La Petite Academy Inc – ‘424B1’ on 6/30/98

As of:  Tuesday, 6/30/98   ·   Accession #:  889812-98-1646   ·   File #:  333-56239

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Prospectus   —   Rule 424(b)(1)
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Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Prospectus                                           118    721K 

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                                              Filed Pursuant to Rule 424(b)(1)
                                   File Number 333-56239

PROSPECTUS                                                                      

LA PETITE ACADEMY, INC. 
LPA HOLDING CORP. 

OFFER TO EXCHANGE UP TO $145,000,000 OF THEIR 
10% SERIES B SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING 
10% SENIOR NOTES DUE 2008 
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JULY 30, 1998, UNLESS EXTENDED 
------------------------

    La Petite Academy, Inc. (the 'Company') and LPA Holding Corp. ('Parent' and,
together with the Company, the 'Issuers') hereby offer, upon the terms and      
subject to the conditions set forth in this Prospectus and the accompanying     
Letter of Transmittal (which together constitute the 'Exchange Offer') to       
exchange $1,000 principal amount of 10% Series B Senior Notes due 2008 (the 'New
Notes') of the Issuers for each $1,000 principal amount of the issued and       
outstanding 10% Senior Notes due 2008 (the 'Old Notes,' and the Old Notes and   
the New Notes, collectively, the 'Notes') of the Issuers from the Holders (as   
defined herein) thereof. As of the date of this Prospectus, there is            
$145,000,000 aggregate principal amount of the Old Notes outstanding. The terms 
of the New Notes are identical in all material respects to the Old Notes, except
that the New Notes have been registered under the Securities Act of 1933, as    
amended (the 'Securities Act'), and therefore will not bear legends restricting 
their transfer and will not contain certain provisions providing for the payment
of liquidated damages to the holders of the Old Notes under certain             
circumstances relating to the Registration Rights Agreement (as defined herein),
which provisions will terminate as to all of the Notes upon the consummation of 
the Exchange Offer.                                                             

   Interest on the New Notes will accrue from May 11, 1998 and will be payable
semi-annually on May 15 and November 15 of each year, commencing November 15,   
1998. No interest will be payable on the Old Notes accepted for exchange. The   
New Notes will mature on May 15, 2008. Except as described below, the New Notes 
will not be redeemable at the option of the Issuers prior to May 15, 2003.      
Thereafter, the New Notes will be redeemable at the option of the Issuers, in   
whole or in part, at the redemption prices set forth herein, plus accrued and   
unpaid interest, if any, to the date of redemption. In addition, at any time and
from time to time on or prior to May 15, 2001, the Issuers may, subject to      
certain requirements, redeem up to a maximum of 35% of the original aggregate   
principal amount of the Notes with the proceeds of one or more Public Equity    
Offerings (as defined) following which there is a Public Market (as defined), at
a redemption price equal to 110% of the principal amount of the Notes to be     
redeemed, plus accrued and unpaid interest, if any, to the date of redemption,  
provided, however, that, after giving effect to any such redemption, at least   
65% of the original aggregate principal amount of the Notes remains outstanding.
The New Notes will not be subject to any sinking fund requirements. Upon the    
occurrence of a Change of Control (as defined), each holder of New Notes will   
have the right to require the Issuers to repurchase all or any part of such     
holder's New Notes at a purchase price equal to 101% of the principal amount    
thereof, plus accrued and unpaid interest, if any, to the date of repurchase.   
See 'Description of Notes.'                                                     

The New Notes will be unsecured Senior Indebtedness (as defined) of the 
Issuers and will be effectively subordinated to all existing and future Secured 
Indebtedness (as defined) of the Issuers and the Guarantors to the extent of the
value of the assets securing such Indebtedness. The New Notes will rank pari    
passu in right of payment with all existing and future Senior Indebtedness of   
the Issuers and will rank senior in right of payment to all Subordinated        
Obligations (as defined) of the Issuers. The New Notes will be fully and        
unconditionally guaranteed (the 'Guarantees') on an unsecured, senior basis by  
the Company's existing subsidiary and by all of the Company's future Restricted 
Subsidiaries (as defined) (the 'Guarantors'). Parent and the Company's existing 
subsidiary, as well as all of the Company's future domestic subsidiaries,       
guarantee the Credit Agreement (as defined) and are jointly and severally liable
on a senior basis with the Company for the obligations thereunder. Such         
obligations are secured by pledges of all the capital stock of the Company and  
the Company's existing subsidiary, as well as all of the Company's future       
domestic subsidiaries, and security interests in, or liens on, substantially all
other tangible and intangible assets of Parent, the Company and the Company's   
existing subsidiary, as well as all of the Company's future subsidiaries. See   
'Description of the Credit Agreement,' 'Description of Notes--Guarantees' and   
'--Certain Covenants--Future Guarantors.' As of March 14, 1998, after giving pro
forma effect to the Transactions (as defined) and the application of the net    
proceeds therefrom, (i) the outstanding Senior Indebtedness of the Issuers would
have been $187.1 million, of which $42.1 million would have been Secured        
Indebtedness (exclusive of unused commitments under the Credit Agreement) and   
(ii) the Guarantor would have had no Senior Indebtedness outstanding (exclusive 
of guarantees of indebtedness under the Credit Agreement (all of which would    
have been Secured Indebtedness) and the Guarantee). The indenture (the          
'Indenture') governing the Notes permits the Issuers to incur additional Senior 
Indebtedness, including Senior Indebtedness under the Credit Agreement, subject 
to certain limitations. See 'Description of Notes-- Ranking.'                   

   The Old Notes were not registered under the Securities Act in reliance upon
an exemption from the registration requirements thereof. In general, the Old    
Notes may not be offered or sold unless registered under the Securities Act,    
except pursuant to an exemption from, or in a transaction not subject to, the   
Securities Act. The New Notes are being offered hereby in order to satisfy      
certain obligations of the Issuers contained in the Registration Rights         
Agreement. Based on interpretations by the staff of the Securities and Exchange 
Commission (the 'Commission') set forth in no-action letters issued to third    
parties, the Issuers believe that the New Notes issued pursuant to the Exchange 
Offer in exchange for Old Notes may be offered for resale, resold or otherwise  
transferred by any holder thereof (other than any such holder that is an        
'affiliate' of the Issuers within the meaning of Rule 405 promulgated under the 
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in  
the ordinary course of such holder's business, such holder has no arrangement   
with any person to participate in the distribution of such New Notes and neither
such holder nor any such other person is engaging in or intends to engage in a  
distribution of such New Notes. Notwithstanding the foregoing, each             
broker-dealer that receives New Notes for its own account pursuant to the       
Exchange Offer must acknowledge that it will deliver a prospectus in connection 
with any resale of such New Notes. The Letter of Transmittal states that by so  
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an 'underwriter' within the meaning of the Securities Act.  
This Prospectus, as it may be amended or supplemented from time to time, may be 
used by a broker-dealer in connection with any resale of New Notes received in  
exchange for such Old Notes where such Old Notes were acquired by such          
broker-dealer as a result of market-making activities or other trading          
activities (other than Old Notes acquired directly from the Issuers). The       
Issuers have agreed that, for a period of 180 days after the date of this       
Prospectus, they will make this Prospectus available to any broker-dealer for   
use in connection with any such resale. See 'Plan of Distribution.'             

  The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ('PORTAL') market. There is no           
established trading market for the New Notes. The Issuers do not currently      
intend to list the New Notes on any securities exchange or to seek approval for 
quotation through any automated quotations system. Accordingly, there can be no 
assurance as to the development or liquidity of any market for the New Notes.   

The Issuers will not receive any proceeds from the Exchange Offer. The  
Issuers will pay all of the expenses incident to the Exchange Offer. Tenders of 
Old Notes pursuant to the Exchange Offer may be withdrawn as provided herein at 
any time prior to the Expiration Date (as defined herein). The Exchange Offer is
subject to certain customary conditions.                                        

 This Prospectus has been prepared for use in connection with the Exchange
Offer and may be used by Chase Securities Inc. ('CSI') in connection with offers
and sales related to market-making transactions in the Notes. CSI may act as    
principal or agent in such transactions. Such sales will be made at prices      
related to prevailing market prices at the time of sale. See 'Plan of           
Distribution.'                                                                  
------------------------
   SEE 'RISK FACTORS' BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.        
------------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND      
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY 
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF   
THIS  PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL    
OFFENSE.

THE DATE OF THIS PROSPECTUS IS JUNE 30, 1998. 

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FORWARD-LOOKING STATEMENTS

 THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY. THESE   
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES,  
MANY OF WHICH ARE BEYOND THE ISSUERS' CONTROL. ALL STATEMENTS OTHER THAN        
STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING THE       
STATEMENTS UNDER 'SUMMARY--THE COMPANY,' 'MANAGEMENT'S DISCUSSION AND ANALYSIS  
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS' AND 'BUSINESS' AND LOCATED    
ELSEWHERE HEREIN REGARDING THE ISSUERS' FINANCIAL POSITION, PLANS TO INCREASE   
REVENUES, REDUCE EXPENSES AND TAKE ADVANTAGE OF SYNERGIES AND ANY STATEMENTS    
REGARDING OTHER FUTURE EVENTS OR FUTURE PROSPECTS OF THE ISSUERS, ARE           
FORWARD-LOOKING STATEMENTS. WHEN USED IN THIS PROSPECTUS, THE WORDS 'BELIEVE,'  
'ANTICIPATE,' 'INTEND,' 'ESTIMATE,' 'EXPECT,' 'PROJECT' AND SIMILAR EXPRESSIONS 
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, ALTHOUGH NOT ALL           
FORWARD-LOOKING STATEMENTS CONTAIN SUCH WORDS. THESE FORWARD-LOOKING STATEMENTS 
SPEAK ONLY AS OF THE DATE HEREOF. THE ISSUERS DO NOT UNDERTAKE ANY OBLIGATION TO
UPDATE OR REVISE PUBLICLY ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF
NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. ALTHOUGH MANAGEMENT BELIEVES THAT  
THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT
CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO BE CORRECT OR THAT   
SAVINGS OR OTHER BENEFITS ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS WILL BE 
ACHIEVED. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM MANAGEMENT'S EXPECTATIONS ('CAUTIONARY STATEMENTS') ARE DISCLOSED IN THIS  
PROSPECTUS, INCLUDING IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS        
INCLUDED IN THIS PROSPECTUS AND UNDER 'RISK FACTORS.' PROSPECTIVE PURCHASERS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. ALL  
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE      
COMPANY, ANY GUARANTOR OR PERSONS ACTING ON THEIR BEHALF ARE EXPRESSLY QUALIFIED
IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. SEE 'RISK FACTORS.'             

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AVAILABLE INFORMATION 

     The Issuers have filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto, 
the 'Registration Statement') under the Securities Act with respect to the New  
Notes being offered hereby. This Prospectus does not contain all of the         
information set forth in the Registration Statement, certain portions of which  
have been omitted pursuant to the rules and regulations promulgated by the      
Commission. Statements made in this Prospectus as to the contents of any        
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed or incorporated by     
reference as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matter involved, and each such   
statement is qualified in its entirety by such reference.                       

     The Registration Statement may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450   
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the  
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,   
New York 10048. Copies of such material may also be obtained at the Public      
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth    
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. Such     
materials can also be inspected on the Internet at http://www.sec.gov.          

 The Company is, and upon consummation of the Exchange Offer Parent will
become, subject to the informational reporting requirements of the Securities   
Exchange Act of 1934, as amended (the 'Exchange Act'). In accordance therewith, 
the Issuers will file reports and other information with the Commission. Such   
materials filed by the Issuers with the Commission may be inspected, and copies 
thereof obtained, at the places, and in the manner, set forth above.            

In the event that the Issuers cease to be subject to the informational
reporting requirements of the Exchange Act, the Issuers have agreed that, so    
long as the Notes remain outstanding, they will file with the Commission and    
distribute to holders of the Notes copies of the financial information that     
would have been contained in annual reports and quarterly reports, including    
management's discussion and analysis of financial condition and results of      
operations, that the Issuers would have been required to file with the          
Commission pursuant to the Exchange Act. Such financial information will include
annual reports containing consolidated financial statements and notes thereto,  
together with an opinion thereto expressed by an independent public accounting  
firm, as well as quarterly reports containing unaudited condensed consolidated  
financial statements for the first three quarters of each fiscal year. The      
Issuers will also make such reports available to prospective purchasers of the  
Notes, securities analysts and broker-dealers upon their request. In addition,  
the Issuers have agreed that for so long as any of the Old Notes remain         
outstanding they will make available to any prospective purchaser of the Old    
Notes or beneficial owner of the Old Notes in connection with any sale thereof  
the information required by Rule 144A(d)(4) under the Securities Act, until such
time as the Issuers have either exchanged the Old Notes for securities identical
in all material respects which have been registered under the Securities Act or 
until such time as the holders thereof have disposed of such Old Notes pursuant 
to an effective registration statement filed by the Issuers.                    

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PROSPECTUS SUMMARY

   The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed financial and other information contained
elsewhere in this Prospectus. Prospective investors are urged to read this      
Prospectus in its entirety. All references to the 'Company,' 'La Petite Academy'
or 'La Petite' mean La Petite Academy, Inc., its consolidated subsidiary and    
predecessor, unless the context indicates otherwise. All references to          
'Academies' mean all residential and employer-based La Petite Academies and all 
Montessori schools that the Company operates, unless the context indicates      
otherwise. All references to fiscal year in this Prospectus refer to the fiscal 
year ending on the last Saturday in August of each year. All references to      
market share and demographic data in this Prospectus are based on industry and  
government publications and Company estimates.                                  

