. Schmidt ............ 159,700 40,000 76,050 15,300
Executive Vice President,
Manufacturing
George E. McHenry, Jr. ...... 149,000 25,000 76,050 7,800
Secretary, Treasurer and
Chief Financial Officer
</TABLE>
- ------------
(1) Represents amounts paid by the Company to the account of the Named
Officers for unused vacation time.
(2) Mr. Gorman's employment with the Company began in September 1996.

Stock Option Plan

Pursuant to the Company's 1996 Stock Option Plan, as amended (the "Stock
Option Plan"), incentive options may be granted to eligible individuals for
the purchase of an aggregate of up to 1,300,000 shares of Common Stock, of
which options to acquire 639,665 shares have already been granted. Eligible
individuals include key employees and such employees of the Company or its
subsidiaries as the Board of Directors may determine from time to time. The
Stock Option Plan is administered by the Stock Option Committee of the Board,
which determines, in its discretion, the number of shares subject to each
incentive option granted and the related purchase price and option period. The
Stock Option Committee consists of Messrs. Shaughnessy and Macrae, both of
whom are disinterested directors with respect to the Stock Option Plan.

The Stock Option Plan requires that the exercise price for each incentive
stock option must not be less than the fair market value per share of the
Common Stock at the time the option is granted. No incentive stock option,
however, may be granted to an employee who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company
unless the option price is at least 110% of the fair market value of the
Common Stock at the date of grant and option

35
<PAGE>

period is not more than five years from the date of grant. No employee may be
granted incentive stock options that first become exercisable during a
calendar year to purchase Common Stock, or stock of any affiliate (or a
predecessor of the Company or an affiliate), with an aggregate fair market
value (determined as of the date of grant of each option) in excess of
$100,000. An incentive stock option counts against the annual limitation only
in the year it first becomes exercisable. Incentive stock options may be
granted only to employees of the Company.

The option period may not be more than ten years from the date the option
is granted. Options may be exercised in annual installments as specified by
the Stock Option Committee. All installments that become exercisable are
cumulative and may be exercised at any time after they become exercisable
until the option expires. Options are not assignable or transferable other
than by will or the laws of descent and distribution.

Full payment for shares purchased upon exercise of an option must be made
at the time of exercise. No shares may be issued until full payment is made.
The Stock Option Plan provides that an option agreement may permit an optionee
to tender previously owned shares of Common Stock in partial or full payment
for shares to be purchased on exercising an option. Unless sooner terminated
by action of the Board, the Stock Option Plan will terminate in 2006. Subject
to certain exceptions, the Stock Option Plan may be amended, altered, or
discontinued by the Board without stockholder approval.

The Board has retained the right to amend or terminate the Stock Option
Plan as it deems advisable. However, without stockholder approval no amendment
shall be made to: (i) change the aggregate number of shares that may be issued
under options pursuant to the provisions of the plan; (ii) reduce the price at
which options may be exercised to an amount less than fair market value per
share at the time the options are granted; or (iii) change the class or
classes of employees eligible to receive options. However, the Board of
Directors may make changes to the plan or outstanding options to enable
options to continue to qualify under Section 422 of the Internal Revenue Code,
and the Board of Directors has the power to accelerate the vesting of or
extend the time of exercise for options subject to the limitations set forth
in the plan.

The following table provides information regarding the stock options
granted by the Company to Named Officers during fiscal 1996. Other than the
incentive stock options which were granted to Mr. Gorman in October 1996 in
connection with the beginning of his employment with the Company, all of the
following incentive stock options were granted in March 1996 and replaced
previously granted non-qualified options.

Fiscal Year 1996 Option Grants
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------------------
Potential Realizable
Value at
Assumed Annual Rates of
Number of Percent of Stock Price Appreciation
Securities Total for
underlying Options Exercise of Option Term (1)
Option/SARs Granted to Base Price Expiration -------------------------
Granted (#) Employees ($/Share) Date 5% 10%
------------- ------------ ------------- ------------ ------------ -----------
Name
- ----
<S> <C> <C> <C> <C> <C> <C>

William A. Schwartz, Jr. ...... 228,735 35.7% $ 7.69 10/01/04 $1,594,295 $3,580,545
Reid V. Eikner ............... 76,050 11.9 7.69 10/01/04 530,072 1,190,463
George T. Gorman ............... 15,665 2.4 7.69 09/01/06 109,186 245,215
Gayle E. Schmidt ............... 76,050 11.9 7.69 10/01/04 530,072 1,190,463
George E. McHenry, Jr. ......... 76,050 11.9 7.69 10/01/04 530,072 1,190,463
</TABLE>
- ------------
(1) The potential realizable values set forth under these columns result from
calculations assuming 5% and 10% growth rates as set by the Securities and
Exchange Commission and are not intended to forecast future price
appreciation of the Company's Common Stock. The amounts reflect potential
future value based upon growth at these prescribed rates. The Company did
not use an alternative formula for a grant date valuation, an approach
which would state gains at present, and therefore lower, value. The
Company is not aware of any formula which will determine with reasonable
accuracy a present value based on future unknown or volatile factors.
Actual gains, if any, on stock options exercises are dependent on the
future performances of the Company's Common Stock. There can be no
assurance that the amounts reflected in this table will be achieved.

36
<PAGE>

No options were exercised by the Named Officers during the fiscal year
ended January 31, 1997. The following table provides information concerning
unexercised options and the value of options held by the Named Officers at
fiscal year end.

Aggregate Option Exercises in Fiscal Year 1996
and Year-end Option Values

<TABLE>
<CAPTION>
Value of Unexercised
Number of in-the-Money
Securities Underlying Options at
Unexercised Options January 31, 1997
at January 31, 1997(#) (1)($)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>

William A. Schwartz, Jr. ...... 228,735 -- $299,643 $ --
Reid V. Eikner ............... 76,050 -- 99,926 --
George T. Gorman ............... 5,221 10,444 6,840 13,682
Gayle E. Schmidt ............... 76,050 -- 99,626 --
George E. McHenry, Jr. ......... 76,050 -- 99,626 --
</TABLE>

- ------------
(1) The initial public offering price is used in lieu of the fair market value
of the Company's Common Stock as of January 31, 1997 in accordance with
the guidelines of the Securities and Exchange Commission and should not be
construed to equal such fair market value.

Employment Agreements

The Company has employment agreements with the following executive
officers: William A. Schwartz, Jr., President and Chief Executive Officer;
George T. Gorman, Executive Vice President Retail; Gayle E. Schmidt, Executive
Vice President Manufacturing, Reid V. Eikner, Executive Vice President
Finance; George E. McHenry, Jr., Vice President, Secretary and Chief Financial
Officer. The employment contracts provide for a guaranteed base salary and the
right to be considered for such bonus programs as are adopted by the board of
directors. All of the agreements were entered into in 1994, except Mr.
Eikner's and Mr. Gorman's, both of whom entered into their contracts in 1995
and 1996, respectively. Mr. Schwartz's employment agreement has been extended
for an additional three year term commencing in November 1997. The employment
agreements of all of the individuals terminate in November 1998, except Mr.
Schwartz's agreement, which terminates in November 2000 and Mr. Gorman's
agreement, which terminates in September, 1999. All of the contracts
automatically renew annually if not terminated by either party, except that
Mr. Eikner has the right to resign in November of 1997 and receive one year's
severance. Under the terms of the agreements, the executive is entitled to
salary continuation for the balance of the term of the employment agreement in
the event that the contract is terminated by the Company other than for good
cause or, in the case of Ms. Schmidt and Messrs. Schwartz, Eikner and McHenry,
if the employee resigns because the employee's compensation is reduced, the
employee is required to relocate or there is a material reduction in the
employee's duties or responsibilities. The severance due to such executive
depends on the monthly salary at the time and the term of such severance
period but in no event may Mr. Schwartz's be less than one year. The monthly
salary for such executives is as follows: Mr. Schwartz -- $20,417; Mr. Eikner
- -- $13,333; Mr. Gorman -- $13,333; Ms. Schmidt -- $13,333; and Mr. McHenry --
$12,500. Messrs. Schwartz, Eikner and Gorman have non-compete and
non-solicitation agreements which limit their rights to seek competitive
employment or hire away employees of the Company following the termination of
their employment with the Company.

Director Compensation

The Company has granted options to acquire Common Stock to directors who
are not employed, affiliated with or 5% stockholders of the Company.
Non-employee directors have historically received $15,000 per year in director
fees. The Company has agreed to grant as director compensation to Messrs.
Tracy and Troup concurrent with this offering, five year options, which vest
over two years, to acquire Common Stock at the public offering price. Mr.
Tracy will receive options to acquire 11,111 shares and Mr. Troup will receive
options to acquire 22,222 shares. The Company also reimburses directors for
out-of pocket expenses. The purpose of

37
<PAGE>

using options as director compensation is to encourage the ownership of Common
Stock by the outside directors upon whose judgment and ability the Company
depends for its long term growth and development and to provide an effective
and economic manner of compensating outside directors. This is intended to
promote a close identity of interest among the Company, the outside directors
and the stockholders, and to provide a further means to attract and retain
outstanding board members.

In November 1995, options to purchase up to 16,250 shares of the Company's
Common Stock were issued to Mr. Tracy.

