TRANS LUX CORP, 424B1, 1996-12-20

TRANS LUX CORP
424B1, 1996-12-20
MISCELLANEOUS MANUFACTURING INDUSTRIES

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<PAGE> 1

$27,500,000

LOGO LOGO

7 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2006
------------------------

The Notes offered hereby (the "Offering") will be convertible into Common
Stock, $1.00 par value per share (the "Common Stock"), of Trans-Lux Corporation
("Trans-Lux" or the "Company") at any time after 60 days following the date of
initial issuance thereof and prior to maturity, unless previously redeemed, at a
conversion price of $14.013 per share, subject to adjustment under certain
conditions. See "Description of Notes -- Conversion Rights" for a description of
events which may cause an adjustment to the conversion price. The Common Stock
of the Company is traded on the American Stock Exchange (the "AMEX") under the
symbol "TLX." On December 19, 1996, the last reported sale price of the Common
Stock on the AMEX was $11 7/8 per share. See "Price Range of Common Stock and
Dividend Policy."

Interest on the Notes is payable on June 1 and December 1 of each year,
commencing June 1, 1997. The Notes are redeemable, in whole or in part, at the
option of the Company at any time on or after December 1, 2001, at the
redemption prices set forth herein, plus accrued interest, if any, to the
redemption date. If a Repurchase Event (as defined herein) occurs, each Holder
of the Notes will have the right, subject to certain conditions and
restrictions, to require the Company to repurchase all outstanding Notes, in
whole or in part, owned by such Holder at 100% of their principal amount plus
accrued interest, if any, to the date of repurchase. The Notes are subordinated
to all existing and future Senior Indebtedness (as defined herein) of the
Company and will be effectively subordinated to all indebtedness and other
liabilities of the Company's subsidiaries. At September 30, 1996, the Company
had approximately $23.2 million of outstanding Senior Indebtedness and the
Company's subsidiaries had indebtedness and other liabilities of approximately
$4.8 million. The Indenture governing the Notes permits the Company to incur
certain additional indebtedness, including Senior Indebtedness. See "Description
of Notes" for a more complete discussion of the Indenture's provisions.

The Notes have been approved for inclusion on the AMEX upon notice of
issuance.

SEE "RISK FACTORS" ON PAGES 7 TO 10 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.

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.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNTS(2) COMPANY(3)
- -----------------------------------------------------------------------------------------------
Per Note................................. 100.00% 4.50% 95.50%
- -----------------------------------------------------------------------------------------------
Total(4)................................. $27,500,000 $1,237,500 $26,262,500
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>

(1) Plus accrued interest, if any, from the date of initial issuance.

(2) See "Underwriting" for information concerning indemnification of the
Underwriter and other matters.

(3) Before deducting expenses payable by the Company, estimated to be $400,000.

(4) The Company has granted the Underwriter a 30-day over-allotment option to
purchase up to an additional $4,125,000 of the Notes on the same terms and
conditions set forth above. If the Underwriter exercises this option in
full, the total Price to Public, Underwriting Discounts and Proceeds to
Company will be $31,625,000, $1,423,125 and $30,201,875, respectively. See
"Underwriting."
------------------------

The Notes offered by this Prospectus are offered by the Underwriter,
subject to prior sale, when, as and if delivered to and accepted by it and
subject to certain conditions. It is expected that delivery of certificates
representing the Notes will be made at the office of Southcoast Capital
Corporation, 277 Park Avenue, New York, New York, on or about December 26, 1996.
------------------------

SOUTHCOAST CAPITAL
CORPORATION

The date of this Prospectus is December 19, 1996.
<PAGE> 2

TRANS-LUX

TRANS-LUX IS A SUPPLIER OF
LARGE-SCALE, MULTI-COLOR
ELECTRONIC INFORMATION DISPLAYS

FOR INDOOR AND OUTDOOR USE.

IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AND THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THOSE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE AMERICAN STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus or
incorporated herein by reference. Except as otherwise noted, all information in
this Prospectus assumes no exercise of the Underwriter's over-allotment option.

THE COMPANY

The Company is a manufacturer, distributor, and servicer of large-scale,
real-time electronic information displays for both indoor and outdoor use. These
display systems utilize light emitting diode ("LED") and light bulb technologies
to display real-time information entered by the user or via a third party
information supplier. The Company provides high quality, reliable display
products configured to suit its customers' needs, and offers extensive on-site
service and maintenance coverage. The Company's display products include data,
graphics, and picture displays for stock and commodity exchanges, financial
institutions, airports, casinos, sports venues, convention centers, corporate,
theatres, retail, and numerous other applications. In addition to the core
display business, the Company also operates a small chain of motion picture
theatres in the southwestern U.S. In 1995, the Company derived approximately 89%
of its revenue from its indoor and outdoor information display business.

The Company's high performance electronic information displays are used to
communicate messages and information in a variety of indoor and outdoor
applications. The Company's product line encompasses a wide range of
state-of-the-art electronic displays in various shape, size and color
configurations. Most of the Company's display products include hardware
components and sophisticated software. In both the indoor and outdoor markets,
the Company adapts basic product types and technologies for specific use in
various niche market applications. The Company also operates a direct service
network throughout the U.S. and Canada which performs on-site service and
maintenance for its customers, further distinguishing the Company from many of
its competitors.

In the indoor market, the Company's high performance electronic displays
are used to communicate messages in the financial, gaming, transportation,
entertainment and retail industries, among others. In the financial industry,
the Company's products display news and market information, interest rates,
up-to-the-second stock and commodity prices, and other financial product
information for stock and commodity exchanges, brokerage firms, banks, mutual
fund companies, and other financial institutions. In the gaming industry, the
Company's products transmit racing and pari-mutuel betting odds and results,
sports scores, statistics, slot machine jackpots and other wagering information.
In the transportation industry, the Company's products are used to display
arrival and departure information and gate and baggage claim information for
airports and other transportation facilities. While the securities and
commodities industries continue to represent a significant portion of the
Company's customer base, the Company has a strong presence in the gaming
industry through its race and sports book displays and also markets its displays
to such users as banks, corporations, transportation facilities, the military,
racetracks, restaurants, pharmacies, theatres, hotels and convention centers.

Over the past four years, the Company has utilized its strong position in
the indoor display market combined with several acquisitions to establish a
growing presence in the outdoor display market. Trans-Lux outdoor displays are
installed in amusement parks, entertainment facilities, professional and college
sports stadiums, military installations, bridges and other roadway
installations, automobile dealerships, banks and other financial institutions.

3
<PAGE> 4

The Company has made three acquisitions over the past four years in order
to establish and enhance its presence in the outdoor market. In August 1992,
after first managing the portfolio for approximately 15 months, the Company
acquired a portfolio of outdoor electric and electronic equipment displays from
American Electronic Displays, L.P. In August 1993, the Company expanded its
presence in the outdoor display market by acquiring a portfolio of outdoor
lease, maintenance and other contracts from Indicator Maintenance Corporation.
In January 1995, the Company acquired all of the capital stock of Integrated
Systems Engineering, Inc. ("ISE"), a manufacturer of outdoor electronic
displays.

The Company's principal executive offices are located at 110 Richards
Avenue, Norwalk, Connecticut 06856-5090. The Company's telephone number is (203)
853-4321.

THE OFFERING

Securities Offered........ $27.5 million aggregate principal amount of 7 1/2%
Convertible Subordinated Notes due 2006 (the
"Notes").

Interest Payment Dates.... June 1 and December 1, commencing June 1, 1997.

Maturity.................. December 1, 2006.

Conversion................ The Notes are convertible into the Company's Common
Stock at any time after 60 days following the date of
initial issuance thereof and prior to maturity,
unless previously redeemed, at a conversion price of
$14.013 per share, subject to adjustment under
certain conditions.

Redemption at Option of
Company................. The Notes are redeemable, in whole or in part, at the
option of the Company, at any time on or after
December 1, 2001, at the redemption prices (expressed
as a percentage of the principal amount) set forth
below for the 12-month period beginning December 1 of
the years indicated:

thereafter and at maturity at 100% of principal,
together in the case of any such redemption with
accrued interest to the redemption date.

Repurchase at Option of
Holders................. If a Repurchase Event occurs, each Holder of the
Notes will have the right, subject to certain
conditions and restrictions, to require the Company
to repurchase all outstanding Notes, in whole or in
part, owned by such holder at 100% of their principal
amount plus accrued interest, if any, to the date of
repurchase. If a Repurchase Event were to occur,
there is no assurance that the Company would have
sufficient funds to pay the repurchase price for all
the Notes tendered by the Holders thereof. The
Company's ability to make such payments may be
limited by its leverage and the terms of its then
existing borrowing and other agreements. See
"Description of Notes -- Repurchase at Option of
Holders Upon a Repurchase Event" for a more complete
discussion of the rights of Holders of the Notes upon
the occurrence of a Repurchase Event.

Certain Covenants......... The Indenture contains certain covenants that, among
other things, limit the ability of the Company and
its subsidiaries to make restricted payments, to
incur Indebtedness, to issue preferred stock of
Subsidiaries, and to enter

4
<PAGE> 5

into merger and similar transactions. These covenants
are subject to important exceptions and
qualifications. See "Description of the Notes."

Subordination............. The Notes are subordinated to all existing and future
Senior Indebtedness of the Company and will be
effectively subordinated to all indebtedness and
other liabilities of the Company's subsidiaries. At
September 30, 1996, the Company had approximately
$23.2 million of outstanding Senior Indebtedness and
the Company's subsidiaries had indebtedness and other
liabilities of approximately $4.8 million. The
Indenture governing the Notes permits the Company to
incur certain additional indebtedness, including
Senior Indebtedness.

Use of Proceeds........... The Proceeds of the Offering will be used to finance
the Company's expansion program and for general
corporate purposes, including the repayment of
certain outstanding indebtedness. See "Use of
Proceeds."

Listing................... The Notes have been approved for inclusion on the
AMEX upon notice of issuance and the Notes will be
listed under the symbol "TLX.N." The Common Stock is
listed on the AMEX under the symbol "TLX."

RISK FACTORS

For a discussion of certain material factors that should be considered by
prospective purchasers of the Notes, see "Risk Factors."

5
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The summary data below has been derived from the audited financial
statements, the unaudited financial statements and other records of the Company.
The following summary data should be read in conjunction with the financial
statements of the Company and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues........................ $22,133 $24,130 $35,799 $33,742 $37,791 $28,881 $32,871
Operating expenses.................... 14,127 15,299 21,554 19,413 22,406 16,914 20,165
Gross profit from operations.......... 8,006 8,831 14,245 14,329 15,385 11,967 12,706
General and administrative expenses... 7,151 7,384 10,202 11,023 11,494 9,210 9,442
Interest expense, net................. 570 893 2,380(1) 1,242(2) 2,144 1,565 1,669
Income before income taxes............ 542 741 1,663(1) 2,064(2) 1,839 1,262 1,498
Provision for income taxes............ 280 469 1,174(1) 750(2) 773 530 629
Net income............................ 262 272 489(1) 1,314(2) 1,066 732 869
OTHER DATA:
EBITDA(3)............................. $ 5,201 $ 6,670 $10,385 $ 9,819 $10,884 $ 7,961 $ 8,444
Net cash provided by operating
activities.......................... 4,379 7,002 7,509 10,229 6,605 3,909 2,178
Net cash (used in) investing
activities.......................... (1,253) (18,571) (7,183) (7,915) (9,372) (8,028) (7,009)
Net cash provided by (used in)
financing activities................ (2,364) 11,157 (378) (1,107) 1,097 2,276 4,220
Ratio of earnings to fixed
charges(4).......................... 1.4 1.5 1.6 2.3 1.8 1.7 1.7
Net rental equipment.................. $13,550 $29,995 $29,039 $29,653 $30,778 $30,142 $32,594
Net book value per share.............. $ 14.59 $ 15.35 $ 15.60 $ 16.29 $ 17.08 $ 16.85 $ 17.39
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1996
---------------------
AS
ACTUAL ADJUSTED(5)
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 54 $14,906
Total assets......................................................... 63,045 79,421
Long-term debt, including current portion............................ 29,084 45,573
Stockholders' equity................................................. 22,308 22,242
</TABLE>

- ---------------
(1) 1993 reflects the impact of an assessment of income taxes and related
interest expense incurred resulting from a prior year state income tax audit
of approximately $600,000.

(2) 1994 reflects the positive impact of a settlement of approximately $360,000
related to the 1993 assessment described in footnote No. 1 above.

(3) EBITDA is defined as income before effect of changes of accounting plus
interest, income taxes, depreciation and amortization. EBITDA is presented
here because it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness. However, EBITDA should not be
considered as an alternative to net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity. The Company's measure of EBITDA may
not be comparable to similarly titled measures reported by other companies.

(4) Earnings used in computing the ratio of earnings to fixed charges consist of
income before income taxes, fixed charges and extraordinary items. Fixed
charges consist of interest expense, including amounts capitalized, and that
portion of rent expense which management deems to be attributable to
interest costs.

(5) Adjusted to reflect the sale of $27,500,000 of the Notes offered by the
Company hereby, the receipt of the estimated net proceeds therefrom and the
repayment of certain outstanding indebtedness. See "Use of Proceeds" and
"Capitalization."

6
<PAGE> 7

RISK FACTORS

LEVERAGE

As of September 30, 1996, as adjusted for the issuance of the Notes and the
application of the proceeds therefrom the Company's total long-term debt
(including current portion) would have been $45.6 million. The Company expects
it will incur indebtedness in addition to the Notes in connection with the
implementation of its growth strategy. The Indenture governing the Notes permits
the Company or its subsidiaries to incur certain additional indebtedness,
including Senior Indebtedness. Additional indebtedness of the Company may rank
senior or pari passu with the Notes in certain circumstances, while additional
indebtedness of the Company's subsidiaries will rank effectively senior to the
Notes. See "Description of Notes." The Company's ability to satisfy its
obligations will be dependent upon its future performance, which is subject to
prevailing economic conditions and financial, business and other factors,
including factors beyond the Company's control. There can be no assurance that
the Company's operating cash flows will be sufficient to meet its debt service
requirements or to repay the Notes at maturity or that the Company will be able
to refinance the Notes or other indebtedness at maturity. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

SUBORDINATION

The Notes will be unsecured subordinated obligations of the Company and
will be subordinated in right of payment to all present and future Senior
Indebtedness and other liabilities of the Company and will be effectively
subordinated to all indebtedness and other liabilities of the Company's
subsidiaries. In the event of bankruptcy, liquidation or reorganization of the
Company, the assets of the Company will be available to pay obligations on the
Notes only after all Senior Indebtedness has been paid in full, and there may
not be sufficient assets remaining to pay amounts due on any or all of the Notes
then outstanding. The Holders of any indebtedness of the Company's subsidiaries
will be entitled to payment of the indebtedness from the assets of the
subsidiaries prior to the holders of any general unsecured obligations of the
Company, including the Notes. At September 30, 1996, the Company had
approximately $23.2 million of outstanding Senior Indebtedness and the Company's
subsidiaries had indebtedness and other liabilities of approximately $4.8
million. In the event of a payment default with respect to Senior Indebtedness,
no payments may be made on account of the Notes until such default no longer
exists with respect to Senior Indebtedness of the Company. See "Description of
Notes" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

RISKS RELATED TO A REPURCHASE EVENT

Upon the occurrence of a Repurchase Event, each Holder of the Notes may
require the Company to repurchase all or a portion of such Holder's Notes. If a
Repurchase Event were to occur, there can be no assurance that the Company would
have sufficient financial resources, or would be able to arrange financing, to
pay the repurchase price for all the Notes tendered by Holders thereof. In
addition, the occurrence of certain Repurchase Events would constitute an event
of default under certain of the Company's current debt agreements, and the
Company's repurchase of the Notes as a result of the occurrence of a Repurchase
Event may be prohibited or limited by, or create an event of default under, the
terms of future agreements relating to borrowings of the Company, including
agreements relating to Senior Indebtedness. In the event a Repurchase Event
occurs at a time when the Company is prohibited from purchasing the Notes, the
Company could seek the consent of its lenders to purchase the Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from purchasing the Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute a further default under certain
of the Company's existing debt agreements and may constitute a default under the
terms of other indebtedness that the Company may incur from time to time. In
such circumstances, the subordination provisions in the Indenture would prohibit
payments to the Holders of the Notes. See "Description of Notes -- Repurchase at
Option of Holders Upon a Repurchase Event."

7
<PAGE> 8

RELIANCE ON KEY SUPPLIERS

The Company designs certain of its materials to match components furnished
by suppliers. If such suppliers were unable or unwilling to provide the Company
with those components, the Company would have to obtain replacement sources. In
particular, the Company purchases almost all of the LED module blocks used in
its electronic displays from a single supplier. The Company does not have a
long-term supply contract with this supplier. A change in suppliers of either
LED module blocks or certain other components may result in engineering design
changes, as well as delays in obtaining such replacement components. The
Company's inability to obtain sufficient quantities of certain components as
required, or to develop alternative sources at acceptable prices and within a
reasonable time, could result in delays or reductions in product shipments which
could have a materially adverse effect on the business and results of operations
of the Company.

COMPETITION

The Company's electronic information displays compete with a number of
companies, both larger and smaller than itself, and with products based on
different forms of technology. In addition, there are several companies whose
current products utilize similar technology and who possess the resources to
develop competitive and more sophisticated products in the future. The Company's
success is somewhat dependent upon its ability to anticipate technological
changes in the industry and to successfully identify, obtain, develop and market
new products that satisfy evolving industry requirements. There can be no
assurance that competitors will not market new products which have perceived
advantages over the Company's products or which, because of pricing strategies,
render the products currently sold by the Company less marketable or otherwise
adversely affect the Company's operating margins. The Company's motion picture
theatres are subject to varying degrees of competition in the geographic areas
in which they operate. In some areas, theatres operated by national circuits
compete with the Company's theatres. The Company's theatres also face
competition from all other forms of entertainment competing for the public's
leisure time and disposable income.

NATURE OF LEASING AND MAINTENANCE REVENUES

The Company derives a substantial percentage of its revenues from the
leasing of its electronic information display products, generally pursuant to
leases which have an average term of less than three years. Consequently, the
Company's future success is at least partly dependent on its ability to obtain
the renewal of existing leases or to enter into new leases as existing leases
expire. The Company also derives a significant percentage of its revenues from
maintenance agreements relating to its display products. The average term of
such agreements is generally three to five years. A portion of the maintenance
agreements are cancellable upon 30 days notice. There can be no assurance that
the Company will be successful in obtaining renewal of existing leases or
maintenance agreements, obtaining replacement leases or realizing the value of
assets currently under leases that are not renewed.

DEPENDENCE ON KEY PERSONNEL

The Company believes that its Chairman, Mr. Richard Brandt, and President
and Chief Executive Officer, Mr. Victor Liss, play a significant role in the
success of the Company and the loss of the services of either could have an
adverse effect on the Company. There can be no assurance that the Company would
be able to find a suitable replacement for either Mr. Brandt or Mr. Liss. The
Company has an employment agreement with Mr. Brandt which expires in 2002 and an
employment agreement with Mr. Liss which, if not extended, expires in December
1997. The Company believes that in addition to the above referenced key
personnel, there is a core group of executives which also plays a significant
role in the success of the Company. See "Executive Compensation and Transactions
with Management -- Employment Agreements."

EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS AND CONTROL BY EXISTING STOCKHOLDERS

The Company's Restated Certificate of Incorporation contains certain
provisions that could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire
control of the Company. Such provisions could limit the price that certain
investors might be willing

8
<PAGE> 9

to pay in the future for shares of the Company's Common Stock, thus making it
less likely that a stockholder will receive a premium on any sale of shares.
Under the Company's Restated Certificate of Incorporation, the Company has two
classes of common stock outstanding, Common Stock and Class B Stock, each with
its own rights and preferences. Each share of Class B Stock receives ten votes
per share on all matters submitted to a vote of the stockholders versus the one
vote received for each share of Common Stock. The Class B Stock is entitled to
vote separately as a class on any proposal for the merger, consolidation and
certain other significant transactions. See "Description of Capital
Stock -- Common Stock" and "Class B Stock." Moreover, the Company's Board of
Directors is divided into three classes, each of which serves for a staggered
three-year term, making it more difficult for a third party to gain control of
the Company's Board. The Company has also adopted a provision for its Restated
Certificate of Incorporation which requires a four-fifths vote on any merger,
consolidation or sale of assets with or to an "Interested Person" or "Acquiring
Person."

Additionally, the Company is authorized to issue 500,000 shares of
Preferred Stock containing such rights, preferences, privileges and restrictions
as may be fixed by the Company's Board of Directors which may adversely affect
the voting power or other rights of the holders of Common Stock or delay, defer
or prevent a change in control of the Company, or discourage bids for the Common
Stock at a premium over its market price or otherwise adversely affect the
market price of the Common Stock. See "Description of Capital Stock -- Preferred
Stock." The Board of Directors of the Company is also authorized to issue
3,000,000 shares of Class A Stock which is identical to the Common Stock but is
non-voting and is entitled to a 10% higher dividend than the Common Stock. See
"Description of Capital Stock -- Class A Stock."

Twelve stockholders, who are executive officers and/or directors of the
Company beneficially own approximately 71.5% of the Company's outstanding Class
B Stock, 17.8% of all classes and 54.3% of the voting power. As a result, these
stockholders collectively will continue to have the ability to elect all of the
Company's directors and to veto major transactions for which a stockholder vote
is required under Delaware law, including mergers, consolidations and certain
other significant transactions. These stockholders could also block tender
offers for the Company's Common Stock that could give stockholders of the
Company the opportunity to realize a premium over the then prevailing market
price for their shares of Common Stock.

ABSENCE OF PUBLIC MARKET FOR THE NOTES

The Notes are a new issue of securities for which there is currently no
public market. Although the Notes have been approved for inclusion on the AMEX,
there is no assurance as to the liquidity of the market for the Notes that may
develop, the ability of the holders to sell their Notes or the prices at which
holders of the Notes would be able to sell their Notes. If a market for the
Notes does develop, the Notes may trade at a discount from their initial public
offering price, depending on prevailing interest rates, the market for similar
securities, the performance of the Company, the market price of the Company's
Common Stock and other factors. There is no assurance that an active trading
market will develop or be maintained for the Notes. See "Underwriting."

LIMITED TRADING VOLUME AND VOLATILITY OF STOCK PRICE

The Company's Common Stock is not widely held and the volume of trading has
been low and sporadic. Accordingly, the Common Stock is subject to increased
price volatility and reduced liquidity. There can be no assurance a more active
trading market for the Common Stock will develop, or be sustained if it does
develop. The limited public float of the Company's Common Stock could cause the
market price for the Common Stock to fluctuate substantially. In addition, stock
markets have experienced wide price and volume fluctuations in recent periods
and these fluctuations often have been unrelated to the operating performance of
the specific companies affected. Any of these factors could adversely affect the
market price of the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of Common Stock in the public market following the Offering by
current stockholders of the Company could adversely affect the market price for
the Common Stock. Upon expiration of lock-up

9
<PAGE> 10

agreements with the Underwriter 90 days after the date of this Prospectus, or
earlier upon the written consent of Southcoast Capital Corporation ("Southcoast
Capital"), 225,590 shares of Common Stock (including Class B Stock if converted
into equal amounts of Common Stock) may be sold in the public market by
executive officers and directors, subject to the limitations contained in Rule
144 under the Securities Act of 1933, as amended. Following the Offering, sales
of substantial amounts of the shares of Common Stock in the public market, or
even the potential for such sales, could adversely affect the prevailing market
price of the Common Stock.