THE COMPANY 

GENERAL                                                                         

   La Petite Academy, founded in 1968, is the second largest operator of for
profit preschool educational facilities in the United States. The Company       
provides center-based educational and child care services five days a week      
throughout the year to children between the ages of six weeks and 12 years.     
Management believes the Company differentiates itself through its superior      
educational programs, which were developed and are regularly enhanced by its    
curriculum department. The Company's focus on quality educational services      
allows it to capitalize on the increased awareness of the benefits of premium   
educational instruction for preschool and elementary school age children. At its
residential and employer-based Academies, the Company utilizes its proprietary  
Journey(Registered) curriculum with the intent of maximizing a child's cognitive
and social development. The Company also operates Montessori schools which      
employ the Montessori method of learning, a classical approach that features the
programming of tasks with materials presented in a sequence dictated by each    
individual child's capabilities.                                                

As of March 14, 1998, the Company operated 744 educational facilities,
including 692 residential Academies, 32 employer-based Academies and 20         
Montessori schools, located in 35 states and the District of Columbia, and had  
an enrollment of approximately 87,000 full and part-time children. The Company's
Operating Capacity (as defined) as of March 14, 1998, was approximately 91,000  
full-time children. For the 52 weeks ended March 14, 1998, estimated full-time  
equivalent student ('FTE') Utilization (as defined) was 65% and the estimated   
Average Weekly FTE Tuition (as defined) was $100.                               

THE CHILD CARE INDUSTRY                                                         

 Favorable Demographics and Social Trends. The  U.S. child care industry
(including home-based care, employer on-site care, and care delivered by private
facilities, government-sponsored institutions, church-affiliated centers,       
colleges and universities, group child care center chains and civic groups such 
as the YMCA) has grown at a compound annual growth rate of 12.1% from $5.7      
billion in revenues in 1982 to an estimated $31.6 billion in 1997, and is       
expected to grow at a 7.1% compound annual growth rate from 1998 until 2003,    
according to Marketdata Enterprises, Inc. This growth has been, and is expected 
to continue to be, driven by several demographic and social trends, including:  
(i) an increase in the number of births in the 1990s as compared generally to   
the 1970s and 1980s, (ii) an increase in the percentage of mothers in the       
workforce and (iii) a significant increase in the appreciation by parents of the
benefits of center-based preschool education and child care. According to the   
United States Bureau of the Census (the 'Census Bureau'), in 1989 and each year 
since, the annual number of births has approximated 4.0 million per year and is 
expected to remain at that level through 2010. Furthermore, the number of       
children under the age of five has grown from approximately 16.1 million in 1975
to an estimated 20.2 million in 1995, according to the Census Bureau. These     
trends are complemented by the continued increase in the number of mothers      
entering the work force. According to the U.S. Bureau of Labor Statistics, the  
labor force participation rate of mothers with children under the age of six    
relative to all mothers with children under the age of six, has increased from  
approximately 39% in 1975 to an estimated 62% in 1995. In addition, the         
percentage of mothers in the work force that have children between the ages of  
five and 12, relative to all mothers of children between the ages of five and   
12, has risen from 53% in 1975 to 75% in 1995.                                  

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     There has been a significant increase in the use of center-based child care
facilities by families with both working and non-working mothers. Center-based  
care typically offers a more structured curriculum, better educational          
materials, more experienced personnel and more children for social interaction  
than alternative forms of child care. In 1993, according to the most recent data
from the Census Bureau, 30% of families with working mothers of preschool aged  
children used center-based care as their primary form of non-parental care, up  
from 6% in 1965. Furthermore, 22% of children under the age of six with mothers 
not in the labor force were enrolled in center-based child care programs in     
1995, according to the U.S. Department of Education.                            

  Growing Awareness of the Importance of Early Childhood Development.  The
demand for quality child care is increasing as scientific research highlights   
the importance of education during a child's early developmental years. The     
Families and Work Institute, an organization devoted to the study of neurology, 
cognitive psychology and child development, has recently completed research the 
results of which management believes demonstrate the importance of early        
childhood experiences in a child's overall cognitive development. Recent essays 
and other scientific research into early childhood development have drawn       
widespread media and political attention, increasing parents' awareness and     
demand for quality educational facilities for their children.                   

  Fragmented Industry.  The U.S. child care industry is highly fragmented,
with the aggregate capacity of the top 50 for profit child care companies       
serving approximately 1% of the potential child care market, or approximately   
500,000 children out of an estimated 50 million children under the age of 12 in 
the United States as of January 1, 1997, according to Child Care Information    
Exchange. Based on a study sponsored by the National Association for the        
Education of Young Children, management estimates that approximately 35% of all 
child care centers are operated for profit, as independent businesses or as part
of a local or national chain. Non-profit centers, such as churches, employers,  
government agencies and YMCAs, account for the remaining 65%. Of the            
approximately 100,000 child care centers in the United States, only 4,400 are   
operated by the top 50 for profit child care companies. Furthermore, including  
La Petite, only ten companies have total capacity in excess of 10,000 children  
and only eight companies have more than 100 centers. Although other national    
child care chains operate in many of the Company's markets, in general, the     
Company primarily competes with local operators that typically do not have the  
substantial resources required to invest in the educational materials and       
curricula and staff training necessary for the educational development of       
children in their care.                                                         

COMPETITIVE STRENGTHS                                                           

Strong Market Position and Brand Identities.  Based on the number of  
centers operated, children served, operating revenue and operating income, La   
Petite Academy is the second largest provider of for profit preschool education 
and child care services in the United States, in an industry where the three    
largest center-based providers represent approximately 55% of the top 50 for    
profit center-based child care providers' total capacity. Operating since 1968, 
the Company has built brand equity in the markets it serves through the         
development of a network of Academies concentrated in clusters in               
demographically desirable Metropolitan Statistical Areas ('MSAs'). The Company's
Academy clusters maintain close ties with local neighborhoods through public    
relations efforts, parent newsletters and brochures and support of community    
activities. The Company believes that it benefits significantly from            
word-of-mouth referrals from parents, educators and other school administrators.
The Company's advertising reinforces its community-based reputation for quality 
service principally through targeted direct mailings and radio air time. In     
September 1995, the Company introduced the 'Parent's Partner(Registered) Plan,' 
a program that, among other things, provides parents with individualized        
feedback on their child's development on at least a weekly basis. Management    
believes this program has contributed to the increase in overall student        
retention and added new enrollments at the Academies. The Company's high,       
customer-driven standards and well-trained and caring staff strengthens its     
image as an innovative education provider.                                      

  Focused Educational Curriculum.  The Company's focus is on educating the
child rather than simply providing traditional child care services. The         
Company's high quality proprietary Journey curriculum was originally developed  
in 1991 by La Petite educators with the assistance of experts in early childhood
education with the intent of maximizing a child's cognitive development while   
ensuring a positive experience for the child. The curriculum emphasizes         
individuality and allows children to progress at their own pace, building skills
in a logical pattern using a 'hands-on' approach. All programs and activities   
are developmentally appropriate, promote a child's intellectual, physical,      
emotional and social development and are enhanced by on-site efforts of         

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the Company's educational staff. The Company also operates Montessori schools,  
which target education conscious parents, under the name Montessori             
Unlimited(Registered). The Montessori method is a classical approach that       
provides specific task-oriented educational materials or 'apparatus' presented  
in a sequence determined by each child's natural capabilities. Each activity in 
the prepared environment of the Montessori classroom has its roots in early     
development and serves as a foundation for future, more complex developments.   

  Attractive Business Model.  Improvements in profitability at the Academy
level have been achieved through a combination of (i) revenue enhancement and   
cost management at the individual Academies and (ii) the economies of scale and 
synergies realized through the clustering of Academies in economically and      
demographically attractive areas. The Company has increased estimated FTE       
Utilization from 59% in fiscal 1994 to 66% in fiscal 1997. During the four      
fiscal years ended August 1994, the Company opened 100 residential Academies    
with an estimated Operating Capacity of 125 children and an average facility    
size of 6,200 square feet. The average EBITDA for such Academies in fiscal 1997 
was approximately $54,700. In addition, the Company's Montessori schools have   
proved to be successful with higher student retention, tuition averaging        
approximately 20% more than at the Company's residential and employer-based     
Academies and more favorable teacher-student ratios, resulting in increased     
profitability. The Company has focused on providing its Academies with the      
systems to improve capacity utilization and operational efficiency. In March    
1998, the Company completed the installation in all of its residential Academies
of the first phase of a newly developed proprietary management information      
system, the Academy Document Management and Information Network ('ADMIN'). The  
first phase of ADMIN is a unique point of sale system which enables the Company 
to more effectively monitor attendance, increase revenues and gather information
throughout all of its markets. By eliminating clerical errors and ensuring that 
all service delivery is accounted for, the implementation of the ADMIN point of 
sale system has increased operating revenue by more than 2% at the 246 Academies
which have been operating on the system since January 1, 1998. ADMIN currently  
handles the tuition billing process, allowing Academy Directors to concentrate  
on communicating and interacting with parents, supervising staff and spending   
time with children. In subsequent phases, ADMIN will automate substantially all 
of the clerical functions at the Academies. The Company's size and scope also   
allows it to cost-effectively purchase supplies, conduct advertising and        
marketing outreach programs and train employees.                                

Geographically Diversified Operations.  The Company's operations are  
geographically diversified, with 744 Academies located throughout 35 states and 
the District of Columbia as of March 14, 1998. Although the highest number of   
the Company's Academies are located in Texas, Florida, California, Georgia and  
Virginia, these states account for less than half of the Company's Academies.   
The geographical diversity of the Company's operations and profitability        
mitigates the potential impact of regional economic downturns or adverse changes
in local regulations.                                                           

Experienced and Incentivized Management Team.  The top four members of
senior management of the Company average approximately ten years of experience  
with the Company. In addition, the Company's eight Area Vice Presidents and 77  
Regional Directors average over 15 years and 11 years with La Petite,           
respectively. Management has successfully reduced employee turnover, closed or  
revitalized underperforming Academies, implemented operational data systems and 
improved operating margins. Management owns or has the right to acquire, subject
to certain performance requirements, approximately 15.6% of the common stock of 
Parent on a fully diluted basis.                                                

BUSINESS STRATEGY                                                               

     Management believes the Company is well positioned for future growth as one
of the leading providers of quality educational care to preschool aged children.
The Company's objective is to grow its higher margin businesses and continue to 
be a leader in the markets in which it operates.                                

Emphasize Educational Curriculum.  The Company's curriculum department
continually evaluates and improves the quality of its educational materials and 
programs. The Company has invested significant resources in developing its      
proprietary Journey curriculum, utilized at both its residential and            
employer-based Academies, and intends to develop additional innovative          
curriculum both internally and with the assistance of educational consultants.  
The Company is investing in additional staff training, classroom facilities and 
educational materials to enhance the delivery of the Journey curriculum at      
approximately one-third of the Company's residential                            

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Academies for the school year beginning in the fall of 1998. The Company's      
Montessori schools are staffed with certified Montessori lead teachers who      
follow traditional Montessori methods that appeal to education conscious        
parents.                                                                        

    Capitalize on Reputation for Customer Driven Service.  Management believes
that the Company's knowledge of parents' objectives and desires for their       
children's education differentiates it from other child care providers. In order
to better understand customer needs, the Company conducts (i) focus groups with 
parents, (ii) bi-annual and annual customer and employee satisfaction surveys   
(conducted by the Company and third parties) and (iii) interviews with parents. 
The Company's Parent's Partner Plan was designed in part to bridge the gap      
between what parents look for on a tour of the facility and expect on a         
day-to-day basis and the requirements of a professionally designed curriculum.  
The program includes a video and a monthly newsletter that explain the          
curriculum being provided to the children and guarantees the delivery of daily  
or weekly (depending on the age of the child) individual progress reports. The  
Company continually strives to improve its customer retention and increase      
loyalty by interacting with parents on a daily basis and focusing on meeting    
and, if possible, exceeding their expectations.                                 