38
<PAGE>

CERTAIN TRANSACTIONS

On December 2, 1994, all of Westinghouse Credit Corporation's
("Westinghouse") interest in the Company was acquired by RAA, an entity
created for the sole purpose of acquiring Westinghouse's interest in the
Company. Following RAA's acquisition of Westinghouse's interest, which
included over 80% of the Company's Common Stock and $19,350,000 of preferred
stock and debt, RAA guaranteed loans to the Company and loaned additional
funds to the Company. See "Use of Proceeds." RAA was dissolved in fiscal 1995,
and its ownership in the Company was transferred to its former partners.
Messrs. Dennis J. Shaughnessy, J. Roger Sullivan, Jr., Richard K. McDonald and
G. Kenneth Macrae, all of whom are directors of the Company and are officers,
directors and or shareholders in one or more of the entities which were
partners in RAA. See "Principal Stockholders." The former partners of RAA
agreed to guarantee a $3,600,000 overadvance on the Company's revolving line
of credit until November 13, 1995. The guarantee was extinguished in January
1996, at which time the Company issued the Subordinated Debt in the amount of
$7,200,000 to the former RAA partners. The Subordinated Debt, the balance of
which was $8,837,000 as of July 31, 1997, is held by the following affiliates
of directors and former directors in the amounts indicated: Grotech Partners
IV, L.P. ($3,588,000); Keystone Ventures IV, L.P. ($753,000); Stolberg
Partners, L.P. ($2,803,000); Richard K. McDonald ($460,000); and Constitution
Partners I, L.P. ($897,000), and by the following non-affiliates; Penn Janney
Fund, Inc. ($224,000) and Needham Capital Partners, L.P. ($112,000). See
"Management--Executive Officers and Directors", "Principal Stockholders" and
"Underwriting." The Subordinated Debt is subordinate to the Company's
Revolving Line of Credit and Term Loan, and accrues interest at the rate of
12.0% per annum. The principal balance and all accrued interest on the
Subordinated Debt is due and payable in full on March 1, 1998. The Company
intends to repay this debt in full with the proceeds of this offering.

The following directors are affiliated with the following entities: Dennis
J. Shaughnessy and J. Roger Sullivan, Jr. (Grotech Partners IV, L.P., Grotech
Partners III, L.P., Grotech III Companion Fund, L.P. and Grotech III
Pennsylvania Fund, L.P.); Richard K. McDonald (M&M General Partnership and
Constitution Partners, L.L.P.); and G. Kenneth Macrae (Keystone Ventures IV,
L.P.). Mr. E. Theodore Stolberg, a partner of Stolberg Partners, L.P. served as
a director of the Company for two years prior to his resignation in October
1997.

Since 1990, the Company has leased a retail store and office space
located in a 7,000 square foot building in Philadelphia, Pennsylvania, from a
limited partnership in which William A. Schwartz, Jr., a director, the
President and Chief Executive Officer of the Company and the general partner
of such partnership, Gayle E. Schmidt, the Executive Vice President,
Manufacturing of the Company, George E. McHenry, Jr., the Secretary, Treasurer
and Chief Financial Officer of the Company and James M. McGrath, the Executive
Vice President, Retail Operations of the Company are limited partners, each of
whom owns 10% of such limited partnership. The Company made payments to the
partnership of $136,600 in fiscal 1995, $136,600 in fiscal 1996 and $67,800
through August 1, 1997. Management believes that the lease terms are
comparable to those that could have been obtained pursuant to an arms length
transaction with unaffiliated parties.

The Company has a consulting arrangement with David M. Tracy, a director
of the Company, pursuant to which Mr. Tracy receives compensation in the
amount of $1,500 per day for consulting services rendered at the Company's
request. During fiscal 1996, Mr. Tracy received $20,000 in compensation from
the Company for consulting services rendered.

39
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of August 31, 1997 (giving pro forma
effect to the conversion of all outstanding shares of the Series A Preferred
Stock and the Series C Preferred Stock into Common Stock), and as adjusted to
reflect the sale of shares offered hereby, by: (i) each director of the
Company who beneficially owns Common Stock and the Company's executive
officers; (ii) all of the Company's directors and executive officers as a
group; and (iii) each person known to the Company to be the beneficial owner
of more than 5% of the Common Stock as of August 31, 1997.

The number of shares of the Company's Common Stock beneficially owned by
each individual or entity set forth below is determined under the rules of the
Securities and Exchange Commission (the "Commission") and the information is
not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which an
individual has sole or shared voting power or investment power and any shares
which an individual presently, or within 60 days, has the right to acquire
through the exercise of any stock option or other right. However, such shares
are not deemed to be outstanding for the purpose of computing the percentage
of outstanding shares beneficially owned by any other person. Unless otherwise
indicated, each individual has sole voting and investment power (or shares
such powers with his or her spouse) with respect to the shares of the
Company's Common Stock set forth in the table below.
<TABLE>
<CAPTION>

Percentage of Ownership(1)
Number of -----------------------
Shares Benefically Before the After the
Officers, Directors & 5% Stockholders Owned(1) Offering Offering
- --------------------------------------- ------------------ ---------- ----------
<S> <C> <C> <C>

Grotech Partners IV, L.P. ............. 1,583,951 30.1% 20.4%
Stolberg Partners L.P. ................ 1,522,931 28.9% 19.6%
Constitution Partners I, L.P. ......... 487,228 9.3% 6.3%
Keystone Ventures IV, L.P. ............ 487,293 9.3% 6.3%
Dennis J. Shaughnessy (2) ............ 1,949,335 37.1% 25.1%
J. Roger Sullivan, Jr. (2) ......... 1,949,335 37.1% 25.1%
Richard K. McDonald (3) ............ 737,254 14.1% 9.5%
G. Kenneth Macrae (4) ............... 487,293 9.3% 6.3%
William A. Schwartz, Jr. (5) ......... 333,718 6.0% 4.1%
David M. Tracy ........................ 19,954 * *
Peter M. Troup ........................ 7,407 * *
Reid V. Eikner ..................... 76,050 1.4% *
George T. Gorman ..................... 5,222 * *
Gayle E. Schmidt (6) .................. 77,090 1.4% *
George E. McHenry, Jr. ............... 76,050 1.4% *
All directors and officers as a
group(7) ............................ 3,769,373 64.8% 45.3%

</TABLE>

40
<PAGE>

- ------------
* Less than one percent.
(1) Assumes no exercise of the Underwriters' over-allotment option.
(2) The shares of Common Stock listed in Mr. Shaughnessy's and Mr. Sullivan's
name are owned by Grotech Partners IV, L.P., Grotech Partners III, L.P.,
Grotech III Companion Fund, L.P. and Grotech III Pennsylvania Fund, L.P.,
each a limited partnership in which Mr. Shaughnessy and Mr. Sullivan serve
as directors and or officers of the respective general partners.
(3) A portion of the shares of Common Stock and derivative securities listed
in Mr. McDonald's name are owned by M&M General Partnership and
Constitution Partners I, L.P., each a limited partnership in which Mr.
McDonald serves as a director and or officer of the respective general
partners.
(4) The shares of Common Stock listed in Mr. Macrae's name are owned by
Keystone Venture IV, L.P., a limited partnership in which Mr. Macrae
serves as a director and or officer of its general partner. Includes
22,945 shares of Common Stock issuable upon exercise of currently
exercisable options.
(5) Includes 228,735 shares issuable upon exercise of currently exercisable
options. Mr. Schwartz is married to Ms. Gayle E. Schmidt and, accordingly,
may be deemed to beneficially own the shares held by Ms. Schmidt.
(6) Includes 76,050 shares issuable upon exercise of currently exercisable
options. Ms. Schmidt is married to Mr. William A. Schwartz, Jr. and,
accordingly may be deemed to beneficially own the shares held by Mr.
Schwartz.
(7) Includes 554,406 shares of Common Stock issuable upon exercise of
currently exercisable options.

41
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The Company is a Delaware corporation authorized to issue 15,000,000
shares of Common Stock, par value $0.01 per share, and 5,000,000 shares of
Preferred Stock, par value $0.01 per share, issuable in series, the relative
rights, limitations, and preferences of which may be designated by the Board
of Directors. As of the date hereof, the Board of Directors has designated the
Series A Preferred Stock and the Series C Preferred Stock both of which will
be converted into common stock in this offering. The Company currently has
2,503,540 shares of Common Stock, 165 shares of Series A Preferred Stock and
122,730 shares of Series C Preferred Stock outstanding. Upon consummation of
this offering, 7,761,544 shares of Common Stock (8,136,544 if the
over-allotment option is exercised in full) and no shares of Preferred Stock
will be outstanding.

Common Stock. The holders of Common Stock are entitled to one vote per
share on all matters that may come before them and may be subject to the
relative rights, limitations, and preferences of any series of preferred stock
that may be issued. Holders of Common Stock are entitled, among other things:
(i) to share ratably in dividends if, when, and as declared by the Company's
Board of Directors out of legally available funds; and (ii) in the event of
the liquidation, dissolution, or winding-up of the Company, to share ratably
in the distribution of legally available assets, after payment of debts and
expenses. The holders of Common Stock have no preemptive rights to subscribe
for additional shares of any of the Company's capital stock or other
securities. No cumulative voting rights exist with regard to the election of
directors.

Preferred Stock. Under the Company's Certificate of Incorporation, the
Board of Directors is authorized, without further stockholder action, to
provide for the issuance of preferred stock in one or more classes or series
within any class or classes, with such designations, preferences,
qualifications, limitations and special or relative rights, if any, as may be
designated by the Board of Directors. The authority of the Board of Directors
includes, but is not limited to, the determination or fixing of the following
with respect to shares of each class or any series thereof: (i) the voting
rights and powers, if any; (ii) the rates and times at which, and the terms
and conditions on which, dividends, if any, will be paid, and any dividend
preferences or rights of cumulation; (iii) whether shares shall be convertible
or exchangeable, and if, so, the terms and provisions thereof; (iv) whether
shares shall be redeemable, and, if so, the terms and conditions thereof; and
(v) the rights and preferences, if any upon the voluntary or involuntary
dissolution, liquidation or winding up of the Company.