10
<PAGE> 11

USE OF PROCEEDS

The net proceeds to the Company (after deducting underwriting discounts and
estimated offering expenses) from the sale of the Notes offered hereby are
estimated to be approximately $25.9 million ($29.8 million if the Underwriter's
over-allotment option is exercised in full). The Company will repay
approximately $6.2 million of debt currently outstanding under its revolving
credit facility which currently bears interest at the effective rate of 7.49%
and has a final maturity of June 2003 and will call and retire approximately
$4.8 million of the Company's 9% Convertible Subordinated Debentures. The
Company will call these Debentures within 45 days of the completion of the
Offering. The remaining net proceeds will be used to finance the expansion of
the Company's leased equipment base, fund product development and marketing
efforts aimed at expanding the Company's position in both the indoor and outdoor
information display markets and for general working capital purposes. The
Company may also use a portion of the net proceeds for acquisitions; however no
agreement with respect to any such acquisition currently exists and the Company
is not currently involved in any negotiations with respect to any acquisitions.
The Company may also use a portion of the net proceeds for the development of
additional theatres. Pending use of the net proceeds for the above purposes, the
Company intends to invest such funds in U.S. government securities or other
investment-grade securities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is traded on the AMEX under the symbol "TLX." The
following table sets forth the high and low closing sales prices of the Common
Stock for the periods indicated, as reported on the AMEX.

<TABLE>
<CAPTION>
PERIOD HIGH LOW
--------------------------------------------------------------------- ---- ---
<S> <C> <C>
1994
First Quarter...................................................... $ 9 5/8 $ 83/8
Second Quarter..................................................... 10 83/4
Third Quarter...................................................... 10 1/8 75/8
Fourth Quarter..................................................... 9 3/8 71/4
1995
First Quarter...................................................... $10 $ 87/8
Second Quarter..................................................... 9 1/8 7 /16
Third Quarter...................................................... 9 1/4 7 /16
Fourth Quarter..................................................... 9 8
1996
First Quarter...................................................... $ 9 5/8 $ 81/8
Second Quarter..................................................... 16 1/2 85/8
Third Quarter...................................................... 14 7/8 101/2
Fourth Quarter (through December 19, 1996)......................... 13 3/4 111/2
</TABLE>

On December 19, 1996, the last reported sale price for the Common Stock on
the AMEX was $11 7/8 per share. As of September 30, 1996, there were 965,002 and
298,882 shares of Common Stock and Class B Stock outstanding and 847 and 68
holders of Common Stock and Class B Stock, respectively.

Commencing with the fourth quarter of 1993, the Company's dividend policy
has been to pay a regular quarterly dividend of $.035 per share on the Common
Stock and $.0315 per share on the Class B Stock. The declaration or payment by
the Company of dividends, if any, on its Common Stock and Class B Stock in the
future is subject to the discretion of the Board of Directors and will depend on
the Company's earnings, financial condition, capital requirements and other
relevant factors. The Company's present credit facility and the Indenture
restrict the payment of dividends to no more than an aggregate $750,000 per
year. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

11
<PAGE> 12

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of September 30, 1996, and as adjusted to give effect to (i) the
consummation of the Offering of the Notes and (ii) the application of the net
proceeds therefrom as described in "Use of Proceeds" (assuming no exercise of
the Underwriter's over-allotment option). This information should be read in
conjunction with Selected Financial Data and the related notes and other
financial information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
--------------------------------
ACTUAL AS ADJUSTED(1)
-------- -------------------
(UNAUDITED, DOLLARS IN
THOUSANDS)
<S> <C> <C>
Short-term debt and current portion of long-term debt............ $ 1,814 $ 1,814
======== ========
Long-term debt:
Revolving credit facility(2)................................... $ 6,200 $ --
Notes payable.................................................. 15,202 15,202
9% Convertible subordinated debentures(3)...................... 4,811 --
9 1/2% Subordinated debentures................................. 1,057 1,057
% Convertible subordinated notes............................. -- 27,500
-------- --------
Total long-term debt...................................... $ 27,270 $ 43,759
-------- --------
Stockholders' equity:
Preferred, $1.00 par value; 500,000 shares authorized; no
shares issued and outstanding............................... -- --
Common, $1.00 par value; 4,000,000 shares authorized; 2,441,523
shares issued and outstanding(4)(6)......................... $ 2,441 $ 2,441
Class B, $1.00 par value; 2,000,000 shares authorized; 298,882
shares issued and outstanding(5)(6)......................... 299 299
Additional paid-in capital..................................... 13,828 13,828
Retained earnings(3)........................................... 17,626 17,560
Other.......................................................... (65) (65)
Less: 1,481,252 treasury shares at cost..................... (11,821) (11,821)
-------- --------
Total stockholders' equity................................ 22,308 22,242
-------- --------
Total capitalization................................... $ 49,578 $ 66,001
======== ========
</TABLE>

- ---------------
(1) Adjusted to reflect the sale of $27,500,000 of the Notes offered by the
Company hereby, the receipt of the estimated net proceeds therefrom and the
repayment of certain outstanding indebtedness. See "Use of Proceeds."

(2) The Company has a revolving credit facility with First Union Bank of
Connecticut ("First Union Bank") pursuant to which it may borrow up to $7.0
million from time to time, available through June 1998, at which time, at
the option of the Company, amounts outstanding are converted to a five year
term note with a final maturity of June 2003. The revolving credit facility
bears a variable rate of interest of LIBOR plus 200 basis points. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

(3) The Company will record a charge in the first quarter of 1997 to its
earnings of approximately $113,000 ($66,000 net of tax) for the unamortized
portion of its financing costs.

(4) Excludes 78,594 shares of Common Stock issuable upon exercise of stock
options outstanding at September 30, 1996 at exercise prices ranging from
$6.31 to $9.69 per share and 378,819 shares upon conversion of the Company's
9% Convertible Subordinated Debentures due 2005 at $12.70 per share.

(5) Class B Stock has greater voting power. See "Description of Capital Stock."

(6) Subsequent to September 30, 1996, a certificate of amendment was filed to
the Company's Restated Certificate of Incorporation increasing the
authorized shares of Common Stock to 5,500,000 shares, decreasing the
authorized shares of Class B Stock to 1,000,000 shares and authorizing
3,000,000 shares of a new non-voting Class A Stock. See "Description of
Capital Stock."

12
<PAGE> 13

SELECTED FINANCIAL DATA

The following selected financial data of the Company at and for each of the
five years ended December 31, 1995 except for Other Data, are derived from and
are qualified by reference to the Company's financial statements, some of which
are presented herein. The selected financial data for the nine months ended
September 30, 1995 and 1996 and the balance sheet data as of September 30, 1995
and 1996 are derived from unaudited financial statements of the Company which in
management's opinion include all adjustments (consisting only of normal
recurring adjustments) necessary for the fair presentation of the information
set forth therein. The results of operations for the nine months ended September
30, 1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. This data should be read in conjunction with
the financial statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Equipment rentals and maintenance....... $10,494 $13,307 $20,824 $21,652 $21,205 $16,509 $16,273
Equipment sales......................... 2,949 4,040 11,806 8,498 12,364 9,174 13,276
Theatre receipts and other.............. 8,690 6,783 3,169 3,592 4,222 3,198 3,322
------- ------- ------- ------- ------- ------- -------
Total revenues.................... 22,133 24,130 35,799 33,742 37,791 28,881 32,871
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Cost of equipment rentals and
maintenance........................... 5,360 7,069 11,249 11,929 11,358 8,700 8,883
Cost of equipment sales................. 1,587 2,273 7,648 4,620 7,863 5,752 8,753
Cost of theatre receipts and other...... 7,180 5,957 2,657 2,864 3,185 2,462 2,529
------- ------- ------- ------- ------- ------- -------
Total operating expenses.......... 14,127 15,299 21,554 19,413 22,406 16,914 20,165
------- ------- ------- ------- ------- ------- -------
Gross profit from operations.............. 8,006 8,831 14,245 14,329 15,385 11,967 12,706
General and administrative expenses....... 7,151 7,384 10,202 11,023 11,494 9,210 9,442
------- ------- ------- ------- ------- ------- -------
855 1,447 4,043 3,306 3,891 2,757 3,264
Interest expense, net..................... 570 893 2,380(1) 1,242(2) 2,144 1,565 1,669
Other income.............................. 257 187 -- -- 92 70 (97)
------- ------- ------- ------- ------- ------- -------
Income before income taxes................ 542 741 1,663(1) 2,064(2) 1,839 1,262 1,498
------- ------- ------- ------- ------- ------- -------
Provision for income taxes:
Current................................. 95 97 231 407 576 501 521
Deferred................................ 185 372 943 343 197 29 108
------- ------- ------- ------- ------- ------- -------
280 469 1,174(1) 750(2) 773 530 629
------- ------- ------- ------- ------- ------- -------
Net income................................ $ 262 $ 272 $ 489(1) $ 1,314(2) $ 1,066 $ 732 $ 869
======= ======= ======= ======= ======= ======= =======
PER SHARE DATA:
Earnings per share:
Primary................................. $ 0.20 $ 0.22 $ 0.39(1) $ 1.04(2) $ 0.85 $ 0.58 $ 0.68
Fully diluted........................... (3) (3) (3) 0.94(2) 0.81 (3) 0.64
Average common and common equivalent
shares outstanding:
Primary................................. 1,305 1,249 1,249 1,260 1,259 1,258 1,283
Fully diluted........................... (3) (3) (3) 1,943 1,643 (3) 1,674
PRO FORMA PER SHARE DATA(4):
Earnings (loss) per share:
Primary................................. $ (0.02) $ 0.16
Fully diluted........................... (3) (3)
Average common and common equivalent
shares outstanding:
Primary................................. 1,259 1,283
Fully diluted........................... 3,222 3,255
OTHER DATA:
EBITDA(5)............................... $ 5,201 $ 6,670 $10,385 $ 9,819 $10,884 $ 7,961 $ 8,444
Net cash provided by operating
activities............................ 4,379 7,002 7,509 10,229 6,605 3,909 2,178
Net cash (used in) investing
activities............................ (1,253) (18,571) (7,183) (7,915) (9,372) (8,028) (7,009)
Net cash provided by (used in) financing
activities............................ (2,364) 11,157 (378) (1,107) 1,097 2,276 4,220
Ratio of earnings to fixed charges(6)... 1.4 1.5 1.6 2.3 1.8 1.7 1.7
Net rental equipment.................... $13,550 $29,995 $29,039 $29,653 $30,778 $30,142 $32,594
Net book value per share................ $ 14.59 $ 15.35 $ 15.60 $ 16.29 $ 17.08 $ 16.85 $ 17.39
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 1,592 $ 1,180 $ 1,128 $ 2,335 $ 665 $ 4,925 $ 54
Total assets............................ 35,647 50,826 52,138 53,307 57,460 58,453 63,045
Long-term debt, including current
portion............................... 11,648 23,497 23,293 22,353 24,299 24,644 29,084
Retained earnings....................... 15,412 14,514 14,850 15,993 16,888 16,597 17,626
Stockholders' equity.................... 20,062 19,169 19,484 20,524 21,499 21,202 22,308
</TABLE>

(Footnotes provided on the following page.)

13
<PAGE> 14

- ---------------
(1) 1993 reflects the impact of an assessment of income taxes and related
interest expense incurred resulting from a prior year state income tax audit
of approximately $600,000.

(2) 1994 reflects the positive impact of a settlement of approximately $360,000
related to the 1993 assessment described in footnote No. 1 above.

(3) Not dilutive.

(4) The pro forma earnings per share data assume that the Offering was
consummated at January 1, 1995, with the Notes bearing interest at the
annual rate of 7.50%, an assumed conversion price of $14.013, and the effect
that the repayment of debt, as indicated in "Use of Proceeds," would have
assuming the receipt and application of those proceeds to retire such debt
at January 1, 1995.

(5) EBITDA is defined as income before effect of changes of accounting plus
interest, income taxes, depreciation and amortization. EBITDA is presented
here because it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness. However, EBITDA should not be
considered as an alternative to net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity. The Company's measure of EBITDA may
not be comparable to similarly titled measures reported by other companies.

(6) Earnings used in computing the ratio of earnings to fixed charges consist of
income before income taxes, fixed charges and extraordinary items. Fixed
charges consist of interest expense, including amounts capitalized, and that
portion of rent expense which management deems to be attributable to
interest costs.

14
<PAGE> 15

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

The following discussion and analysis should be read in conjunction with
the Company's financial statements and the notes thereto included elsewhere in
this Prospectus. This Prospectus contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors" as well as those discussed below and elsewhere in
this Prospectus.

GENERAL

The Company is a manufacturer, distributor, and servicer of large-scale,
real-time electronic information displays for both indoor and outdoor use. These
display systems utilize LED and light bulb technologies to display real-time
information entered by the user or via a third party information supplier. The
Company provides high quality, reliable display products configured to suit its
customers' needs, and offers extensive on-site service and maintenance coverage.
The Company's display products include data, graphics, and picture displays for
stock and commodity exchanges, financial institutions, airports, casinos, sports
venues, convention centers, corporate, theatres, retail and numerous other
applications. In addition to the core display business, the Company also
operates a small chain of motion picture theatres in the southwestern U.S. In
1995, the Company derived approximately 89% of its revenue from its indoor and
outdoor information display business.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995.

The Company's total revenues for the nine months ended September 30, 1996
increased 13.8% to $32.9 million versus $28.9 million for the same period in the
previous year. Revenues from equipment rentals and maintenance decreased from
$16.5 million in 1995 to $16.3 million in 1996, or 1.4%, primarily due to the
expected decline in revenues from the outdoor lease and maintenance bases
previously acquired, although the decline is at a slower rate than originally
anticipated. This decline in revenues was partially offset by an increase in new
indoor and outdoor display rentals and maintenance contracts. Revenues from
equipment sales increased 44.7% or $4.1 million in 1996, primarily due to
increased sales of outdoor displays as a result of the acquisition of ISE in
January 1995 and certain significant sales which are being recognized on the
percentage of completion basis. Revenues from theatre receipts and other
increased by $124,000 or 3.9% in 1996, primarily attributable to increased
concession sales at the theatres.

Cost of equipment rentals and maintenance increased by $183,000 or 2.1%,
primarily due to operating expenses of the indoor displays. The cost of
equipment rentals and maintenance represented 54.6% of related revenues in 1996
compared to 52.7% in 1995. Cost of equipment sales increased by $3.0 million to
$8.8 million in 1996 or 52.2%, primarily due to increased sales of outdoor
displays and certain significant indoor display equipment sales, which due to
the size of the orders have lower gross profit margins. Due to the nature of the
outdoor display market, the Company anticipates the gross profit margin to
decline somewhat as it enters new industry segments of the outdoor market. The
Company does not anticipate the gross profit margin on future significant indoor
display equipment sales to decline. The cost of equipment sales represented
65.9% of related revenues in 1996 compared to 62.7% in 1995. The cost of theatre
receipts and other increased $67,000 or 2.7%, which was proportional to the
increase in theatre revenues. The cost of theatre receipts and other represented
76.1% and 77.0% of related revenues in 1996 and 1995, respectively.

General and administrative expenses increased by $232,000 or 2.5%,
primarily due to expanded sales efforts and increased payroll and benefits
costs, partially offset by the favorable adjustment of previously accrued
expenses.

Interest income decreased by $29,000, primarily attributable to reduced
investments. Interest expense increased by $75,000, primarily due to increased
bank borrowing for general corporate purposes on the revolving credit line.

15
<PAGE> 16

Other expense of $97,000 in 1996 relates to the loss incurred by the
theatre joint venture, MetroLux Theatres, which includes start up costs. Other
income of $70,000 in 1995 was largely due to the sale of a theatre property in
New Mexico.

The effective tax rate at September 30, 1996 and 1995 was 42.0%.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

The Company's total revenues for the year ended 1995 increased by 12.0% to
$37.8 million in 1995 from $33.7 million in 1994. In January 1995, the Company
acquired all the capital stock of ISE, a manufacturer of outdoor electronic
displays. Operating results for 1995 include a full twelve months from this
acquisition. Revenues from equipment rentals and maintenance decreased $447,000
or 2.1% during 1995, primarily due to the expected decline in revenues from the
two acquisitions of outdoor lease and maintenance base portfolios from $11.7
million in 1994 to $10.8 million in 1995. Revenues from equipment sales
increased 45.5% during 1995. The increase was largely attributable to the
revenues generated from the acquisition of ISE, which contributed $3.6 million
in revenues during 1995. Revenues from theatre receipts and other increased
$630,000 during 1995, primarily due to the inclusion of a full year of
operations at the five-plex theatre in Durango, Colorado which opened in
mid-1994.

Cost of equipment rentals and maintenance, which includes field service
expenses, plant repair costs and depreciation, decreased $571,000 or 4.8% during
1995, to 53.6% of related revenues from 55.1% in 1994. The decrease is primarily
attributable to a reduction in field service expenses. The cost of equipment
sales as a percentage of related revenue represented 63.6% in 1995 and 54.4% in
1994. The increase in costs is primarily due to the expected lower profit
margins generated by ISE. The cost of theatre receipts and other, which includes
film rental expenses increased $321,000 or 11.2% during 1995, primarily due to a
full year of operations at the five-plex theatre in Durango, Colorado which
opened in mid-1994. Cost of theatre receipts and other represented 75.4% of
related revenues in 1995 and 79.7% in 1994.

General and administrative expenses increased $471,000 or 4.3% from $11.0
million in 1994 to $11.5 million in 1995 primarily due to the acquisition of
ISE. General and administrative expenses decreased as a percentage of revenue to
30.4% in 1995, compared to 32.7% in 1994, primarily as a result of economies of
scale.

Interest income decreased $57,000 during 1995, primarily attributable to
reduced investments which were utilized for acquisitions. Interest expense
increased by $845,000 during 1995, primarily as a result of the additional debt
incurred relative to the acquisition of ISE, in addition to the lower interest
expense recorded in 1994 as a result of a settlement of a 1993 assessment of
interest resulting from a 1986 state income tax audit. The other income of
$92,000 in 1995 is largely due to the sale of a theatre property in New Mexico.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

The Company's total revenues for the year ended 1994 decreased by 5.7% to
$33.7 million from $35.8 million in 1993. Revenues from equipment rentals and
maintenance increased $828,000 or 4.0% during 1994. The revenue from the
acquisition of the lease base portfolio of outdoor displays and maintenance
contracts which occurred in August 1993 contributed a full year of revenues.
Revenues from equipment sales decreased $3.3 million or 28.0% during 1994,
primarily because 1993 included a $4.3 million sale to the Chicago Mercantile
Exchange (the "CME"), the largest sale in the Company's history. Revenues from
theatre receipts and other increased by $423,000 in 1994, primarily due to the
opening of the theatre in Durango, Colorado in mid-1994.

Cost of equipment rentals and maintenance increased $680,000 or 6.0% during
1994, to 55.1% of related revenue from 54.0% in 1993. The increase is primarily
attributable to a full year of field service expenses relating to the August
1993 acquisition. The cost of equipment sales decreased $3.0 million or 39.6% in
1994 and represented 54.4% of related revenue compared to 64.8% in 1993,
primarily due to the sale to the CME in 1993, which due to the size of the order
had a lower gross profit margin. The cost of theatre receipts and other
increased $207,000 or 7.8% during 1994. Cost of theatre receipts and other
represented 79.7% of related

16
<PAGE> 17

revenue in 1994 compared to 83.8% in 1993, primarily due to lower film rental
costs and the opening of the theatre in Durango, Colorado in mid-1994.

General and administrative expenses increased by $821,000 or 8.0% during
1994, partially due to the additional expenses incurred in order to maintain the
outdoor lease and maintenance base acquired in August 1993. General and
administrative expenses increased as a percentage of revenue to 32.7% in 1994
compared to 28.5% in 1993, which increase was caused by the overall decrease in
1994 total revenues from the 1993 level, which included the sale to the CME.

Interest income decreased $19,000 during 1994. Interest expense decreased
$1.2 million during 1994. The decrease was primarily due to the settlement of a
1993 assessment of interest resulting from a 1986 state income tax audit, which
when assessed in 1993 increased interest expense for that year.

INCOME TAXES

The effective tax rate was 42.0% in 1996 and 1995, 36.3% in 1994 and 70.6%
in 1993. The increase in the effective tax rate for 1995 was due to a settlement
of a 1986 state income tax audit in 1994, which lowered the effective tax rate
in 1994 and when assessed in 1993 increased the effective tax rate for that
year.

ACCOUNTING STANDARDS

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of " in the first quarter of 1996. In
accordance with the standard, the Company evaluates the carrying value of its
long-lived assets and identifiable intangibles, including goodwill, when events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The adoption of the standard did not have any effect on the
Company's consolidated financial position or results of operations.

The Company also adopted the provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" in the
first quarter of 1996. As provided for in the standard, the Company continues to
apply Accounting Principals Board Opinion No. 25, "Accounting for Stock Issued
to Employees" and related interpretations for employee stock compensation
measurement and will disclose the required pro forma information in the 1996
Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary sources of liquidity and capital
resources have been cash flow from operations and bank borrowings.

The Company believes that cash generated from operations together with the
anticipated net proceeds of the Offering will be sufficient to fund its
anticipated further cash requirements.

Cash and cash equivalents decreased by $1.7 million in 1995 compared to an
increase of $1.2 million in 1994 and a decrease of $52,000 in 1993. The decrease
in 1995 is primarily attributable to cash utilized to acquire ISE, repayment of
its long-term debt and an investment in a theatre joint venture. This was offset
by an increase of $1.1 million in deferred revenue and deposits, primarily due
to prepayments of annual billings not yet recorded as revenue. During the nine
months ended September 30, 1996, the Company's cash and cash equivalents
decreased by $611,000, primarily attributable to cash utilized for investment in
rental equipment, an increase in accounts receivable which is attributable to
the timing of large equipment sales, unbilled receivables and a decrease in
deferred revenue and deposits which was primarily due to the timing of recording
the revenues versus billings and the loan to the theatre joint venture, MetroLux
Theatres. The decrease in cash and cash equivalents in 1995 was largely
attributable to the cash utilized to acquire ISE, repayment of long-term debt
and the investment in MetroLux Theatres. Inventories, prepaids and intangibles
increased during 1995 primarily due to the acquisition of ISE. Although
receivables increased both at December 31, 1995 and September 30, 1996, the
Company continues to experience a favorable collection cycle on its trade
receivables.

17
<PAGE> 18

The Company entered into a Credit Agreement in August 1995 restructuring
$15.6 million of indebtedness and a $4.0 million revolving credit facility with
First Union Bank. The revolving credit facility was increased to $7.0 million
during 1996 and was extended until June 1998. The revolving credit facility was
subsequently supplemented by a $3.0 million revolving facility available to the
Company at the discretion of First Union Bank, which expires January 1997. The
restructuring extended the terms at a variable rate of interest of LIBOR plus
175 basis points. Simultaneously, the Company entered into an interest rate swap
for three years at a fixed rate of 7.86% for $15.6 million of notional value to
mitigate the risk of the variable interest rate. The agreement relating to the
Company's credit facility contains certain financial covenants with which the
Company must comply, absent a waiver by First Union Bank, on a continuing basis
including: (1) the Company is required to make rental equipment capital
expenditures of not less than $3 million per year; (2) the Company may not make
capital expenditures of more than $12 million per year (excluding capital
expenditures related to movie theatres); (3) the Company must maintain a
debt-to-worth ratio of at least 1.25 to 1.0 until September, 1997, 1.2 to 1.0
between September 1997 and September 1998 and 1.0 to 1.0 after September 1998;
(4) the Company must maintain a fixed charge coverage ratio of 1.05 to 1.0; (5)
the Company must maintain consolidated tangible net worth of not less than $18
million; and (6) the Company may not make any payment in excess of $1 million in
respect of any lease (excluding leases related to movie theatres) during any
fiscal year. In the event the Company breaches one or more these covenants and
the Company receives a Default Notice from First Union Bank, no payment may be
made on account of principal of or premium, if any, or interest on the Notes
unless certain conditions are met. See "Description of Notes -- Subordination."
The Company is a guarantor of a $3 million term loan to MetroLux Theatres, the
theatre joint venture. The owner of the non-related general partner of the joint
venture has guaranteed their pro rata portion of the indebtedness to the
Company.