Increase Academy Profitability.  The Company plans to improve Academy 
profitability by increasing capacity utilization and tuition rates, managing    
costs and leveraging its existing and newly built Academies to achieve economies
of scale and synergies. The Company intends to continue to increase capacity    
utilization by emphasizing local marketing programs and improving customer      
retention and loyalty. The Company believes it is an industry leader in its     
commitment to ongoing qualitative and quantitative research to determine        
customer needs and expectations. Academy Directors use their understanding of   
the markets in which they operate to cost effectively target parents through    
customer referrals, the support of community activities and print media and spot
radio advertising. In addition, with the implementation of ADMIN, which provides
the Company with the information necessary to implement targeted pricing, the   
Company has the ability to maximize revenue by charging its customers a premium 
for services in high demand. The ability to control revenue and increase        
operating efficiency at the point of sale through the implementation of ADMIN   
also presents an opportunity for the Company to better allocate an Academy      
Director's time. The Company achieves local economies of scale by employing a   
cluster strategy of either building in markets where it has existing Academies  
or entering new markets through the construction of a minimum number of         
Academies.                                                                      

    Build Academies and Montessori Schools in Attractive Markets.  The Company
intends to expand within existing markets and enter new markets with Academies  
and Montessori schools concentrated in clusters. Over the last three years, the 
Company has made significant investments in personnel and infrastructure to     
facilitate the future growth of the Company. The Company currently expects to   
open approximately 25 and 35 Academies in fiscal 1999 and fiscal 2000,          
respectively. The Company has targeted 25 MSAs that it believes have favorable  
characteristics for development, as measured by household income and education  
levels, population growth, existing competition, labor supply, appropriate real 
estate, and marketing possibilities. The Company expects to build residential   
Academies and Montessori schools, primarily in higher-end neighborhoods, both of
which are anticipated to generate higher operating margins than the average     
existing Academy. Because of the Montessori schools' success and popularity,    
management intends to build new Montessori schools and convert certain existing 
Academies to create new clusters of Montessori schools. Based upon significant  
input from the Company's field personnel, visits to competitors and focus groups
with parents, the Company has recently designed a new prototype for its         
Academies. New Academies will be approximately 9,500 square feet, built on sites
of approximately one acre, have an Operating Capacity of approximately 175      
children for residential Academies and 150 children for Montessori schools and  
incorporate a closed classroom concept. The Company will continue to target     
profitable opportunities for employer-based Academies and seek to leverage its  
residential Academy network to meet the needs of its corporate customers.       

  Pursue Strategic Opportunities.  In addition to accelerating new Academy
development, the Company may seek to acquire existing child care centers where  
demographics and facility conditions complement its business strategy.          
Management believes the Company's competitive position, economies of scale and  
financial strength will enable it to capitalize on selective acquisition        
opportunities in the fragmented child care industry. The Company may also engage
in cross-marketing opportunities with manufacturers and marketers of educational
products. These opportunities should enable La Petite to further its reputation 
as an educator and carry the residual benefit of an additional revenue stream.  

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THE TRANSACTIONS

     On March 17, 1998, LPA Investment LLC (the 'Investor'), a limited liability
company owned by an affiliate of Chase Capital Partners ('CCP') and by an entity
controlled by Robert E. King, a Director of the Company, and Vestar/LPA         
Investment Corp., the parent company of the Company, which was renamed LPA      
Holding Corp. ('Parent'), entered into a Merger Agreement pursuant to which a   
wholly owned subsidiary of the Investor was merged into Parent (the             
'Recapitalization'). In the Recapitalization (i) all of the then outstanding    
shares of preferred stock and common stock of Parent (other than the shares of  
common stock retained by Vestar/LPT Limited Partnership ('Vestar') and          
management of the Company) owned by the existing stockholders of the Parent (the
'Existing Stockholders') were converted into the right to receive cash and (ii) 
the Existing Stockholders received the cash of the Company as of the date of the
closing of the Transactions. As part of the Recapitalization, the Investor      
purchased $72.5 million (less the value of options retained by management) of   
common stock of the Parent (representing approximately 74.5% of the common stock
of Parent on a fully diluted basis) and $30 million of redeemable preferred     
stock of Parent (collectively, the 'Equity Investment'). In addition, in        
connection with the purchase of preferred stock of Parent, the Investor received
warrants to purchase up to 6.0% of Parent's common stock on a fully diluted     
basis (resulting in an aggregate fully diluted ownership of 80.5% of the common 
stock of Parent). Vestar retained common stock of Parent having a value (based  
on the amount paid by the Investor for its common stock of Parent) of $2.8      
million (representing 3.0% of the outstanding common stock of Parent on a fully 
diluted basis). Management retained common stock of Parent having a value (based
on the amount paid by the Investor for its common stock of Parent) of $4.7      
million (representing 5.0% of the common stock of Parent on a fully diluted     
basis) and retained existing options to acquire 3.0% of Parent's fully diluted  
common stock. In addition, Parent adopted a new option plan (the 'New Option    
Plan') covering 8.5% of its fully diluted common stock. Accordingly, management 
owns or has the right to acquire, subject to certain performance requirements,  
approximately 16.5% of the common stock of Parent on a fully diluted basis. The 
Equity Investment was used, together with the proceeds of the offering of the   
Old Notes (the 'Offering') and borrowings under the Credit Agreement, to finance
the Recapitalization, to refinance substantially all of the Company's           
outstanding indebtedness and outstanding preferred stock (the 'Refinancing      
Transactions') and to pay the fees and expenses relating to the foregoing. See  
'Ownership of Securities.'                                                      

     The Refinancing Transactions consisted of (i) the defeasance by the Company
of all of its outstanding $85 million principal amount of 9 5/8% Senior Secured 
Notes due 2001 (the 'Senior Notes'), (ii) the exchange of all outstanding shares
of the Company's Class A Preferred Stock (the 'Class A Preferred Stock') for    
$34.7 million in aggregate principal amount of the Company's 12 1/8%            
Subordinated Exchange Debentures due 2003 (the 'Exchange Debentures'), (iii) the
defeasance of all of the then outstanding Exchange Debentures and (iv) the      
retirement of all the Company's outstanding 6 1/2% Convertible Subordinated     
Debentures due 2011 (the 'Convertible Debentures').                             

   In connection with the Recapitalization and the Refinancing Transactions,
the Company entered into a new credit agreement (the 'Credit Agreement')        
providing for a $40 million term loan facility (the 'Term Loan Facility') and a 
$25 million revolving loan facility (the 'Revolving Credit Facility'), which is 
available for the Company's working capital requirements. See 'Description of   
the Credit Agreement.'                                                          

   The Offering, the Recapitalization, the Equity Investment, the borrowings
under the Credit Agreement and the Refinancing Transactions are collectively    
referred to herein as the 'Transactions.' The Transactions closed on May 11,    
1998.                                                                           

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OWNERSHIP AND MANAGEMENT

   As a result of the Recapitalization, the Investor beneficially owns 80.5%
of the common stock of Parent on a fully diluted basis and $30 million of       
redeemable preferred stock of Parent. A majority of the economic interests of   
the Investor are owned by CCP and a majority of the voting interests of the     
Investor are owned by an entity controlled by Robert E. King, a Director of the 
Company. CCP is the private equity group of The Chase Manhattan Corporation, the
largest bank holding company in the United States, and is one of the largest    
private equity organizations in the United States, with over $5.0 billion under 
management. Through its affiliates, CCP invests in leveraged buyouts,           
recapitalizations and venture capital opportunities by providing equity and     
mezzanine debt capital. Since its inception in 1984, CCP has made over 550      
direct investments in a variety of industries.                                  

The top four members of senior management of the Company average      
approximately ten years of experience with the Company. In addition, the        
Company's eight Area Vice Presidents and 77 Regional Directors average over 15  
years and 11 years with La Petite, respectively. Management owns or has the     
right to acquire, subject to certain performance requirements, approximately    
16.5% of the common stock of Parent on a fully diluted basis.                   
------------------------

 The principal executive offices of the Company are located at 8717 West
110th Street, Suite 300, Overland Park, Kansas 66210 and its telephone number is
(913) 345-1250.                                                                 

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THE EXCHANGE OFFER

THE OFFERING

                                                        [Enlarge/Download Table]
                                                                                                                
Registration Rights Agreement............. The Old Notes were sold by the Issuers on May 11, 1998 to CSI and    
                                           NationsBanc Montgomery Securities LLC (the 'Initial Purchasers'), who
                                           resold the Old Notes to qualified institutional investors in reliance
                                           on Rule 144A under the Securities Act or pursuant to offers and sales
                                           that occurred outside the United States within the meaning of        
                                           Regulation S under the Securities Act. In connection therewith, the  
                                           Issuers, the Guarantor and the Initial Purchasers executed and       
                                           delivered for the benefit of the holders of the Old Notes an exchange
                                           and registration rights agreement (the 'Registration Rights          
                                           Agreement') providing, among other things, for the Exchange Offer.   

The Exchange Offer........................ New Notes are being offered in exchange for a like principal amount  
                                           of Old Notes. As of the date hereof, $145,000,000 aggregate principal
                                           amount of Old Notes are outstanding. The Issuers will issue the New  
                                           Notes to Holders promptly following the Expiration Date. See 'Risk   
                                           Factors--Consequences of Failure to Exchange.'                       

Expiration Date........................... 5:00 p.m., New York City time, on July 30, 1998, unless the Exchange 
                                           Offer is extended as provided herein, in which case the term         
                                           'Expiration Date' means the latest date and time to which the        
                                           Exchange Offer is extended.                                          

Interest.................................. Each New Note will bear interest from May 11, 1998. No interest will 
                                           be paid on the Old Notes accepted for exchange.                      

Conditions to the Exchange Offer.......... The Exchange Offer is subject to certain customary conditions, which 
                                           may be waived by the Issuers. The Issuers reserve the right to amend,
                                           terminate or extend the Exchange Offer at any time prior to the      
                                           Expiration Date upon the occurrence of any such condition. See 'The  
                                           Exchange Offer--Conditions.'                                         

Procedures for Tendering Old Notes........ Each Holder of Old Notes wishing to accept the Exchange Offer must   
                                           complete, sign and date the Letter of Transmittal, or a facsimile    
                                           thereof, in accordance with the instructions contained herein and    
                                           therein, and mail or otherwise deliver such Letter of Transmittal, or
                                           such facsimile, together with the Old Notes and any other required   
                                           documentation to the exchange agent (the 'Exchange Agent') at the    
                                           address set forth herein. By executing the Letter of Transmittal,    
                                           each Holder will represent to the Issuers, among other things, that  
                                           (i) the New Notes acquired pursuant to the Exchange Offer by the     
                                           Holder and any beneficial owners of Old Notes are being obtained in  
                                           the ordinary course of business of the person receiving such New     
                                           Notes, (ii) neither the Holder nor such beneficial owner has an      
                                           arrangement with any person to participate in the distribution of    
                                           such New Notes, (iii) neither the Holder nor such beneficial owner   
                                           nor any such other person is engaging in or intends to engage in a   
                                           distribution of such New Notes and (iv) neither the Holder nor such  
                                           beneficial owner is an 'affiliate,' as defined under Rule 405        
                                           promulgated under the Securities Act, of the Issuers. Each           
                                           broker-dealer that receives New Notes for its own account in exchange
                                           for Old Notes, where such Old Notes were acquired by such            
                                           broker-dealer as a result of marketmaking activities or other trading
                                           activities (other than Old Notes acquired directly from the Issuers),
                                           may participate in the Exchange Offer but                            

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                                                        [Enlarge/Download Table]
                                                                                                                
                                           may be deemed an 'underwriter' under the Securities Act and,         
                                           therefore, must acknowledge in the Letter of Transmittal that it will
                                           deliver a prospectus in connection with any resale of such New Notes.
                                           The Letter of Transmittal states that by so acknowledging and by     
                                           delivering a prospectus, a broker-dealer will not be deemed to admit 
                                           that it is an 'underwriter' within the meaning of the Securities Act.
                                           See 'The Exchange Offer--Procedures for Tendering' and 'Plan of      
                                           Distribution.'                                                       

Special Procedures for Beneficial                                                                               
  Owners.................................. Any beneficial owner whose Old Notes are registered in the name of a 
                                           broker, dealer, commercial bank, trust company or other nominee and  
                                           who wishes to tender should contact such registered Holder promptly  
                                           and instruct such registered Holder to tender on such beneficial     
                                           owner's behalf. If such beneficial owner wishes to tender on such    
                                           beneficial owner's own behalf, such beneficial owner must, prior to  
                                           completing and executing the Letter of Transmittal and delivering his
                                           Old Notes, either make appropriate arrangements to register ownership
                                           of the Old Notes in such beneficial owner's name or obtain a properly
                                           completed bond power from the registered Holder. The transfer of     
                                           registered ownership may take considerable time. See 'The Exchange   
                                           Offer--Procedures for Tendering.'                                    

Guaranteed Delivery Procedures............ Holders of Old Notes who wish to tender their Old Notes and whose Old
                                           Notes are not immediately available or who cannot deliver their Old  
                                           Notes, the Letter of Transmittal or any other documents required by  
                                           the Letter of Transmittal to the Exchange Agent prior to the         
                                           Expiration Date must tender their Old Notes according to the         
                                           guaranteed delivery procedures set forth in 'The Exchange Offer--    
                                           Guaranteed Delivery Procedures.'                                     

Withdrawal Rights......................... Tenders may be withdrawn as provided herein at any time prior to 5:00
                                           p.m., New York City time, on the Expiration Date. See 'The Exchange  
                                           Offer--Withdrawal of Tenders.'                                       

Acceptance of Old Notes and Delivery of                                                                         
  New Notes............................... The Issuers will accept for exchange any and all Old Notes which are 
                                           properly tendered in the Exchange Offer prior to 5:00 p.m., New York 
                                           City time, on the Expiration Date. The New Notes issued pursuant to  
                                           the Exchange Offer will be delivered promptly following the          
                                           Expiration Date. See 'The Exchange Offer--Terms of the Exchange      
                                           Offer.'                                                              

Exchange Agent............................ PNC Bank, National Association is serving as Exchange Agent in       
                                           connection with the Exchange Offer. See 'The Exchange Offer--        
                                           Exchange Agent.'                                                     

Use of Proceeds........................... There will be no cash proceeds to the Issuers from the exchange      
                                           pursuant to the Exchange Offer.                                      

Consequences of Failure to Exchange....... Holders of Old Notes who do not exchange their Old Notes for New     
                                           Notes pursuant to the Exchange Offer will continue to be subject to  
                                           the restrictions on transfer of such Old Notes as set forth in the   
                                           legend thereon as a consequence of the issuance of the Old Notes     
                                           pursuant to exemptions from, or in transactions not subject to, the  
                                           registration requirements of the Securities Act and applicable state 
                                           securities laws. In general, Old Notes may not be offered or sold    
                                           unless registered under the Securities Act, except pursuant to an    
                                           exemption from, or in a transaction not subject to, the Securities   
                                           Act and applicable state securities laws.                            