Series A 9% Cumulative Preferred Stock. The Board of Directors has
authorized the issuance of 200 shares of Series A Preferred Stock, 165 of
which have been issued and are outstanding. The Series A Preferred Stock is
senior to the Common Stock and any other capital stock of the Company ranking
junior to the Series A Preferred Stock as to dividends and upon the
liquidation, dissolution or winding up of the Company's affairs. Holders of
the Series A Preferred Stock are entitled to receive cumulative dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor, at the annual rate of 9% per annum until December 31, 1998
or, at the option of the Company, by the issuance of additional shares of
Series A Preferred Stock. After that date, all dividends are subject to an
adjustable rate based on the treasury bond rate then in effect. Unless all
accrued dividends on the Series A Preferred Stock have been paid or set apart
for payment: (i) no dividends or other distributions may be paid or set apart
for payment on the Common Stock or any other class of capital stock ranking
junior to the Series A Preferred Stock as to dividends or other distributions;
and (ii) the Company is prohibited from repurchasing, redeeming or otherwise
acquiring Common Stock or any other class of capital stock ranking junior to
the Series A Preferred Stock as to dividends and other distributions, except
by conversion of such junior stock into, or exchange of such stock for, stock
of the Company ranking junior to the Series A Preferred Stock as to dividends.

Shares of the Series A Preferred Stock may be redeemed at the option of
the Company at any time, in whole or in part, at a price per share of
$100,000, plus accrued and unpaid dividends (the

42
<PAGE>

"Redemption Price"). The Series A Preferred Stock is not subject to any
mandatory redemption, sinking fund or other similar provisions. Further, the
holders of Series A Preferred Stock are entitled to elect two members to the
Company's Board of Directors, but have only limited voting rights and no
preemptive rights or subscription rights in respect of any capital stock of
the Company.

In the event of any voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, before any distribution of assets
may be made to the holders of any Common Stock or the holders of any other
capital stock of the Company that ranks junior to the Series A Preferred Stock
upon liquidation, the holders of shares of Series A Preferred Stock are
entitled to receive, out of the assets of the Company available for
distribution to its shareholders, an amount equal to the Redemption Price plus
any accrued and unpaid dividends.

Series C 9% Cumulative Preferred Stock. Pursuant to its authority under
the Certificate of Incorporation, the Board of Directors of the Company has
authorized the issuance of 300,000 shares of Series C Preferred Stock, 122,730
shares of which have been issued and are outstanding. The Series C Preferred
Stock is senior to all capital stock of the Company as to dividends and upon
liquidation, dissolution or winding up of the Company's affairs. Holders of
the Series C Preferred Stock are entitled to receive cumulative quarterly
dividends out of funds legally available therefor, at the annual rate of 9%
per annum or, at the option of the Company, by the issuance of additional
shares of Series C Preferred Stock. Any quarterly dividends payable after
December 1, 1999, are payable only in cash out of funds legally available
therefor, at the annual rate of 25% per annum. Unless full cumulative
quarterly dividends on all outstanding shares of the Series C Preferred Stock
have been paid or declared and set aside for payment for all past dividend
periods: (i) no dividends, in cash, stock or other property, may be declared
or any other distribution made upon any other capital stock of the Company;
and (ii) no other capital stock of the Company may be redeemed pursuant to a
sinking fund or otherwise purchased or otherwise acquired for any
consideration by the Company.

Shares of the Series C Preferred Stock may be redeemed at the option of
the Company at any time, in whole or in part, at a price per share of $63.50
(subject to adjustments for any stock dividends, combinations, splits or
recapitalizations), plus accrued and unpaid dividends (the "Redemption
Price"). The Series C Preferred Stock is not subject to any mandatory
redemption, sinking fund or other similar provisions. Further, the holders of
Series C Preferred Stock are entitled to elect two members to the Company's
Board of Directors, but have only limited voting rights and have no preemptive
rights or subscription rights in respect of any securities of the Company.

In the event of any voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, before any distribution of assets
may be made to the holders of any other capital stock of the Company, the
holders of shares of Series C Preferred Stock are entitled to receive, out of
the assets of the Company available for distribution to its shareholders, an
amount equal to the Redemption Price plus any accrued and unpaid interest on
any dividends.

Conversion of Series A Preferred Stock and Series C Preferred Stock

The designation of rights for both the Series A Preferred Stock and the
Series C Preferred Stock provide for the conversion of such preferred stock
into Common Stock at the option of the stockholder in connection with any
public offering accomplished during 1997. The Series A Preferred Stock and the
Series C Preferred Stock of the Company provide for conversion of the face
amount of such preferred stock (including accrued but unpaid dividends) at the
price at which the Common Stock is offered to the public in this offering. Any
dividends accrued on the Series A Preferred Stock and Series C Preferred Stock
prior to this offering and after October 31, 1997, will be paid in cash by the
Company.

43
<PAGE>

In connection with this offering, 1,872,592 and 885,412 shares, respectively,
of Common Stock are issuable upon conversion of the Series A Preferred
Stock and the Series C Preferred Stock.

Registration Rights

The Company, certain stockholders, William A. Schwartz, Jr., Reid V.
Eikner, Gayle E. Schmidt, George E. McHenry, Jr. and James M. McGrath are
parties to a Stockholders' Agreement dated December 29, 1995 (the
"Stockholders' Agreement" ). Under the terms of the Stockholders' Agreement,
the holders of at least two-thirds of all shares of Common Stock covered by
the Stockholders' Agreement may, at any time after December 29, 1997, require
the Company to register all or a portion of those shares of Common Stock under
the Securities Act at the expense of the Company. The Stockholders' Agreement
also provides that the Company must provide each party to the Stockholders'
Agreement with written notice of any proposal by the Company to register any
Common Stock under the Securities Act for sale to the public. If any party to
the Stockholders' Agreement elects to have its shares registered under the
Securities Act along with those of the Company, the Company is required to use
its best efforts to include such party's shares in any registration of Common
Stock by the Company for sale to the public. In addition, the Stockholders'
Agreement provides that those parties covered by the agreement may elect to
have their shares registered on Form S-3 if such is available for use by the
Company; provided that the Company is not required to make more than two such
registrations within any twelve-month period.

Certain Provisions of the Company's Certificate of Incorporation and Delaware
Law

Anti-takeover Provisions

The Company's Certificate of Incorporation contains provisions described
below that may reduce the likelihood of a change in management or voting
control of the Company without the consent of the Company's Board of
Directors. These provisions could have the effect of delaying, deterring, or
preventing tender offers or takeover attempts that some or a majority of the
Company's stockholders might consider to be in their best interests, including
offers or attempts that might result in a premium over the market price for
the Common Stock, and may have the effect of depressing the market price
investors are willing to pay.

Preferred Stock. The Company's Certificate of Incorporation permits the
Company's Board of Directors to issue at any time, without stockholder
approval, preferred stock with super-voting rights or other features that
would deter or delay a takeover by reducing the ability of a potential
acquiror to acquire the necessary voting shares to obtain control.

Delaware Takeover Statute. The Company is subject to Section 203 of the
Delaware General Corporation Law which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any of a broad range of
business combinations with any "interested stockholder" for a period of three
years following the date that such stockholder became an interested
stockholder, unless: (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and also
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or

44
<PAGE>

after such date, the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder. An
"interested stockholder" is defined as any person that is (a) the owner of 15%
or more of the outstanding voting stock of the corporation or (b) 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.

Other Provisions

Director Liability Limitation. As authorized by the Delaware General
Corporation Law, the Com-pany's Certificate of Incorporation provides that the
Company's directors will have no personal liability to the Company or its
stockholders for monetary damages for breach or alleged breach of the
directors' duty of care. This provision does not apply to: (i) the directors'
duty of loyalty; (ii) acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law; (iii) unlawful dividends,
stock repurchases, or stock redemptions; and (iv) approval of any transaction
from which such director derives an improper personal benefit. In addition,
the Company's Certificate of Incorporation provides that any additional
liabilities permitted to be eliminated by subsequent legislation automatically
will be eliminated without further stockholder vote, unless additional
stockholder approval is required by such legislation.

The principal effect of the limitation of liability provision is that a
stockholder will be unable to pursue an action for monetary damages against a
director of the corporation for breach of the duty of care unless the
stockholder can demonstrate one of the specified bases for liability. This
provision, however, will not eliminate or limit director liability arising in
connection with causes of action brought under the federal securities laws or
for breaches by directors of the duty of loyalty.

The Company's Certificate of Incorporation does not eliminate its
directors' duty of care. Accordingly, the provision should not affect the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of the duty of care.

Indemnification. The Company's Certificate of Incorporation also provides
that the Company will indemnify its directors and officers to the fullest
extent permitted by Delaware law, including circumstances in which
indemnification is otherwise discretionary under Delaware law. The Company
generally is required to indemnify its directors and officers against all
judgments, fines, settlements, legal fees, and other expenses incurred in
connection with pending or threatened legal proceedings because of the
director's or officer's position with the Company or another entity that the
director or officer serves at the Company's request, subject to certain
conditions. To receive indemnification, the director or officer must have been
successful in the legal proceeding or acted in good faith in what was
reasonably believed to be a lawful manner, and in, or not opposed to, the
Company's best interest. The Company has entered into an indemnification
agreement with each director of the Company which provides for indemnification
to the fullest extent permitted by law.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to the Company's Certificate of Incorporation, or otherwise,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer, or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

Transfer Agent and Registrar

Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey
07016-3572 has been appointed as the transfer agent and registrar for the
Common Stock.

45
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, 7,761,544 shares of Common Stock will
be issued and outstanding (8,136,544 if the over-allotment option is
exercised in full). The 2,500,000 shares of Common Stock sold in this offering
(or 2,875,000 shares if the Underwriters' over-allotment option is exercised
in full) will be freely tradeable without restriction under the Securities
Act, except that any shares acquired by an "affiliate" of the Company (as
defined in the rules and regulations of the Securities Act) will be subject to
certain of the resale limitations of Rule 144 promulgated under the Securities
Act. Of the remaining 5,261,544 shares of Common Stock outstanding after this
offering, 5,026,179 are restricted securities (the "Restricted Securities")
under the Securities Act, and may not be resold except pursuant to an
effective registration statement under the Securities Act regarding that sale,
in accordance with the provisions of Rule 144, or in other transactions that
are exempt from registration under the Securities Act.