RESULTS OF OPERATIONS

The following table sets forth unaudited quarterly financial data:

<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ----------------------------------------------------- -------- ------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996
Revenues............................................. $10,033 $10,591 $ 12,247
Gross profit......................................... 3,969 4,080 4,579
Income before income taxes........................... 427 467 604
Net income........................................... 248 271 350
Earnings per share:
Primary............................................ $ 0.20 $ 0.21 $ 0.27
Fully diluted...................................... 0.19 0.20 0.25
1995
Revenues............................................. $ 9,379 $ 9,861 $ 9,641 $ 8,910
Gross profit......................................... 3,913 4,078 3,976 3,418
Income before income taxes........................... 340 390 532 577
Net income........................................... 197 226 309 334
Earnings per share:
Primary............................................ $ 0.16 $ 0.18 $ 0.24 $ 0.27
Fully diluted...................................... (1 ) (1) 0.23 0.24
1994
Revenues............................................. $ 8,343 $ 8,006 $ 8,765 $ 8,628
Gross profit......................................... 3,424 3,485 3,534 3,886
Income before income taxes........................... 677 (2) 375 437 575
Net income........................................... 554 (2) 216 241 303
Earnings per share:
Primary............................................ $ 0.44 (2) $ 0.17 $ 0.19 $ 0.24
Fully diluted...................................... 0.34 (2) 0.17 0.18 0.23
</TABLE>

- ---------------
(1) Not dilutive.

(2) The first quarter of 1994 reflects the positive impact of a settlement of a
1993 assessment of income taxes and related interest expense incurred
resulting from a 1986 state income tax audit of approximately $360,000,
$0.29 primary earnings per share and $0.18 fully diluted earnings per share.

18
<PAGE> 19

The following table sets forth unaudited selected financial data stated as
a percentage of the Company's total revenues:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, LATEST TWELVE
--------------------------- MONTHS ENDING
1993 1994 1995 SEPTEMBER 30, 1996
------ ----- ------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Equipment rentals and maintenance.............. 58.2% 64.2% 56.1% 50.2%
Equipment sales................................ 33.0 25.2 32.7 39.4
Theatre receipts and other..................... 8.8 10.6 11.2 10.4
------ ------ ------ ------
Total revenues......................... 100.0 100.0 100.0 100.0
------ ------ ------ ------
Operating expenses:
Cost of equipment rentals and maintenance...... 31.4 35.3 30.1 27.6
Cost of equipment sales........................ 21.4 13.7 20.8 26.0
Cost of theatre receipts and other............. 7.4 8.5 8.4 7.8
------ ------ ------ ------
Total operating expenses............... 60.2 57.5 59.3 61.4
Income before income taxes....................... 4.6 6.1 4.9 5.0
Net income....................................... 1.4 3.9 2.8 2.9
</TABLE>

The following table sets forth the gross profit of each of the Company's
three revenue categories as a percentage of the revenue generated by that
category.

<TABLE>
<S> <C> <C> <C> <C>
Gross margin analysis:
Equipment rentals and maintenance.............. 46.0% 44.9% 46.4% 45.0%
Equipment sales................................ 35.2 45.6 36.4 34.0
Theatre receipts and other..................... 16.2 20.3 24.6 25.2
------ ----- ------ ------
Total gross margin..................... 39.8 42.5 40.7 38.6
</TABLE>

19
<PAGE> 20

BUSINESS

GENERAL

The Company is a manufacturer, distributor, and servicer of large-scale,
real-time electronic information displays for both indoor and outdoor use. These
display systems utilize LED and light bulb technologies to display real-time
information entered by the user or via a third party information supplier. The
Company provides high quality, reliable display products configured to suit its
customers' needs, and offers extensive on-site service and maintenance coverage.
The Company's display products include data, graphics, and picture displays for
stock and commodity exchanges, financial institutions, airports, casinos, sports
venues, convention centers, corporate, theatres, retail, and numerous other
applications. In addition to the core display business, the Company also
operates a small chain of motion picture theatres in the southwestern U.S. In
1995, the Company derived approximately 89% of its revenue from its indoor and
outdoor information display business.

The Company is a Delaware corporation founded in 1920 as a developer of
display products. The Company sold its first large scale moving display product
in 1923, based on proprietary rear screen projection technology. The Company's
development of rear screen projection technology also led it into the theatre
business which at one time represented a significant portion of its revenues.
Over the years, the Company has focused on the development and examination of
new technologies in the information display industry. In the late 1960s, the
Company developed and marketed its first electromechanical display units. These
products were actively marketed until 1983 when the Company introduced its first
LED-based display systems.

20
<PAGE> 21

Maintenance Corporation. In January 1995, the Company acquired all of the
capital stock of ISE, a manufacturer of outdoor electronic displays.

ELECTRONIC INFORMATION DISPLAY MARKET

Accessing information in a timely and efficient manner has become
increasingly important over the past two decades and has been driven by
technological improvements in both the telecommunications and computer
industries. Today, access to either specific information or general news events
is critical in many aspects of business. As demand for various information
displays has spread into an increasingly diverse number of applications, an
equally diverse number of display products has emerged, leaving the industry
highly fragmented with no single company or group of companies having a dominant
share of the entire industry.

The electronic information display market can be broken down into two
distinct markets: the indoor market and the outdoor market. Electronic
information displays are used by financial institutions, including brokerage
firms, banks, saving and loans, insurance companies and mutual fund companies;
by retail outlets; by casinos, race tracks and other gaming establishments; by
outdoor advertising companies; in airports, train stations and bus terminals,
and other transportation facilities; on highways and major thoroughfares; and by
movie theatres, and in various other applications. The industry is expected to
continue to expand as additional applications are added and current applications
are increasingly implemented by businesses attempting to increase information
flow to current and potential customers.

The Indoor Market: The indoor electronic display market is currently
dominated by three categories of users: financial, gaming and corporate. The
financial market segment, including trading floors, exchanges, brokerage firms
and mutual fund companies, has long been a user of electronic information
displays due to the need for the real-time dissemination of data. The major
stock and commodity exchanges depend on reliable information displays to post
stock and commodity prices, trading volumes, interest rates and other financial
information. Brokerage firms have increasingly installed electronic ticker
displays for both customers and brokers, and in the last few years have
installed larger displays to post major headline news events in their brokerage
offices to enable their sales force to stay up-to-date on the events affecting
general market conditions and specific stocks. The changing regulatory
environment in the financial marketplace has also resulted in the influx of
banks and other financial institutions into the brokerage business and has
resulted in these institutions increasingly using information displays to
advertise product offerings to consumers.

The proliferation of gaming establishments including casinos, Indian gaming
establishments, and off-track betting parlors, has resulted in the rapid
expansion of electronic information displays in the gaming industry. These
establishments generally use large information displays to post odds for race
and sporting events and to display timely information such as results, track
conditions, jockey weights and scratches. Casinos also use electronic displays
throughout their facilities to advertise to and attract gaming patrons. This
includes using electronic displays in conjunction with slot machines to attract
customer attention to potential payoffs and thus increase customer play.

The corporate market includes applications found in major corporations,
public utilities and government agencies for the display of real-time, critical
data in command/control centers, data centers, help desks, inbound/outbound
telemarketing centers and for employee communications. Electronic displays have
found acceptance in applications for the healthcare industry such as out-patient
pharmacies, military hospitals and HMOs which desire to automatically post
patient names when prescriptions are ready for pick up. Theatres use electronic
displays to post current box office and ticket information, directional
information and to promote concession sales. Information displays are
consistently used in airports, bus terminals and train stations to post arrival
and departure information and gate and baggage claim information, which helps to
guide passengers through these facilities.

The Outdoor Market: The outdoor electronic display market is even more
diverse than the indoor market with displays being used by banks and other
financial institutions, gas stations, highway departments, sports stadiums and
outdoor advertisers attempting to capture the attention of passers-by. In
addition to traditional uses of outdoor electronic displays, the Company
believes the outdoor market represents a growth

21
<PAGE> 22

opportunity for participants in the indoor electronic information display
industry. The entire "out-of-home" advertising category, such as traditional
billboards and roadside displays, has expanded to include displays in shopping
centers and malls, airports, stadiums, movie theatres and supermarkets. While
most existing outdoor advertisers do not currently utilize either LED or light
bulb generated messages, the Company believes a growing number of outdoor
advertising mediums are beginning to turn to these higher-end technologies in
order to enhance visibility, recognition and impression on the viewer, and to
expand the capabilities of the display, which therefore represents a potential
growth opportunity for participants in the electronics information display
industry.

COMPANY STRATEGY

The Company's strategy is to leverage its position in the U.S. indoor
electronic information display market to expand market share in the global
indoor and outdoor display markets. Trans-Lux has a proven track record for
providing high quality, innovative information display products in the indoor
market. The Company supplies many of the electronic information displays to the
financial services industry and to the race and sports book segment of the
gaming industry, and has a significant presence in the corporate and
transportation markets. The Company offers its customers the option of either
leasing or purchasing its display products and believes this provides a
competitive advantage over most of its competitors who primarily offer their
products for sale only. In addition, the Company plans to expand the scope of
its service force to include the maintenance of other companies' display
products and related electronic equipment. The Company believes that by
providing high quality, reliable electronic displays configured to suit their
customers' needs, combined with offering extensive on-site service and
maintenance coverage and the opportunity to purchase or lease display products,
it will be able to continue to expand its market share in the indoor and outdoor
display markets.

In the indoor market, the Company's growth strategy centers around
increased marketing efforts, expanded sales coverage and continued product
developments aimed at capitalizing on the Company's presence in its current
market segments and expanding into new market segments. Because of the Company's
expertise in and close association with certain market segments, such as the
financial services industry, it is able to anticipate requirements for new
products, product enhancements and new technologies before its competitors. The
Company has increased its engineering staff to accommodate the development of
new products and enhancements, and will continue to do so as needed. The Company
also plans to continue to penetrate new market segments such as call centers,
motion picture theatres, outpatient pharmacies and military hospitals through
increased direct marketing and sales efforts. Additionally, the Company expects
its new progressive meter and controller systems to provide expanded
opportunities within the gaming industry. The Company will continue its strategy
of developing partnerships with key data suppliers and software vendors in its
various market niches, both to add value to the access of the data and to
increase product exposure via third party distribution channels.

The Company's acquisitions in the outdoor market will be enhanced through
focused marketing efforts and expansion of the sales force. The Company will
continue to increase its presence in the outdoor market by identifying target
segments in which to become a leading supplier. The Company has identified and
commenced market development in key outdoor market segments such as sports
stadiums and arenas, convention centers, theme parks, shopping malls, automobile
dealerships, theatres and highway/transportation applications.

The Company expects that its recently completed and planned product
developments will enhance its outdoor product line and allow it to penetrate new
market segments. The capability of displaying live video, offering lower power
consumption and other competitive advantages, provides an attractive product
offering to targeted market segments and paves the way for entry into the
broader advertising market. Development of a 16 shades of gray outdoor display
system will enable the Company to capitalize on the growth of its basic message
center business across all market segments, which will appeal to customers who
want to utilize animation without the added cost of full color.

22
<PAGE> 23

Internationally, the Company anticipates growth in the financial exchange
markets, penetration of the international gaming markets for its meter and
controller product line and entry into advertising/media applications and other
outdoor applications. The Company is currently in the process of expanding its
distributor network in key foreign markets.

INFORMATION DISPLAY PRODUCTS

The Company employs a modular engineering design strategy, allowing basic
"building blocks" of electronic modules to be easily combined and configured in
order to meet the broad application requirements of the markets the Company
serves. This approach ensures maximum product flexibility, reliability, ease of
service and minimum spare parts requirements.

Listed below are the Company's major product technologies and a brief
description of their features and primary market applications:

INDOOR MARKET

LED Jet(@): A two line scrolling LED text display which is widely used in
financial exchanges, brokerage firms and retail investment centers to post
last-sale information on stock trades directly from various exchange
sources.

LED News Jet(TM): A multi-line scrolling LED text display which interfaces
directly to real-time news services and information services. The News Jet
is used to provide up-to-the-second critical news to the floor traders in
financial exchanges, brokerage firms and retail investment centers.

DataWall(@): A high speed, line- and character-addressable LED text display
which is used in applications that require the posting of frequently
changing tabular information, such as indices, stocks, bonds, foreign
exchange and news in the financial markets; race and sports odds and
results in the gaming market; and arrival and departure information in the
transportation market.

PictureWall(TM): A full-matrix, tricolor LED display that, via custom
software, displays any text and/or graphic images that can be shown on a
computer monitor. Typical uses for this product include real-time financial
data, graphs and charts for exchanges and brokerage firms, and
computer-generated data for corporate command centers.

OUTDOOR MARKET

Time & Temperature Displays: Alternating or full-view models used primarily
by banks to build corporate identity and generate public awareness.

Message Center Displays: Scrolling message ranging in size from one to
three lines used by shopping malls, automobile dealerships and other retail
outlets to promote products and services, generate public awareness and
inform customers.

Graphic Displays and Score Boards: Fully populated displays accommodating
graphics, animation and video used by stadiums, arenas, convention centers,
casinos and other entertainment venues to welcome fans, promote events and
advertise products and sponsors. Also used in scoreboards, in conjunction
with Message Centers and scoring displays, to show instant replays and
animated advertising.

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<PAGE> 24

MARKETING AND DISTRIBUTION

The Company markets its indoor and outdoor electronic information display
products primarily through its direct sales force and telemarketers which as of
September 30, 1996 consisted of 30 direct sales representatives and 8
telemarketers. The Company divides its domestic sales and marketing efforts into
two categories: (i) renewal of existing product leases and product upgrades; and
(ii) the sale or lease of display products to new customers. In the indoor
market for leased equipment, the Company attempts to maintain an ongoing
relationship with its customers to discuss lease renewals. In the outdoor
market, sales personnel contact existing and potential customers to discuss the
customer's usage or requirements for display equipment. The Company also uses
primarily telemarketing personnel to maintain communication with its installed
base of lease equipment customers contacting them prior to the expiration of
existing leases in order to discuss lease renewal.

The Company uses a number of different techniques in order to attract new
customers, including direct marketing efforts by its sales force to known or
potential users of information displays, advertising in industry publications,
and placing exhibits at approximately 20 domestic and international trade shows
annually. In the outdoor market, the Company supplements these efforts by using
a network of independent distributors who market and sell the products of
several manufacturers. The Company intends to use a portion of the proceeds from
the Offering to expand its marketing and sales efforts.

Internationally, the Company uses a combination of internal sales people
and independent distributors to market its products in Europe, South America,
Asia and Australia. The Company currently has manufacturing operations, service
centers and sales offices in New South Wales, Australia and Ontario, Canada. The
Company has existing relationships with approximately 30 independent
distributors worldwide covering Europe, South America, Asia and Australia.
Historically, international sales have represented less than 15% of the
Company's revenues but the Company believes that it is positioned to expand its
international sales and that such sales will represent an increasing percentage
of the Company's revenues in the future.

Headquartered in Norwalk, Connecticut, the Company has major sales and
service offices in New York, Chicago, Las Vegas, Torrance, California, Ontario,
Canada, Logan, Utah and New South Wales, Australia, as well as 58 satellite
offices in the U.S. and Canada.

SERVICE AND SUPPORT

The Company emphasizes the quality and reliability of its products and the
ability of its field service personnel to provide timely and expert service to
the Company's installed base. The Company believes that the quality and
timeliness of its on-site service personnel are important components in the
Company's success. The Company provides turnkey installation and support for the
products it leases or sells in the U.S., Canada and Australia as part of the
installation. The Company provides training to end users and provides ongoing
support to users who have questions regarding operating procedures, equipment
problems or other issues. The Company provides service to customers who lease
equipment and offers installation and service to those who purchase equipment.
In the markets the Company's distributors cover, the distributors offer support
for the products they sell.

Personnel based in regional and satellite service locations throughout the
U.S., Canada and Australia provide high quality and timely on-site service for
the installed equipment base. Purchasers or lessees of the Company's larger
products, such as financial exchanges, casinos and sports facilities, often
retain the Company to provide on-site service through the deployment of a
service technician who is on-site daily or for the scheduled sporting event. The
Company also maintains a National Technical Services Center in the Atlanta,
Georgia area which performs off-site equipment repairs and dispatches service
technicians on a nationwide basis. The Company's field service is augmented by
various outdoor service companies in the U.S., Canada and overseas. From time to
time the Company uses various third party service agents to install, service
and/or assist in the service of outdoor displays for reasons that include
geographic area and unusual height of displays.

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<PAGE> 25

ENGINEERING AND PRODUCT DEVELOPMENT

The Company's ability to compete and operate successfully depends upon,
among other factors, its ability to anticipate and respond to the changing
technological and product needs of its customers. As such, the Company
continually examines and tests new display technologies and develops
enhancements to its existing products in order to meet the current and
anticipated future needs of its customers. Product enhancement work continues in
both the indoor and outdoor areas.

Development of new indoor products includes progressive meter and
controller systems for use in the gaming industry; smaller character displays to
post more information in a comparably sized area; higher speed processors for
faster data access and improved update speed; integration of blue LEDs to
provide full color text and graphics displays; a new graphics interface to
display more data in higher resolutions; and tricolor news displays providing
the ability to color-code and identify "hot" stories.

New outdoor product plans include the development of the Spectra Lens
System(TM) which will enable the Company to capitalize on full color, full
matrix indoor applications, particularly in the sports market. Complete
development of the 16 shades of gray Spectra Lens System should encourage the
growth of the Company's message center business in all market segments. This
product will be targeted to customers who want an animated display at a lower
cost than full color. The Company is also currently developing full color LED
displays which will have application particularly in the gaming market where
entertainment value is important to marketing properties and in the sports
market where enhancing the presentation of live action is of central importance.

As part of its ongoing development efforts, the Company seeks to package
certain products for specific market segments as well as to continually track
emerging technologies that can enhance its products. Future technologies under
consideration are trending toward full color, live video, and digital input. The
Company is currently focused on certain technologies which incorporate these
features and which are expected to provide a choice of products for the custom
applications the Company's customers demand.

The Company maintains a staff of 32 people who are responsible for product
development and support in indoor and outdoor markets. The engineering and
product enhancement and development efforts are supplemented by outside
independent engineering consulting organizations where required. Engineering,
product enhancement and development amounted to $1,315,000, $1,497,000 and
$2,139,000 in 1993, 1994 and 1995, respectively.

MANUFACTURING AND OPERATIONS

The Company's production facilities are located in Norwalk, Connecticut,
Logan, Utah, Ontario, Canada and New South Wales, Australia and consist
principally of the manufacturing, assembly and testing of display units, and
related components. The Company performs most subassembly and all final assembly
of its products. Equipment orders generally have a lead time of 30 to 90 days
depending on the size and type of the equipment, and material availability.

All product lines are design engineered by the Company, and controlled
throughout the manufacturing process. The Company has the ability to produce
printed circuit board fabrications, very large sheet metal fabrications, plastic
molded parts, cable assemblies, and surface mount and through hole designed
assemblies. The Company produces more than 100,000 board assemblies annually
which are tested with the latest state of the art automated test equipment. The
Company's production of many of the subassemblies and all of the final
assemblies gives the Company the control needed for on-time delivery to its
customers.

The Company also has the ability to rapidly modify its product lines. The
Company's displays are designed with versatility in mind, enabling the Company
to customize its displays to meet different application with a minimum of lead
time. The Company's automated planning and purchasing department further enables
it to secure raw materials in a timely fashion without maintaining excessive
inventories. The Company also partners with large distributors via volume
purchase agreements, giving it the benefit of a third party stocking its
components ready for delivery on demand. The Company designs certain of its
materials to match components furnished by suppliers. If such suppliers were
unable to provide the Company with those

25
<PAGE> 26

components, the Company would have to contract with other suppliers to obtain
replacement sources. Such replacement might result in engineering design
changes, as well as delays in obtaining such replacement components. The Company
does not acquire a material amount of purchases directly from foreign suppliers,
but components are manufactured by foreign sources. See "Risk
Factors -- Reliance on Key Suppliers."

BACKLOG

The amount of sales order backlog was approximately $2.2 million and $2.6
million at September 30, 1995 and 1996, respectively. The September 30, 1996
backlog will be recognized throughout 1996 and 1997. These amounts do not
include leases or renewals of leases currently in effect.

COMPETITION

The Company supplies many of the large-scale electronic display products to
the financial services industry and the race and sports book segment of the
gaming industry in the U.S. The Company's offer of short-term leases to
customers and its nationwide sales, service and installation capabilities are
major competitive advantages in the display business.

The Company competes with a number of competitors, both larger and smaller
than itself, and with products based on different forms of technology. In
addition, there are several companies whose current products utilize similar
technology and who possess the resources necessary to develop competitive and
more sophisticated products in the future.

In the indoor market, competitors vary according to market segment. In the
financial market, major competitors include Daktronics, Inc., Sunrise Systems,
Inc., Display Solutions, Inc. and Ferranti Packard Electronics Ltd. Additional
competitors include Grandwell Industries Inc., Gamma Technologies, Inc. IGG
Systems Inc. (exchanges only), and Adaptive Micro Systems, Inc. In some
corporate market applications the Company competes with other technologies (such
as video monitors); in others, Adaptive Micro Systems is a competitor. In the
race and sports book segment of the gaming market, competitors include
Daktronics and Display Solutions. In the progressive meter and controller
segment, the dominant vendor is Mikohn Gaming Corporation; other competitors
include Casino Data Systems, Daktronics, INFAX, Inc., and AEG Corporation
compete in the transportation market.

In the outdoor market, key competitors with direct sales capabilities are
Daktronics, White Way Sign, Fairtron Corporation and Display Solutions. Other
competitors include local sign companies that distribute other manufacturers'
equipment and have limited resources.

Internationally, competitors vary according to market and region. Primary
competitors include Daktronics, IGG and Giantek Technology Corp. (Taiwan). There
are also numerous local and regional competitors.

The Company's motion picture theatres are subject to varying degrees of
competition in the geographic areas in which they operate. In some areas,
theatres operated by national circuits compete with the Company's theatres. The
Company's theatres also face competition from all other forms of entertainment
competing for the public's leisure time and disposable income.

THEATRE OPERATIONS

The Company currently operates 29 screens in eight locations in the
southwestern U.S. This includes a twelve-plex theatre in Loveland, Colorado
which was built in late 1995 through a 50% owned joint venture. The Company's
theatre revenues are generated from box office admissions, theatre concessions,
theatre rentals and other sales. Theatre revenues are generally seasonal and
coincide with the release dates of major films during the summer and holiday
seasons. In 1995, the Company derived approximately 10% of its revenues from
theatre operations.

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<PAGE> 27

PROPERTIES

The Company's headquarters and principal executive offices are located at
110 Richards Avenue, Norwalk, Connecticut. The Company owns the 102,000 square
foot facility located at such site, which it also uses for engineering,
production and assembly of its indoor displays and outdoor LED display products.