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SUMMARY DESCRIPTION OF THE NEW NOTES

  The Exchange Offer applies to $145,000,000 aggregate principal amount of
Old Notes. The terms of the New Notes are identical in all material respects to 
the Old Notes except that the New Notes have been registered under the          
Securities Act and, therefore, will not bear legends restricting their transfer 
and will not contain certain provisions providing for the payment of liquidated 
damages to the holders of the Old Notes under certain circumstances relating to 
the Registration Rights Agreement, which provisions will evidence the same debt 
as the Old Notes and, except as set forth in the immediately preceding sentence,
will be entitled to the benefits of the Indenture, under which both the Old     
Notes were, and the New Notes will be, issued. See 'Description of Notes.'      

                                                        [Enlarge/Download Table]
                                                                                                                
Securities Offered........................ $145,000,000 aggregate principal amount of 10% Series B Senior Notes 
                                           due 2008.                                                            

Maturity.................................. May 15, 2008.                                                        

Interest Payment Dates.................... May 15 and November 15 of each year commencing November 15, 1998.    

Sinking Fund.............................. None.                                                                

Optional Redemption....................... Except as described below, the Notes will not be redeemable at the   
                                           option of the Issuers prior to May 15, 2003. Thereafter, the Notes   
                                           will be redeemable at the option of the Issuers, in whole or in part,
                                           on not less than 30 nor more than 60 days' prior notice, at the      
                                           redemption prices set forth herein, plus accrued and unpaid interest,
                                           if any, to the date of redemption. In addition, at any time and from 
                                           time to time on or prior to May 15, 2001, the Issuers may, subject to
                                           certain requirements, redeem up to a maximum of 35% of the original  
                                           aggregate principal amount of the Notes (calculated giving effect to 
                                           any issuance of Additional Notes (as defined)) with the proceeds of  
                                           one or more Public Equity Offerings following which there is a Public
                                           Market, at a redemption price equal to 110% of the principal amount  
                                           of the Notes to be redeemed, plus accrued and unpaid interest, if    
                                           any, to the date of redemption; provided, however, that, after giving
                                           effect to any such redemption, at least 65% of the original aggregate
                                           principal amount of the Notes (calculated giving effect to any       
                                           issuance of Additional Notes) remains outstanding. See 'Description  
                                           of Notes--Optional Redemption.'                                      

Change of Control......................... Upon the occurrence of a Change of Control, each holder of Notes will
                                           have the right to require the Issuers to repurchase all or any part  
                                           of such holder's Notes at a purchase price equal to 101% of the      
                                           principal amount thereof, plus accrued and unpaid interest, if any,  
                                           to the date of repurchase. See 'Description of Notes--Change of      
                                           Control.'                                                            

Guarantees................................ The New Notes will be fully and unconditionally guaranteed on an     
                                           unsecured, senior basis by the Guarantors. Parent and the Company's  
                                           existing subsidiary, as well as all of the Company's future domestic 
                                           subsidiaries, guarantee the Credit Agreement and are jointly and     
                                           severally liable on a senior basis with the Company for the          
                                           obligations thereunder. The obligations under the Credit Agreement   
                                           are secured by pledges of all the capital stock of the Company and   
                                           the Company's existing subsidiary, as well as all of the Company's   
                                           future domestic subsidiaries, and security interests in, or liens on,
                                           substantially all other tangible and intangible assets of Parent, the
                                           Company and the Company's existing subsidiary, as well as all of the 
                                           Company's future domestic subsidiaries. See 'Description of the      
                                           Credit Agreement,' 'Risk Factors--Unsecured                          

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                                           Status of Notes and Guarantees,' 'Description of Notes-- Guarantees,'
                                           and '--Certain Covenants--Future Guarantors.'                        

Ranking................................... The New Notes will be unsecured Senior Indebtedness of the Issuers   
                                           and will be effectively subordinated to all existing and future      
                                           Secured Indebtedness of the Issuers and the Guarantor to the extent  
                                           of the value of the assets securing such Indebtedness. The New Notes 
                                           will rank pari passu in right of payment with all existing and future
                                           Senior Indebtedness of the Issuers and will rank senior in right of  
                                           payment to all Subordinated Obligations of the Issuers. The          
                                           Guarantees will be unsecured and will be pari passu in right of      
                                           payment to all existing and future Senior Indebtedness of the        
                                           Guarantors. As of March 14, 1998, after giving pro forma effect to   
                                           the Transactions and the application of the net proceeds therefrom as
                                           described under 'Use of Proceeds,' (i) the outstanding Senior        
                                           Indebtedness of the Issuers would have been $187.1 million, of which 
                                           $42.1 million would have been Secured Indebtedness (exclusive of     
                                           unused commitments under the Credit Agreement) and (ii) the Guarantor
                                           would have had no Senior Indebtedness outstanding (exclusive of      
                                           guarantees of Indebtedness under the Credit Agreement (all of which  
                                           would have been Secured Indebtedness) and the Guarantees).           

Restrictive Covenants..................... The Indenture contains certain covenants that, among other things,   
                                           limit (i) the incurrence of additional indebtedness of Parent, the   
                                           Company and its Restricted Subsidiaries, (ii) the payment of         
                                           dividends on, and redemption of, capital stock of the Parent, Company
                                           and its Restricted Subsidiaries and the redemption of certain        
                                           subordinated obligations of Parent, the Company and its Restricted   
                                           Subsidiaries, (iii) investments, (iv) sales of assets and subsidiary 
                                           stock, (v) the grants of liens on the assets of Parent, the Company  
                                           and its Restricted Subsidiaries, (vi) certain transactions with      
                                           affiliates, (vii) the sale or issuance of capital stock of the       
                                           Restricted Subsidiaries of the Company and (viii) consolidations,    
                                           mergers and transfers of all or substantially all the assets of      
                                           Parent or the Company. The Indenture also prohibits any restriction  
                                           on the ability of any Restricted Subsidiary of the Company to pay    
                                           dividends or make certain other distributions. All of these          
                                           limitations and prohibitions, however, are subject to a number of    
                                           important qualifications and exceptions. See 'Description of         
                                           Notes--Certain Covenants' and '--Merger and Consolidation.'          

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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

The following table sets forth as of the dates and for the periods    
indicated summary historical financial and other data for Parent and the Company
on a consolidated basis. The historical consolidated data for the fiscal years  
ended August 30, 1997 and August 26, 1995 have been derived from and should be  
read in conjunction with the audited consolidated financial statements and the  
related notes thereto included elsewhere in this Prospectus. Fiscal 1996 was a  
53 week year ending on August 31, 1996. For comparison purposes, the following  
table presents the unaudited results of the first 52 weeks of fiscal 1996. The  
historical unaudited consolidated financial data for the 28 weeks ended March   
14, 1998 and March 15, 1997 have been derived from and should be read in        
conjunction with the unaudited consolidated financial statements and the related
notes thereto included elsewhere in this Prospectus. In the opinion of          
management, all adjustments considered necessary for a fair presentation have   
been included in the unaudited consolidated financial statements. The unaudited 
pro forma financial data are derived from the unaudited pro forma financial     
statements and the related notes included elsewhere herein that give pro forma  
effect to the Transactions. The pro forma financial data for the periods        
presented give effect to the Transactions as if they had been consummated on    
September 1, 1996 for the fiscal year ended August 30, 1997 and as of August 31,
1997 for the 28 weeks ended March 14, 1998. The unaudited pro forma balance     
sheet data gives effect to the Transactions as if they had occurred on March 14,
1998. The summary pro forma data do not purport to represent what the results of
operations or financial position would have been if the Transactions had been   
completed as of the date or for the periods presented, nor do such data purport 
to represent the results of operations for any future period. See 'Unaudited Pro
Forma Consolidated Financial Information,' 'Selected Historical Consolidated    
Financial and Other Data,' 'Management's Discussion and Analysis of Financial   
Condition and Results of Operations' and the historical consolidated financial  
statements and the notes thereto included elsewhere herein.                     

                                                        [Enlarge/Download Table]

                                                          52 WEEKS ENDED                                28 WEEKS ENDED(B)        
                                     --------------------------------------------------------    --------------------------------
                                     AUGUST 26, 1995    AUGUST 24, 1996(A)    AUGUST 30, 1997    MARCH 15, 1997    MARCH 14, 1998
                                     ---------------    ------------------    ---------------    --------------    --------------
                                                             (DOLLARS IN THOUSANDS, EXCEPT ACADEMY DATA)                         
                                                                                                                                 
STATEMENT OF OPERATIONS DATA:                                                                                                    
Operating revenue.................      $ 279,806            $294,836            $ 302,766          $159,983          $166,701   
Operating expenses................        287,552             284,684              288,740           154,167           159,310   
Operating income..................         (7,746)             10,152               14,026             5,816             7,391   
Interest expense(c)...............         11,110              10,126                9,245             4,994             4,917   
Net loss..........................        (14,462)             (4,737)              (1,217)           (1,671)             (937)  

OTHER FINANCIAL DATA:                                                                                                            
EBITDA(d).........................      $  21,167            $ 26,605            $  30,087          $ 14,464          $ 15,668   
Cash flows from operating                                                                                                        
  activities .....................         17,140              15,208               14,886             2,739             6,321   
Cash flows from investing                                                                                                        
  activities .....................         (2,956)             (6,045)              (7,239)           (2,973)           (4,437)  
Cash flows from financing                                                                                                        
  activities .....................         (9,348)            (12,671)               3,533             3,862            (1,100)  
Depreciation......................         13,501              13,680               13,825             7,444             7,073   
Amortization of goodwill and other                                                                                               
  intangibles.....................          3,712               2,773                2,236             1,204             1,204   
Capital expenditures..............          9,101               8,570                7,691             3,061             4,776   
Ratio of earnings to fixed                                                                                                       
  charges(e)......................         (e)                 (e)                1.1x                (e)             1.1x       

ACADEMY DATA:                                                                                                                    
Number of Academies...............            786                 751                  745               751               744   
Operating Capacity (at end of                                                                                                    
  period)(f)......................         94,671              91,049               90,601            91,202            90,599   
FTE Utilization(g)................             59%                 64%                  66%               65%               65%  
Average Weekly FTE Tuition(h).....      $      96            $     97            $      98          $     97          $    101   

PRO FORMA DATA:                                                                                                                  
Cash interest expense(i)..........                                                  18,178                               9,804   
Ratio of earnings to fixed                                                                                                       
  charges(e)......................                                                  (e)                                 (e)      


                                                                                                AS OF MARCH 14, 1998             
                                                                                               -----------------------           
                                                                                               HISTORICAL    PRO FORMA           
                                                                                               ----------    ---------           
                                                                                                                                 
BALANCE SHEET DATA:                                                                                                              
Cash, cash equivalents and restricted cash(j)...............................................    $  27,533    $  1,100            
Working capital.............................................................................       10,901     (15,532 )          
Total assets................................................................................      170,347     150,441            
Total long term debt........................................................................       87,345     187,112            
Redeemable preferred stock..................................................................       34,698          --            
Stockholders' equity (deficit)(k)...........................................................        2,396     (82,579 )          

                                                        (Footnotes on next page)

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(Footnotes from previous page)                                                  

------------------                                                              
(a) Fiscal 1996 was a 53 week year ending on August 31, 1996. Capital           
expenditures are for the entire 53 week fiscal year.                    

(b) The Company's fiscal year ends on the last Saturday in August. The first    
   quarter consists of 16 weeks and the second, third and fourth quarters each
   consist of 12 weeks. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview' for a discussion of      
seasonality.                                                            

(c) Interest expense includes $1.4 million, $1.3 million, $0.9 million, $0.5    
  million and $0.5 million of amortization of deferred financing expense and
 accretions of the discount on the Convertible Debentures for fiscal 1995,
1996 and 1997 and the 28 weeks ended March 15, 1997 and March 14, 1998. 

(d) EBITDA is defined herein as net income before non-cash restructuring        
   charges, extraordinary items, net interest expense, taxes, depreciation and
   amortization. EBITDA is not intended to represent cash flow from operations
as defined by generally accepted accounting principles and should not be
   considered as an alternative to net income as an indicator of the Company's
   operating performance or to cash flows as a measure of liquidity. EBITDA is
presented because the Company believes that EBITDA represents a more    
    consistent financial indicator of the Company's ability to service its debt.