In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated for purposes of Rule 144), including
an affiliate of the Company, who has beneficially owned Common Stock treated
as restricted securities for at least one (1) year is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
(i) one percent of the then outstanding shares of Common Stock (approximately
78,000 shares immediately after this offering) or (ii) the average weekly
trading volume of Common Stock on the Nasdaq National Market during the four
calendar weeks preceding the date of the sale. These sales are also subject to
certain other requirements with respect to the manner of sale, notice to the
Commission, and availability of current public information about the Company.
Under Rule 144(k), a stockholder who is not and has not been an affiliate of
the Company at any time during the three months before a sale and who has
beneficially owned restricted Common Stock for at least two (2) years before
the sale will be entitled to sell the Common Stock immediately, without regard
to the restrictions and requirements described above. In addition, affiliates
of the Company must comply with the requirements of Rule 144, other than the
one-year holding period requirement, to sell any of their shares of Common
Stock that are not treated as restricted securities.

Of the 5,026,179 Restricted Shares to be outstanding after this offering,
4,843,267 shares (all of which are subject to the lock-up agreements described
below) will be eligible for sale in the public market pursuant to Rule 144,
beginning 90 days after the offering, subject to the manner of sale, volume
and other restrictions of Rule 144 and 182,911 shares (none of which are
subject to the lock-up agreements described to below) will be eligible for
sale in the public market immediately after the offering without restriction
pursuant to Rule 144(k). In addition, 356,006 shares (none of which are subject
to the lock-up agreements described below) are unrestricted and available for
immediate sale following this offering.

The Company is unable to estimate the number of shares that may be sold
from time to time under Rule 144 because the number will depend on the market
price and trading volume for the Common Stock, the personal circumstances of
the sellers, and other factors.

The Company has granted registration rights to certain of its
stockholders. See "Description of Capital Stock -- Registration Rights."

Each of the Company's officers, directors, and certain stockholders of
the Company have agreed not to sell, contract to sell, grant any option for
the sale of, or otherwise dispose of any shares of capital stock or any
securities convertible into capital stock currently owned (a total of
5,292,304 shares upon the completion of this offering) for 180 days after the
effective date of the Registration Statement without the prior written consent
of Salomon Smith Barney.

46
<PAGE>

The Company plans to file a registration statement on Form S-8 to
register shares of Common Stock issuable under Company stock options to
employees and directors. Accordingly, shares issued pursuant to these stock
options will be freely tradeable without restriction under the Securities Act,
except for any shares acquired by an affiliate of the Company. The Company's
Stock Option Plan provides for grants of options to purchase up to 1,300,000
shares, of which options to acquire 639,665 shares have been granted. See
"Management -- Stock Option Plan" and "Description of Capital Stock."

The Company cannot predict the effect, if any, that future sales of
shares of Common Stock or the availability of shares for sale will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts
of Common Stock in the public market could adversely affect the prevailing
market price of Common Stock and impair the Company's ability to raise capital
by issuing additional equity securities.

UNDERWRITING

Subject to the terms and subject to the conditions set forth in the
Underwriting Agreement, the Company has agreed to sell to each of the
Underwriters named below (the "Underwriters"), for whom Smith Barney Inc.
and Janney Montgomery Scott Inc. are acting as representatives (the
"Representatives"), and each of such Underwriters has severally agreed to
purchase from the Company, the respective number of shares of Common Stock set
forth opposite its name below:

Name Number of Shares
- ---- -----------------
Smith Barney Inc. ......................................... 648,438
Janney Montgomery Scott Inc. ............................. 648,437
Bear, Stearns & Co., Inc .................................. 78,125
CIBC Oppenheimer Corp. .................................... 78,125
Donaldson, Lufkin & Jenrette Securities Corporation ....... 78,125
Lehman Brothers Inc. ...................................... 78,125
Merrill Lynch, Pierce, Fenner & Smith Incorporated......... 78,125
Prudential Securities Incorporated ........................ 78,125
Schroeder & Co. Inc. ...................................... 78,125
Needham & Company, Inc. ................................... 62,500
Raymond James & Associates, Inc. .......................... 62,500
The Robinson-Humphrey Company, LLC ........................ 62,500
Surto & Co. Incorporated .................................. 62,500
Tucker Anthony Incorporated ............................... 62,500
Wheat, First Securities, Inc. ............................. 62,500
Barington Capital Group, L.P. ............................. 46,875
Blackford Securities Corp. ................................ 46,875
First Albany Corporation .................................. 46,875
Pennsylvania Merchant Group Ltd. .......................... 46,875
Rodman & Renshaw, Inc. .................................... 46,875
Van Kasper & Company ...................................... 46,875
---------
Total ............................................... 2,500,000
=========

In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock offered hereby (other than those covered by the
Underwriters' over-allotment option described below) if any such shares are
purchased. In the event of a default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
nondefaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.

The Company has been advised by the Representatives that the Underwriters
propose initially to offer the shares of Common Stock to the public at the
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price, less a concession not in excess of $0.38 per share. The
Underwriters may allow and such dealers may reallow a concession not in excess
of $0.10 per share to certain other dealers. After the initial public offering,
the price and such concessions may be changed by the Underwriters.

The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
aggregate of 375,000 additional shares of Common Stock at the same price per
share as the initial 2,500,000 shares of Common Stock to be purchased by the
Underwriters. The Underwriters may exercise such option only to cover
over-allotments in the sale of the shares of Common Stock that the
Underwriters have agreed to purchase. To the extent the Underwriters exercise
such option, each Underwriter will

47
<PAGE>

have a firm commitment, subject to certain conditions, to purchase the same
proportion of the option shares as the number of shares of Common Stock to be
purchased and offered by such Underwriter in the above table bears to the
total number of shares of Common Stock initially offered by the Underwriters.
See "Principal Stockholders."

The Company, its officers and directors, and the holders of all of the
Common Stock and options to purchase Common Stock outstanding prior to this
offering have agreed not to offer, sell, contract to sell or otherwise dispose
of, directly or indirectly, or announce the offering of their shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of Salomon Smith Barney.

The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or contribute to payments the Underwriters may be required
to make in respect thereof.

During and after the offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include overallotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members of other
broker-dealers in respect of the shares of Common Stock sold in the offering
for their account may be reclaimed by the syndicate if such shares are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock which may be higher than the price that might otherwise prevail
in the open market.

Immediately prior to this offering, there has been no public market for
the Common Stock. The initial public offering price for the Shares was
determined by negotiation between the Company and Salomon Smith Barney. Among
the factors considered in determining the initial public offering price were
the earnings and certain other financial and operating information of the
Company in recent periods, the future prospects of the Company and its
industry in general, the general condition of the securities market at the
time of this offering and the market prices of securities and certain
financial and operating information of companies engaged in activities similar
to those of the Company. There can, however, be no assurance that the prices
at which the Common Stock will sell in the public market after this offering
will not be lower than the price at which they are sold by the Underwriters.

Penn Janney Fund, Inc. ("Penn Janney"), which owns 121,777 shares of
Common Stock, is an affiliate of Janney Montgomery Scott Inc., an Underwriter
of this offering. Penn Janney also holds $224,000 of the Subordinated Debt,
all of which will be repaid with the proceeds of this offering. In addition,
FMH Incorporated holds options to purchase 16,689 shares of Common Stock with
an exercise price of $7.69 per share. Michael J. Mufson, a Senior Vice
President and Co-Director of Investment Banking at Janney Montgomery Scott
Inc. and Michael C. Foley, Senior Vice President and a Director of Janney
Montgomery Scott Inc., each own 25.5% of the equity interest in FMH
Incorporated. Mr. Mufson also holds options to purchase 2,295 shares of Common
Stock with an exercise price of $7.69 per share. Needham Capital Partners,
L.P. ("Needham Capital") which owns 60,992 shares of Common Stock, is an
affiliate of Needham & Company, Inc., an Underwriter of this offering.
Needham Capital also holds $112,000 of the Subordinated Debt, all of which
will be repaid with the proceeds of this offering. See "Use of Proceeds".

48
<PAGE>

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Sayles & Lidji, A Professional
Corporation, Dallas, TX. Certain legal matters in connection with the sale of
the issuance of the shares of Common Stock offered hereby will be passed upon
for the Underwriters by Dewey Ballantine LLP, New York, NY.

EXPERTS

The consolidated financial statements of the Company as of January 31,
1996 and 1997, and for the year ended January 31, 1997, the ten months ended
January 31, 1996, and the year ended March 31, 1995, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance on such report given upon the authority
of such firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on
Form S-1 (together with all amendments and exhibits filed or to be filed in
connection therewith, the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. This Prospectus is a part of and does not include all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in
its entirety by reference to the copy of the applicable document filed with
the Commission.

For further information regarding the Company and the Common Stock
offered by this Prospectus, reference is made to the Registration Statement
and exhibits and schedules thereto, which may be inspected and copied at
prescribed rates at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and the regional offices of the Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained at prescribed rates by writing to the Commission, Public
Reference Section, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission also maintains a Web site that contains reports, proxy
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.

49
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
-----
Report of Independent Auditors .............................. F-2

Consolidated Balance Sheets ................................. F-3

Consolidated Statements of Operations ........................ F-5

Consolidated States of Changes in Stockholders' Equity ...... F-6

Consolidated Statements of Cash Flows ........................ F-7

Notes to Consolidated Financial Statements .................. F-8

F-1
<PAGE>

Report of Independent Auditors

Board of Directors
U.S. Vision, Inc.

We have audited the accompanying consolidated balance sheets of U.S. Vision,
Inc. as of January 31, 1997 and 1996, and the related consolidated statements
of operations, changes in stockholders' equity and cash flows for the year
ended January 31, 1997, the ten months ended January 31, 1996 and the year
ended March 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of U.S. Vision,
Inc. at January 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for the year ended January 31, 1997, the ten
months ended January 31, 1996 and the year ended March 31, 1995 in conformity
with generally accepted accounting principles.