The Company owns facilities in Ontario, Canada, Torrance, California and
Logan, Utah which it uses for administration, sales and service. The Ontario,
Canada and Logan, Utah sites are also used as production and assembly
facilities. In addition, the Company owns a facility in Norcross, Georgia which
it uses as its National Technical Services Center from which it dispatches the
Company's service technicians on a nationwide basis. The Company also leases ten
premises throughout North America and in Australia for use as sales, service
and/or administrative operations. Additionally, the Company owns the buildings
and land in Santa Fe, New Mexico, Taos, New Mexico, and Durango, Colorado which
house theatre operations.

REGULATION

In the U.S. and other countries, various laws and regulations restrict the
installation of outdoor signs and information displays. These regulations may
impose greater restriction on information displays due to alleged concerns over
aesthetics or driver safety if a display is located near a road or highway.

The Company's products are tested to safety standards developed by
Underwriters Laboratories and Edison Testing Laboratories in the U.S. as well as
similar standards in other countries. The Company designs and produces its
products in accordance with these standards. The Company's printed circuit board
manufacturing operations must also meet various safety related rules and
regulations. The Company believes it is in compliance with all applicable
governmental laws and regulations.

INTELLECTUAL PROPERTY

The Company owns or licenses a number of patents and holds a number of
trademarks for its communications equipment and theatrical enterprises and
considers such patents, trademarks and licenses important to its business.

LITIGATION

The Company is not involved in any litigation other than in the ordinary
course of business, none of which would materially adversely affect the
financial position, results of operations or cash flows of the Company in the
event of an adverse judgment.

EMPLOYEES

The Company has approximately 564 employees as of September 30, 1996, of
which 431 employees are related to the Company's electronics display business.
Less than 1% of the employees are unionized. The Company believes its employee
relations are good.

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<PAGE> 28

MANAGEMENT

<TABLE>
<CAPTION>
NAME AGE OFFICE
- ----------------------------------- --- ------------------------------------------------
<S> <C> <C>
Richard Brandt..................... 69 Chairman of the Board and Director
Victor Liss........................ 59 Vice Chairman of the Board, President, Chief
Executive Officer and Director
Michael R. Mulcahy................. 48 Executive Vice President
Frank N. Daniels................... 58 Senior Vice President
Karl P. Hirschauer................. 51 Senior Vice President
Thomas F. Mahoney.................. 49 Senior Vice President
Angela D. Toppi.................... 41 Senior Vice President, Treasurer, Secretary and
Chief Financial Officer
Steven Baruch...................... 58 Director
Jean Firstenberg................... 60 Director
Allan Fromme....................... 81 Director
Robert Greenes..................... 75 Director
Gene Jankowski..................... 62 Director
Howard S. Modlin................... 65 Director
</TABLE>

Richard Brandt has been a director of the Company since 1954, Chairman of
the Board since 1973, President from 1962 to 1980 and Chief Executive Officer
from 1974 to 1992. He has been an employee of the Company for over 45 years. He
is a director of Presidential Realty Corporation, a real estate company, Vice
Chairman and a trustee of the College of Santa Fe, Chairman Emeritus and a
trustee of the American Film Institute ("AFI") and a trustee of American Theatre
Wing. Mr. Brandt is the brother-in-law of Dr. Allan Fromme.

Victor Liss has been a director of the Company since 1988 and an executive
officer since 1968. He has been Chief Executive Officer of the Company since
December 1992, and Co-Chief Executive Officer between March 1992 and December
1992, responsible for overall operations of the Company, including corporate
direction, long range planning and business development. He has been an employee
for over 28 years. He is a director of Blue Cross & Blue Shield of Connecticut,
Inc., and a trustee of Norwalk Hospital and Norwalk Community Technical College
Foundation, Inc.

Michael R. Mulcahy was elected Executive Vice President of the Company in
charge of sales, marketing and engineering operations in May 1995. He was Senior
Vice President between December 1993 and May 1995, and a Vice President between
1989 and December 1993. He has been an employee of the Company for over 29
years.

Frank N. Daniels was elected Senior Vice President of the Company in charge
of field service and human resources in December 1993 and has been an executive
officer since 1984. He has been an employee of the Company for over 33 years.

Karl P. Hirschauer was elected Senior Vice President of the Company in
charge of engineering and product development in December 1993 and was a Vice
President in charge of engineering between 1984 and December 1993. He has been
an employee of the Company for over 16 years.

Thomas F. Mahoney was elected Senior Vice President of the Company in
charge of sales in June 1996. He was a Vice President between 1994 and June 1996
in charge of financial sales and an Assistant Vice President in sales from 1988
to 1994. He has been an employee of the Company for over 29 years.

Angela D. Toppi was elected Senior Vice President of the Company in charge
of finance in September 1995. Ms. Toppi has served as Secretary since July 1992,
Chief Financial Officer since March 1992 and Treasurer since 1988. She has been
an employee of the Company for over 10 years.

Steven Baruch has been a director of the Company since 1994. During the
past five years he has been Executive Vice President of Presidential Realty
Corporation, a real estate company. He has been a producer

28
<PAGE> 29

of various theatrical productions, among them Driving Miss Daisy, Angels in
America, Love Letters and the Broadway revivals of Damn Yankees, Smokey Joe's
Cafe and A Funny Thing Happened on the Way to the Forum.

Jean Firstenberg has been a director of the Company since 1989 and is
Chairperson of its Audit Committee. She is currently Chief Executive Officer of
the AFI, has been a director of AFI since 1980 and is a trustee of Boston
University.

Dr. Allan Fromme has been a director of the Company since 1958. He is a
consultant to the Company and Chairman of its Executive Committee. Dr. Fromme is
a psychologist and author.

Robert Greenes has been a director of the Company since 1971 and is Vice
Chairman of its Executive Committee. During the past five years he has been
President of Petroconsult, Inc., a petroleum consulting company and President of
East Coast Energy Council. He previously was President and Chief Executive
Officer of Public Fuel Service Inc., a fuel marketing and distribution company.

Gene Jankowski has been a director of the Company since 1994. He has been
Chairman of Jankowski Communications System, Inc., a broadcast consulting
company, since 1990. He previously was President and Chairman of the CBS
Broadcast Group. He is an Adjunct Professor of Telecommunications for Michigan
State University, Chairman Emeritus of the AFI, director of The Advertising
Educational Foundation and the Silvermine Art Center and advisor to the World
Press Freedom Foundation.

Howard S. Modlin has been a director of the Company since 1975 and is
Chairman of its Compensation Committee. He is an attorney and member of the firm
Weisman Celler Spett & Modlin, P.C. which provides legal services to the
Company. He is a director of Fedders Corporation and General DataComm
Industries, Inc.

The executive officers are elected annually at the meeting of the Board
following the annual meeting of stockholders to serve until their successors are
elected. However, provisions in employment agreements provide for such election
throughout the term of such respective agreements.

The Board of Directors is divided into three classes with the term of
office of one of the classes of directors expiring each year and with each class
being elected for a three-year term. The term of each of Messrs. Baruch and
Fromme expires in 1997, the term of each of Messrs. Brandt, Jankowski and Liss
and Ms. Firstenberg expires in 1998 and the term of each of Messrs. Greenes and
Modlin expires in 1999.

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<PAGE> 30

EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT

COMPENSATION OF EXECUTIVE OFFICERS

The following Summary Compensation Table sets forth all cash and non-cash
compensation paid or awarded for the fiscal years ended December 31, 1995, 1994
and 1993 to the Company's four most highly compensated executive officers and
the Chairman of the Board whose compensation exceeded $100,000 for the fiscal
year ended December 31, 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
-------------------------------------- COMPENSATION
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) GRANTED COMPENSATION($)(1)
- -------------------------- ---- --------- -------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Richard Brandt............ 1995 -- 78,618 368,146 -- 57,549
Chairman of the Board, 1994 -- 73,491 363,380 -- 116,535
former Chief and Co-Chief 1993 -- 57,694 349,242 12,500 96,615
Executive Officer(2)
Victor Liss............... 1995 228,037 106,230 -- 5,000 1,888
Chief Executive Officer, 1994 196,915 133,753 -- 10,000 1,888
President and Vice
Chairman 1993 168,244 67,694 -- 10,000 1,958
Michael R. Mulcahy........ 1995 166,593 21,458 -- 1,500 --
Executive Vice President, 1994 130,261 28,124 -- 3,500 --
former Senior Vice
President 1993 129,689 -- -- 500 --
and Vice President of
Sales
Karl P. Hirschauer........ 1995 98,654 5,000 -- 1,000 --
Senior Vice President, 1994 91,212 6,719 -- 1,000 --
former Vice President 1993 91,859 -- -- 500 --
of Engineering
</TABLE>

- ---------------
(1) There are no restricted stock awards, stock appreciation rights or deferred
long-term incentive payouts. The amounts reflected for Mr. Liss are payments
by the Company for split dollar life insurance premiums.

(2) The bonuses and other annual compensation for Mr. Brandt constituted
consulting fees and other payments under a prior agreement with the Company
which was superseded on August 16, 1996 by a new employment agreement.

RETIREMENT PLAN AND SUPPLEMENTAL RETIREMENT BENEFITS

There was a cash contribution of $98,816 for the individuals listed in the
Summary Compensation Table and all other eligible employees to the Company's
retirement plan for 1995. The amounts set forth for All Other Compensation
include $96,615, $116,535 and $57,549 paid to Mr. Brandt for tax equalization
payments in 1993, 1994 and 1995, respectively, under a former consulting
agreement primarily resulting from limitations placed on the Plan by the
Internal Revenue Code. Under the supplemental retirement arrangement with Mr.
Liss, $15,000, $95,475 and $43,723 was accrued but not paid in 1993, 1994 and
1995, respectively.

The Company's retirement plan covers all salaried employees over age 21
with at least one year of service who are not covered by a collective bargaining
agreement to which the Company is a party. The following table presents
estimated retirement benefits payable at normal retirement date, which normally
is age 65. The amounts shown include estimated Social Security benefits which
would be deducted in calculating benefits payable under such Plan.

30
<PAGE> 31

<TABLE>
<CAPTION>
FINAL AVERAGE SALARY ESTIMATED ANNUAL RETIREMENT BENEFITS
FOR HIGHEST FIVE OF BASED ON CREDITED SERVICE YEARS
THE TEN YEARS -------------------------------------------------
PRECEDING RETIREMENT 10 20 30 35 40
--------------------------------------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000............................... $15,000 $30,000 $45,000 $ 52,500 $ 60,000
125,000............................... 18,750 37,500 56,250 65,625 75,000
150,000............................... 22,500 45,000 67,500 78,750 90,000
200,000(1)............................ 30,000 60,000 90,000 105,000 120,000(2)
</TABLE>

As of January 1, 1996, Messrs. Liss, Mulcahy and Hirschauer had 27, 28 and
16 years of credited service, respectively.
- ---------------
(1) $235,840 is the legislated annual cap on compensation for 1993 and $150,000
is the limit for subsequent years.

(2) Maximum legislated annual benefits payable from qualified pension plan.

CERTAIN TRANSACTIONS

During the year 1995, $265,000 in fees for legal services rendered were
paid by the Company to the law firm of which Mr. Modlin, a director of the
Company, is a member.

A subsidiary of the Company loaned an aggregate of $290,385 during the
years 1989 through 1996 (and has agreed to loan an additional $30,000) to Dr.
Fromme, Chairman of the Executive Committee, to fully pay the premiums on a
$500,000 life insurance policy on his life. The Company has received an
assignment of the policy as collateral for their repayment to the extent the
proceeds of the policy are in excess of $200,000. The loans plus accrued
interest are repayable solely from the proceeds of the policy.

Messrs. Matthew Brandt and Thomas Brandt (sons and nephews of Messrs. R.
Brandt and Dr. Fromme, respectively) are Vice Presidents of the Company, and
each is employed by the Company at annual compensation level of approximately
$87,500.

EMPLOYMENT AGREEMENTS

The Company has employment agreements with Messrs. R. Brandt, Liss, Mulcahy
and Hirschauer expiring on December 31, 2002, December 31, 1997, May 31, 1998
and December 31, 1996, respectively. The agreements provide for annual
compensation of $356,762 (subject to cost of living adjustments) for Mr. Brandt,
$205,000 in 1996 and $215,000 in 1997 for Mr. Liss, $145,000 through May 1997
and $155,000 through May 1998 for Mr. Mulcahy, and $100,000 in 1996 for Mr.
Hirschauer. Each agreement contains graduated bonus provisions based on the
Company's defined pre-tax consolidated earnings, not to exceed $125,000,
$150,000, $30,000 and $20,000 in the case of Messrs. R. Brandt, Liss, Mulcahy
and Hirschauer, respectively. Each agreement also contains varying disability,
death, and, other than Mr. Hirschauer, insurance benefits. In the case of
Messrs. R. Brandt and Liss, each of their agreements provide for profit
participations of 1 1/2% of the Company's defined pre-tax consolidated earnings.
Mr. Mulcahy's agreement also provides for sales override commissions and
severance benefits. Messrs. Brandt and Liss have the right to cancel their
agreements if, among other things, in the case of Mr. Liss, the Company fails to
renegotiate the terms of his agreement (which negotiations are in process) and
elect him to his present positions and, in the case of Mr. Brandt, the Company
fails to elect him to his present position in which case he has the right to
receive the payments for the balance of the term of his agreement, including
certain lump sum payments thereof. The foregoing is a summary of the agreements
and reference is made to the agreements, each of which has been filed with the
Securities and Exchange Commission for the full terms thereof.

STOCK OPTION PLANS

The Company has two incentive stock option plans adopted by the
stockholders in 1992 and 1995 which provide for the grant of incentive stock
options to purchase Common Stock (and/or Class A Stock under the 1995 Plan) at
fair market value (or 110% of fair market value if the optionee owns more than
10% of the

31
<PAGE> 32

Company's outstanding voting securities) on the date of grant. Options
outstanding are exercisable during the period one to ten years after the date of
grant and 500 and 76,200 shares remain available for issuance under the 1992 and
1995 Plans, respectively. The following two tables set forth certain information
with respect to (i) the number of options granted to named executive officers in
fiscal 1995 and (ii) the aggregate number and value of options exercisable by
the named executive officers at December 31, 1995. Except for Mr. Mulcahy, no
other named executive officer exercised any options in fiscal 1995. In 1996, Mr.
Liss exercised options to purchase 6,906 shares.

OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
POTENTIAL
% OF REALIZABLE VALUE
TOTAL AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED STOCK PRICE
SECURITIES TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ------------------
NAME GRANTED(#) YEAR PER SHARE($) DATE 5% ($) 10% ($)
- -------------------------- ---------- --------- ------------ ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Victor Liss............... 5,000 18.4% 8.125 07/26/05 26,000 65,000
Michael R. Mulcahy........ 1,500 5.5% 8.125 07/26/05 8,000 19,000
Karl P. Hirschauer........ 1,000 3.7% 8.125 07/26/05 5,000 13,000
</TABLE>

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTION EXERCISES OPTIONS AT OPTIONS AT
------------------------------ FISCAL YEAR END FISCAL YEAR END($)
SHARES --------------- ------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- ---------------------------------- ------------- ------------ --------------- ------------------
<S> <C> <C> <C> <C>
Richard Brandt.................... -- -- 12,500/-- 6,250/--
Victor Liss....................... -- -- 28,000/5,000 17,875/--
Michael R. Mulcahy................ 2,000 2,063 4,000/1,500 --/--
Karl P. Hirschauer................ -- -- 2,000/1,000 844/--
</TABLE>

- ---------------
(1) Market value of underlying securities at fiscal year end, minus the exercise
price.

MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES

During 1995, the Board of Directors had five meetings. All directors
attended 75% or more of such meetings and of committees of which they were
members. Non-employee directors receive an annual fee of $3,500 and $950 for
each meeting of the Board attended, while employee directors receive an annual
fee of $2,200 and $450 for each meeting attended.

The members of the Executive Committee of the Board of Directors are
Messrs. R. Brandt, Greenes, Liss, Modlin and Dr. Fromme. The Executive Committee
is authorized to exercise the powers of the Board of Directors during the
intervals between the meetings of the Board and is from time to time delegated
certain authorizations by the Board in matters pertaining to the Company. The
Executive Committee did not hold any formal meetings in 1995. Members of said
Committee receive a fee of $300 for each meeting of the Committee they attend.
Dr. Fromme receives an annual fee of $12,000 as Chairman of the Executive
Committee and for other consulting services. Mr. Greenes receives an annual fee
of $6,000 as Vice Chairman of the Executive Committee and for other consulting
services.

The members of the Compensation Committee of the Board of Directors are
Messrs. Modlin, Greenes and Jankowski and Ms. Firstenberg. The Compensation
Committee reviews compensation and other benefits.

32
<PAGE> 33

The Compensation Committee had two meetings in 1995. Members of said Committee
receive a fee of $300 for each meeting of the Committee they attend and the
Chairman, Mr. Modlin, receives an annual fee of $2,500.

The members of the Audit Committee of the Board of Directors are Ms.
Firstenberg and Messrs. Baruch, Greenes and Modlin. The Audit Committee reviews
the audit function and material aspects thereof with the Company's independent
auditors. Such Committee had two meetings in 1995. Members of the Audit
Committee receive a fee of $300 for each meeting which they attend and the
Chairperson, Ms. Firstenberg, receives an annual fee of $2,500.

On June 20, 1989, the Board of Directors established a Non-Employee
Director Stock Option Plan as amended, which covers a maximum of 30,000 shares
for grant. Options are for a period of six years from the date of the grant, are
granted at fair market value on the date of the grant, may be exercised at any
time after one year from the date of the grant while a director and are based on
years of service, with a minimum of 500 stock options for each director, an
additional 500 based on five or more years of service, another 500 based on ten
or more years of service and an additional 1,000 based on twenty or more years
of service. Additional options are granted upon the expiration or exercise of
any such option which is no earlier than four years after the date of the grant,
in an amount equal to such exercised or expired options.

33
<PAGE> 34

DESCRIPTION OF NOTES

The Notes offered hereby are to be issued under an Indenture, to be dated
as of December 1, 1996, between the Company and Continental Stock Transfer &
Trust Company, as Trustee (the "Trustee"), a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summary of certain provisions of the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture, including the definitions therein of
certain terms. Wherever a particular Section, Article or defined term is
referred to, such Section, Article or defined term refers to the Indenture and
is incorporated herein by reference.

GENERAL

The Notes will be unsecured subordinated obligations of the Company, will
be limited to an aggregate principal amount of $27,500,000 (subject to increase
in the event of the exercise of the Underwriter's over-allotment option) and
will mature on December 1, 2006. The Notes will bear interest at the rate per
annum shown on the front cover of this Prospectus from the date of initial
issuance, or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semi-annually on June 1 and December 1 of
each year, commencing June 1, 1997, to the Person in whose name the Notes (or
any predecessor Notes) are registered at the close of business on the Regular
Record Date for such interest, which shall be May 15 or November 15 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Interest on the Notes will be paid on the basis of a 360-day year of
twelve 30-day months, based on actual days elapsed. (Section 2.04 and 6.01)

Principal of, and premium, if any, and interest on the Notes will be
payable, and the transfer of Notes will be registerable, at the office or agency
of the Company maintained for such purposes in the Borough of Manhattan, the
City of New York. In addition, payment of interest may, at the option of the
Company, be made by check mailed to the address of the Person entitled thereto
as it appears in the Note Register. (Sections 2.03, 6.01 and 6.02)

The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiples thereof. (Section 2.02) No
service charge will be made for any registration of transfer or exchange of the
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. The Company is not
required (i) to issue, register the transfer of or exchange any Note during a
period beginning at the opening of business 15 days before the mailing of notice
fixed for any redemption and ending at the close of business on such Redemption
Date or (ii) to register the transfer of or exchange any Notes for redemption in
whole or in part, except the unredeemed portion of the Notes being redeemed in
part. (Section 2.07)

All monies paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium, if any, and interest on any Note which
remains unclaimed for two years after such principal, premium or interest
becomes due and payable may be repaid to the Company. Thereafter, the Holder of
such Note may, as an unsecured general creditor, look only to the Company for
payment thereof. (Section 13.04)

The Indenture does not contain any provisions that would provide protection
to Holders of the Notes against a sudden and dramatic decline in the credit
quality of the Company resulting from any takeover, recapitalization or similar
restructuring, except as described below under "Repurchase at Option of Holders
Upon a Repurchase Event" and "Consolidation, Merger and Sale of Assets."

CONVERSION RIGHTS

The Notes will be convertible into the Common Stock of the Company at any
time after 60 days following the date of initial issuance thereof and up to and
including the maturity date (subject to prior redemption by the Company on not
less than 30 nor more than 60 days' notice to the Trustee) of the principal
amount thereof, initially at the Conversion Price stated on the cover page of
this Prospectus (subject to adjustment as described below). The right to convert
the Notes called for redemption or delivered for repurchase will terminate at
the close of business on the last Trading Day prior to the Redemption Date or
the

34
<PAGE> 35

Repurchase Date, unless the Company defaults in making the payment due upon
redemption or repurchase. (Section 5.01) For information as to notices of
redemption, see "Optional Redemption."

The Conversion Price will be subject to adjustment in certain events,
including (i) dividends (and other distributions) payable in Common Stock or any
class of capital stock of the Company, (ii) the issuance to all holders of
Common Stock of rights, warrants or options entitling them to subscribe for or
purchase Common Stock at less than the current market price, (iii) subdivisions
or combinations of Common Stock, (iv) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, cash or other assets
(including securities, but excluding those dividends, rights, warrants, options
and distributions referred to above and excluding dividends and distributions
paid exclusively in cash), (v) distributions consisting exclusively of cash
(excluding any cash portion of distributions referred to in (iv) above or cash
distribution upon a merger or consolidation to which the second succeeding
paragraph applies) to all holders of Common Stock in an aggregate amount that,
combined together with (a) all other such all-cash distributions made within the
preceding 12 months in respect to which no adjustment has been made and (b) any
cash and the fair market value of other consideration paid or payable in respect
of any tender offers by the Company for Common Stock concluding within the
preceding 12 months in respect of which no adjustment has been made, exceeds
12.5% of the Company's market capitalization (defined as being the product of
the current market price of the Common Stock times the number of shares of
Common Stock then outstanding) on the record date for such distribution, and
(vi) the purchase of Common Stock pursuant to a tender offer made by the Company
or any of its subsidiaries which involves an aggregate consideration that
together with (a) any cash and the fair market value of any other consideration
paid or payable in any other tender offer by the Company or any of its
subsidiaries of Common Stock expiring within the 12 months preceding the
expiration of such tender offer in respect of which no adjustment has been made
and (b) the aggregate amount of any such all-cash distributions referred to in
(v) above to all holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 12.5% of the Company's market capitalization on the expiration of
such tender offer. No adjustment in the Conversion Price shall be required
unless such adjustment (plus any adjustments not previously made) would require
an increase or decrease of at least 1% in such price; provided, however, that
any adjustments which by reason of this sentence are not required to be made
shall be carried forward and then taken into account in any subsequent
adjustment. (Section 5.04)

In addition to the foregoing adjustments, the Company will be permitted to
make such reduction in the Conversion Price as it considers to be advisable in
order that any event treated for Federal income tax purposes as a dividend or
distribution of stock or stock rights will not be taxable to the holders of the
Common Stock. (Section 5.04)

Subject to the rights of Holders of the Notes described below under
"Repurchase at Option of Holders Upon a Repurchase Event," in case of certain
consolidations or mergers to which the Company is a party or the transfer of
substantially all of the assets of the Company, each Note then outstanding
would, without the consent of any Holders of the Notes, become convertible only
into the kind and amount of securities, cash and other property receivable upon
the consolidation, merger or transfer by a holder of the number of shares of
Common Stock into which such Note might have been converted immediately prior to
such consolidation, merger or transfer (assuming such holder of Common Stock
failed to exercise any rights of election and received per share the kind and
amount received per share by a plurality of non-electing shares). (Section 5.10)

Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based upon market price.
(Section 5.03) Notes surrendered for conversion during the period from the close
of business on any Regular Record Date next preceding any Interest Payment Date
to the opening of business on such Interest Payment Date (except the Notes
called for redemption on a Redemption Date within such period) must be
accompanied by payment of an amount equal to the interest thereon which the
registered Holder is to receive. In the case of any Note that has been converted
after any Regular Record Date but on or before the next Interest Payment Date,
interest whose stated maturity is on such Interest Payment Date will be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
will be paid to the Holder of such Note on such Regular Record Date. Except as
described

35
<PAGE> 36

above, no interest on converted Notes will be payable by the Company on any
Interest Payment Date subsequent to the date of conversion. No other payment or
adjustment for interest or dividends will be made upon conversion. (Section
5.02)

If at any time the Company makes a distribution of property to its
stockholders that would be taxable to such stockholders as a dividend for
Federal income tax purposes (e.g., distributions of evidence of indebtedness or
assets of the Company, but generally not stock dividends or rights to subscribe
for Common Stock) and, pursuant to the antidilution provisions of the Indenture,
the Conversion Price of the Notes is reduced, such reduction may be deemed to be
the payment of a taxable dividend to Holders of the Notes. Holders of the Notes
could, therefore, have taxable income as a result of an event pursuant to which
they receive no cash or property that could be used to pay the related income
tax.