(e) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes and extraordinary items, plus 
fixed charges. Fixed charges consists of interest expense on all        
indebtedness, amortization of deferred financing costs, and one-third of
rental expense on operating leases representing that portion of rental  
expense deemed by the Company to be attributable to interest. For the   
 historical 52 weeks ended August 26, 1995 and August 24, 1996, and the 28
    weeks ended March 15, 1997, the deficiency of earnings to fixed charges were
$20.6 million, $2.7 million and $0.6 million, respectively. For the Pro 
   Forma 52 weeks ended August 30, 1997 and the 28 weeks ended March 15, 1997,
the deficiency of earnings to fixed charges are $8.1 million and $4.2   
million, respectively.                                                  

(f) As a result of the Company's targeted teacher-student ratios, the physical  
    layout of certain residential Academies and the typical layout of Montessori
Schools, the Company's Academies have an operating capacity ('Operating 
Capacity') approximately 8% below Licensed Capacity. 'Licensed Capacity'
measures the overall capacity of the Company's Academies based upon     
applicable state licensing regulations.                                 

(g) 'FTE Utilization' is the ratio of 'full-time equivalent' ('FTE') students to
the total Operating Capacity for all of the Company's Academies. FTE    
    attendance is not a measure of the absolute number of students attending the
Company's Academies. Rather, it is an approximation of the full-time    
equivalent number of students based on Company estimates and weighted   
 averages. For example, a student attending full-time is equivalent to one
 FTE, while a student attending only one-half of each day is equivalent to
0.5 FTE.                                                                

(h) The Company calculates the 'Average Weekly FTE Tuition' by dividing total   
    operating revenue by the number of weeks in the applicable period and by the
number of FTE students for the applicable period.                       

(i) Pro forma cash interest expense is defined as interest expense exclusive of 
bank agency fees and amortization of deferred financing costs.          

(j) The pro forma amount consists entirely of the cash required to be deposited 
in the restricted cash investment accounts pursuant to the Company's    
self-insurance program.                                                 

(k) The pro forma amount represents the implied value of the stockholders'      
equity of Parent to be purchased and retained in the Transactions of    
approximately $110 million. See 'The Transactions.'                     

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RISK FACTORS

In addition to the other information set forth in this Prospectus, the
following factors should be considered carefully in evaluating an investment in 
the Notes offered by this Prospectus.                                           

SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS                               

    As a result of the Offering and the borrowings under the Credit Agreement,
the Company has a highly leveraged capital structure and the Company's          
consolidated indebtedness is substantial in relation to its stockholders'       
equity. As of March 14, 1998, on a pro forma basis after giving effect to the   
Transactions, the Company would have had consolidated indebtedness of           
approximately $187.1 million (exclusive of unused commitments under the Credit  
Agreement) and the Company would have had a stockholders' deficit of $82.4      
million.                                                                        

The degree to which the Company is leveraged could have important     
consequences to the holders of the Notes, including, but not limited to, the    
following: (i) a substantial portion of the Company's cash flow from operations 
will be required to be dedicated to the payment of interest on, and principal   
of, its indebtedness, including the Notes, thereby reducing the funds available 
for other purposes; (ii) the Company's ability to obtain additional financing in
the future, as needed, may be significantly impaired (including the Company's   
ability to obtain additional financing for working capital, capital             
expenditures, acquisitions or other corporate purposes and to obtain sale       
leaseback financing); (iii) certain of the Company's indebtedness is at variable
rates of interest, which could result in higher interest expense in the event of
increases in interest rates; (iv) all the indebtedness outstanding under the    
Credit Agreement is secured by pledges of all the capital stock of the Company  
and the Company's existing subsidiary, as well as the capital stock of all of   
the Company's future subsidiaries, and security interests in, or liens on,      
substantially all other tangible and intangible assets of Parent, the Company   
and the Company's existing subsidiary, as well as all of the Company's future   
subsidiaries, and such indebtedness will mature prior to the maturity of the    
Notes; (v) the Company's ability to compete through capital improvement and     
expansion may be limited and (vi) the Company's ability to adjust to changing   
market conditions and to withstand competitive pressures could be limited, and  
the Company may be vulnerable in the event of a downturn in general economic    
conditions or its business.                                                     

The Company's ability to make scheduled payments (and to refinance its
obligations) with respect to its indebtedness (including the Notes) will depend 
upon its future operating performance, which, in turn, will be affected by      
general economic and competitive conditions and by financial, business and other
factors, many of which are beyond the control of the Company. For the 52 weeks  
ended March 14, 1998, on a pro forma basis after giving effect to the           
Transactions, the Company's consolidated cash interest expense would have been  
approximately $18.2 million. The Company anticipates that its cash flow,        
together with borrowings under the Credit Agreement, will be sufficient to meet 
its operating expenses and to service its debt requirements as they become due. 
If the Company is unable to generate sufficient cash flow from operations in the
future or borrow under the Credit Agreement in an amount sufficient to meet its 
operating expenses and to service its debt requirements as they become due, it  
will be required to adopt an alternative strategy that may include actions such 
as reducing or delaying capital expenditures, selling assets, restructuring or  
refinancing its indebtedness, changing its corporate structure or seeking       
additional equity capital. There can be no assurance that any of these actions  
could be effected in a timely manner on satisfactory terms, if at all, or that  
any of these actions would enable the Company to continue to meet its operating 
expenses and to service its debt requirements as they become due. In addition,  
the terms of the agreements governing the Company's existing and future         
indebtedness, including the terms of the Credit Agreement and the Indenture, may
prohibit the Company from taking any of these actions. The failure to generate  
sufficient cash flow from operations, to borrow under the Credit Agreement or to
adopt an alternative strategy could materially adversely affect, among other    
things, the Company's ability to pay interest on, and to repay the principal of,
the Notes and the market value of the Notes. See 'Management's Discussion and   
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources.'                                                                     

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UNSECURED STATUS OF NOTES AND GUARANTEES                                        

   The Indenture permits Parent, the Company and its Restricted Subsidiaries
to incur Secured Indebtedness, including indebtedness under the Credit          
Agreement, which is secured by security interests in, or liens on, substantially
all tangible and intangible assets of Parent, the Company and the Company's     
existing subsidiary, as well as all of the Company's future subsidiaries. The   
Notes and the Guarantees are unsecured and therefore will not have the benefit  
of any collateral. Accordingly, in the event of a bankruptcy, liquidation,      
reorganization or similar proceeding of either of the Issuers or a Guarantor,   
the lenders of such Secured Indebtedness would have the right to foreclose upon 
such collateral to the exclusion of the holders of the Notes, notwithstanding   
the existence of an event of default with respect to the Notes or the applicable
Guarantee. In such event, the assets of either Issuer or the Guarantors, as the 
case may be, constituting such collateral would first be used to repay in full  
all amounts outstanding under such Secured Indebtedness, resulting in all or a  
portion of the assets of the Issuers or such Guarantors being unavailable to    
satisfy claims of holders of the Notes and other unsecured indebtedness.        

RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS                                   

     The terms and conditions of the Credit Agreement impose restrictions on the
ability of the Issuers to, among other things, incur indebtedness or issue      
certain equity securities, incur liens, undergo certain fundamental changes,    
make loans or advances, incur guarantees or make acquisitions, undertake asset  
sales, engage in sale and leaseback transactions, enter into hedging agreements,
pay dividends in respect of, make distributions on or repurchase or redeem      
capital stock or certain indebtedness, enter into transactions with affiliates, 
enter into certain restrictive agreements, amend certain material documents,    
make capital expenditures and engage in mergers and consolidations. The Credit  
Agreement also requires the Issuers to maintain specified financial ratios and  
satisfy certain tests, including, without limitation a maximum leverage ratio, a
fixed charge coverage ratio and a minimum EBITDA (as defined in the Credit      
Agreement) test. The terms and conditions of the Indenture impose restrictions  
on the ability of the Issuers and the Restricted Subsidiaries to, among other   
things, incur additional indebtedness, pay dividends on and redeem capital      
stock, redeem certain subordinated obligations, make investments, undertake     
sales of assets and subsidiary stock, grant liens on the assets of Parent, the  
Company and the Restricted Subsidiaries, engage in certain transactions with    
affiliates, sell or issue capital stock of the Restricted Subsidiaries and      
engage in consolidations, mergers and transfers of all or substantially all the 
assets of the Issuers. The ability of the Issuers to comply with these and other
terms and conditions of the Credit Agreement and the Indenture may be affected  
by general economic and competitive conditions and by financial, business and   
other factors, many of which are beyond the control of the Issuers. A breach of 
any of these covenants could result in a default under the Credit Agreement or  
the Indenture. In addition, the lenders under the Credit Agreement could elect  
to declare all amounts outstanding under the Credit Agreement, together with    
accrued and unpaid interest, to be immediately due and payable. If the Company  
were unable to repay such amounts, such lenders would have the right to proceed 
against the collateral granted to them to secure such indebtedness and other    
amounts. See 'Description of the Credit Agreement' and 'Description of Notes.'  

PURCHASE OF THE NOTES UPON CHANGE OF CONTROL                                    

    Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Issuers to repurchase all or any part of such holder's 
Notes at a purchase price equal to 101% of the principal amount thereof, plus   
accrued and unpaid interest, if any, to the date of repurchase. The occurrence  
of certain events which would constitute a Change of Control would also         
constitute an event of default under the Credit Agreement. In addition, the     
Credit Agreement will effectively prohibit the repurchase of the Notes by the   
Company in the event of a Change of Control unless all amounts outstanding      
thereunder are repaid in full. The failure by the Issuers to repurchase any     
Notes upon the occurrence of a Change of Control would result in an event of    
default under the Indenture. The inability to repay all indebtedness outstanding
under the Credit Agreement, if accelerated, would also constitute an event of   
default under the Indenture. In the event of a Change of Control, there can be  
no assurance that the Issuers will have sufficient assets to satisfy all        
obligations under the Credit Agreement and the Indenture. The agreements        
governing future indebtedness of the Issuers may also contain prohibitions of   
certain events and transactions which would constitute a Change of Control. See 
'Description of Notes--Change of Control.'                                      

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LICENSING REQUIREMENTS AND GOVERNMENT REGULATIONS                               

  Each Academy must be licensed under applicable state and local licensing
laws and is subject to a variety of state and local regulations. Although these 
state and local licensing requirements and regulations vary greatly from        
jurisdiction to jurisdiction, governmental agencies generally review the safety,
fitness and adequacy of the buildings and equipment, the ratio of staff to      
children, the dietary program, the daily curriculum and compliance with health  
standards. In many jurisdictions, new legislation or regulations have been      
enacted or are being considered which establish requirements for employee       
background checks or other clearance procedures for new employees of child care 
centers. For example, many of the states in which the Company operates require  
criminal record checks for all child care staff as part of their licensing      
regulations, and some states in which the Company operates require fingerprint  
verification. Repeated failures by an Academy to comply with applicable         
regulations may subject the Academy to state sanctions, which might include     
fines, corrective orders, being placed on probation or, in more serious cases,  
suspension or revocation of the Academy's license to operate. Management        
believes the Company is in substantial compliance with all material licensing   
requirements and regulations applicable to its businesses.                      

    State and local licensing requirements often provide that licenses may not
be transferred. As a result, any transferee of a child care business must apply 
to the appropriate administrative body for a new license. The Company believes  
that the change in the ownership of the equity capital of Parent to be effected 
pursuant to the Recapitalization will not constitute a transfer of the Company's
businesses under applicable state and local licensing regulations. If an        
administrative body were to take a contrary position, the Company may, in       
certain circumstances, be required to apply for relicensing in the applicable   
jurisdiction. If such relicensing were required, there can be no assurance that 
the Company would not incur material expenses.                                  

 Although there are presently no federal licensing requirements, certain
minimum standards must be satisfied in order for a child care center to qualify 
for participation in certain federal subsidy programs. Management believes the  
Company has substantially satisfied all material standards necessary to qualify 
for participation in the federal subsidy programs relevant to its business.     

IMPACT OF POSSIBLE LOSS OF GOVERNMENT FUNDING                                   

 During fiscal 1997, management estimates approximately 5% to 10% of the
Company's operating revenues were generated from federal and state child care   
assistance programs. Funding for such programs is subject to changes in federal 
and state environments and governmental appropriations processes, which are     
unpredictable and outside the Company's control. Accordingly, there is no       
assurance that funding for such federal and state programs will continue at     
current levels and a significant reduction in such funding may have an adverse  
impact on the Company. Although additional funding for child care will be       
available for low income families as part of the welfare reform included in     
legislation signed by President Clinton in August 1996, no assurance can be     
given that the Company will benefit from any such additional funding. In        
addition, although the Internal Revenue Code of 1986, as amended (the 'Code'),  
makes certain tax incentives available to parents utilizing child care programs,
such provisions of the Code are subject to change. See 'Business--Government    
Regulation.'                                                                    

ADVERSE PUBLICITY; ABILITY TO OBTAIN INSURANCE                                  

   As a result of adverse publicity concerning reported incidents of alleged
child physical and sexual abuse at child care centers and the length of time    
before the expiration of applicable statutes of limitations for the filing of   
child abuse and personal injury claims (typically a number of years after the   
child reaches the age of majority), many operators of child care centers have   
had difficulty obtaining general liability insurance, child abuse liability     
insurance or similar liability insurance or have been able to obtain such       
insurance only at high rates. To date, the Company has been able to obtain      
insurance in amounts it believes to be appropriate. There can be no assurance,  
however, that the Company's insurance premiums will not increase in the future  
as a consequence of conditions in the insurance business generally or the       
Company's experience in particular or that continuing publicity with respect to 
alleged instances of child abuse will not result in the Company's being unable  
to obtain insurance. Like its competitors, the Company is periodically subject  
to claims of child abuse arising out of alleged incidents at its Academies. In  
addition, any adverse publicity concerning reported incidents of alleged        
physical or sexual abuse                                                        

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of children at the Company's Academies or at other child care centers could     
affect occupancy levels at the Company's Academies.                             