Ernst & Young LLP

Philadelphia, Pennsylvania
March 18, 1997, except for
Note 12 as to which the
date is December 1, 1997

F-2
<PAGE>

U.S. Vision, Inc.

Consolidated Balance Sheets

(Dollars in thousands, except share data and per share amounts)
<TABLE>
<CAPTION>
January 31, July 31,
1996 1997 1997
---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash ....................................... $ 1,529 $ 374 $ 428
Accounts receivable ........................ 7,605 8,706 12,420
Inventory ................................. 18,663 18,125 19,790
Prepaid expenses and other ............... 172 423 450
--------- --------- ---------
Total current assets ........................ 27,969 27,628 33,088
Property, plant and equipment:
Land ....................................... 937 549 549
Buildings ................................. 5,907 6,792 7,033
Leasehold improvements ..................... 8,497 8,612 8,671
Machinery and equipment .................. 16,969 17,143 17,307
Furniture and fixtures ..................... 11,232 15,684 18,761
Automobiles ................................. 943 482 482
--------- --------- ---------
44,485 49,262 52,803
Less accumulated depreciation ............ 23,308 25,882 27,693
--------- --------- ---------
21,177 23,380 25,110
Goodwill (net of $236, $319, and $361 in
accumulated amortization, respectively) ....... 3,083 3,000 2,958
Other ....................................... 804 395 678
--------- --------- ---------
$ 53,033 $ 54,403 $ 61,834
========= ========= =========
</TABLE>

F-3
<PAGE>

U.S. Vision, Inc.

Consolidated Balance Sheets

(Dollars in thousands, except share data and per share amounts)

<TABLE>
<CAPTION>
January 31, July 31,
1996 1997 1997
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable -- trade ........................ $ 7,820 $ 7,173 $ 9,917
Accrued expenses and other ........................ 6,891 7,141 5,088
Current portion of obligation under capital lease . 58 586 536
Current portion of long-term debt ............... 948 1,407 10,224
--------- --------- ---------
Total current liabilities ........................... 15,717 16,307 25,765
Obligations under capital lease ..................... 225 567 946
Long-term debt, less current portion ............... 21,291 22,056 16,784
Other long-term liabilities ........................ 3,903 1,663 1,595
Stockholders' equity:
9% Series A cumulative preferred stock;
$100,000 face value:
Authorized shares -- 200
Issued and outstanding shares -- 158 at
January 31, 1997, 144 at January 31,
1996, and 165 at July 31, 1997 ............... 14,422 15,765 16,483
9% Series C cumulative preferred stock; $63.50
face value:
Authorized shares -- 300,000
Issued and outstanding shares - 120,969 at
January 31, 1997, 110,936 at January 31,
1996, and 122,730 at July 31, 1997 ............ 7,044 7,682 7,793
Common stock, $0.01 par value:
Authorized shares -- 15,000,000
Issued and outstanding shares - 895,765 at
January 31, 1997, 916,890 at January 31,
1996 and 2,503,540 at July 31, 1997 ......... 9 9 25
Additional paid-in capital ........................ 70,905 70,683 70,914
Accumulated deficit .............................. (80,483) (80,329) (78,471)
--------- --------- ---------
Total stockholders' equity ........................... 11,897 13,810 16,744
--------- --------- ---------
$ 53,033 $ 54,403 $ 61,834
========= ========= =========
</TABLE>

See accompanying notes.

F-4
<PAGE>

U.S. Vision, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
Year 10 months Year Six months Six months
ended ended ended ended ended
March 31, January 31, January 31, July 31, July 31,
1995 1996 1997 1996 1997
----------- ------------- ------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>

Net sales ........................... $112,283 $ 91,172 $ 111,544 $ 57,372 $ 62,053
Cost of sales ........................ 35,139 29,652 34,273 17,745 19,438
--------- ---------- ---------- -------- ----------
Gross profit ........................ 77,144 61,520 77,271 39,627 42,615
Operating expenses:
Selling, general and administrative
expenses........................... 70,506 61,598 68,366 34,391 36,612
Depreciation and amortization ....... 3,654 2,608 3,271 1,599 1,855
Write-off of goodwill ............ -- 8,067 -- -- --
Writedown of Dallas facility ...... 2,100 1,305 -- -- --
Store closings and disposals ........ -- 10,473 -- -- --
--------- ---------- ---------- -------- ----------
76,260 84,051 71,637 35,990 38,467
--------- ---------- ---------- -------- ----------
Operating income (loss) ............... 884 (22,531) 5,634 3,637 4,148
Other income (expense):
Other income ..................... 16 59 18 14 2
Interest expense .................. (1,459) (2,100) (3,517) (1,566) (1,216)
--------- ---------- ---------- -------- ----------
(1,443) (2,041) (3,499) (1,552) (1,214)
--------- ---------- ---------- -------- ----------
Income (loss) before income tax
benefit .............................. (559) (24,572) 2,135 2,085 2,934
Income tax benefit .................. (463) (1,686) -- -- --
--------- ---------- ---------- -------- ----------
Net income (loss) ..................... $ (96) $ (22,886) $ 2,135 $ 2,085 $ 2,934
========= ========== ========== ======== ==========
Net income per share -- supplemental.... $ .40 $ .55
========== ==========
Shares used in computing net income
per share -- supplemental ............ 5,368,700 5,368,700
========== ==========
</TABLE>

See accompanying notes.

F-5
<PAGE>
U.S. Vision, Inc.

Consolidated Statements of Changes in Stockholders' Equity

(In thousands, except share data)
<TABLE>
<CAPTION>
9% Series A 9% Series C
Cumulative Cumulative
Preferred Stock Preferred Stock
($100,000 face value ($63.50 face value
per share) per share)
-------------------- --------------------
Shares Amount Shares Amount
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Balance at March 31, 1994 ...... 130 $ 13,000 -- $ --
Net loss ........................
Effect of debt for equity
exchange between stock-
holder and Royal Acquisition
Associates including costs
incurred net of income taxes
of $801,000 .....................
Issuance of preferred stock ... 100,000 6,350
Dividends on preferred stock ... 4 390 3,000 191
---- --------- ------- -------
Balance at March 31, 1995 ...... 134 13,390 103,000 6,541
Net loss ........................
Cash in lieu of fractional shares
after reverse stock split ......
Additional cost of equity
exchange .....................
Dividends on preferred stock ... 10 1,032 7,936 503
---- --------- ------- -------
Balance at January 31, 1996 ... 144 14,422 110,936 7,044
Net income .....................
Additional cost of equity
exchange .....................
Dividends on preferred stock ... 14 1,343 10,033 638
---- --------- ------- -------
Balance at January 31, 1997 ... 158 15,765 120,969 7,682
Net income (unaudited) .........
Dividends on preferred stock
(unaudited) .................. 7 718 5,656 358
Conversion of warrants ......... (3,895) (247)
---- --------- ------- -------
Balance at July 31, 1997
(unaudited) .................. 165 $ 16,483 122,730 $ 7,793
==== ========= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common Stock
($0.01 par value
per share) Additional Total
---------------------- Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------------ -------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1994 ...... 671,450 $ 7 $ 71,539 $ (55,385) $ 29,161
Net loss ........................ (96) (96)
Effect of debt for equity
exchange between stock-
holder and Royal Acquisition
Associates including costs
incurred net of income taxes
of $801,000 ..................... (166) (166)
Issuance of preferred stock ... 245,440 2 36 6,388
Dividends on preferred stock ... (581) --
--------- ---- -------- ---------- ----------
Balance at March 31, 1995 ...... 916,890 9 71,409 (56,062) 35,287
Net loss ........................ (22,886) (22,886)
Cash in lieu of fractional shares
after reverse stock split ...... (407) (407)
Additional cost of equity
exchange ..................... (97) (97)
Dividends on preferred stock ... (1,535)
--------- ---- -------- ---------- ----------
Balance at January 31, 1996 ... 916,890 9 70,905 (80,483) 11,897
Net income ..................... 2,135 2,135
Additional cost of equity
exchange ..................... (21,125) (222) (222)
Dividends on preferred stock ... (1,981)
--------- ---- -------- ---------- ----------
Balance at January 31, 1997 ... 895,765 9 70,683 (80,329) 13,810
Net income (unaudited) ......... 2,934 2,934
Dividends on preferred stock
(unaudited) .................. (1,076) --
Conversion of warrants ......... 1,607,775 16 231 --
--------- ---- -------- ---------- ----------
Balance at July 31, 1997
(unaudited) .................. 2,503,540 $ 25 $ 70,914 $ (78,471) $ 16,744
========= ===== ======== ========== ==========
</TABLE>

See accompanying notes.

F-6
<PAGE>

U.S. Vision, Inc.