RESTRICTION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK

The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
Guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur"), after the date of issuance
of the Notes, any Indebtedness (including Acquired Debt) and the Company will
not issue any Disqualified Capital Stock and will not permit any of its
Subsidiaries to issue any shares of preferred stock. Indebtedness consisting of
reimbursement obligations in respect of a letter of credit will be deemed to be
incurred when the letter of credit is first issued.

The foregoing provisions will not apply to:

(i) the incurrence by the Company and its Subsidiaries of Indebtedness
represented by the Notes;

(ii) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used
to extend, refinance, renew, replace, defease or refund, Indebtedness that was
permitted by the Indenture to be incurred (including, without limitation,
Existing Indebtedness);

(iii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries;

(iv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by performance bonds, standby letters of credit or
appeal bonds, in each case to the extent incurred in the ordinary course of
business of the Company or such Subsidiary; and

(v) the incurrence by the Company of Indebtedness, which, together with all
other Indebtedness outstanding as of the date of such incurrence, does not
exceed (a) five times EBITDA for the last four full fiscal quarters ending
immediately preceding such date plus (b) $5.0 million. (Section 6.12)

"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a lien
encumbering any asset acquired by such specified Person. "Acquired Debt" shall
be deemed to be incurred by such Person at the time of such merger, or upon the
other Person becoming a Subsidiary or upon the acquisition of such asset.

"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.

"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or

36
<PAGE> 37

distributions paid in cash to the referent Person or a wholly-owned Subsidiary
thereof, (ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.

"Disqualified Capital Stock" means, with respect to any person, any Capital
Stock of such Person that, by its terms (or by the terms of any security into
which it is convertible or for which it is exercisable, redeemable or
exchangeable), matures, or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the maturity of the Securities.

"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date of the Indenture, until such amounts are
repaid, including all reimbursement obligations with respect to letters of
credit outstanding as of the date of issuance of the Notes.

"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period plus (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with a Sale of
Assets (to the extent such losses were deducted in computing such Consolidated
Net Income), plus (ii) provision for taxes based on income or profits of such
Person and its Subsidiaries for such period, to the extent that such provision
for taxes was included in computing such Consolidated Net Income, plus (iii) the
Fixed Charges of such Person and its Subsidiaries for such period, to the extent
that such Fixed Charges were deducted in computing such Consolidated Net Income,
plus (iv) depreciation and amortization of such Person and its Subsidiaries for
such period to the extent that such depreciation and amortization were deducted
in computing such Consolidated Net Income, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization of a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only of a corresponding amount
would be permitted at the date of determination to be dividended to such Person
by such Subsidiary without prior approval (that has not been obtained), pursuant
to the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.

"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions, and
discounts and other fees and charges incurred in respect of letters of credit or
bankers' acceptance financings, (ii) the consolidated interest expense of such
Person and its Subsidiaries that was capitalized during such period, (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Subsidiaries or secured by a lien on assets of such Person
or one of its Subsidiaries (whether or not such Guarantee or lien is called
upon), (iv) the product of (a) all cash dividend payments (and non-cash dividend
payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP, and (v) (without
duplication of any of the foregoing) one-third of the aggregate rental
obligations of such Person and its Subsidiaries for such period, whether paid or
accrued, in respect of leases of real and personal property, whether or not such
obligations are reflected as liabilities on the balance sheet of such Person and
its Subsidiaries.

37
<PAGE> 38

"Indebtedness" means, with respect to the Company, any of the following
(without duplication): (i)(a) any liability or obligation of the Company for
borrowed money (including, without limitation, principal and premium, if any,
interest, fees, penalties, expenses, collection expenses, and other obligations
in respect thereof, and, to the extent permitted by applicable law, interest
accruing after the filing of a petition initiating any proceeding under the
Bankruptcy Code whether or not allowed as a claim in such proceeding),whether or
not evidenced by bonds, debentures, notes or other written instruments, and any
other liability or obligation evidenced by notes, bonds debentures or similar
instruments (other than the Notes) whether or not contingent and whether
outstanding on the date of execution of the Indenture or thereafter created,
incurred or assumed, (b) any deferred payment obligation of the Company for the
payment of the purchase price of property or assets evidenced by a note or
similar instrument (excluding any obligation for trade payables or constituting
the deferred purchase price of property or assets which is not evidenced by a
note or similar instrument and which is unsecured),(c) any obligation of the
Company for the payment of rent or other amounts under a lease of property or
assets which obligation is required to be classified and accounted for as a
capitalized lease on the balance sheet of the Company under generally accepted
accounting principles, (d) all obligations of the Company under interest rate
and currency swaps, floors, caps, or similar arrangements intended to fix
interest rate obligations or currency fluctuation risks, (e) all obligations of
the Company evidenced by a letter of credit or any reimbursement obligation of
the Company in respect of a letter of credit, (f) all obligations of others
secured by a lien to which any of the properties or assets of the Company are
subject (including, without limitation, leasehold interests and any intangible
property rights), whether or not the obligations secured thereby have been
assumed by the Company or shall otherwise be the Company's legal obligation and
(g) all obligations of others of the kinds described in the preceding clauses
(a),(b),(c),(d) or (e) assumed by or guaranteed by the Company and the
obligations of the Company under guarantees of any such obligations; and (ii)
any amendments, renewals, extensions, deferrals, modifications, refinancing and
refunding of any of the foregoing. "Indebtedness" shall not include; (i) any
indebtedness of the Company to any Subsidiary or to any Affiliate of the Company
or any of the Subsidiaries, (ii) any indebtedness incurred in connection with
the purchase of goods, assets, materials or services in the ordinary course of
business or representing amounts recorded as accounts payable, trade payables
(which are unsecured), other current liabilities (other than for borrowed money)
or deferred revenue and deposits of the Company on the books of the Company,
(iii) any indebtedness of or amount owed by the Company to employees for
services rendered to the Company, and (iv) any liability for Federal, state,
local or other taxes owing or owed by the Company.

"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Sale of Assets and (ii) any extraordinary
or nonrecurring gain (but not loss), together with any related provision for
taxes on such extraordinary or nonrecurring gain (but not loss).

"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used solely to extend, refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Subsidiaries; provided that, except in
the case of Indebtedness of the Company issued in exchange for, or the net
proceeds of which are used solely to extend, refinance, renew, replace, defease
or refund, Indebtedness of a Subsidiary of the Company: (i) the principal amount
of such Permitted Refinancing Indebtedness does not exceed the principal amount
of the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of any premiums paid and reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.

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RESTRICTED PAYMENTS

The Indenture provides that the Company shall not make any Restricted
Payment to any Person and the Company shall not permit any Subsidiary or
Affiliate to make any Restricted Payment other than to the Company. (Section
6.11) "Restricted Payment" means, with respect to any Person, (i) the
declaration or payment of any dividend or the occurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of such Person's Stock, excluding dividends from one Subsidiary to
another or to the Company and excluding cash dividends by the Company which do
not exceed $750,000 in the aggregate in any fiscal year, (ii) except for (A) the
Odd Lot Purchase Program, (B) the purchase of shares of Common Stock of the
Company in the aggregate amount of up to $750,000 in any fiscal year, and (C) in
respect of the Stock Option Plans, any payment on account of the purchase,
redemption, defeasance or other retirement of such Person's Stock or any other
payment or distribution made in respect thereof, either directly or indirectly,
or (iii) any payment, loan, contribution, or other transfer of funds or other
property to any Stockholder of such Person in their capacity as Stockholders as
opposed to employees, directors or consultants; provided, however, that no Event
of Default exists or would be caused by the making of a Restricted Payment.
(Section 1.01)

SUBORDINATION

The payment of the principal of and premium, if any, and interest on the
Notes will, to the extent set forth in the Indenture, be subordinated in right
of payment to the prior payment in full of all Senior Indebtedness. Upon any
payment or dissolution of assets to creditors upon any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors, marshaling
of assets or any bankruptcy, insolvency or similar proceedings of the Company,
the holders of all Senior Indebtedness will be first entitled to receive payment
in full of all amounts due or to become due thereon before the Holders of the
Notes will be entitled to receive any payment in respect of the principal of or
premium, if any, or interest on the Notes. No payment or distribution of any
assets of the Company shall be made on account of principal of and premium, if
any, or interest on the Notes, in the event and during the continuation of (i)
any default in the payment of principal of or premium, if any, or interest on
any Senior Indebtedness beyond any applicable grace period with respect thereto
or (ii) any other event of default with respect to any Senior Indebtedness
permitting the holders of such Senior Indebtedness (or a trustee or other
representative on behalf of the holders thereof) to declare such Senior
Indebtedness due and payable prior to the date on which it would otherwise have
become due and payable, upon written notice thereof to the Company and the
Trustee by any holders of Senior Indebtedness (or a trustee or other
representative on behalf of the holders thereof) (the "Default Notice"), unless
and until such event of default shall have been cured or waived or ceased to
exist and such acceleration shall have been rescinded or annulled; provided such
payments may not be prevented under clause (ii) above for more than 179 days
after an applicable Default Notice has been received by the Trustee unless the
Senior Indebtedness in respect of which such event of default exists has been
declared due and payable in its entirety, in which case no such payment may be
made until such acceleration has been rescinded or annulled or such Senior
Indebtedness has been paid in full. No event of default which existed or was
continuing on the date of any Default Notice may be made the basis for the
giving of a second Default Notice and only one such Default Notice may be given
in any 365-day period. (Article Four)

By reason of such subordination, in the event of insolvency, creditors of
the Company who are not holders of Senior Indebtedness or of the Notes may
recover less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the Holders of the Notes.

"Senior Indebtedness" means, with respect to the Company, any of the
following (without duplication): (i) (a) any liability or obligation of the
Company for borrowed money (including, without limitation, principal of and
premium, if any, interest, fees, penalties, expenses, collection expenses, and
other obligations in respect thereof, and, to the extent permitted by applicable
law, interest accruing after the filing of a petition initiating any proceeding
under the Bankruptcy Code whether or not allowed as a claim in such proceeding),
whether or not evidenced by bonds, debentures, notes or other written
instruments, and any other liability or obligation evidenced by notes, bonds,
debentures or similar instruments (other than the Notes) whether or not
contingent and whether outstanding on the date of execution of the Indenture or
thereafter created, incurred

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<PAGE> 40

or assumed, (b) any deferred payment obligation of the Company for the payment
of the purchase price of property or assets evidenced by a note or similar
instrument (excluding any obligation for trade payables or constituting the
deferred purchase price of property or assets which is not evidenced by a note
or similar instrument and which is unsecured), (c) any obligation of the Company
for the payment of rent or other amounts under a lease of property or assets
which obligation is required to be classified and accounted for as a capitalized
lease on the balance sheet of the Company under generally accepted accounting
principles, (d) all obligations of the Company under interest rate and currency
swaps, floors, caps, or similar arrangements intended to fix interest rate
obligations or currency fluctuation risks, (e) all obligations of the Company
evidenced by a letter of credit or any reimbursement obligation of the Company
in respect of a letter of credit, (f) all obligations of others secured by a
lien to which any of the properties or assets of the Company are subject
(including, without limitation, leasehold interests and any intangible property
rights), whether or not the obligations secured thereby have been assumed by the
Company or shall otherwise be the Company's legal obligation and (g) all
obligations of others of the kinds described in the preceding clauses (a), (b),
(c), (d) or (e) assumed by or guaranteed by the Company and the obligations of
the Company under guarantees of any such obligations; and (ii) any amendments,
renewals, extensions, deferrals, modifications, refinancing and refunding of any
of the foregoing. "Senior Indebtedness" shall not include: (i) indebtedness that
by the terms of the instrument or instruments by which such indebtedness was
created or incurred expressly provides that it (a) is junior in right of payment
to the Notes or (b) ranks pari passu, in right of payment with the Notes, (ii)
any repurchase, redemption or other obligation in respect of Disqualified
Capital Stock, (iii) any indebtedness of the Company to any Subsidiary or to any
Affiliate of the Company or any of the Subsidiaries, (iv) any indebtedness
incurred in connection with the purchase of goods, assets, materials or services
in the ordinary course of business or representing amounts recorded as accounts
payable, trade payables (which are unsecured) or other current liabilities
(other than for borrowed money) or deferred revenue and deposits of the Company
on the books of the Company (other than the current portion of any long-term
indebtedness of the Company that but for this clause (iv) would constitute
Senior Indebtedness), (v) any indebtedness of or amount owed by the Company to
employees for services rendered to the Company, (vi) any liability for Federal,
state, local or other taxes owing or owed by the Company and (vii) the Company's
9 1/2% Subordinated Debentures due 2012 and 9% Convertible Subordinated
Debentures due 2005. (Section 1.01)

The Notes will be effectively subordinated to all indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's subsidiaries. Any right of the Company to receive assets of any
such subsidiary upon the liquidation or reorganization of any such subsidiary
(and the consequent right of the Holders of the Notes to participate in those
assets) will be effectively subordinated to the claims of that subsidiary's
creditors, except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.

The Indenture permits the incurrence of certain additional Indebtedness,
including Senior Indebtedness. At September 30, 1996 , the Company's Senior
Indebtedness aggregated approximately $23.2 million, excluding accrued interest
and the Company's subsidiaries had indebtedness and other liabilities of
approximately $4.8 million. The Company expects from time to time to incur
additional indebtedness, including Senior Indebtedness to the extent permitted
by the Indenture. See Note 9 of "Notes to Consolidated Financial Statements" for
a more detailed description of the Company's outstanding indebtedness. The
Company's 9% Convertible Subordinated Debentures due 2005 and 9 1/2%
Subordinated Debentures due 2012 are not Senior Indebtedness.

OPTIONAL REDEMPTION

The Notes are redeemable at the Company's option, in whole or from time to
time in part, upon not less than 20 nor more than 65 days' notice mailed to each
Holder of the Notes to be redeemed at such Holder's address appearing in the
Note Register, on any date on or after December 1, 2001 and prior to maturity.

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<PAGE> 41

The Redemption Prices (expressed as a percentage of the principal amount)
are as follows for the 12-month period beginning December 1 of the years
indicated:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
----------
<S> <C>
2001...................................................... 103.750%
2002...................................................... 102.813
2003...................................................... 101.875
2004...................................................... 100.938
</TABLE>

thereafter and at maturity at 100% of principal, together in the case of any
such redemption with accrued interest to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date).

No sinking fund is provided for the Notes.

EVENTS OF DEFAULT

The following will be Events of Default under the Indenture:

(i) failure to pay principal of or premium, if any, on any Note when
due, whether or not such payment is prohibited by the subordination
provisions of the Indenture;

(ii) failure to pay any interest on any Note when due, continued for
30 days, whether or not such payment is prohibited by the subordination
provisions of the Indenture;

(iii) default in the payment of the Repurchase Price in respect of any
Note on the Repurchase Date therefor, whether or not such payment is
prohibited by the subordination provisions of the Indenture;

(iv) failure to perform or breach of any other covenant of the Company
in the Indenture, which continues for 60 days after written notice as
provided in the Indenture; and

(v) certain events of bankruptcy, insolvency or reorganization of the
Company or any Significant Subsidiary. (Section 7.01)

Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 8.01) Subject
to the Trustee being offered reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by the Trustee, the Holders of
a majority in aggregate principal amount of the Outstanding Notes will have the
right by written instruction to the Trustee, to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. (Section 7.05)

If an Event of Default shall occur and be continuing, either the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Notes may accelerate the maturity of all Notes; provided, however,
that after such acceleration, but before a judgment or decree based on
acceleration, the Holders of a majority in aggregate principal amount of the
Outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of accelerated
principal, have been cured or waived as provided in the Indenture. (Section
7.02) For information as to waiver of defaults, see "Modification and Waiver"
below.

No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless (i) such Holder
shall have previously given to the Trustee written notice of a continuing Event
of Default and unless also the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes shall have made written request to the Trustee
to institute proceedings, (ii) such Holder has offered to the Trustee reasonable
indemnity, (iii) the Trustee for 60 days after receipt of such notice has failed
to institute any such proceeding and (iv) no direction inconsistent with such
request shall have been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding Notes. (Section
7.06) However, such limitations do not apply to a suit instituted by a Holder of
a

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<PAGE> 42

Note for enforcement of (a) payment of the principal of and premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note, (b) the right to require repurchase of such Note or (c) the right to
convert such Note in accordance with the Indenture. (Section 7.07)

The Indenture provides that the Company will deliver to the Trustee, within
95 days after the end of each fiscal year, an officers' certificate, stating as
to each signer thereof that he or she is familiar with the affairs of the
Company and whether or not to his or her knowledge the Company is in default in
the performance and observance of any of the Company's obligations under the
Indenture and if the Company shall be in default, specifying all such defaults
of which he or she has knowledge and the nature and status thereof. (Section
6.04)

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Company, without the consent of the Holders of any of the Notes under
the Indenture, may consolidate with or merge into any other Person or convey,
transfer or lease its assets substantially as an entirety to any Person,
provided that (i) the successor is a Person organized under the laws of any
domestic jurisdiction; (ii) the successor Person, if other than the Company,
assumes the Company's obligations on the Notes and under the Indenture; (iii)
after giving effect to the transaction no Event of Default, and no event after
notice or lapse of time, would become an Event of Default, shall have occurred
and be continuing; (iv) the Company or the surviving person (if other than the
Company) (A) will have Consolidated Net Worth (immediately after the transaction
but prior to any purchase accounting adjustments resulting from the transaction)
greater than or equal to the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to Section 6.12 of the Indenture and
(v) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture, complies with this covenant
and that all conditions precedent herein provided for relating to such
transaction have been complied with. (Section 12.01)

"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Capital Stock).

MODIFICATION AND WAIVER

Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of 66 2/3% in aggregate
principal amount of the Outstanding Notes; provided, however, that no such
modification or amendment may, without consent of the Holder of each Outstanding
Note affected thereby, (i) change the stated maturity of the principal of, or
any installment of interest on any Note; (ii) reduce the principal amount of, or
the premium or interest on any Note; (iii) change the place of payment where, or
currency in which, any Note or any premium or interest thereof is payable; (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Note; (v) adversely affect the right to convert the Notes; (vi)
adversely affect the right to cause the Company to repurchase the Notes; (vii)
modify the subordination provisions in a manner adverse to the Holders of the
Notes; (viii) reduce the above-stated percentage of Outstanding Notes necessary
to modify or amend the Indenture; or (ix) reduce the percentage of aggregate
principal amount of Outstanding Notes necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults. (Section
11.02)

The Holders of a majority in aggregate principal amount of Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. (Section 7.04) The Holders of a majority in aggregate principal
amount of the Outstanding Notes may waive any past default or right under the
Indenture, except (i) a default in payment of principal, premium or interest,
(ii) the right of a Holder to redeem or convert the Note or (iii) with respect
to any covenant or provision of the Indenture that requires the consent of the
Holder of each Outstanding Note affected. (Section 7.04)

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<PAGE> 43

REPURCHASE AT OPTION OF HOLDERS UPON A REPURCHASE EVENT

The Indenture provides that if a Repurchase Event occurs after initial
issuance of the Notes, each Holder of the Notes shall have the right (which
right may not be waived by the Board of Directors or the Trustee) at the
Holder's option, to require the Company to repurchase all of such Holder's
Notes, or any portion thereof that is an integral multiple of $1,000, on the
date (the "Repurchase Date") that is 45 calendar days after the date of the
Company Notice (as defined below), for cash at a price equal to 100% of the
principal amount of such Notes to be repurchased (the "Repurchase Price"),
together with accrued interest to the Repurchase Date. (Section 6.09)

Within 15 calendar days after the occurrence of a Repurchase Event, the
Company is obligated to mail all Holders of record of the Notes a notice (the
"Company Notice") of the occurrence of such Repurchase Event and of the
repurchase right arising thereof. The Company must deliver a copy of the Company
Notice to the Trustee. To exercise the repurchase right, the Holder of such Note
must deliver on or before the fifth day preceding the Repurchase Date
irrevocable written notice to the Trustee of the Holder's exercise of such right
(except that the right of the Holders to convert such Notes shall continue until
the close of business on the last Trading Day preceding the Repurchase Date),
together with the Notes with respect to which the right is being exercised, duly
endorsed for transfer to the Company. (Section 6.09)

A Repurchase Event will be deemed to have occurred at such time after
initial issuance of the Notes if:

(i) any Person (including any syndicate or group deemed to be a
"Person" under Section 13(d)(3)of the Exchange Act), other than the
Company, any subsidiary of the Company, any existing Person (including
directly or indirectly, the immediate family of any such Person) who
currently beneficially owns shares of capital stock with 50% or more of the
voting power as described below, or any current or future employee or
director benefit plan of the Company or any subsidiary of the Company or
any entity holding capital stock of the Company for or pursuant to the
terms of such plan, or an underwriter engaged in a firm commitment
underwriting in connection with a public offering of capital stock of the
Company, is or becomes the beneficial owner, directly or indirectly,
through a purchase, merger or other acquisition transaction or series of
transactions of shares of capital stock of the Company entitling such
Person to exercise 50% or more of the total voting power of all shares of
capital stock of the Company entitled to vote generally in the election of
directors;

(ii) the Company sells or transfers all or substantially all of the
assets of the Company to another Person;

(iii) there occurs any consolidation of the Company with, or merger of
the Company into, any other Person, any merger of another Person into the
Company (other than a merger (a) which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock, (b) which is effected solely to change the
jurisdiction of incorporation of the Company and results in a
reclassification, conversion or exchange of outstanding shares of Common
Stock solely into shares of Common Stock, or (c) a transaction in which the
stockholders of the Company immediately prior to such transaction owned,
directly or indirectly, immediately following such transaction, at least a
majority of the combined voting power of the outstanding voting stock of
the Company resulting from the transaction, such stock to be owned by such
stockholders in substantially the same proportion as their ownership of the
voting stock of the Company immediately prior to such transaction);

(iv) a change in the Board of Directors of the Company in which the
individuals who constituted the Board of Directors of the Company at the
beginning of the 24-month period immediately preceding such change
(together with any other director whose election by the Board of Directors
of the Company or whose nomination for election by the stockholders of the
Company was approved by a vote of at least a majority of the directors then
in office either who were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors then in office; or

(v) the Common Stock of the Company is the subject of a "Rule 13e-3
transaction" as defined under the Exchange Act.