Consolidated Statements of Cash Flows

(In thousands)
<TABLE>
<CAPTION>
Ten months Six months Six months
Year ended ended Year ended ended ended
March 31, January 31, January 31, July 31, July 31,
1995 1996 1997 1996 1997
------------ ------------- ------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) ........................ $ (96) $ (22,886) $ 2,135 $ 2,085 $ 2,934
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization ......... 3,911 2,823 3,719 1,821 1,881
Interest expense ........................ -- -- 1,637 -- --
Deferred tax benefit .................. (269) (1,958) -- -- --
Decrease in deferred taxes ............ (289) (26) -- -- --
Goodwill write-off ..................... -- 8,067 -- -- --
Writedown of Dallas facility ............ 2,100 1,305 -- -- --
Store closings and lease termination
payments .............................. -- 640 (3,513) (1,839) (845)
Changes in operating assets and
liabilities:
Accounts receivable .................. (1,476) 287 (1,101) (376) (3,715)
Inventory ........................... (1,968) 1,240 538 707 (1,665)
Other .............................. 126 103 (118) (132) (337)
Accounts payable -- trade ............ 651 2,807 (647) (1,353) 2,744
Accrued expenses and other ......... (2,285) 6,081 1,522 444 (1,276)
---------- ---------- ---------- --------- ---------
Net cash provided by (used in)
operating activities .................. 405 (1,517) 4,172 1,357 (279)
Cash flows from investing activities
Additions to property, plant, and
equipment, net ........................... (4,426) (4,825) (4,492) (1,411) (3,541)
---------- ---------- ---------- --------- ---------
Cash flows from financing activities
Costs to exchange debt for equity ......... (1,434) (97) (222) (125) --
Cash in lieu of shares after reverse stock
split .................................... -- (407) -- -- --
Proceeds from borrowings:
Revolving line of credit ............... 110,008 90,805 106,034 52,431 59,362
Term loan .............................. -- -- 8,000 -- --
RAA Term loan ........................... -- 7,200 -- -- --
DRPA loans .............................. 4,680 -- -- -- --
Repayments of borrowings:
Revolving line of credit ............... (104,548) (92,348) (111,988) (53,637) (55,105)
Term loans .............................. -- -- (2,099) (156) (571)
Vendor notes and other .................. (1,745) (810) (560) 727 188
---------- ---------- ---------- --------- ---------
Net cash provided by (used in)
financing activities .................. 6,961 4,343 (835) (760) 3,874
---------- ---------- ---------- --------- ---------
Net increase (decrease) in cash ......... 2,940 (1,999) (1,155) (814) 54
Cash at beginning of year ............... 588 3,528 1,529 1,529 374
---------- ---------- ---------- --------- ---------
Cash at end of year ..................... $ 3,528 $ 1,529 $ 374 $ 715 $ 428
========== ========== ========== ========= =========
Supplemental disclosure of cash flow
data
Interest paid ........................... $ 1,021 $ 1,799 $ 990 $ 1,332 $ 1,117
========== ========== ========== ========= =========
Income tax payments, net of refunds ...... $ 107 $ -- $ -- $ -- $ --
========== ========== ========== ========= =========
Capital lease obligations incurred ...... $ -- $ 306 $ 1,070 $ 330 $ 696
========== ========== ========== ========= =========
</TABLE>

See accompanying notes.

F-7
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

1. Organization

U.S. Vision, Inc. (formerly Royal International Optical Inc.) and
Subsidiaries (the Company) was formed in March 1990 and incorporated in the
Commonwealth of Pennsylvania. In March 1997, the Company reincorporated in the
State of Delaware. The Company's principal business activity is the retail sale
and manufacture of prescription eyewear through approximately 550 stores
located throughout the United States.

On December 2, 1994 all of the interest of Westinghouse Credit
Corporation (Westinghouse), the Company's principal shareholder at that time,
was acquired by Royal Associates Acquisition Partnership ("RAA"), a Delaware
general partnership for the aggregate purchase price of $19,400,000. The "RAA"
Partnership was dissolved in Fiscal 1995 and the interest of the Partnership
in the Company was transferred to the former partners. Any reference to a
transaction with "RAA" will be referred to as a transaction with "investors."

The interest that the investors acquired from Westinghouse is described
as follows:

(a) Senior Subordinated Term Loan - This loan with an outstanding balance
of $6,350,000 when acquired from Westinghouse, was exchanged for
100,000 shares of a new 9% Series C Cumulative Preferred Stock with a
liquidation preference value of $63.50 per share. The Series C
Preferred Stock pays a quarterly dividend (payable in cash or
additional shares of stock) at an annual rate of 9%. Effective for
dividend payment dates after December 1, 1999, the dividend rate will
increase to 25%. The Company issued 3,000, 7,936, and 10,033 additional
shares in fiscal 1994, 1995 and 1996, respectively, to satisfy the
dividend requirement. The Company issued 5,656 additional shares in the
first six months of 1997 to satisfy the dividend requirements. Also,
the shareholders used 3,895 shares to exercise 1,607,775 warrants to
purchase common stock in first six months of 1997.

(b) 9% Series A Cumulative Preferred Stock - The Investors acquired the
Series A Preferred Stock from Westinghouse with a face value of
$13,000,000 ($100,000 per share). The Series A Preferred Stock pays a
quarterly dividend (payable in cash or additional shares of stock) at
an annual rate of 9%. The Company issued 4, 10, and 14 additional
shares in fiscal 1994, 1995, and 1996, respectively, to satisfy the
dividend requirements. The Company issued 7 additional shares in the
first six months of 1997 to satisfy the dividend requirements. The
Series A Shareholders have the right to elect two directors and have
other limited voting rights.

(c) Common Stock - The investors exercised a portion of its acquired
warrants to purchase 245,440 shares of the Company's stock at $10.00
per share, which together with the 390,910 shares previously acquired
increased their holdings of common stock to 636,350 shares.

(d) Common Stock Warrants - After exercising 245,440 warrants and canceling
warrants to purchase 631,150 shares of common stock, the investors had
warrants to purchase 245,440 additional shares of common stock. On
February 1, 1997 all of the outstanding warrants were exercised. The
warrant holders used unpaid paid-in-kind dividends on the Series C
preferred stock to pay the exercise price.

(e) Guarantee on Revolving Line of Credit - The investors agreed to
guarantee a $3,600,000 overadvance on the Company's revolving line of
credit until November 30, 1995. The guarantee was extinguished in
January 1996 at which time the investors made a $7.2 million
subordinated loan to the Company which is described in Note 6.

F-8
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

1. Organization -- (Continued)

As part of the above transaction the unpaid interest payments on the
Senior Subordinated Term Loan in the amount of $1,306,000, net of $801,000 of
income taxes, was forgiven. The Company incurred legal, accounting and other
costs to complete the transaction in the amount of $1,753,000, including
$821,000 paid to the investors for reimbursement of costs incurred by the
investors to complete the transaction and $182,000 paid to officers and
directors of the Company for reimbursements of deposits paid to Westinghouse
to allow the Company to obtain an option to acquire Westinghouse's position.
As the investors are the majority shareholders, these transactions were
accounted for as capital contributions.

On May 12, 1995, the Board of Directors of the Company effected a
1,000-for-1 reverse stock split. All shareholders who had fractional shares
after the reverse split received cash at the rate of $1.25 per pre-split
share. The Company paid $407,000 for the fractional shares. Subsequent to the
reverse split, the Company deregistered its common stock under the Securities
and Exchange Act of 1934, as amended, and delisted its common stock for
trading on the National Association of Securities Dealers, Inc. stock
exchange. All share data for all periods presented herein reflects the reverse
stock split.

As further discussed in Note 12, in September 1997 the Company filed a
registration statement in anticipation of a proposed underwritten public
offering by the Company of 2,500,000 shares of the Company's Common Stock. In
connection with the sale of Common Stock, the Company recapitalized and effected
a 64-for-1 stock dividend. All share data for all periods presented herein also
reflects the 64-for-1 stock dividend.

2. Significant Accounting Policies

Fiscal Year

Effective January 31, 1996, the Company changed its fiscal year from
March 31 to January 31. Fiscal years are identified according to the calendar
year in which they begin. The fiscal year ended January 31, 1997 will be
referred as "fiscal 1996."

Interim Financial Information

The financial statements and disclosures included herein for the six
months ended July 31, 1996 and 1997 are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of the consolidated financial
statements in accordance with generally accepted accounting principles for
these interim periods have been included. The results of interim periods are
not necessarily indicative of the results to be obtained for a full fiscal
year.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

F-9
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

2. Significant Accounting Policies -- (Continued)

Net Income Per Share

Historical per share data in accordance with Accounting Principles Board
Opinion No. 15, "Earnings Per Share," is excluded from the Company's financial
statements since such per share data is not indicative of the continuing
capital structure of the Company. See Note 12

Net income per share -- supplemental reflected in the consolidated
statements of income has been computed using the weighted average number of
shares outstanding after giving effect to the 64 for 1 stock dividend and the
exchange of all outstanding Series A Preferred Stock and Series C Preferred
Stock for Common Stock upon the closing of the Company's initial public
offering as described in Note 12. In addition, common share equivalents such
as warrants and options are included in the computation for the year ended
January 31, 1997 and the six months ended July 31, 1997, respectively.

In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share," which is required to be adopted for
annual and quarterly periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods presented. Under the new
requirements for calculating primary earnings per share, the dilutive effect
of stock options and warrants will be excluded. The application of Statement
128 on net income per share -- supplemental was a $0.01 increase for both the
year ended January 31 and the six months ended July 31, 1997. There is no impact
on fully diluted earnings per share as a result of applying Statement 128.

Inventory

Inventory, principally frames and lenses, is valued at the lower of cost
or market, determined by the first-in, first-out method.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Depreciation, which
includes assets under capital leases, is computed using the straight-line
method for financial reporting purposes and accelerated methods for income tax
purposes. The general range of useful lives for financial reporting is 10 to
30 years for buildings and improvements, and 3 to 10 years for automobiles,
machinery and equipment, and furniture and fixtures. Depreciation expense
totalled $3,344,000, $2,347,000 and $3,178,000, in fiscal 1994, 1995 and 1996,
respectively. Depreciation expense totalled $1,552,000 and $1,811,000 for the
six months ended July 31, 1996 and 1997, respectively.

Long-Lived Assets

Long-lived assets, which principally includes property, plant and
equipment, and goodwill arising from business acquisitions, are amortized on a
straight-line basis over the expected period to be benefited up to 40 years.
In accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company
periodically evaluates the realizability of long-lived assets as events or
circumstances indicate a possible inability to recover their carrying amounts.
Long-lived assets are grouped and evaluated on a per store basis by applying
various analyses, including undiscounted cash flows and profitability
projections. See Note 9 for charge-offs relating to long-lived assets.

F-10
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

2. Significant Accounting Policies -- (Continued)

Advertising

The Company expenses advertising costs as incurred. Advertising expense
was $7,202,000, $6,426,000 and $6,766,000 in fiscal 1994, 1995 and 1996,
respectively. Advertising expense was $3,368,000 and $4,036,000 for the six
months ended July 31, 1996 and 1997, respectively.

Store Openings and Closings

The noncapital expenditures incurred in opening new stores or remodeling
existing stores are expensed as incurred. When a store is closed, the
remaining investment in leasehold improvements and the amount estimated to
terminate the lease are expensed.

Revenue Recognition

Revenue is generally recognized when merchandise is delivered or shipped
to the customer.

Accounting for Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. The
effect of applying Statement 123's fair value method to the Company's
stock-based awards results in pro forma earnings per share that is not
different from amounts reported.

Reclassification

Certain prior-year amounts have been reclassified to conform with the
current-year presentation.

3. Inventory

Inventory is as follows (in thousands):

January 31,
--------------------- July 31,
1996 1997 1997
--------- --------- ------------
(Unaudited)
Finished goods ...... $15,571 $15,204 $16,645
Work-in-process ...... 1,005 1,196 1,158
Raw materials ......... 2,087 1,725 1,987
-------- -------- --------
$18,663 $18,125 $19,790
======== ======== ========

4. Accrued Expenses and Other

Accrued expenses and other are as follows (in thousands):
<TABLE>
<CAPTION>
January 31,
------------------- July 31,
1996 1997 1997
-------- -------- ------------
(Unaudited)
<S> <C> <C> <C>
Estimated lease payments on closed stores ...... $3,097 $1,825 $1,048
Compensation ................................. 1,400 1,825 1,828
Rent .......................................... 903 1,058 1,537
Other .......................................... 1,491 2,433 675
------- ------- -------
$6,891 $7,141 $5,088
======= ======= =======
</TABLE>

F-11
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

5. Writedown of the Dallas Facility

In February 1995, the Company decided to move its manufacturing
operations from Dallas, Texas to Blackwood, New Jersey. As part of the move to
New Jersey, the Company decided to sell the Dallas facility. Accordingly, the
Company recorded a charge of $2,100,000 for the year ended March 31, 1995 to
reduce the book value of the Dallas facility to its estimated net realizable
value. In January, 1996 the Company recorded an additional charge of
$1,305,000 to further reduce the book value of the Dallas facility to its
revised estimate of net realizable value of $1,300,000.

6. Long-Term Debt

Long-term debt is as follows (in thousands):
<TABLE>
<CAPTION>
January 31,
-------------------- July 31,
1996 1997 1997
-------- --------- ------------
(Unaudited)
<S> <C> <C> <C>
$7,000,000 Revolving Line of Credit which expires on
December 31, 1998 (with automatic one year extensions).
Interest is payable monthly at prime, as defined, plus
1.0% (9.25% at January 31, 1997). The revolving line
of credit is secured by substantially all the assets
of the Company......................................... $ -- $ 2,010 $ 6,399
$8,000,000 Term Loan. Interest is due monthly at
prime, as defined, plus 1.5% (9.75% at January 31,
1997). Requires quarterly principal payments of
$285,714 and a final payment of $2,571,428 on
December 31, 2001. The term loan is secured by
substantially all the assets of the Company. .......... -- 8,000 7,428
DRPA Term Loan due February 1, 2010. Requires quarterly
payments of $13,322, which includes principal and
interest at 2%. Final payment of $702,434 is due
on January 31, 2010. The term loan is secured by
the land and building of the Corporate headquarters. .. 1,178 1,148 1,133
DRPA Term Loan due February 1, 2010. Requires quarterly
payments of $25,313, which includes principal and
interest at 2%. Final payment of $1,334,625 is due on
January 31, 2010. The term loan is secured by the land
and building of the New Jersey manufacturing
facility. ............................................ 2,238 2,181 2,152
DRPA Term Loan due on June 7, 2005. Requires
quarterly payments of $33,175, which includes
principal and interest at 2%. The term loan is
secured by certain of the equipment located in the
New Jersey manufacturing facility. .................. 1,118 1,007 950
</TABLE>

F-12
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

6. Long-Term Debt -- (Continued)
<TABLE>
<CAPTION>
January 31,
----------------------- July 31,
1996 1997 1997
---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
Subordinated Term Loan payable to investors.
Interest accrued at 20% per annum in fiscal 1996
(reduced to 12% per annum on January 29, 1997).
The principal balance and all accrued interest is
payable in full on March 1, 1998. ............... $ 7,200 $ 8,837 $ 8,837
Other .......................................... 508 280 109
Revolving Line of Credit, repaid on December 19,
1996. .......................................... 8,096 -- --
Term Loan, repaid on December 19, 1996. ......... 1,901 -- --
--------- --------- ---------
22,239 23,463 27,008
Less current portion ........................... 948 1,407 10,224
--------- --------- ---------
$ 21,291 $ 22,056 $ 16,784
========= ========= =========
</TABLE>
The revolving credit and term loan agreements contain various financial
covenants pertaining to net worth, current ratio, and ratio of cash flow to
fixed charges. At July 31, 1997, the Company was in compliance with all
financial covenants.

Borrowings under the revolving line of credit are limited based upon a
formula. Total availability as determined by the formula, at January 31, 1997,
was $7,000,000, of which $2,010,000 was outstanding and $4,990,000 was
available. Total availability as determined by the formula, at July 31, 1997,
was $7,000,000, of which $6,399,000 was outstanding and $601,000 was
available.

The carrying amounts of the Company's borrowings approximate their fair
value.

Maturities of long-term debt for each of the next five years and
thereafter are as follows (in thousands):

Year ended January 31,
----------------------
1998 ....................................... $ 1,407
1999 ....................................... 12,367
2000 ....................................... 1,377
2001 ....................................... 1,370
2002 ....................................... 3,658
Thereafter ................................. 3,284
---------
$ 23,463
=========

7. Lease Commitments

Capital lease obligations are machinery and equipment leases which expire
on various dates through 2001. Assets under capital leases at January 31, 1996
and 1997 were $355,000 and $1,303,000 net of accumulated amortization of
$715,000 and $768,000, respectively.

F-13
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

7. Lease Commitments -- (Continued)

At January 31, 1997, the Company operated 66 of its retail stores under
operating leases with varying terms. The leases expire at various dates from
fiscal 1997 to fiscal 2002, and many have renewal options for up to five
additional years. The leases provide for minimum lease payments and, in many
cases, require payment of additional rents if sales exceed stipulated levels.
These additional rents are not significant. The leases also require, in most
cases, payment of taxes and common area expenses such as maintenance,
security, and other expenses. The Company also operates other facilities under
operating leases. Rent expense for all operating leases was $17,498,000,
$13,974,000 and $15,519,000 in fiscal 1994, 1995 and 1996, respectively. Total
rent expense was $7,723,000 and $8,597,000 for the six months ended July 31,
1996 and 1997, respectively.

Future minimum payments required under noncancelable capital leases and
operating leases with lease terms in excess of one year as of January 31,
1997, are as follows (in thousands):

Capital Operating
Year ended January 31 Leases Leases
- --------------------- --------- ----------
1998 ............................................. $ 429 $ 2,072
1999 ............................................. 429 1,403
2000 ............................................. 344 1,081
2001 ............................................. 47 631
2002 ............................................. -- 184
Thereafter ....................................... -- 88
------ --------
Total lease payments ........................... 1,249 $ 5,459
========
Less amount representing interest ............... (96)
------
Present value of minimum capitalized lease payments 1,153
Current portion ................................. 586
------
Long-term portion .............................. $ 567
======

At January 31, 1997, the Company operated 488 licensed optical
departments under leases with expiration dates ranging from 5 years to 60
days. These leases provide for monthly lease payments calculated as a
percentage of sales. Rent expense under these leases was $11,227,000,
$9,244,000 and $12,580,000, for the year ended March 31, 1995, the ten months
ended January 31, 1996 and the year ended January 31, 1997, respectively. Rent
expense under the leases was $6,215,000 and $7,158,000, for the six months
ended July 31, 1996 and July 31, 1997, respectively.

8. Income Taxes

The components of income tax provision (benefit) are as follows (in
thousands):

<TABLE>
<CAPTION>
10 months Quarter Quarter
Year ended ended Year ended ended ended
March 31, January 31, January 31, July 31, July 31,
1995 1996 1997 1996 1997
------------ ------------- ------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Current provision (benefit) ...... $ (194) $ 272 $ -- $ -- $ --
Deferred benefit .................. (269) (1,958) -- -- --
------- --------- ----- ----- -----
Income tax benefit ............... $ (463) $ (1,686) $ -- $ -- $ --
======= ========= ===== ===== =====
</TABLE>

F-14
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

8. Income Taxes -- (Continued)

Deferred income tax liabilities and assets result from differences in the
tax basis of assets and liabilities and their reported amounts in the
consolidated financial statements. Significant components of the Company's
deferred income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
10 months Six months Six months
ended Year ended ended ended
January 31, January 31, July 31, July 31,
1996 1997 1996 1997
------------- ------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Deferred tax liability:
Depreciation ........................... $ 2,028 $ 1,739 $ 1,884 $ 1,511
Deferred tax assets:
Store closing reserves .................. 2,676 1,324 1,993 793
Inventory costs ........................ 1,548 423 1,092 482
Other ................................. 233 104 153 113
Net operating loss carryover ............ 8,915 10,366 9,177 9,487
--------- --------- --------- --------
13,372 12,217 12,415 10,875
Valuation allowance for deferred tax assets (11,344) (10,478) (10,531) (9,364)
--------- --------- --------- --------
Total deferred tax assets ............... 2,028 1,739 1,884 1,511
--------- --------- --------- --------
Net deferred tax liability ............... $ -- $ -- $ -- $ --
========= ========= ========= ========
</TABLE>
The deferred tax valuation reserve increased $4,141,000 and decreased
$866,000 for 1996 and 1997, respectively. The deferred tax valuation reserve
decreased $813,000 and $1,114,000 for the six months ended July 31, 1996 and
July 31, 1997, respectively. The valuation reserve has been established to
eliminate the benefit of all net deferred tax assets.