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<PAGE> 44

provided, however, that a Repurchase Event shall not be deemed to have occurred
if the closing price per share of the Common Stock for any five Trading Days
within the period of ten consecutive Trading Days ending immediately before a
Repurchase Event shall equal or exceed 110% of the Conversion Price of such
Notes in effect on each such Trading Day. A "beneficial owner" shall be
determined in accordance with Rule 13d-3 promulgated by the Commission under the
Exchange Act, as in effect on the date of execution of the Indenture. (Sections
1.01 and 6.09)

The right to require the Company to repurchase the Notes as a result of the
occurrence of a Repurchase Event could create an event of default under Senior
Indebtedness as a result of which any repurchase could, absent a waiver, be
blocked by the subordination provisions of the Notes. See "Subordination" above.
Failure of the Company to repurchase the Notes when required would result in an
Event of Default with respect to the Notes whether or not such repurchase is
permitted by the subordination provisions. The Company's ability to pay cash to
the Holders of Notes upon a repurchase may be limited by certain financial
covenants contained in the Company's credit agreement.

Rule 13e-4 under the Exchange Act requires, among other things, the
dissemination of certain information to security holders in the event of any
issuer tender offer and may apply in the event that the repurchase option
becomes available to the Holders of the Notes. The Company will comply with this
rule to the extent applicable at that time. (Section 6.09)

The repurchase feature of the Notes may in certain circumstances make more
difficult or discourage a takeover of the Company and the removal of incumbent
management. The foregoing provisions would not necessarily afford Holders of the
Notes protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect Holders.

Except as described above with respect to a Repurchase Event, the Indenture
does not contain provisions permitting the Holders of the Notes to require the
Company to repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction. Subject to the limitation on mergers
and consolidations described above, the Company, its management or its
subsidiaries could, in the future, enter into certain transactions, including
refinancing, certain recapitalizations, acquisitions, the sale of all or
substantially all of its assets, the liquidation of the Company or similar
transactions, that would not constitute a Repurchase Event under the Indenture,
but that would increase the amount of Senior Indebtedness (or any other
indebtedness) outstanding at such time or substantially reduce or eliminate the
Company's assets. There are certain restrictions in the Indenture on the
creation of Senior Indebtedness (and other Indebtedness), however, under certain
circumstances, the incurrence of significant amounts of additional indebtedness
could have an adverse effect on the Company's ability to service its
indebtedness, including the Notes.

If a Repurchase Event were to occur, there is no assurance that the Company
would have sufficient funds to repurchase all Notes tendered by the Holders
thereof or to make any principal, premium, if any, or interest payments
otherwise required by the Notes. At September 30, 1996, the Company had
outstanding approximately $21.4 million principal amount of indebtedness under
its existing credit agreement which could be accelerated upon the occurrence of
certain change of control events.

As noted above, one of the events that constitutes a Repurchase Event under
the Indenture is a sale or other transfer of all or substantially all of the
assets of the Company. The Indenture will be governed by New York law, and the
definition under New York law of "substantially all" of the assets of a
corporation varies according to the facts and circumstances of the transaction.
Accordingly, if the Company were to engage in a transaction in which it disposed
of less than all of its assets, a question of interpretation could arise as to
whether such disposition was of "substantially all" of its assets and whether
the transaction was a Repurchase Event.

SATISFACTION AND DISCHARGE

The Company may, subject to certain conditions, discharge its obligations
under the Indenture while the Notes remain outstanding if (i) all outstanding
Notes will become due and payable at their scheduled maturity within one year or
(ii) all outstanding Notes are scheduled for redemption within one year, and, in

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<PAGE> 45

either case, the Company has deposited with the Trustee an amount sufficient to
pay and discharge all outstanding Notes on the date of their scheduled maturity
or the scheduled date of redemption. (Section 13.01)

REPORTS

In addition to complying with any applicable legal requirements, the
Company will deliver to the Holders of record, and to any beneficial owners so
requesting, annual reports containing audited consolidated financial statements
with a report thereon by the Company's independent public accountants. (Section
8.06)

GOVERNING LAW

The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.

INFORMATION CONCERNING THE TRUSTEE

Continental Stock Transfer & Trust Company is the Trustee under the
Indenture. A successor Trustee may be appointed in accordance with the terms of
the Indenture.

The Trustee's duties are set forth in the Trust Indenture Act, as amended
(the "Trust Indenture Act"), and in the Indenture. The Trust Indenture Act
imposes certain limitations on the right of the Trustee, in the event it becomes
a creditor of the Company, to obtain payment of claims in certain cases, or to
realize on certain property received in respect to any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
provided, however, it if acquires any conflicting interest within the meaning of
Section 310 of the Trust Indenture Act, it must generally either eliminate such
conflict or resign.

Prior to an Event of Default, the Trustee is responsible to perform only
such duties as are specifically set out in the Indenture. In case an Event of
Default shall occur (and shall not be cured), the Trust Indenture Act required
that the Trustee use the degree of care of a prudent person in the conduct of
its own affairs in the exercise of its powers. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the Holders of Notes, unless they
shall have offered to the Trustee reasonable indemnity. (Section 8.01)

The holders of a majority in principal amount of all outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy or power available to the Trustee, provided that such
direction does not conflict with any rule of law or with the Indenture, is not
prejudicial to the rights of another Holder or the Trustee, and does not involve
the Trustee in personal liability. (Sections 7.05 and 8.01)

The Trustee is also the trustee for the Company's 9% Convertible
Subordinated Debentures due 2005 and 9 1/2% Subordinated Debentures due 2012.

45
<PAGE> 46

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The shares of Common Stock are entitled to one vote per share on all
matters submitted to stockholders. The holders of Common Stock are entitled to
vote separately as a class (as are the shares of Class B Stock) on all matters
requiring an amendment to the Company's Certificate of Incorporation, as well as
on mergers, consolidations and certain other significant transactions for which
stockholder approval is required under Delaware law. Holders of the Common Stock
do not have preemptive rights or cumulative voting rights.

Dividends on the Common Stock will be paid if, and when declared. The
Common Stock is entitled to cash dividends which are 11.1% higher per share than
the cash dividends which may be paid on the Class B Stock. Except as otherwise
set forth herein the Common Stock and the Class B Stock rank equally. Stock
dividends on and stock splits of Common Stock will only be payable or made in
shares of Common Stock.

In the event of liquidation the Common Stock is entitled to receive the
entire net assets of the Company remaining after payment of all debts and other
claims of creditors and after the holders of each series of Preferred Stock, if
any, have been paid the preferred liquidating distribution on their shares, if
any, as fixed by the Board of Directors of the Company. The Common Stock is not
convertible into shares of any other equity security of the Company.

The Common Stock is freely transferable. As of September 30, 1996, there
were 847 holders of record of Common Stock.

CLASS B STOCK

The shares of Class B Stock are entitled to ten votes per share on all
matters submitted to stockholders. They are entitled to vote separately as a
class (as are the shares of Common Stock) on all matters requiring an amendment
to the Company's Certificate of Incorporation, as well as on mergers,
consolidations and certain other significant transactions for which stockholder
approval is required under Delaware law. Holders of the Class B Stock do not
have preemptive rights or cumulative voting rights.

Dividends on the Class B Stock will be paid only as and when dividends on
the Common Stock are declared and paid. The Class B Stock is entitled to cash
dividends which are 10% lower per share than the cash dividends which may be
paid on the Common Stock. Except as otherwise set forth herein the Common Stock
and the Class B Stock rank equally. Stock dividends on and stock splits of Class
B Stock will only be payable or made in shares of Class B Stock.

In the event of liquidation or insolvency, each share of Class B Stock will
be entitled, through conversion into Common Stock, to share ratably with the
Common Stock in the assets remaining after payment of all debts and other claims
of creditors, subject to the rights of any Preferred Stock which may be issued
in the future.

Holders of Class B Stock may elect at any time to convert any or all of
such shares into shares of Common Stock on a share-for-share basis. In the event
that the number of outstanding shares of Class B Stock falls below 5% of the
aggregate number of issued and outstanding shares of Common Stock and Class B
Stock, or the Board of Directors and a majority of the outstanding shares of
Class B Stock approve the conversion of all of the Class B Stock into Common
Stock, then immediately upon the occurrence of either event, the shares of the
Class B Stock will automatically be converted into shares of Common Stock. In
the event of such conversion, certificates formerly representing outstanding
shares of Class B Stock will thereafter be deemed to represent a like number of
shares of Common Stock.

The Class B Stock is not transferable except to certain family members and
related entities. As of September 30, 1996 there were 68 holders of Class B
Stock.

46
<PAGE> 47

CLASS A STOCK

Each share of Class A Stock has no voting rights except as otherwise
required by law. Under the Delaware General Corporation Law, holders of Class A
Stock are entitled to vote on proposals to increase or decrease the number of
authorized shares of Class A Stock, change the par value of the Class A Stock or
to alter or change the powers, preferences or special rights of the shares of
Class A Stock which may affect them adversely.

Each outstanding share of Class A Stock is entitled to receive such
dividends and other distributions in cash, stock or property as may be declared
by the Board of Directors of the Company, provided that, if at any time a cash
dividend is paid on the Common Stock, a cash dividend will also be paid on the
Class A Stock in an amount 10% higher than the amount per share paid on the
Common Stock and 22.2% higher than that paid on the Class B Stock. In no event
shall dividends and other distributions be paid on any of the Common Stock,
Class A Stock or Class B Stock unless the other such classes of stock also
receive dividends subject to the above provisions for the requirement of the
respective higher cash dividends for Class A Stock and Common Stock. Dividends
or other distributions payable in shares of stock shall be made to holders of
Class A Stock in shares of Class A Stock. The Board can authorize a distribution
of Class A Stock proportionately to holders of Common Stock, Class A Stock and
Class B Stock. In no event will either Common Stock, Class A Stock or Class B
Stock be split, divided or combined unless the others are also proportionately
split, divided or combined.

The Class A Stock will convert into Common Stock only at such time as all
of the Class B Stock is converted to Common Stock in accordance with the terms
of the Certificate of Incorporation. The Certificate of Incorporation provides
that if the number of shares of Class B Stock falls below 5% of the aggregate
number of outstanding shares of Common Stock and Class B Stock, or if the Board
of Directors and a majority of the outstanding shares of Class B Stock approve,
the outstanding shares of Class B Stock will be converted into Common Stock.

Consistent with the terms of the Common Stock and Class B Stock, the Class
A Stock does not carry any preemptive rights enabling a holder to subscribe for
or receive shares of any class of stock of the Company or any other securities
convertible into shares of any class of stock of the Company.

The Class A Stock is entitled to receive the same consideration per share
as the Common Stock and Class B Stock in the event of any liquidation,
dissolution or winding-up of the Company.

Each holder of Class A Stock is entitled to receive the same per share
consideration as the per share consideration, if any, received by any holder of
the Common Stock and Class B Stock in a merger or consolidation of the Company.

SPECIAL VOTING REQUIREMENTS

The Company's Certificate of Incorporation, as presently in effect,
contains a required four-fifths vote on mergers, consolidations or a sale of
substantially all of the Company's assets with an "Interested Person," i.e. a
holder of 10% or more of its common stock, unless such transaction is first
approved by the Company's Board of Directors. It also contains a "fair price"
provision requiring all stockholders to receive equal treatment in the event of
a takeover which may be coercive. Such provision may not be amended except by a
four-fifths vote of the stockholders and may be considered to have the effect of
discouraging tender offers, takeover attempts, acquisitions or business
combinations involving the Company. Such provision also requires that business
combinations involving the Company and certain "Acquiring Persons" (i.e., a
person or entity which directly or indirectly owns or controls at least 5% of
the voting stock of the Company) be approved by the holders of four-fifths of
the Company's outstanding shares entitled to vote (excluding shares held by the
Acquiring Person) unless such business combination either (1) has been
authorized by the Board of Directors prior to the time that the Acquiring Person
involved in such business combination became an Acquiring Person, or (2) will
result in the receipt by the other stockholders of a specified minimum amount
and form of payment for their shares.

47
<PAGE> 48

PREFERRED STOCK

Preferred stock may be issued in one or more series from time to time by
action of the Board of Directors. The shares of any series of Preferred Stock
may be convertible into Common Stock, may have priority over the Common Stock,
Class B Stock and Class A Stock in the payment of dividends and as to the
distribution of assets in the event of liquidation, dissolution or winding-up of
the Company and may have preferential or other voting rights, in each case, to
the extent, if any, determined by the Board of Directors of the Company at the
time it creates the series of Preferred Stock. There currently are no shares of
Preferred Stock outstanding.

DELAWARE ANTI-TAKEOVER LAW

Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation whose stock is listed on a national securities exchange or held of
record by more than 2,000 stockholders, and an "interested stockholder" are
prohibited for a three-year period following the date that such stockholder
became an interested stockholder, unless (i) the corporation has elected in its
certificate of incorporation or bylaws not to be governed by the Delaware
anti-takeover law (the Company has not made such an election), (ii) the business
combination was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee stock plans in which the
employees do not have a right to determine confidentially whether to tender or
vote stock held by the plan), or (iv) the business combination was approved by
the board of directors of the corporation and ratified by 66 2/3% of the voting
stock which the interested stockholder did not own. The three year prohibition
does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an interested
stockholder, transactions with an interested stockholder involving the assets or
stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. The
term "interested stockholder" is defined generally as a stockholder who becomes
the beneficial owner of 15% or more of a Delaware corporation's voting stock.
The Delaware anti-takeover law could have the effect of delaying, deferring or
preventing a change in control of the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, relating to prohibited dividends or
distributions or the repurchase or redemption of stock, or (iv) for any
transaction from which the director derives an improper personal benefit. The
provision does not apply to claims against a director for violations of certain
laws, including federal securities law. If the Delaware General Corporation Law
is amended to authorize the further elimination or limitation of directors'
liability, then the liability of directors of the Company shall automatically be
limited to the fullest extent provided by law. The Company's By-laws also
contain provisions to indemnify the directors, officers, employees or other
agents to the fullest extent permitted by the Delaware General Corporation Law.
In addition, the Company has entered into indemnification agreements with its
current directors and executive officers. These provisions and agreements may
have the practical effect in certain cases of eliminating the ability of
stockholders to collect monetary damages from directors. The Company believes
that these contractual agreements and the provisions in its Certificate of
Incorporation and By-laws are necessary to attract and retain qualified persons
as directors and officers.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar of the Common Stock of the Company is
Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York
10004.

48
<PAGE> 49

UNDERWRITING

The Underwriter, Southcoast Capital, has agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company
$27,500,000 principal amount of the Notes. The Underwriting Agreement provides
that the obligations of the Underwriter to pay for and accept delivery of the
Notes are subject to certain conditions precedent, and that the Underwriter is
committed to purchase all of the Notes if it purchase any of the Notes.

The Underwriter has advised the Company that it proposes initially to offer
the Notes to the public on the terms set forth on the cover page of this
Prospectus. The Underwriter may allow selected dealers a concession of not more
than 2.25% of the principal amount of the Notes, and the Underwriter may allow,
and such dealers may reallow, a discount of not more than 0.5% of the principal
amount of the Notes to other dealers. The public offering price and the
concession and discount to dealers may be changed by the Underwriter after the
initial public offering of the Notes. The Notes are offered subject to receipt
and acceptance by the Underwriter, and to certain other conditions, including
the right to reject orders in whole or in part.

The Company has granted the Underwriter an option for 30 days to purchase
up to an additional $4,125,000 principal amount of the Notes solely to cover
over-allotments, if any, at the same price per Note as the initial principal
amount of the Notes to be purchased by the Underwriter.

The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain liabilities, including civil liabilities under the
Securities Act of 1933, as amended (the "Securities Act"), or will contribute to
payments the Underwriter may be required to make in respect thereof.

The Notes are a new issue of securities for which there is currently no
public market. The Notes have been approved for inclusion on the AMEX upon
notice of issuance. However, no assurance can be given as to the liquidity of or
trading market for the Notes.

Directors and executive officers of the Company, who in the aggregate own
approximately 288,590 shares (including options to purchase shares) of Common
Stock (including Class B Stock if converted into equal amounts of Common Stock),
have agreed not to offer for sale, sell, distribute or otherwise dispose of any
shares of Common Stock, or any securities convertible into or warrants to
purchase shares of Common Stock, now owed or hereafter acquired for a period of
90 days after the date of this Prospectus without prior written consent of
Southcoast Capital.

49
<PAGE> 50

LEGAL MATTERS

The legality of the Notes and the Common Stock offered hereby and certain
other legal matters will be passed upon for the Company by Weisman Celler Spett
& Modlin, P.C., New York, New York. Certain legal matters in connection with the
offering contemplated hereby will be passed upon for the Underwriter by
Fulbright & Jaworski L.L.P., New York, New York. As of June 30, 1996, members of
the firm of Weisman Celler Spett & Modlin, P.C. beneficially owned 2,812 shares
of the Class B Stock of the Company. Howard S. Modlin, a member of such firm, is
a director of the Company.

EXPERTS

The financial statements as of December 31, 1995 and 1994 and for each of
the three years in the period ended December 31, 1995 of the Company included
and incorporated by reference in this Prospectus from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report which is
included and incorporated by reference herein, and have been so included and
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 the ("Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional
offices located at Northwestern Atrium Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates by writing the Public Reference Section of the Commission, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company at http://www.sec.gov. The Common Stock is
listed on the AMEX and reports, proxy statements and other information
concerning the Company can be inspected at such Exchange's office located at 86
Trinity Place, New York, New York 10006.

This Prospectus forms a part of a registration statement on Form S-2
(herein, together with all exhibits thereto, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933 (the "Securities Act") with respect to the Notes offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. Statements contained herein concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto can be inspected and copied at the public
reference facilities and regional offices referred to above.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 1-2257), are hereby
incorporated by reference in and made a part of this Prospectus:

(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, (filed April 1, 1996).

50
<PAGE> 51

(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996, and September 30, 1996 (filed May 14,
1996, August 14, 1996, and November 12, 1996 respectively).

Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a Prospectus
is delivered, upon the written or oral request of any such person, a copy of any
of or all the documents referred to above which have been or may be incorporated
in this Prospectus by reference, other than exhibits to such documents which are
not specifically incorporated by reference into such documents. Requests for
such copies should be directed to Angela Toppi, Chief Financial Officer,
Trans-Lux Corporation, 110 Richards Avenue, Norwalk, Connecticut 06856-5090,
telephone number (203) 853-4321.

51
<PAGE> 52

TRANS-LUX CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995.......................... F-3
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and
1995................................................................................ F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995................................................................................ F-5
Notes to Consolidated Financial Statements............................................ F-6
Consolidated Balance Sheets as of December 31, 1995 and September 30, 1996
(Unaudited)......................................................................... F-20
Consolidated Statements of Income for the nine months ended September 30, 1995 and
1996 (Unaudited).................................................................... F-21
Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and
1996
(Unaudited)......................................................................... F-22
Notes to Consolidated Financial Statements (Unaudited)................................ F-23
</TABLE>

F-1
<PAGE> 53

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Trans-Lux Corporation:

We have audited the accompanying consolidated balance sheets of Trans-Lux
Corporation and subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of income and cash flows for each of the three years in
the period ended December 31, 1995. These consolidated 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at December 31, 1995 and 1994 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Stamford, Connecticut
February 28, 1996

F-2
<PAGE> 54

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 2,335,000 $ 665,000
Available-for-sale securities........................................... 1,603,000 576,000
Receivables............................................................. 1,403,000 2,403,000
Inventories............................................................. 517,000 1,900,000
Prepaids and other current assets....................................... 104,000 466,000
Current deferred taxes.................................................. 192,000 --
----------- -----------
Total current assets............................................... 6,154,000 6,010,000
----------- -----------
Rental equipment.......................................................... 43,807,000 47,043,000
Less accumulated depreciation........................................... 14,154,000 16,265,000
----------- -----------
29,653,000 30,778,000
----------- -----------
Property, plant and equipment............................................. 18,313,000 20,913,000
Less accumulated depreciation and amortization.......................... 5,070,000 5,921,000
----------- -----------
13,243,000 14,992,000
Prepaids, intangibles and other........................................... 2,295,000 4,081,000
Maintenance contracts, net................................................ 1,962,000 1,599,000
----------- -----------
$53,307,000 $57,460,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals........................................... $ 5,379,000 $ 4,804,000
Income taxes payable.................................................... 198,000 136,000
Short-term borrowings................................................... -- 500,000
Current portion of long-term debt....................................... 2,660,000 1,804,000
----------- -----------
Total current liabilities.......................................... 8,237,000 7,244,000
----------- -----------
Long-term debt:
9% convertible subordinated debentures due 2005......................... 4,874,000 4,874,000
9 1/2% subordinated debentures due 2012................................. 1,057,000 1,057,000
Notes payable........................................................... 13,762,000 16,564,000
----------- -----------
19,693,000 22,495,000
Deferred revenue and deposits............................................. 1,550,000 2,621,000
Deferred income taxes..................................................... 3,282,000 3,600,000
Minority interest......................................................... 21,000 1,000
----------- -----------
Stockholders' equity:
Capital stock
Preferred -- $1 par value -- 500,000 shares authorized..................
Common -- $1 par value -- 4,000,000 shares authorized
2,435,046 shares issued in 1994 and 2,436,268 in 1995................. 2,435,000 2,436,000
Class B -- $1 par value -- 2,000,000 shares authorized
305,359 shares issued in 1994 and 304,137 in 1995..................... 305,000 304,000
Additional paid-in capital.............................................. 13,809,000 13,806,000
Retained earnings....................................................... 15,993,000 16,888,000
Other................................................................... (107,000) (71,000)
----------- -----------
32,435,000 33,363,000
Less treasury stock -- at cost -- 1,492,581 shares in 1994 and 1,488,837
in 1995 (excludes additional 305,359 shares held in 1994 and 304,137 in
1995 for conversion of Class B stock)................................... 11,911,000 11,864,000
----------- -----------
Total stockholders' equity......................................... 20,524,000 21,499,000
----------- -----------
$53,307,000 $57,460,000
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE> 55

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
GROSS REVENUES:
Equipment rentals and maintenance................. $20,824,000 $21,652,000 $21,205,000
Equipment sales................................... 11,806,000 8,498,000 12,364,000
Theatre receipts and other........................ 3,169,000 3,592,000 4,222,000
----------- ----------- -----------
35,799,000 33,742,000 37,791,000
----------- ----------- -----------
OPERATING EXPENSES:
Cost of equipment rentals and maintenance......... 11,249,000 11,929,000 11,358,000
Cost of equipment sales........................... 7,648,000 4,620,000 7,863,000
Cost of theatre receipts and other................ 2,657,000 2,864,000 3,185,000
----------- ----------- -----------
21,554,000 19,413,000 22,406,000
----------- ----------- -----------
GROSS PROFIT FROM OPERATIONS........................ 14,245,000 14,329,000 15,385,000
General and administrative expenses................. 10,202,000 11,023,000 11,494,000
----------- ----------- -----------
4,043,000 3,306,000 3,891,000
Interest income..................................... 223,000 204,000 147,000
Interest expense.................................... (2,603,000) (1,446,000) (2,291,000)
Other income........................................ -- -- 92,000
----------- ----------- -----------
INCOME BEFORE INCOME TAXES.......................... 1,663,000 2,064,000 1,839,000
----------- ----------- -----------
Provision for income taxes:
Current........................................... 231,000 407,000 576,000
Deferred.......................................... 943,000 343,000 197,000
----------- ----------- -----------
1,174,000 750,000 773,000
----------- ----------- -----------
NET INCOME.......................................... $ 489,000 $ 1,314,000 $ 1,066,000
=========== =========== ===========
Earnings per share:
Primary........................................... $ 0.39 $ 1.04 $ 0.85
Fully diluted..................................... * $ 0.94 $ 0.81
Average common and common equivalent shares
outstanding:
Primary........................................... 1,249,000 1,260,000 1,259,000
Fully diluted..................................... -- 1,943,000 1,643,000
</TABLE>

- ---------------
* not dilutive

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE> 56

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................... $ 489,000 $ 1,314,000 $ 1,066,000
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 6,342,000 6,513,000 6,901,000
Deferred income taxes............................. 1,022,000 (188,000) 475,000
Current deferred taxes............................ (31,000) 230,000 192,000
Minority interest................................. -- 20,000 (20,000)
Changes in operating assets and liabilities:
Receivables.................................... 454,000 1,062,000 (595,000)
Inventories.................................... 73,000 (3,000) (361,000)
Prepaids and other current assets.............. 226,000 42,000 (309,000)
Prepaids, intangibles and other................ (256,000) (85,000) (78,000)
Accounts payable and accruals.................. 1,409,000 370,000 (1,675,000)
Income taxes payable........................... 96,000 (48,000) (62,000)
Deferred revenue and deposits.................. (2,315,000) 1,002,000 1,071,000
----------- ----------- -----------
Net cash provided by operating activities.... 7,509,000 10,229,000 6,605,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of rental equipment....................... (2,972,000) (5,276,000) (5,932,000)
Purchases of property, plant and equipment.......... (915,000) (3,187,000) (1,749,000)
Payments for acquisitions........................... (3,274,000) -- (3,178,000)
Proceeds from acquisition note receivable........... -- -- 658,000
Sale of assets...................................... -- 52,000 221,000
Investment in joint venture......................... -- (12,000) (480,000)
Purchases of securities............................. (1,110,000) (3,470,000) (494,000)
Proceeds from sales of securities................... 1,088,000 3,978,000 1,582,000
----------- ----------- -----------
Net cash (used in) investing activities...... (7,183,000) (7,915,000) (9,372,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt........................ 2,400,000 4,308,000 4,379,000
Repayment of long-term debt......................... (2,604,000) (2,163,000) (3,655,000)
Proceeds from short-term borrowings................. -- -- 500,000
Redemption of Company's 9% convertible subordinated
debentures........................................ -- (3,080,000) --
Proceeds from exercise of stock options and stock
award............................................. -- -- 45,000
Purchase of treasury stock.......................... (21,000) (1,000) (1,000)
Cash dividends...................................... (153,000) (171,000) (171,000)
----------- ----------- -----------
Net cash provided by (used in) financing
activities................................ (378,000) (1,107,000) 1,097,000
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... (52,000) 1,207,000 (1,670,000)
Cash and cash equivalents at beginning of year...... 1,180,000 1,128,000 2,335,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR............ $ 1,128,000 $ 2,335,000 $ 665,000
=========== =========== ===========
Interest paid....................................... $ 1,767,000 $ 2,135,000 $ 1,851,000
Interest received................................... 228,000 214,000 176,000
Income taxes paid................................... 140,000 756,000 661,000
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE> 57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation: The consolidated financial statements include
the accounts of Trans-Lux Corporation and its majority-owned subsidiaries (the
"Company"). Investment in a 50% owned joint venture, MetroLux Theatres, is
reflected under the equity method.

Cash equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.

Available-for-sale securities: Available-for-sale securities consists of
U.S. Treasury Notes and common and preferred stock holdings and are stated at
fair value.

Inventories: Inventories are stated at the lower of cost (first-in,
first-out method) or market value.

Rental equipment and property, plant and equipment: These assets are
stated at cost and are being depreciated over their respective useful lives
using straight line or 150% declining balance methods. Leaseholds and
improvements are amortized over the lesser of the useful life or term of the
lease. The estimated useful lives are as follows:

<TABLE>
<S> <C>
Rental equipment...................................................... 5 to 15 years
Buildings and improvements............................................ 10 to 45 years
Machinery, fixtures and theatre equipment............................. 4 to 15 years
Leaseholds and improvements........................................... 2 to 12 years
</TABLE>

When rental equipment and property, plant and equipment are fully
depreciated, retired or otherwise disposed of, the cost and accumulated
depreciation are eliminated from the accounts.

Maintenance contracts: These assets are stated at cost and are being
amortized over their economic lives of eight to 15 years using an accelerated
method.

Revenue recognition: Rental income from leasing of equipment and revenue
from maintenance contracts are recognized as they accrue during the term of the
respective agreement. The Company recognizes revenues on long term equipment
sales contracts, which require more than three months to complete, using the
percentage of completion method. Income is recognized based on the percentage of
incurred costs to the estimated total costs. Revenue on equipment sales other
than long term equipment sales contracts are recognized upon shipment. Theatre
receipts and other revenues are recognized at the time service is provided.

Taxes on income: Effective January 1, 1993 the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under
this Standard, deferred tax assets and liabilities are determined based on the
difference between financial statement and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse.

Earnings per share: Primary earnings per share of Common and Class B
shares are based on the weighted average number of Common and Class B shares and
common stock equivalents outstanding computed by the "treasury stock" method.
Fully diluted earnings per share assumes conversion of dilutive convertible
debentures and the assumed exercise of all common stock equivalents.

Long-lived assets: The Company will adopt the provisions of Statement of
Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" in the first quarter of
1996. The anticipated effect of adopting this new standard is not expected to
have a material effect on the Company's consolidated financial position or
results of operations.

Stock-based compensation: The Company will adopt the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123) in the first quarter of 1996. The Company, as provided
for in FAS 123, will continue to apply Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" for employees stock compensation
measurement, and

F-6
<PAGE> 58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

will disclose the required pro forma effect on net income and earnings per share
based on the fair value of the equity instruments awarded.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Certain reclassifications have been made to prior years' amounts to conform
to the current year's format.

2. AVAILABLE-FOR-SALE SECURITIES

Available-for-sale securities are carried at estimated fair values and the
unrealized holding losses are excluded from earnings and are reported net of
income taxes in a separate component of stockholders' equity until realized.
Adjustments of $107,000 and $71,000 were made to equity to reflect the net
unrealized losses on available-for-sale securities as of December 31, 1994 and
1995, respectively.

Available-for-sale securities consist of the following as of December 31,
1994 and 1995.

<TABLE>
<CAPTION>
1994 1995
----------------------- -----------------------
FAIR UNREALIZED FAIR UNREALIZED
VALUE LOSS VALUE LOSS
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
Equity securities..................... $ 610,000 $104,000 $576,000 $ 71,000
U.S. Treasury securities.............. 993,000 3,000 -- --
-------- ------- ---------- --------
$1,603,000 $107,000 $576,000 $ 71,000
======== ======= ========== ========
</TABLE>

3. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
1994 1995
-------- ----------
<S> <C> <C>
Raw materials and spare parts................................ $498,000 $1,191,000
Work-in-process.............................................. -- 181,000
Finished goods............................................... 19,000 528,000
---------- --------
$517,000 $1,900,000
========== ========
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Land, buildings and improvements.......................... $13,521,000 $14,767,000
Machinery, fixtures and equipment......................... 3,785,000 5,129,000
Leaseholds and improvements............................... 1,007,000 1,017,000
----------- -----------
$18,313,000 $20,913,000
=========== ===========
</TABLE>

Land, buildings and equipment having a net book value of $8,049,000 and
$12,292,000 at December 31, 1994 and 1995, respectively, were pledged as
collateral under borrowing agreements.

F-7
<PAGE> 59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. PREPAIDS, INTANGIBLES AND OTHER

Prepaids, intangibles and other consists of the following:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Prepaids and other.......................................... $1,145,000 $1,005,000
Deferred debenture expense.................................. 168,000 206,000
Deferred financing costs.................................... 287,000 480,000
Acquisition costs........................................... 100,000 96,000
Deposits and advances....................................... 89,000 68,000
Long-term note receivable................................... 218,000 --
Patents..................................................... -- 323,000
Goodwill and noncompete agreement........................... -- 1,105,000
Investment in joint ventures................................ 38,000 506,000
Long-term portion of officers' and employees' loans......... 250,000 292,000
---------- ----------
$2,295,000 $4,081,000
========== ==========
</TABLE>

Deferred debenture expense represents costs attributable to the 9%
convertible subordinated debenture issue and the 9 1/2% subordinated debenture
issue being amortized over the respective lives of the issues on a straight line
basis, and are net of accumulated amortization of $652,000 and $670,000, at
December 31, 1994 and 1995, respectively. Deferred financing costs represent
costs attributable to financing agreements being amortized over the lives of the
agreements on a straight line basis, and are net of accumulated amortization of
$182,000 and $349,000 at December 31, 1994 and 1995, respectively. Acquisition
costs represent the purchase price attributable to intangibles being amortized
over 30 years on a straight line basis, and are net of accumulated amortization
of $49,000 and $53,000 at December 31, 1994 and 1995, respectively. Patents
represent costs attributable to engineering and design costs of outdoor products
being amortized over 14 years on a straight line basis, and is net of
accumulated amortization of $64,000 at December 31, 1995. Goodwill and
noncompete agreement costs are attributable to the purchase costs associated
with the acquisition of ISE in January 1995. (See Note 7 -- Acquisitions.)
Goodwill is being amortized over 20 years on a straight line basis, and is net
of accumulated amortization of $35,000 at December 31, 1995. The noncompete
agreement is being amortized over five years on a straight line basis, the term
of the agreement, and is net of accumulated amortization of $96,000 at December
31, 1995. Impairment of intangibles and their associated useful lives are
evaluated quarterly based on recoverability of unamortized balances from
expected future cash flows on an undiscounted basis. The investment in joint
ventures is primarily an investment in MetroLux Theatres, a 12-plex theatre
located in Loveland, Colorado.

6. MAINTENANCE CONTRACTS

Maintenance contracts represent the present value of contracts the Company
has with customers to service their outdoor display equipment, which were
acquired during 1993. (See Note 7 -- Acquisitions.) These contracts are being
amortized over 15 years, on an accelerated method, which contemplates contract
expiration, fall out and non-renewals and are net of accumulated amortization of
$686,000 and $1,049,000, at December 31, 1994 and 1995, respectively.

7. ACQUISITIONS

During January 1995, the Company acquired all of the capital stock of
Integrated Systems Engineering, Inc. (ISE), which manufactures outdoor
electronic signs, for a cash purchase price of approximately $2.7 million plus
payment of noncompete and consulting fees. The payments for the acquisition are
shown in the Consolidated Statements of Cash Flows net of $1.9 million of
liabilities assumed.

F-8
<PAGE> 60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The acquisition has been accounted for using the purchase method of
accounting. The purchase price has been allocated on the basis of the fair value
of the assets acquired and liabilities assumed. Assets include land, building,
machinery and equipment, accounts receivable, inventory and patents. The excess
of the purchase price over the fair value of the net assets acquired has been
recorded as goodwill. Pro forma results of operations as if the acquisition had
occurred as of January 1, 1995 are not presented, as the amounts are not
materially different from those presented.

The following pro forma financial information should be read in conjunction
with the Company's consolidated financial statements. The pro forma information
does not purport to represent what the Company's results of operations or
financial position would have been if the acquisition, in fact, had occurred on
January 1, 1994, or to project the Company's results of operations or financial
position for any future period or at any future date. The results of operations
have been included in the Company's consolidated financial statements since the
date of acquisition. The pro forma consolidated balance sheet is not presented
as the transaction is already reflected in the Company's consolidated balance
sheet at December 31, 1995.

<TABLE>
<CAPTION>
1994
-----------
UNAUDITED
<S> <C>
Gross revenues.......................................................... $38,284,000
-----------
Gross profit from operations............................................ $17,046,000
-----------
Net income.............................................................. $ 1,439,000
-----------
Earnings per share -- primary........................................... $1.14
-----
Earnings per share -- fully diluted..................................... $1.00
-----
</TABLE>

During 1993 the Company, through its subsidiary Trans-Lux Sign Corporation,
purchased certain assets and liabilities of Indicator Maintenance Corporation
for an aggregate cash price of approximately $3.2 million. The assets acquired
included a portfolio of leased outdoor electronic signs, a maintenance base and
other contracts.

The acquisition has been accounted for using the purchase method of
accounting. The purchase price has been allocated on the basis of the fair value
of the assets which approximates the acquisition cost.

The following pro forma financial information should be read in conjunction
with the Company's consolidated financial statements. The pro forma information
does not purport to represent what the Company's results of operations or
financial position would have been if the acquisition, in fact, had occurred on
January 1, 1993, or to project the Company's results of operations or financial
position for any future period or at any future date. The results of operations
have been included in the Company's consolidated financial statements since the
date of acquisition.

<TABLE>
<CAPTION>
1993
-----------
UNAUDITED
<S> <C>
Gross revenues.......................................................... $39,035,000
-----------
Gross profit from operations............................................ $14,752,000
-----------
Net income.............................................................. $ 505,000
-----------
Earnings per share...................................................... $0.40
-----
</TABLE>

F-9
<PAGE> 61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. TAXES ON INCOME

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1994 1995
---------- -------- --------
<S> <C> <C> <C>
Current:
Federal......................................... $ 76,000 $229,000 $490,000
State........................................... 155,000 150,000 86,000
Foreign......................................... -- 28,000 --
-------- -------- ----------
231,000 407,000 576,000
-------- -------- ----------
Deferred:
Federal......................................... 391,000 311,000 157,000
State........................................... 552,000 -- 40,000
Foreign......................................... -- 32,000 --
-------- -------- ----------
943,000 343,000 197,000
-------- -------- ----------
Total income tax expense.......................... $1,174,000 $750,000 $773,000
======== ======== ==========
</TABLE>

1994 includes the favorable state tax settlement, which assessment was
recorded in 1993.

Income taxes provided differed from the expected federal statutory rate of
34% as follows:

<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate.............................. 34.0% 34.0% 34.0%
State income taxes, net of federal benefit..................... 28.1 8.1 4.5
Benefit of NOL................................................. 7.3 (6.4) --
Other.......................................................... 1.2 0.6 3.5
---- ---- ----
Effective income tax rate................................. 70.6% 36.3% 42.0%
==== ==== ====
</TABLE>

The tax effect of temporary differences giving rise to the Company's
deferred tax provision are as follows:

<TABLE>
<CAPTION>
1993 1994 1995
-------- --------- --------
<S> <C> <C> <C>
Depreciation and amortization..................... $(96,000) $ 180,000 $ 49,000
Pension actuarial gain............................ 20,000 (30,000) (14,000)
Supplemental retirement plan...................... 7,000 (143,000) (15,000)
State income taxes................................ 211,000 478,000 27,000
Impact of NOL..................................... 801,000 61,000 191,000
AMT credit........................................ -- (235,000) (25,000)
Other............................................. -- 32,000 (16,000)
--------- --------- --------
Net deferred tax provision................... $943,000 $ 343,000 $197,000
========= ========= ========
</TABLE>

F-10
<PAGE> 62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of the items comprising the net deferred tax asset and
liability at December 31, 1994 and 1995 in the Company's statement of financial
position are as follows:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Current asset
Deferred tax asset:
Operating loss carryforwards........................... $ 192,000 --
Valuation allowance.................................... -- --
---------- ----------
Net deferred tax asset............................ 192,000 --
========== ==========
Long-term liability
Deferred tax asset:
Operating loss carryforwards........................... $ 82,000 $ 175,000
Excess financial reporting depreciation and
amortization over tax depreciation and
amortization......................................... 259,000 331,000
Acquisition costs not deducted for tax purposes........ 84,000 84,000
Net pension cost not deducted for tax purposes......... 36,000 52,000
Supplemental retirement plan costs not deducted for tax
purposes............................................. 44,000 61,000
Tax credit carryforwards............................... 337,000 397,000
Unrealized holding losses not deducted for tax
purposes............................................. 87,000 58,000
Bad debt expense not deducted for tax purposes......... -- 37,000
Valuation allowance.................................... (402,000) (232,000)
---------- ----------
527,000 963,000
---------- ----------
Deferred tax liability:
Excess tax depreciation over financial reporting
depreciation......................................... 2,715,000 3,328,000
Gain on purchases of Company's 9% debentures not
reported for tax purposes............................ 439,000 439,000
Net pension benefit not reported for tax purposes...... 373,000 373,000
Foreign exchange gain not reported for tax purposes.... 32,000 31,000
State income taxes..................................... 250,000 392,000
---------- ----------
3,809,000 4,563,000
---------- ----------
Net deferred tax liability........................ $3,282,000 $3,600,000
========== ==========
</TABLE>

The valuation allowance changed by $170,000 for the year ended December 31,
1995. The valuation allowance has been established for the amount of deferred
tax assets which management estimates will more likely than not expire unused.

F-11
<PAGE> 63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
9% convertible subordinated debentures due 2005........... $ 4,874,000 $ 4,874,000
9 1/2% subordinated debentures due 2012................... 1,057,000 1,057,000
Loan and security agreement -- bank, secured, due in
quarterly installments through 1998..................... 9,855,000 --
Line of credit and security agreement -- bank, secured.... 2,989,000 --
Note payable -- banks, secured, due in monthly
installments through 1998............................... 538,000 --
IRB note payable -- banks, secured, due in quarterly
installments through 1997............................... 733,000 --
Term loans -- bank, secured, due in quarterly installments
through 2002............................................ -- 15,177,000
Loan payable -- CDA, due in monthly installments through
2002 at 5.0%............................................ -- 517,000
Real estate mortgages -- secured, due in monthly and
quarterly installments through 2015..................... 2,206,000 2,597,000
Capital lease obligation, -- secured, due in monthly
installments through 1999 at 9.5%....................... 101,000 77,000
-----------
22,353,000 24,299,000
Less portion due within one year.......................... 2,660,000 1,804,000
-----------
$19,693,000 $22,495,000
===========
</TABLE>

Payments of long-term debt due for the next five years are:

During 1985, the Company issued $15 million of 9% convertible subordinated
debentures due 2005. These debentures are redeemable at the option of the
Company at declining premiums. An annual sinking fund requirement of $1,125,000
was to commence December 1, 1995; however, at its option, the Company is
depositing with the Trustee debentures that have been repurchased and receive a
credit against such required payments. The debentures are redeemable at the
option of the Company at par. The debentures are currently convertible into
shares of the Company's Common Stock at a conversion price of $12.70 per share.

During 1994, the Company made an Offer to Exchange $1,000 principal amount
of its new 9 1/2% subordinated debentures due 2012 ("New Debentures") for each
$1,000 principal amount of its 9% convertible subordinated debentures due 2005
("Old Debentures"). The New Debentures pay an interest rate of 9 1/2%, mature in
2012, are not callable until 1999 and are not convertible into Common Stock. The
Company accepted $1,057,000 of Old Debentures in exchange for $1,057,000 of New
Debentures. The New Debentures are redeemable at the option of the Company at
declining premiums. An annual sinking fund requirement of $105,700 will commence
December 1, 2009. Simultaneously with the Offer to Exchange, the Company called
for redemption of approximately 39% of the Old Debentures at 101.125% on
December 1, 1994 and redeemed $3,080,000 of the Old Debentures. The Company
entered into a Line of Credit and Security Agreement for $3,000,000 to finance
such redemption. The line of credit was converted to a five-year term note on
January 27, 1995 with an interest rate of 9.04% through January 27, 1998 and at
prime plus 1/2% thereafter. This loan was part of the restructuring in August
1995.

The Company entered into a Credit Agreement with First Union Bank of
Connecticut (formerly known as First Fidelity Bank) in August 1995 restructuring
its indebtedness of $15,581,000 and a $4,000,000 line

F-12
<PAGE> 64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of credit. The restructuring extends the terms to an average of 11 years at a
variable rate of interest of LIBOR plus 175 basis points (7.688% at December 31,
1995). Simultaneously, the Company entered into interest rate swap agreements to
reduce the impact of changes in interest rates on its floating rate long-term
debt. At December 31, 1995, the Company had outstanding two interest rate swap
agreements with a commercial bank, having a notional value of $15,177,000. The
resulting gain or loss on the swaps is included in interest expense. The
agreements effectively change the Company's interest rate exposure on its
$7,867,000 floating rate installment note due quarterly through October 2002 to
a fixed rate of 7.86% and its $7,310,000 floating rate installment note due
quarterly through July 2002 to a fixed rate of 7.86%. The notional value of the
interest rate swap agreements are reduced quarterly with the installment
payments on the notes and mature July 1, 1998. The aggregate cost to terminate
the interest rate swap agreements at December 31, 1995 was $389,000. The Company
is subject to credit loss in the event of nonperformance by other parties to the
interest rate swap agreements. However, the Company does not anticipate
nonperformance by the counterparties.

The $4 million line of credit is at a variable rate of interest of LIBOR
plus 200 basis points (7.867% at December 31, 1995) and is available until June
1997. At December 31, 1995, the Company had $3.5 million available under such
agreement.

The Company has a first mortgage on a four-plex theatre in Taos, New Mexico
at an interest rate of prime plus 1% (9.5% at December 31, 1995) with a balloon
payment of $837,000 in 1998 and a first mortgage on a five-plex theatre in
Durango, Colorado at an interest rate of prime plus 1%, capped at 9% with a
balloon payment of $920,000 in 2000.

The fair value of the 9% convertible subordinated debentures and the 9 1/2%
subordinated debentures are $5,166,000 and $1,046,000, respectively at December
31, 1995. The fair value of the remaining long-term debt approximates the
carrying value.

The theatrical joint venture, MetroLux Theatres, entered into an agreement
to borrow $3,000,000 for the land and construction of the 12-plex theatre
located in Loveland, Colorado. The Company is the guarantor of the entire
indebtedness. However, the owner of the non-related general partner of the joint
venture has guaranteed their prorata portion of the indebtedness to the Company.