A reconciliation of the income tax provision (benefit) with amounts
determined by applying the U.S. Statutory rate to income (loss) before income
tax benefit is as follows (in thousands):
<TABLE>
<CAPTION>
10 months Six months Six months
Year ended ended Year ended ended ended
March 31, January 31, January 31, July 31, July 31,
1995 1996 1997 1996 1997
------------ ------------- ------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Income tax provision (benefit) at the
statutory rate .................. $ (190) $ (8,355) $ 726 $ 709 $ 997
Amortization of goodwill ......... 102 2,828 28 14 14
Nondeductible expenses ............ 77 53 32 16 16
Change in realization of deferred
asset ........................... (377) 19 (13) (6) (6)
Increase (decrease) in deferred tax
asset valuation reserve ......... (133) 4,141 (866) (813) (1,114)
State income tax provision (benefit)
and other taxes .................. 58 (372) 93 80 93
------- --------- ------ ------- ---------
Income tax benefit ............... $ (463) $ (1,686) $ -- $ -- $ --
======= ========= ====== ======= =========
</TABLE>
F-15
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

8. Income Taxes -- (Continued)

As of January 31, 1997, the Company had net operating loss carryforwards
of approximately $27,300,000 which will begin to expire in the year 2006.
Approximately $15,900,000 of these carryforwards are available to offset
future taxable income without limitation and approximately $11,400,000 of
these carryforwards (the "Restricted NOLs") are significantly limited due to
ownership changes experienced by the Company. As a result of these
limitations, approximately $780,000 of the Restricted NOLs will become
available for use each year through the year 2008. The remaining Restricted
NOLs in the amount of $3,400,000 are expected to expire unutilized. A
valuation allowance has been established to fully reserve the future benefit
of all the net operating loss carryforwards.

9. Store Closings and Goodwill Write-off

In fiscal 1995, the Company recorded a charge of $10,473,000 related to
the closing of approximately 140 retail stores. All such stores were closed
prior to January 31, 1996. Sales and operating losses for these 140 stores
totaled $10,554,000 and $2,737,000 for fiscal 1995 and $11,921,000 and
$155,000 for fiscal 1994, respectively.

The charge includes $6,500,000 for estimated lease termination
liabilities. Approximately $6,175,000 of unpaid lease liabilities remained at
January 31, 1996 of which $2,500,000 was recorded as a current liability and
$3,675,000 was classified in other long-term liabilities. At January 31, 1997,
approximately $3,459,000 of these liabilities remain unpaid, of which
$1,825,000 is classified as current and $1,634,000 as long term. At July 31,
1997, approximately $2,615,000 of these liabilities remain unpaid, of which
$1,048,000 is classified as current and $1,567,000 as long term. The charge
also includes $1,483,000 of property and equipment write-offs for leasehold
improvements and other equipment located in the affected stores, $1,600,000 of
inventory previously stocked in these stores, and $890,000 in other costs
associated with the closings. No termination benefits were offered to the
affected employees, therefore, no provision for termination benefits was
recorded.

Additionally, in fiscal 1995, the Company wrote off goodwill of
$8,067,000 which reduced the remaining unamortized balance to $3,083,000 at
January 31, 1996. A significant portion of goodwill was attributable to assets
that were closed or otherwise liquidated prior to January 31, 1996, including
210 stores over the last three fiscal periods and the Dallas lab facility.
Consequently, the Company determined that the cumulative effect of store
closings and the closing of the Dallas facility was material and indicative of
a significant impairment of goodwill.

In fiscal 1995, the Company further evaluated inventory determined to be
slow moving and, as a result, wrote off an additional $1,500,000 of inventory.
This charge was recorded as a component of costs of sales.

10. Commitments and Contingencies

The Company, in the normal course of business, has become the defendant
or is the plaintiff in various legal proceedings. Management of the Company
believes that, in all cases, the outcome of such legal proceedings will not
have a material adverse effect on the Company's results of operations or
financial condition.

Approximately 50%, 55% and 62% of the Company's sales were in licensed
departments of one retailer for the year ended March 31, 1995, the ten months
ended January 31, 1996 and for the year

F-16
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

10. Commitments and Contingencies -- (Continued)

ended January 31, 1997, respectively. Approximately 62% and 65% of the
Company's sales were in licensed departments of one retailer for the quarters
ended July 31, 1996 and July 31, 1997, respectively. A termination of the
licensed departments could cause a loss of sales, which would affect operating
results adversely.

11. Stock Options

In February 1996, the Board of Directors authorized the formation of an
incentive stock option plan. As of January 31, 1997, various members of
management had options to purchase 639,665 shares of common stock under this
plan. These options were issued before September 30, 1996 and are exercisable
at $7.69 per share (estimated fair market value at the date of grant) and
expire on October 1, 2004.

In October 1994, the Company issued options to certain directors to
purchase 96,525 shares of Common Stock at $7.69 per share. These options
expire on October 30, 2004.

12. Recapitalization and Impact of Initial Public Offering

In September 1997, the Company filed a registration statement with
respect to a proposed underwritten public offering of 2,500,000 shares of the
Company's Common Stock. The estimated initial public offering price will be
between $9.00 and $11.00 per share. The net proceeds to the Company will be
used to retire the outstanding balance (including any accrued interest
thereon) of its 12% subordinated debentures due March 1998 (see Note 6) to
retire its outstanding bank term loan (including any accrued interest thereon)
due 1998 (see Note 6) and to retire the outstanding balance on the Company's
revolving line of credit which expires on December 31, 1996 (see Note 6). In
conjunction with the sale of Common Stock, the Company recapitalized the
Common Stock and authorized a 64-for-1 stock dividend. In conjunction with the
proposed public offering described above, the holders of the Series A
Preferred Stock and Series C Preferred Stock have committed to convert all
outstanding Series A Preferred Stock and Series C Preferred Stock into Common
Stock at the public offering price. The liquidation value of the preferred
stock plus accumulated dividends at the date of the exchange (assumed to be
October 31, 1997) of approximately $16,853,000 and $7,969,000 respectively,
will be exchanged for 1,872,592 and 885,412 shares of Common Stock,
respectively. All references to net income per share data in the financial
statements have been restated to give effect to the stock dividend and
exchange of the Preferred Stock.

Net income per share -- pro forma for the fiscal year ended January 31,
1997 and the six months ended July 31, 1997 was $0.60 and $0.52, respectively.
Net income per share -- pro forma is calculated by dividing net income after
adjustment for applicable interest expense, net of tax ($2,625,000 and
$1,122,000 for the fiscal year ended January 31, 1997 and the six months ended
July 31, 1997, respectively) by the adjusted number of weighted average shares
outstanding (7,868,700 shares at January 31, 1997 and July 31, 1997,
respectively) after giving effect to the estimated number of shares that would
be required to be sold at the initial public offering price of $9.00 per share
to repay $20,375,000 of debt (unaudited).

F-17
<PAGE>

U.S. Vision, Inc.

Notes to Consolidated Financial Statements -- (Continued)

January 31, 1997 and 1996

(Information with respect to the six months ended
July 31, 1996 and 1997 is unaudited)

13. Quarterly Financial Data (Unaudited)

For the quarter ended
------------------------
April 30, July 31,
1997 1997
----------- ----------
Net sales ................................. $ 31,239 $ 30,814
Gross profit .............................. 21,597 21,018
Net income .............................. 1,780 1,154
Net income per share -- supplemental ...... .33 .21

<TABLE>
<CAPTION>
For the quarter ended
-------------------------------------------------------
April 30, July 31, October 31, January 31,
1996 1996 1996 1997
----------- ---------- ------------- ------------
<S> <C> <C> <C> <C>

Net sales .............................. $29,616 $27,756 $27,972 $26,200
Gross profit ........................... 20,370 19,257 19,504 18,140
Net income (loss) ........................ 1,386 700 681 (632)
Net income (loss) per share -- supplemental .26 .13 .13 (.12)

For the quarter ended
-------------------------------------------------------
April 30, July 31, October 31, January 31,
1995 1995 1995 1996
----------- ---------- ------------- ------------
Net sales ............... $30,445 $28,028 $28,262 $ 25,183
Gross profit ............ 20,375 19,576 19,626 15,485
Net income (loss) ...... (927) 167 (925) (21,842)
</TABLE>

F-18
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<PAGE>

[GRAPHIC]

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<PAGE>

No dealer, sales representative or any other person has been authorized to
give any information or to make any representation in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company, any Selling Shareholder or any Underwriter. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any securities other than the registered securities to which it
relates or an offer to, or solicitation of, any person in any jurisdiction
where such an offer or solicitation would be unlawful. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained herein is
correct as of any date subsequent to the date hereof.

---------------------
Table of Contents

Page
---------

Prospectus Summary ........................ 3
Risk Factors .............................. 7
Use of Proceeds ........................... 11
Dividend Policy ........................... 11
Capitalization ........................... 12
Dilution ................................. 13
Selected Consolidated Financial Data ...... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................. 16
Business ................................. 22
Management ................................. 33
Certain Transactions ..................... 39
Principal Stockholders ..................... 40
Description of Capital Stock ............... 42
Shares Eligible for Future Sale ............ 45
Underwriting .............................. 47
Legal Matters .............................. 48
Experts .................................... 49
Available Information ..................... 49
Index to Consolidated Financial
Statements .............................. F-1

Until December 26, 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in shares of Common Stock, whether or not participating
in this distribution, may be required to deliver a Prospectus. This
requirement is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters or with respect to their unsold
allotments or subscriptions.

<PAGE>

2,500,000 Shares

[LOGO]

Common Stock
($.01 par value)

Salomon Smith Barney
Janney Montgomery Scott Inc.

Prospectus

Dated December 1, 1997