F-13
<PAGE> 65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. STOCKHOLDERS' EQUITY

Changes in capital stock, additional paid-in capital, treasury stock and
retained earnings for the three years ended December 31, 1995 are as follows:

<TABLE>
<CAPTION>
COMMON STOCK CLASS B ADDITIONAL RETAINED
---------------------- ------------------ PAID-IN TREASURY EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK AND OTHER
--------- ---------- ------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31,
1992.................... 2,420,201 $2,420,000 319,811 $320,000 $13,804,000 $(11,889,000) $14,514,000
Net income................ -- -- -- -- -- -- 489,000
Cash dividends............ -- -- -- -- -- -- (153,000)
Common stock acquired
(2,311 shares).......... -- -- -- -- -- (21,000) --
Class B conversion to
common stock............ 13,264 13,000 (13,264) (13,000) -- -- --
--------- ---------- ------- -------- ----------- ------------ -----------
Balance December 31,
1993.................... 2,433,465 2,433,000 306,547 307,000 13,804,000 (11,910,000) 14,850,000
Net income................ -- -- -- -- -- -- 1,314,000
Cash dividends............ -- -- -- -- -- -- (171,000)
9% debentures
conversion.............. 393 1,000 -- -- 5,000 -- --
Unrealized holding
losses.................. -- -- -- -- -- -- (107,000)
Common stock acquired (131
shares)................. -- -- -- -- -- (1,000) --
Class B conversion to
common stock............ 1,188 1,000 (1,188) (2,000) -- -- --
--------- ---------- ------- -------- ----------- ------------ -----------
Balance December 31,
1994.................... 2,435,046 2,435,000 305,359 305,000 13,809,000 (11,911,000) 15,886,000
Net income................ -- -- -- -- -- -- 1,066,000
Cash dividends............ -- -- -- -- -- -- (171,000)
Unrealized holding gain... -- -- -- -- -- -- 36,000
Exercise of stock
options................. -- -- -- -- (4,000) 40,000 --
Common stock acquired
(56 shares)............. -- -- -- -- -- (1,000) --
Common stock award........ -- -- -- -- 1,000 8,000 --
Class B conversion to
common stock............ 1,222 1,000 (1,222) (1,000) -- -- --
--------- ---------- ------- -------- ----------- ------------ -----------
Balance December 31,
1995.................... 2,436,268 $2,436,000 304,137 $304,000 $13,806,000 $(11,864,000) $16,817,000
========= ========== ======= ======== =========== ============ ===========
</TABLE>

During 1995, the Board of Directors declared four quarterly cash dividends
of $.035 per share on the Company's Common Stock and $.0315 per share on the
Company's Class B Stock, which were paid in April, July and October 1995 and
January 1996. During 1993 the Board authorized an increase of 17% in the
quarterly cash dividends to its current level. Each share of Class B Stock is
convertible at any time into one share of Common Stock and has ten votes per
share, as compared to Common Stock which has one vote per share but receives a
higher dividend.

During 1995, the stockholders approved 3 million shares of a new class of
capital stock designated Class A Stock, $1.00 par value. The stock will have no
voting rights except as required by law and will receive a 10% higher dividend
than the Common Stock. A Certificate of Amendment authorizing the Class A shares
and adjusting authorized shares of Common Stock to 5.5 million and Class B Stock
to 1 million will be filed prior to the first issuance of Class A Stock. No
specific issuance of Class A Stock is presently contemplated.

At December 31, 1995, shares of Common Stock were reserved for:

<TABLE>
<S> <C>
Conversion of 9% convertible subordinated debentures....................... 782,000
Stock options.............................................................. 124,000
</TABLE>

F-14
<PAGE> 66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. LEASES

The Company occupies theatre and other premises under operating leases
expiring at varying dates through 2006. Certain of the leases provide for the
payment of real estate taxes and other occupancy costs. In addition, the Company
has a long-term lease for a telephone system, which is classified as a capital
lease.

The following is a summary of future minimum lease payments due under
capital and operating leases at December 31, 1995:

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASE LEASES
-------------------------------------------------------------- ------- ----------
<S> <C> <C>
1996.......................................................... $30,000 $ 248,000
1997.......................................................... 30,000 188,000
1998.......................................................... 30,000 160,000
1999.......................................................... 7,000 129,000
2000.......................................................... -- 107,000
Thereafter.................................................... -- 668,000
------- ----------
Total future minimum lease payments........................... $97,000 $1,500,000
==========
Amount representing interest.................................. 20,000
-------
Present value of net minimum lease payments................... 77,000
Current portion............................................... 24,000
-------
Long-term portion............................................. $53,000
=======
</TABLE>

Total rent expense for all operating leases amounted to $308,000, $267,000,
and $238,000 in 1993, 1994 and 1995, respectively. At December 31, 1995,
sublease income of $110,000 is to be received on non-cancelable leases through
2000.

12. ENGINEERING DEVELOPMENT EXPENSE

Engineering development expense was $108,000, $238,000 and $172,000 for
1993, 1994 and 1995, respectively.

13. PENSION PLAN

All eligible salaried employees of Trans-Lux Corporation and certain of its
subsidiaries are covered by a non-contributory pension plan. Pension benefits
vest after five years of service and are based on years of service and final
average salary. The Company's funding policy is to contribute annually an amount
that can be deducted for Federal income tax purposes. Contributions are intended
to provide not only for benefits based on service to date, but also for those
benefits expected to be earned in the future.

F-15
<PAGE> 67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The funded status of the plan at December 31, 1994 and 1995 are as follows:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Fair value of plan assets, invested in insurance company
funds..................................................... $3,893,000 $4,172,000
---------- ----------
Actuarial present value of benefits for service rendered to
date:
Accumulated benefits based on salaries to date, including
vested benefits of $1,902,000 and $2,879,000 for 1994
and 1995, respectively................................. 1,998,000 2,985,000
Additional benefits based on estimated future salary
levels................................................. 1,016,000 1,286,000
---------- ----------
Projected benefit obligation (PBO).......................... 3,014,000 4,271,000
---------- ----------
Plan assets (less than) in excess of PBO.................... 879,000 (99,000)
Unrecognized prior service cost............................. 24,000 22,000
Unrecognized net loss from past experience different from
that assumed.............................................. 53,000 952,000
Unrecognized net asset on January 1, 1985 being recognized
over 13.38 years.......................................... (132,000) (92,000)
---------- ----------
Prepaid pension cost........................................ $ 824,000 $ 783,000
========== ==========
</TABLE>

The following items are components of the net pension cost for 1995:

<TABLE>
<S> <C>
Present value of benefits earned during the period........................ $273,000
Interest cost on projected benefit obligation............................. 278,000
Actual return on plan assets.............................................. (372,000)
Net amortization and deferral............................................. (38,000)
--------
Net pension cost.......................................................... $141,000
========
</TABLE>

The weighted average discount rate used in determining the actuarial
present value of the PBO was 8.5% in 1994 and 7.5% in 1995. The rate of increase
in future compensation levels used in determining the actuarial present value of
the PBO was 4.25% in 1994 and 4.0% in 1995. The expected long-term rate of
return on assets was 9.5 percent for 1994 and 1995.

The Company provides supplemental retirement benefits for the Chief
Executive Officer, during 1995, the Company accrued $43,000 for such benefits.
At December 31, 1994 and 1995, respectively, the total liability accrued was
$110,000 and $153,000.

The Company's pension and supplemental pension costs for the years ended
December 31, 1993, 1994 and 1995 were $241,000, $226,000 and $183,000,
respectively.

The Company does not offer any postretirement benefits other than the
pension and the supplemental retirement benefits described herein.

As of January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This statement requires the accrual of
estimated costs of benefits to former or inactive employees after employment but
before retirement. The adoption of this standard did not have a material effect
on the Company's consolidated financial statements. The Company did not accrue
any liability for such benefits during 1995.

14. STOCK OPTION PLANS

The Company has five stock option plans. The 1995 Stock Option Plan and the
1992 Stock Option Plan each reserved 50,000 shares of Common Stock for issue to
key employees. Stock Option Plan II terminated, and accordingly, additional
shares cannot be granted under such plan, which originally reserved 50,000
shares of Common Stock (before giving effect for stock dividends). The
Non-Employee Director Stock Option Plan

F-16
<PAGE> 68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reserved 15,000 shares of Common Stock for grant. The Non-Statutory Stock Option
Plan Agreement reserved 12,500 shares of Common Stock for issue to the Chairman
of the Board.

Changes in the stock option plans are as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES
------------------------------------
AUTHORIZED GRANTED AVAILABLE
---------- ------- ---------
<S> <C> <C> <C>
Balance December 31, 1992............................ 111,900 95,100 16,800
Additional authorized shares......................... 12,500 -- 12,500
Terminated........................................... (22,500) (42,500) 20,000
Granted.............................................. -- 27,900 (27,900)
------- ------- ------
Balance December 31, 1993............................ 101,900 80,500 21,400
Terminated........................................... (3,500) (8,000) 4,500
Granted.............................................. -- 17,000 (17,000)
------- ------- ------
Balance December 31, 1994............................ 98,400 89,500 8,900
Additional authorized shares......................... 50,000 -- 50,000
Terminated........................................... (19,700) (25,200) 5,500
Granted.............................................. -- 28,200 (28,200)
Exercised............................................ (5,000) (5,000) --
------- ------- ------
Balance December 31, 1995............................ 123,700 87,500 36,200
======= ======= ======
</TABLE>

Under the 1995 Stock Option Plan and the 1992 Stock Option Plan, option
prices must be at least 100% of the market value of the Common Stock at the time
of the grant. Exercise periods are for ten years from date of the grant (five
years if the optionee owns more than 10% of the voting power) and terminate at a
stipulated period of time after an employee's termination of employment. At
December 31, 1995, under the 1995 Plan, options for 23,800 shares (granted in
1995) with an exercise price of $8.125 per share were outstanding. No shares
were exercisable or were exercised during 1995. At December 31, 1995, under the
1992 Plan, options for 48,700 shares (granted in 1992, 1993, 1994 and 1995) with
exercise prices ranging from $6.3125 to $9.6875 per share were outstanding, of
which 45,300 shares were exercisable. Options for 1,300 shares (granted in 1992)
with an exercise price of $6.3125 per share were exercised in 1995. During 1995,
options for 1,000 shares expired. No options were exercised during 1993 and
1994.

Under Stock Option Plan II, option prices must be at least 100% of the
market value of the Common Stock at the time of the grant. Exercise periods are
for six years from date of the grant (five years if the optionee owns more than
10% of the voting power) and terminate at a stipulated period of time after an
employee's termination of employment. At December 31, 1995, all 19,700 options
under the plan have terminated. Options for 2,200 shares (granted in 1989) with
an exercise price of $7.625 per share were exercised in 1995. No options were
exercised during 1993 and 1994.

Under the Non-Employee Director Stock Option Plan, options must be at least
100% of the market value of the Common Stock at the time of the grant. No option
may be exercised prior to one year after the date of the grant and the optionee
must be a director of the Company at the time of exercise, except in certain
cases as permitted by the Compensation Committee. Exercise periods are for six
years from date of the grant and options terminate at a stipulated period of
time after an optionee ceases to be a director. At December 31, 1995, options
for 2,500 shares (granted in 1994 and 1995) with exercise prices ranging from
$8.625 to $9.6875 per share were outstanding, all of which were exercisable.
During 1995, options for 1,500 shares (granted in 1989) with an option price of
$7.4375 per share were exercised. During 1995, options for 4,500 shares expired.
No options were exercised during 1993 and 1994.

Under the Non-Statutory Stock Option Agreement, the option must be at least
100% of the market value of the Common Stock at the time of the grant. The
exercise period is for ten years from the date of the grant.

F-17
<PAGE> 69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1995, an option for 12,500 shares (granted in 1993) with an
exercise price of $7.50 per share was outstanding, which is exercisable. No
options were exercised during 1993, 1994 and 1995.

15. COMMITMENTS AND CONTINGENCIES

The Company has employment/consulting agreements with certain current and
former executive officers which expire at various dates through December 2002.
The aggregate commitment for future salaries/consulting fees at December 31,
1995, excluding bonuses, is approximately $3,404,000.

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not have a material
adverse affect on the consolidated financial statements of the Company.

16. BUSINESS SEGMENT DATA

The Company's operations have been classified into two business segments.
The Communications Division designs, produces, leases, sells and services
large-scale, multi-color, real-time electronic information displays for both
indoor and outdoor use. The Entertainment and Real Estate Division owns a chain
of motion picture theatres in the Southwestern United States and owns real
estate used for both corporate and income-producing purposes in the United
States and Canada.

F-18
<PAGE> 70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information about the Company's operations in its two business segments for
the three years ended December 31, 1995 is as follows:

<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
GROSS REVENUE
Communications.................................... $32,630,000 $30,150,000 $33,569,000
Entertainment and real estate..................... 3,169,000 3,592,000 4,222,000
------------ ------------ ------------
$35,799,000 $33,742,000 $37,791,000
============ ============ ============
OPERATING INCOME
Communications.................................... $ 9,431,000 $ 8,881,000 $ 9,500,000
Entertainment and real estate..................... 142,000 204,000 548,000
------------ ------------ ------------
9,573,000 9,085,000 10,048,000
Other income........................................ -- -- 92,000
General and administrative expenses................. (5,530,000) (5,779,000) (6,157,000)
Interest expense -- net............................. (2,380,000) (1,242,000) (2,144,000)
------------ ------------ ------------
Income before taxes................................. $ 1,663,000 $ 2,064,000 $ 1,839,000
============ ============ ============
ASSETS
Communications.................................... $43,743,000 $42,684,000 $49,565,000
Entertainment and real estate..................... 4,955,000 6,685,000 6,654,000
------------ ------------ ------------
Total identifiable assets........................... 48,698,000 49,369,000 56,219,000
Cash and available-for-sale securities.............. 3,440,000 3,938,000 1,241,000
------------ ------------ ------------
$52,138,000 $53,307,000 $57,460,000
============ ============ ============
DEPRECIATION AND AMORTIZATION
Communications.................................... $ 5,988,000 $ 5,951,000 $ 6,403,000
Entertainment and real estate..................... 215,000 264,000 301,000
General corporate................................. 139,000 298,000 197,000
------------ ------------ ------------
$ 6,342,000 $ 6,513,000 $ 6,901,000
============ ============ ============
CAPITAL EXPENDITURES
Communications.................................... $ 3,768,000 $ 6,240,000 $ 7,461,000
Entertainment and real estate..................... 119,000 2,223,000 220,000
------------ ------------ ------------
$ 3,887,000 $ 8,463,000 $ 7,681,000
============ ============ ============
</TABLE>

General and administrative expenses consist of general corporate expenses
not deemed to be operating expenses and have therefore not been allocated.

No single customer accounted for 10% or more of total revenues in 1994 and
1995. During 1993, the Company recorded revenues of approximately $4.3 million
from a single customer.

Foreign revenues were less than 10% of consolidated revenue in 1993 and
1995 and were approximately 15% in 1994.

17. ACCOUNTS PAYABLE AND ACCRUALS

Accounts payable and accruals includes $1,361,000 and $1,730,000 for
accounts payable, $135,000 and $368,000 for accrued interest payable, and
$466,000 and $518,000 for taxes payable for 1994 and 1995, respectively.

F-19
<PAGE> 71

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER
31,
1995
----------- SEPTEMBER 30,
1996
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 665,000 $ 54,000
Available-for-sale securities.......................................... 576,000 586,000
Receivables............................................................ 2,403,000 5,434,000
Unbilled receivables................................................... -- 1,632,000
Inventories............................................................ 1,900,000 1,778,000
Prepaids and other current assets...................................... 466,000 332,000
----------- -----------
Total current assets................................................. 6,010,000 9,816,000
----------- -----------
Rental equipment....................................................... 47,043,000 52,574,000
Less accumulated depreciation........................................ 16,265,000 19,980,000
----------- -----------
30,778,000 32,594,000
----------- -----------
Property, plant and equipment.......................................... 20,913,000 21,795,000
Less accumulated depreciation and amortization....................... 5,921,000 6,960,000
----------- -----------
14,992,000 14,835,000
Prepaids, intangibles and other........................................ 4,081,000 3,640,000
Maintenance contracts, net............................................. 1,599,000 1,352,000
Note receivable, MetroLux Theatres (excludes $94,000 current
portion).............................................................. -- 808,000
----------- -----------
$57,460,000 $63,045,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals.......................................... $ 4,804,000 $ 6,436,000
Income taxes payable................................................... 136,000 55,000
Short-term borrowings.................................................. 500,000 --
Current portion of long-term debt...................................... 1,804,000 1,184,000
----------- -----------
Total current liabilities............................................ 7,244,000 8,305,000
----------- -----------
Long-term debt:
9% convertible subordinated debentures due 2005...................... 4,874,000 4,811,000
9 1/2% subordinated debentures due 2012.............................. 1,057,000 1,057,000
Notes payable........................................................ 16,564,000 21,402,000
----------- -----------
22,495,000 27,270,000
Deferred revenue and deposits.......................................... 2,621,000 1,513,000
Deferred income taxes.................................................. 3,600,000 3,648,000
Minority interest...................................................... 1,000 1,000
----------- -----------
Stockholders' equity:
Capital stock
Preferred -- $1 par value -- 500,000 shares authorized............
Common -- $1 par value -- 4,000,000 shares authorized
2,436,268 shares issued in 1995 and 2,441,523 in 1996........... 2,436,000 2,441,000
Class B -- $1 par value -- 2,000,000 shares authorized
304,137 shares issued in 1995 and 298,882 in 1996............... 304,000 299,000
Additional paid-in capital........................................... 13,806,000 13,828,000
Retained earnings.................................................... 16,888,000 17,626,000
Other................................................................ (71,000) (65,000)
----------- -----------
33,363,000 34,129,000
Less treasury stock -- at cost -- 1,488,837 shares in 1995 and
1,481,258 in 1996 (excludes additional 304,137 shares held in 1995 and
298,882 in 1996 for conversion of Class B stock)...................... 11,864,000 11,821,000
----------- -----------
Total stockholders' equity........................................ 21,499,000 22,308,000
----------- -----------
$57,460,000 $63,045,000
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-20
<PAGE> 72

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
-----------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Equipment rentals and maintenance............................. $16,509,000 $16,273,000
Equipment sales............................................... 9,174,000 13,276,000
Theatre receipts and other.................................... 3,198,000 3,322,000
----------- -----------
Total revenues............................................. 28,881,000 32,871,000
----------- -----------
OPERATING EXPENSES:
Cost of equipment rentals and maintenance..................... 8,700,000 8,883,000
Cost of equipment sales....................................... 5,752,000 8,753,000
Cost of theatre receipts and other............................ 2,462,000 2,529,000
----------- -----------
Total operating expenses................................... 16,914,000 20,165,000
----------- -----------
GROSS PROFIT FROM OPERATIONS.................................... 11,967,000 12,706,000
General and administrative expenses............................. 9,210,000 9,442,000
----------- -----------
2,757,000 3,264,000
----------- -----------
Interest income................................................. 124,000 95,000
Interest expense................................................ (1,689,000) (1,764,000)
Other income (expense).......................................... 70,000 (97,000)
----------- -----------
INCOME BEFORE INCOME TAXES...................................... 1,262,000 1,498,000
----------- -----------
Provision for income taxes:
Current....................................................... 501,000 521,000
Deferred...................................................... 29,000 108,000
----------- -----------
530,000 629,000
----------- -----------
NET INCOME...................................................... $ 732,000 $ 869,000
=========== ===========
Earnings per share:
Primary....................................................... $ 0.58 $ 0.68
Fully diluted................................................. * $ 0.64
Average common and common equivalent shares outstanding:
Primary....................................................... 1,258,000 1,283,000
Fully diluted................................................. * 1,674,000
Cash dividends per share:
Common stock.................................................. $ 0.105 $ 0.105
Class B stock................................................. $ 0.0945 $ 0.0945
</TABLE>

- ---------------
* not dilutive

The accompanying notes are an integral part of these consolidated financial
statements.

F-21
<PAGE> 73

TRANS-LUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
-----------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................... $ 732,000 $ 869,000
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 5,134,000 5,277,000
Net loss of joint venture.................................. -- 97,000
Deferred income taxes...................................... 531,000 44,000
Minority interest.......................................... (8,000) --
Changes in operating assets and liabilities:
Receivables.............................................. (1,386,000) (3,031,000)
Unbilled receivables..................................... -- (1,632,000)
Inventories.............................................. (307,000) 122,000
Prepaids and other current assets........................ (113,000) 228,000
Prepaids, intangibles and other.......................... (82,000) (239,000)
Accounts payable and accruals............................ 117,000 1,632,000
Income taxes payable..................................... 87,000 (81,000)
Deferred revenue and deposits............................ (796,000) (1,108,000)
----------- -----------
Net cash provided by operating activities............. 3,909,000 2,178,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of rental equipment................................... (4,112,000) (5,531,000)
Purchases of property, plant and equipment...................... (1,389,000) (882,000)
Payments for an acquisition..................................... (3,178,000) --
Proceeds from acquisition note receivable....................... 658,000 --
Sale of assets.................................................. 209,000 --
Investment in joint venture..................................... (1,304,000) 345,000
Loan to joint venture........................................... -- (941,000)
Purchases of securities......................................... (494,000) --
Proceeds from sales of securities............................... 1,582,000 --
----------- -----------
Net cash (used in) investing activities............... (8,028,000) (7,009,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt.................................... 4,275,000 5,700,000
Repayment of long-term debt..................................... (3,206,000) (1,352,000)
Proceeds from short-term borrowings............................. 1,300,000 --
Proceeds from exercise of stock options......................... 36,000 4,000
Purchase of treasury stock...................................... (1,000) (1,000)
Cash dividends.................................................. (128,000) (131,000)
----------- -----------
Net cash provided by financing activities............. 2,276,000 4,220,000
----------- -----------
Net (decrease) in cash and cash equivalents..................... (1,843,000) (611,000)
Cash and cash equivalents at beginning of year.................. 2,335,000 665,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................... $ 492,000 $ 54,000
=========== ===========
Interest paid................................................... $ 1,366,000 $ 1,452,000
Interest received............................................... 132,000 101,000
Income taxes paid............................................... 376,000 542,000
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-22
<PAGE> 74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Financial information included herein is unaudited, however, such
information reflects all adjustments which are, in the opinion of management,
necessary for the fair presentation of the consolidated financial statements for
the interim periods. The results for the interim periods are not necessarily
indicative of the results to be expected for the full year. Certain
reclassifications have been made to prior year's amounts to conform to the
current year's format. It is suggested that the September 30, 1995 and 1996
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" in the first
quarter of 1996. As provided for in the standard, the Company continues to apply
Accounting Principals Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations for employee stock compensation
measurement and will disclose the required pro forma information in the 1996
Form 10-K.

2. ACCOUNTING FOR INCOME TAXES

The effective tax rate at September 30, 1996 was 42%. There was no change
in the valuation allowance during the nine months ended September 30, 1996.

3. PREPAIDS, INTANGIBLES AND OTHER

Prepaid, intangibles and other consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1995 1996
------------ ------------
<S> <C> <C>
Prepaids and other..................................... $1,005,000 $1,048,000
Deferred debenture expense............................. 206,000 193,000
Deferred financing costs............................... 480,000 421,000
Acquisition costs...................................... 96,000 92,000
Deposits and advances.................................. 68,000 76,000
Patents................................................ 323,000 275,000
Goodwill and noncompete agreement...................... 1,105,000 1,003,000
Investment in joint venture............................ 506,000 128,000
Long-term portion of officers' and employees' loans.... 292,000 404,000
---------- ----------
$4,081,000 $3,640,000
========== ==========
</TABLE>

4. ACCOUNTS PAYABLE AND ACCRUALS

Accounts payable and accruals includes $1,730,000 and $2,415,000 for
accounts payable, $368,000 and $569,000 for accrued interest payable, and
$518,000 and $632,000 for taxes payable at December 31, 1995 and September 30,
1996, respectively.

F-23
<PAGE> 75

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

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER. 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. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 11
Price Range of Common Stock and
Dividend Policy..................... 11
Capitalization........................ 12
Selected Financial Data............... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 20
Management............................ 28
Executive Compensation and
Transactions with Management........ 30
Description of Notes.................. 34
Description of Capital Stock.......... 46
Underwriting.......................... 49
Legal Matters......................... 50
Experts............................... 50
Available Information................. 50
Incorporation of Certain Documents by
Reference........................... 50
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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

- ------------------------------------------------------
- ------------------------------------------------------
$27,500,000
LOGO
LOGO

7 1/2% CONVERTIBLE
SUBORDINATED NOTES
DUE 2006
------------------------
PROSPECTUS
------------------------

SOUTHCOAST CAPITAL
CORPORATION

DECEMBER 19, 1996

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