SEASONALITY                                                                     

     The Company's revenues and the initial success of new Academies are subject
to seasonal variation. New enrollments are generally highest in September and   
January because children return to child care and/or school after summer and    
holiday vacation. Academies which open at other times usually experience a lower
rate of enrollment during early months of operation. Enrollment generally       
decreases 5% to 10% during holiday periods and summer months.                   

CONTROL BY KING AND CCP                                                         

   All of the outstanding common stock of the Company is held by Parent. All
of the outstanding shares of preferred stock of Parent are owned by the         
Investor, and approximately 80.5% of the fully diluted common stock of Parent is
owned by the Investor. A majority of the economic interests of the Investor is  
owned by CCP, and a majority of the voting interests of the Investor is owned by
an entity controlled by Robert E. King, a Director of the Parent and the        
Company. Mr. King is entitled to three votes as a director of Parent and the    
Company. However, pursuant to an operating agreement between CCP and the        
Investor (the 'Operating Agreement'), CCP has the right to elect a majority of  
the directors of the Investor if certain triggering events occur, and the       
Investor is prohibited from taking certain actions in respect of the common     
stock of Parent held by the Investor without the consent of CCP. See 'Ownership 
of Securities.'                                                                 

   Accordingly, the Investor controls the affairs of the Company and has the
power to elect all of its directors (other than James R. Kahl, the Chairman of  
the Board, President and Chief Executive Officer of the Company), appoint new   
management and approve any action requiring the approval of the Company's       
stockholders, including adopting amendments to the Company's Certificate of     
Incorporation and approving mergers or sales of all or substantially all of the 
Company's assets. Circumstances may occur in which the interests of the         
Investor, as the majority stockholder of Parent, may conflict with the interests
of the holders of Notes. See 'Management,' 'Ownership of Securities' and        
'Certain Relationships and Related Transactions.'                               

COMPETITION                                                                     

 The United States preschool education and child care industry is highly
fragmented and competitive. The Company's competition consists principally of   
local nursery schools and child care centers, some of which are non-profit      
(including church-affiliated centers), providers of services that operate out of
their homes and other for profit companies which may operate a number of        
centers. Local nursery schools and child care centers generally charge less for 
their services than the Company charges. Many church-affiliated and other       
non-profit child care centers have no or lower rental costs than the Company and
may receive donations or other funding to cover operating expenses and may      
utilize volunteers for staffing. Consequently, tuition rates at these facilities
are commonly less than the Company's rates. Additionally, fees for home-based   
care are normally lower than fees for center-based care because providers of    
home care are not always required to satisfy the same health, safety or         
operational regulations as the Company's centers. The Company's competition also
consists of other large, national, for profit child care companies that may have
more aggressive tuition discounting and other pricing policies than the Company.

IMPACT OF RECESSION                                                             

Demand for the Company's services may be subject to general economic  
conditions, and the Company's revenues depend, in part, on the number of working
mothers and working single parents who require child care services. Recessionary
pressure on the economy, and a consequent reduction in the size of the labor    
force, may adversely impact the Company's business, financial condition and     
results of operations as a result of the general tendency of parents who are not
employed to cease using child care services.                                    

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FRAUDULENT CONVEYANCE STATUTES                                                  

   The incurrence by the Issuers and the Guarantors of indebtedness (such as
the Notes and the Guarantees) in connection with the Transactions may be subject
to review under relevant federal and state fraudulent conveyance and similar    
statutes in a bankruptcy or reorganization case or lawsuit commenced by or on   
behalf of creditors of either of the Issuers or any of the Guarantors. Under    
these statutes, if a court were to find that, after giving effect to the        
issuance of the Notes and the incurrence of the Guarantees, (i) either of the   
Issuers, or the relevant Guarantor incurred such indebtedness with the intent of
hindering, delaying or defrauding present or future creditors, (ii) either of   
the Issuers or the relevant Guarantor received less than the reasonably         
equivalent value in consideration for incurring such indebtedness, and, at the  
time of the incurrence of such indebtedness such Issuer or such Guarantor (a)   
was insolvent or was rendered insolvent by reason of such incurrence, (b) was   
engaged or was about to engage in a business or transaction for which its       
remaining unencumbered assets constituted unreasonably small capital or (c)     
intended to incur, or did incur, or believed that it would incur, debts beyond  
its ability to pay as they matured or became due, such court might subordinate  
the Notes or the applicable Guarantee to presently existing or future           
indebtedness of such Issuer or Guarantor, void the issuance of the Notes or the 
incurrence of such Guarantee and direct the repayment of any amounts paid       
thereunder to the creditors of such Issuer or Guarantor or take other actions   
detrimental to holders of the Notes.                                            

  The measure of insolvency under fraudulent conveyance statutes will vary
depending upon the law of the jurisdiction being applied. Generally, however, a 
debtor will be considered insolvent with respect to a particular date if on such
date the sum of all its liabilities, including contingent liabilities, was      
greater than the value of all its assets at fair valuation or if the present    
fair saleable value of its assets was less than the amount required to repay its
probable liabilities, including contingent liabilities, as they become absolute 
and matured.                                                                    

    If a court were to find that any component of the Transactions constituted
a fraudulent transfer, to the extent proceeds from the Offering were used to    
finance such component, the court might find that the Issuers or the Guarantor  
did not receive reasonably equivalent value in consideration for incurring the  
indebtedness represented by the Notes and the Guarantee. The Guarantee may be   
subject to the additional claim that, because the Guarantee was incurred for the
benefit of the Issuers (and only indirectly for the benefit of the Guarantor),  
the obligations of the Guarantor thereunder were incurred for less than         
reasonably equivalent value.                                                    

Each of the Issuers and the Guarantor believes that it will receive   
equivalent value at the time the indebtedness under the Notes or the Guarantee  
is incurred. In addition, after giving effect to the Transactions, each of the  
Issuers and the Guarantor (a) believes that it will not be insolvent or rendered
insolvent, (b) believes that it will not be engaged or be about to engage in a  
business or transaction for which its remaining unencumbered assets constitute  
unreasonably small capital or (c) does not intend to incur, will not incur, and 
does not believe that it will incur, debts beyond its ability to pay as they    
mature or become due. These beliefs and intentions are based upon analyses of   
internal cash flow projections and estimated values of assets and liabilities at
the time of the Offering. There can be no assurance, however, that a court      
passing on these issues would make the same determination.                      

CONSEQUENCES OF FAILURE TO EXCHANGE                                             

Holders of Old Notes who do not exchange the Old Notes for New Notes  
pursuant to the Exchange Offer will continue to be subject to the restrictions  
on transfer of such Old Notes as set forth in the legend thereon as a           
consequence of the issuance of the Old Notes pursuant to exemptions from, or in 
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be      
offered or sold unless registered under the Securities Act, except pursuant to  
an exemption from, or in a transaction not subject to, the Securities Act and   
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. Based on               
interpretations by the staff of the Commission set forth in no-action letters   
issued to third parties, the Issuers believe that the New Notes issued pursuant 
to the Exchange Offer in exchange for Old Notes may be offered for resale,      
resold or otherwise transferred by any holder thereof (other than any such      
holder that is an 'affiliate' of the Issuers within the meaning of Rule 405     
promulgated under the Securities Act) without compliance with the registration  
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such holder
has no arrangement with any person to participate in the                        

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distribution of such New Notes and neither such holder nor any such other person
is engaging in or intends to engage in a distribution of such New Notes.        
Notwithstanding the foregoing, each broker-dealer that receives New Notes for   
its own account pursuant to the Exchange Offer must acknowledge that it will    
deliver a prospectus in connection with any resale of such New Notes. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or         
supplemented from time to time, may be used by a broker-dealer in connection    
with any resale of New Notes received in exchange for Old Notes where such Old  
Notes were acquired by such broker-dealer as a result of market-making          
activities or other trading activities (other than Old Notes acquired directly  
from the Issuers). The Issuers have agreed that, for a period of 180 days after 
the date of this Prospectus, they will make this Prospectus available to any    
broker-dealer for use in connection with any such resale. See 'Plan of          
Distribution.' However, the ability of any Holder to resell the New Notes is    
subject to applicable state securities laws as described in '-- Blue Sky        
Restrictions on Resale of New Notes' below.                                     

NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES                              

To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, Holders of Old Notes must transmit a properly        
completed Letter of Transmittal, including all other documents required by such 
Letter of Transmittal, to the Exchange Agent at the address set forth below     
under 'The Exchange Offer-- Exchange Agent' on or prior to the Expiration Date. 
In addition, either (i) certificates for such Old Notes must be received by the 
Exchange Agent along with the Letter of Transmittal or (ii) a timely            
confirmation of a book-entry transfer for such Old Notes, if such procedure is  
available, into the Exchange Agent's account at The Depository Trust Company    
pursuant to the procedure for book-entry transfer described herein, must be     
received by the Exchange Agent prior to the Expiration Date or (iii) the Holder 
must comply with the guaranteed delivery procedures described herein. See 'The  
Exchange Offer.'                                                                

BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES                                    

   In order to comply with the securities laws of certain jurisdictions, the
New Notes may not be offered or resold by any Holder unless they have been      
registered or qualified for sale in such jurisdictions or an exemption from     
registration or qualification is available and the requirements of such         
exemption have been satisfied. The Issuers do not currently intend to register  
or qualify the resale of the New Notes in any such jurisdictions. However, an   
exemption is generally available for sales to registered broker-dealers and     
certain institutional buyers. Other exemptions under applicable state securities
laws may also be available.                                                     

LACK OF A PUBLIC MARKET FOR THE NEW NOTES                                       

     The New Notes will constitute a new class of securities with no established
trading market. The Issuers do not intend to list the New Notes on any national 
securities exchange or to seek the admission thereof to trading in the Nasdaq   
National Market. The Old Notes are designated for trading in the Private        
Offerings, Resale and Trading through Automatic Linkages ('PORTAL') market. The 
Issuers have been advised by CSI that CSI currently intends to make a market in 
the New Notes. CSI is not obligated to do so, however, and any market-making    
activities with respect to the New Notes may be discontinued at any time without
notice. In addition, such market-making activity will be subject to the limits  
imposed by the Securities Act and the Exchange Act, and may be limited during   
the Exchange Offer and the pendency of any Shelf Registration Statement (as     
defined). Accordingly, no assurance can be given that an active public or other 
market will develop for the New Notes or as to the liquidity of the trading     
market for the New Notes. If a trading market does not develop or is not        
maintained, holders of the New Notes may experience difficulty in reselling the 
New Notes or may be unable to sell them at all. If a market develops for the New
Notes, future trading prices of the New Notes will depend on many factors,      
including, among other things, prevailing interest rates, the Issuers' financial
condition and results of operations, and the market for similar notes. Depending
on those and other factors, the New Notes may trade at a discount from their    
principal amount.                                                               

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THE EXCHANGE OFFER

PURPOSE AND EFFECT OF THE EXCHANGE OFFER                                        

The Old Notes were sold by the Issuers on May 11, 1998 to the Initial 
Purchasers, who resold the Old Notes to qualified institutional investors in    
reliance on Rule 144A under the Securities Act or pursuant to offers and sales  
that occurred outside the United States within the meaning of Regulation S under
the Securities Act. In connection therewith, the Issuers, the Guarantor and the 
Initial Purchasers entered into the Registration Rights Agreement, which        
provides that (i) the Issuers will file an Exchange Offer Registration Statement
with the Commission within 60 days after the date of the original issuance of   
the Old Notes (the 'Issue Date'), (ii) the Issuers will use their best efforts  
to have the Exchange Offer Registration Statement declared effective by the     
Commission within 120 days after the Issue Date (the 'Target Effectiveness      
Date'), (iii) the Issuers will consummate the Exchange Offer within 180 days    
after the Issue Date (the 'Target Consummation Date') and (iv) if obligated to  
file the Shelf Registration Statement (as described below), the Issuers will use
their best efforts to file the Shelf Registration Statement with the Commission 
promptly after such filing obligation arises and to cause the Shelf Registration
Statement to become effective by the Commission as promptly as possible after   
such obligation arises. Promptly after the effectiveness of the Registration    
Statement, the Issuers will offer, pursuant to this Prospectus, to the Holders  
of the Old Notes the opportunity to exchange their Old Notes for a like         
principal amount of New Notes, to be issued without a restrictive legend and    
which may, generally, be reoffered and resold by the holder without restrictions
or limitations under the Securities Act. The term 'Holder' with respect to the  
Exchange Offer means any person in whose name Old Notes are registered on the   
books of the Issuers or any other person who has obtained a properly completed  
bond power from the registered holder.                                          

The Issuers have not requested, and do not intend to request, an      
interpretation by the staff of the Commission with respect to whether the New   
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without         
compliance with the registration and prospectus delivery provisions of the      
Securities Act. Instead, based on interpretations by the staff of the Commission
set forth in no-action letters issued to Exxon Capital Holdings Corporation     
(available April 13, 1989), Morgan Stanley & Co. Incorporated (available June 5,
1991) and Shearman & Sterling (available July 2, 1993), the Issuers believe that
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder of such New  
Notes (other than any such holder that is an 'affiliate' of the Issuers within  
the meaning of Rule 405 promulgated under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act, 
provided that such New Notes are acquired in the ordinary course of such        
Holder's business, such Holder has no arrangement or understanding with any     
person to participate in the distribution of such New Notes and neither such    
Holder nor any other such person is engaging in or intends to engage in a       
distribution of such New Notes. Because the Commission has not considered the   
Exchange Offer in the context of a no-action letter, there can be no assurance  
that the staff of the Commission would make a similar determination with respect
to the Exchange Offer. Any Holder who is an affiliate of the Issuers or who     
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes cannot rely on such interpretations by the staff of the        
Commission and must comply with the registration and prospectus delivery        
requirements of the Securities Act in connection with a resale transaction.     

    Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in        
connection with any resale of such New Notes. The Letter of Transmittal states  
that by so acknowledging and by delivering a prospectus, a broker-dealer will   
not be deemed to admit that it is an 'underwriter' within the meaning of the    
Securities Act. This Prospectus, as it may be amended or supplemented from time 
to time, may be used by a broker-dealer in connection with resales of New Notes 
received in exchange for Old Notes where such Old Notes were acquired by such   
broker-dealer as a result of market-making activities or other trading          
activities (other than Old Notes acquired directly from the Issuers). The       
Issuers have agreed that, for a period of 180 days after the date of this       
Prospectus, they will make this Prospectus available to any broker-dealer for   
use in connection with any such resale. See 'Plan of Distribution.'             

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SHELF REGISTRATION                                                              

     Pursuant to the Registration Rights Agreement, if (i) because of any change
in law or applicable interpretations thereof by the staff of the Commission, the
Issuers not permitted to effect the Exchange Offer as contemplated hereby, (ii) 
any Old Notes validly tendered pursuant to the Exchange Offer are not exchanged 
for New Notes within 180 days after the Issue Date, (iii) the Initial Purchasers
so request with respect to Old Notes not eligible to be exchanged for New Notes 
in the Exchange Offer, (iv) any applicable law or interpretations do not permit 
any holder of Old Notes to participate in the Exchange Offer, (v) any holder of 
Old Notes that participates in the Exchange Offer does not receive freely       
transferable New Notes in exchange for tendered Old Notes, or (vi) the Company  
so elects, then the Issuers will file with the Commission a shelf registration  
statement (the 'Shelf Registration Statement') to cover resales of Transfer     
Restricted Securities by such holders who satisfy certain conditions relating to
the provision of information in connection with the Shelf Registration          
Statement. For purposes of the foregoing, 'Transfer Restricted Securities' means
each Old Note until (i) the date on which such Old Note has been exchanged for a
freely transferable New Note in the Exchange Offer; (ii) the date on which such 
Old Note has been effectively registered under the Securities Act and disposed  
of in accordance with the Shelf Registration Statement or (iii) the date on     
which such Old Note is distributed to the public pursuant to Rule 144 under the 
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 
The Issuers will use their reasonable best efforts to have the Shelf            
Registration Statement declared effective by the Commission as promptly as      
practicable after the filing thereof and to keep the Shelf Registration         
Statement continuously effective until May 11, 2000 or such shorter period that 
will terminate when all the Transfer Restricted Securities covered by the Shelf 
Registration Statement have been sold pursuant thereto. The Issuers, at their   
expense, will provide to each holder of the Old Notes copies of the prospectus  
that is a part of the Shelf Registration Statement, notify each such holder when
the Shelf Registration Statement has become effective and take certain other    
actions as are required to permit unrestricted resales of the Old Notes from    
time to time. A holder of Old Notes who sells such Old Notes pursuant to the    
Shelf Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to        
purchasers, will be subject to certain of the civil liability provisions under  
the Securities Act in connection with such sales and will be bound by the       
provisions of the Registration Rights Agreement which are applicable to such    
holder (including certain indemnification obligations).                         

ADDITIONAL INTEREST                                                             

If (i) the applicable Registration Statement is not filed with the    
Commission on or prior to 60 days after the Issue Date, (ii) the Exchange Offer 
Registration Statement or the Shelf Registration Statement as the case may be,  
is not declared effective within 120 days after the Issue Date (or in the case  
of a Shelf Registration Statement required to be filed in response to a change  
in law or the applicable interpretations of Commission's staff, if later, within
45 days after publication of the change in law or interpretation), (iii) the    
Registered Exchange Offer is not consummated on or prior to 180 days after the  
Issue Date, or (iv) the Shelf Registration Statement is filed and declared      
effective within 120 days after the Issue Date (or in the case of a Shelf       
Registration Statement required to be filed in response to a change in law or   
the applicable interpretations of Commission's staff, if later, within 45 days  
after publication of the change in law or interpretation) but shall thereafter  
cease to be effective (at any time that the Issuers are obligated to maintain   
the effectiveness thereof) without being succeeded within 30 days by an         
additional Registration Statement filed and declared effective (each such event 
referred to in clauses (i) through (iv), a 'Registration Default'), the Issuers 
and the Guarantor will be jointly and severally obligated to pay liquidated     
damages to each Holder of Transfer Restricted Securities, during the period of  
one or more such Registration Defaults, in an amount equal to $0.192 per week   
per $1,000 principal amount of Transfer Restricted Securities held by such      
Holder until (i) the applicable Registration Statement is filed, (ii) the       
Exchange Offer Registration Statement is declared effective and the Registered  
Exchange Offer is consummated, (iii) the Shelf Registration Statement is        
declared effective or (iv) the Shelf Registration Statement again becomes       
effective, as the case may be.                                                  

  Holders of Old Notes will be required to make certain representations to
the Issuers (as described in the Registration Rights Agreement) in order to     
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide      
comments on the Shelf                                                           

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Registration Statement within the time periods set forth in the Registration    
Rights Agreement in order to have their Old Notes included in the Shelf         
Registration Statement and benefit from the provisions set forth above.         

  The summary herein of the material provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all of the provisions of the Registration Rights Agreement, a  
copy of which has been filed as an exhibit to the Registration Statement of     
which this Prospectus forms a part.                                             

The Old Notes are designated for trading in the PORTAL market. To the 
extent Old Notes are tendered and accepted in the Exchange Offer, the principal 
amount of outstanding Old Notes will decrease with a resulting decrease in the  
liquidity in the market therefor. Following the consummation of the Exchange    
Offer, Holders of Old Notes who were eligible to participate in the Exchange    
Offer but who did not tender their Old Notes will not be entitled to certain    
rights under the Registration Rights Agreement and such Old Notes will continue 
to be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for the Old Notes could be adversely affected.                       

TERMS OF THE EXCHANGE OFFER                                                     

   Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Old Notes 
validly tendered and not withdrawn prior to 5:00 p.m., New York City time on the
Expiration Date. The Issuers will issue $1,000 principal amount of New Notes in 
exchange for each $1,000 principal amount of outstanding Old Notes accepted in  
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant  
to the Exchange Offer. However, Old Notes may be tendered only in integral      
multiples of $1,000.                                                            

The form and terms of the New Notes will be identical in all material 
respects to the form and terms of the Old Notes, except that the New Notes (i)  
have been registered under the Securities Act and therefore will not bear       
legends restricting their transfer, (ii) will not contain certain provisions    
providing for the payment of additional interest on the Old Notes under certain 
circumstances relating to the Registration Rights Agreement, which provisions   
will terminate upon the consummation of the Exchange Offer and (iii) have been  
given a series designation to distinguish the New Notes from the Old Notes. The 
New Notes will evidence the same debt as the Old Notes and will be entitled to  
the benefits of the Indenture under which the Old Notes were, and the new Notes 
will be, issued.                                                                

    As of the date of this Prospectus, $145,000,000 aggregate principal amount
of the Old Notes are outstanding. The Issuers have fixed the close of business  
on June 15, 1998 as the record date for the Exchange Offer for purposes of      
determining the persons to whom this Prospectus, together with the Letter of    
Transmittal, will initially be sent. As of such date, there were registered     
Holders of the Old Notes.                                                       

  Holders of the Old Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law (the 'DGCL') or the Indenture in     
connection with the Exchange Offer. The Issuers intend to conduct the Exchange  
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission promulgated thereunder.                 

 The Issuers shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuers have given oral notice (confirmed in writing) or    
written notice thereof to the Exchange Agent. The Exchange Agent will act as    
agent for the tendering Holders for the purpose of the exchange of Old Notes.   

If any tendered Old Notes are not accepted for exchange because of an 
invalid tender, the occurrence of certain other events set forth herein or      
otherwise, any such unaccepted Old Notes will be returned, without expense, to  
the tendering Holder thereof as promptly as practicable after the Expiration    
Date.                                                                           

    Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter 
of Transmittal, transfer taxes with respect to the exchange of Old Notes        
pursuant to the Exchange Offer. The Issuers will pay all charges and expenses,  
other than certain applicable taxes, in connection with the Exchange Offer. See 
'--Fees and Expenses.'                                                          

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EXPIRATION DATE; EXTENSIONS; AMENDMENTS                                         

 The term 'Expiration Date' shall mean 5:00 p.m., New York City time, on
July 30, 1998 unless the Issuers, in their sole discretion, extends the Exchange
Offer, in which case the term 'Expiration Date' shall mean the latest date and  
time to which the Exchange Offer is extended, which shall in no event be later  
than September 30, 1998.                                                        

     In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice  
and will make a public announcement thereof prior to 9:00 a.m., New York City   
time, on the next business day after each previously scheduled expiration date. 

The Issuers reserve the right, in their sole discretion, (i) to delay 
accepting any Old Notes, to extend the Exchange Offer or, if any of the         
conditions set forth below under 'The Exchange Offer--Conditions' shall not have
been satisfied, to terminate the Exchange Offer, by giving oral notice          
(confirmed in writing) or written notice of such delay, extension or termination
to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any   
manner. Any such delay in acceptance, extension, termination or amendment will  
be followed as promptly as practicable by a public announcement thereof. If the 
Exchange Offer is amended in a manner determined by the Issuers to constitute a 
material change, the Issuers will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and   
the Issuers will extend the Exchange Offer for a period of five to 10 business  
days, depending upon the significance of the amendment and the manner of        
disclosure to the registered Holders, if the Exchange Offer would otherwise     
expire during such five- to 10-business-day period.                             

    Without limiting the manner in which the Issuers may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange  
Offer, the Issuers shall have no obligation to publish, advertise or otherwise  
communicate any such public announcement, other than by making a timely release 
to the Dow Jones News Service.                                                  

INTEREST ON THE NEW NOTES                                                       

  Each New Note will bear interest from May 11, 1998, its date of original
issuance. Holders of Old Notes that are accepted for exchange and exchanged for 
New Notes will receive, in cash, accrued interest thereon to, but not including,
the original issuance date of the New Notes. The Old Notes will bear interest at
a rate per annum of 10% through the date next preceding the date of the original
issuance of the New Notes. Such interest will be paid on the first interest     
payment date for the New Notes. Interest on the Old Notes accepted for exchange 
and exchanged in the Exchange Offer will cease to accrue on the date next       
preceding the date of original issuance of the New Notes. The New Notes will    
bear interest (as do the Old Notes) at a rate per annum of 10%, which interest  
will be payable semi-annually on each May 15 and November 15, commencing on     
November 15, 1998.                                                              

PROCEDURES FOR TENDERING                                                        

The tender of Old Notes by a holder thereof pursuant to one of the    
procedures set forth below and the acceptance thereof by the Issuers will       
constitute a binding agreement between such Holder and the Issuers in accordance
with the terms and subject to the conditions set forth herein and in the Letter 
of Transmittal. This Prospectus, together with the Letter of Transmittal, will  
first be sent on or about June 30, 1998, to all Holders of Old Notes known to   
the Issuers and the Exchange Agent.                                             

  Only a Holder of the Old Notes may tender such Old Notes in the Exchange
Offer. A Holder who wishes to tender any Old Notes for exchange pursuant to the 
Exchange Offer must transmit a properly completed and duly executed Letter of   
Transmittal, or a facsimile thereof, including any other required documents, to 
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration    
Date. In addition, either (i) certificates for such Old Notes must be received  
by the Exchange Agent along with the Letter of Transmittal or (ii) a timely     
confirmation of a book-entry transfer (a 'Book-Entry Confirmation') of such Old 
Notes, if such procedure is available, into the Exchange Agent's account at The 
Depository Trust Company (the 'Book-Entry Transfer Facility') pursuant to the   
procedure for book-entry transfer described below, must be received by the      
Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with
the guaranteed delivery procedures described below. To be tendered effectively, 
the Old Notes, Letter of Transmittal and other required documents               

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must be received by the Exchange Agent at the address set forth below under     
'Exchange Agent' prior to 5:00 p.m., New York City time, on the Expiration Date.

   THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF   
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN  
OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT     
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND PROPER INSURANCE BE      
OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO 
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD  
NOTES SHOULD BE SENT TO THE ISSUERS.                                            

Any beneficial owner whose Old Notes are registered in the name of a  
broker, dealer, commercial bank, trust company or other nominee and who wishes  
to tender should contact the registered Holder promptly and instruct such       
registered Holder to tender on such beneficial owner's behalf. If such          
beneficial owner wishes to tender on such beneficial owner's own behalf, such   
beneficial owner must, prior to completing and executing the Letter of          
Transmittal and delivering such beneficial owner's Old Notes, either make       
appropriate arrangements to register ownership of the Old Notes in such         
beneficial owner's name or obtain a properly completed bond power from the      
registered Holder. The transfer of registered ownership may take considerable   
time.                                                                           

 Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)  
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered 
Holder who has not completed the box entitled 'Special Registration             
Instructions' or 'Special Delivery Instructions' on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are      
required to be guaranteed, such guarantee must be by a member firm of a         
registered national securities exchange or of the National Association of       
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an 'eligible guarantor institution' within
the meaning of Rule 17Ad-15 promulgated under the Exchange Act (an 'Eligible    
Institution').                                                                  

If the Letter of Transmittal is signed by a person other than the     
registered Holder of any Old Notes listed therein, such Old Notes must be       
endorsed or accompanied by a properly completed bond power, signed by such      
registered Holder as such registered Holder's name appears on such Old Notes.   

    If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of  
corporations or others acting in a fiduciary or representative capacity, such   
persons should so indicate when signing, and unless waived by the Issuers,      
evidence satisfactory to the Issuers of their authority to so act must be       
submitted with the Letter of Transmittal.                                       

     The Exchange Agent and DTC have confirmed to the Issuers that any financial
institution that maintains a direct account with DTC (a 'Participant') may      
utilize DTC's Automated Tender Offer Program ('ATOP') to tender Old Notes for   
exchange in the Exchange Offer. The Exchange Agent will request that DTC        
establish an account with respect to the Old Notes for purposes of the Exchange 
Offer within two business days after the date of this Prospectus. Any           
Participant may effect book-entry delivery of Old Notes by causing DTC to record
the transfer of the tendering Participant's beneficial interests in the global  
Old Notes into the Exchange Agent's account in accordance with DTC's ATOP       
procedures for such transfer. However, the exchange of New Notes for Old Notes  
so tendered only will be made after a Book-Entry Confirmation of Old Notes into 
the Exchange Agent's account, and timely receipt by the Exchange Agent of an    
Agent's Message (as defined below) and any other documents required by the      
Letter of Transmittal. The term 'Agent's Message' as used herein means a        
message, transmitted by DTC and received by the Exchange Agent and forming part 
of a Book-Entry Confirmation, which states that DTC has received an express     
acknowledgement from a Participant tendering Old Notes for exchange which are   
the subject of such Book-Entry Confirmation that such Participant has received  
and agrees to be bound by the terms and conditions of the Letter of Transmittal,
and that the Company may enforce such agreement against such Participant.       

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by 
the Issuers in their sole discretion, which determination will be final and     
binding. The Issuers reserve the absolute right to reject any and all Old Notes 
not properly tendered or any Old Notes the Issuers' acceptance of which would,  
in the opinion of counsel for the Issuers, be unlawful. The                     

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Issuers also reserve the right to waive any defects, irregularities or          
conditions of tender as to particular Old Notes. The interpretation by the      
Issuers of the terms and conditions of the Exchange Offer (including the        
instructions in the Letter of Transmittal) will be final and binding on all     
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Issuers shall determine.     
Although the Issuers intend to notify Holders of defects or irregularities with 
respect to tenders of Old Notes, neither the Issuers, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.   
Tenders of Old Notes will not be deemed to have been made until such defects or 
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that the Issuers determine are not properly tendered and as to which the  
defects or irregularities have not been cured or waived will be returned by the 
Exchange Agent to the tendering Holders, unless otherwise provided in the Letter
of Transmittal, as soon as practicable following the Expiration Date.           

By tendering, each Holder will represent to the Issuers, among other  
things, that (i) the New Notes acquired by the Holder and any beneficial owners 
of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary  
course of business of the person receiving such New Notes, (ii) neither the     
Holder nor such beneficial owner has an arrangement with any person to          
participate in the distribution of such New Notes, (iii) neither the Holder nor 
such beneficial owner nor any such other person is engaging in or intends to    
engage in a distribution of such New Notes and (iv) neither the Holder nor any  
such other person is an 'affiliate,' as defined under Rule 405 promulgated under
the Securities Act, of the Issuers. Each broker-dealer that receives New Notes  
for its own account in exchange for Old Notes, where such Old Notes were        
acquired by such broker-dealer as a result of market-making activities or other 
trading activities (other than Old Notes acquired directly from the Issuers),   
may participate in the Exchange Offer but may be deemed an 'underwriter' under  
the Securities Act and, therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such New     
Notes. The Letter of Transmittal states that by so acknowledging and by         
delivering a prospectus, a broker-dealer will not be deemed to admit that it is 
an 'underwriter' within the meaning of the Securities Act. See 'Plan of         
Distribution.'                                                                  

BOOK-ENTRY TRANSFER                                                             

     The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the        
Exchange Offer within two business days after the date of this Prospectus, and  
any financial institution that is a participant in the Book-Entry Transfer      
Facility's system may make book-entry delivery of Old Notes by causing the      
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange       
Agent's account at the Book-Entry Transfer Facility in accordance with such     
Book-Entry Transfer Facility's procedures for transfer. However, although       
delivery of Old Notes may be effected through book-entry transfer at the        
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,   
with any required signature guarantees and any other required documents, must,  
in any case, be transmitted to and received by the Exchange Agent at the address
set forth below under '--Exchange Agent' on or prior to the Expiration Date or  
the guaranteed delivery procedures described below must be complied with.       

GUARANTEED DELIVERY PROCEDURES                                                  

    Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of 
Transmittal or any other required documents to the Exchange Agent prior to the  
Expiration Date may effect a tender if:                                         

(a) the tender is made through an Eligible Institution;     

      (b) prior to the Expiration Date, the Exchange Agent receives from
    such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
     setting forth the name and address of the Holder, the certificate number(s)
   of such Old Notes and the principal amount of Old Notes tendered, stating
  that the tender is being made thereby and guaranteeing that, within five
    New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
 representing the Old Notes, or a Book-Entry Confirmation, and any other
  documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and                     

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      (c) such properly completed and executed Letter of Transmittal (or
     facsimile thereof), as well as the certificate(s) representing all tendered
     Old Notes in proper form for transfer, or a Book-Entry Confirmation, as the
    case may be, and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within five New York Stock Exchange
trading days after the Expiration Date.                               

     Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed  
delivery procedures set forth above.                                            

WITHDRAWAL OF TENDERS                                                           

To withdraw a tender of Old Notes in the Exchange Offer, a written or 
facsimile transmission notice of withdrawal must be received by the Exchange    
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of 
the person having deposited the Old Notes to be withdrawn (the 'Depositor'),    
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder  
in the same manner as the original signature on the Letter of Transmittal by    
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with  
respect to the Old Notes register the transfer of such Old Notes into the name  
of the persons withdrawing the tender and (iv) specify the name in which any    
such Old Notes are to be registered, if different from that of the Depositor. If
certificates for Old Notes have been delivered or otherwise identified to the   
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be 
withdrawn and a signed notice of withdrawal with signatures guaranteed by an    
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described  
above, any notice of withdrawal must specify the name and number of the account 
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes 
and otherwise comply with the procedures of such facility. All questions as to  
the validity, form and eligibility (including time of receipt) of such notices  
will be determined by the Issuers in their sole discretion, which determination 
shall be final and binding on all parties. Any Old Notes so withdrawn will be   
deemed not to have been validly tendered for purposes of the Exchange Offer and 
no New Notes will be issued with respect thereto unless the Old Notes so        
withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered
by following one of the procedures described above under '--Procedures for      
Tendering' at any time prior to the Expiration Date.                            

Any Old Notes which have been tendered but which are not accepted for 
payment due to withdrawal, rejection of tender or termination of the Exchange   
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer    
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant  
to the book-entry transfer procedures described above, such Old Notes will be   
credited to an account maintained with such Book-Entry Transfer Facility for the
Old Notes).                                                                     

CONDITIONS                                                                      

     Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,   
and may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:                                                             

         (a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or                     

         (b) any action or proceeding is instituted or threatened in any court
   or by any governmental agency that might materially impair the ability of
the Issuers to proceed with the Exchange Offer or any material adverse
    development has occurred in any existing action or proceeding with respect
to the Issuers; or                                                    

       (c) any governmental approval has not been obtained, which approval
the Issuers shall deem necessary for the consummation of the Exchange 
Offer.                                                                

If the Issuers determine in their sole discretion that any of the     
conditions are not satisfied, the Issuers may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering Holders (or, in the case of  

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Old Notes tendered by book-entry transfer into the Exchange Agent's account at  
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures 
described above, such Old Notes will be credited to an account maintained with  
such Book-Entry Transfer Facility), (ii) extend the Exchange Offer and retain   
all Old Notes tendered prior to the expiration of the Exchange Offer, subject,  
however, to the rights of Holders to withdraw such Old Notes (see '--Withdrawal 
of Tenders') or (iii) waive such unsatisfied conditions with respect to the     
Exchange Offer and accept all properly tendered Old Notes which have not been   
withdrawn. If such waiver constitutes a material change to the Exchange Offer,  
the Issuers will promptly disclose such waiver by means of a prospectus         
supplement that will be distributed to the registered Holders, and the Issuers  
will extend the Exchange Offer for a period of five to 10 business days,        
depending upon the significance of the waiver and the manner of disclosure to   
the registered Holders, if the Exchange Offer would otherwise expire during such
five- to 10-business-day period.                                                

EXCHANGE AGENT                                                                  

     PNC Bank, National Association has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional  
copies of this Prospectus or of the Letter of Transmittal and requests for      
Notices of Guaranteed Delivery should be directed to the Exchange Agent         
addressed as follows:                                                           

PNC Bank, National Association
Two Tower Center Boulevard    
20th Floor                    
  East Brunswick, New Jersey 08816
Attention: Robert Frier       
Telecopier: (732) 220-3745    

FEES AND EXPENSES                                                               

The expenses of soliciting tenders will be borne by the Issuers. The  
principal solicitation is being made by mail; however, additional solicitation  
may be made by telegraph, telephone or in person by officers and regular        
employees of the Issuers and their affiliates.                                  

 The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others     
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.           

     The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the Exchange 
Agent and Trustee, accounting and legal fees and printing costs, among others.  

     The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates          
representing New Notes or Old Notes for principal amounts not tendered or       
accepted for exchange are to be delivered to, or are to be issued in the name   
of, any person other than the registered Holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the      
person signing the Letter of Transmittal, or if a transfer tax is imposed for   
any reason other than the exchange of Old Notes pursuant to the Exchange Offer, 
then the amount of any such transfer taxes (whether imposed on the registered   
Holder or any other persons) will be payable by the tendering Holder. If        
satisfactory evidence of payment of such taxes or exemption therefrom is not    
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.                                    

ACCOUNTING TREATMENT                                                            

     The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less unamortized discount, as reflected in the Issuers'     
accounting records on the date of the exchange. Accordingly, no gain or loss for
accounting purposes will be recognized. The expenses of the Exchange Offer and  
the unamortized expenses related to the issuance of the Old Notes will be       
amortized over the term of the New Notes.                                       

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USE OF PROCEEDS 

    The Issuers will not receive any proceeds from the Exchange Offer, because
it will be an even exchange of the Old Notes. The net proceeds to the Issuers   
from the Old Notes were approximately $140 million, after deducting the Initial 
Purchasers' discounts and fees and expenses of the Offering. The Issuers used   
such net proceeds, together with the proceeds from the Equity Investment and    
borrowings under the Credit Agreement, to consummate the Recapitalization and   
the Refinancing Transactions and to pay fees and expenses related to the        
foregoing.                                                                      

THE TRANSACTIONS

    On March 17, 1998, the Investor and Parent entered into a Merger Agreement
pursuant to which a wholly owned subsidiary of the Investor was merged into     
Parent to effect the Recapitalization. In the Recapitalization (i) all of the   
then outstanding shares of preferred stock and common stock of Parent (other    
than the shares of common stock retained by Vestar and management of the        
Company) owned by the Existing Stockholders was converted into the right to     
receive cash and (ii) the Existing Stockholders received the cash of the Company
as of the date of the closing of the Transactions. As part of the               
Recapitalization, the Investor purchased $72.5 million (less the value of       
options retained by management) of common stock of Parent (representing         
approximately 74.5% of the common stock of Parent on a fully diluted basis) and 
$30 million of redeemable preferred stock of Parent. In addition, in connection 
with the purchase of preferred stock of Parent, the Investor received warrants  
to purchase up to 6.0% of Parent's common stock on a fully diluted basis        
(resulting in an aggregate fully diluted interest of 80.5%). Vestar retained    
common stock of Parent having a value (based on the amount paid by the Investor 
for its common stock of Parent) of $2.8 million (representing approximately 3.0%
of the outstanding common stock of Parent on a fully diluted basis). Management 
retained common stock of Parent having a value (based on the amount paid by the 
Investor for its common stock of Parent) of $4.7 million (representing 5.0% of  
the outstanding common stock of Parent on a fully diluted basis) and retained   
existing options to acquire 3.0% of Parent's fully diluted common stock. In     
addition, Parent adopted the New Option Plan covering 8.5% of its fully diluted 
common stock. Accordingly, management owns or has the right to acquire, subject 
to certain performance requirements, approximately 16.5% of the common stock of 
Parent on a fully diluted basis. The Equity Investment was used, together with  
the proceeds of the offering and borrowings under the Credit Agreement, to      
finance the Recapitalization, to consummate the Refinancing Transactions and to 
pay the fees and expenses relating to the foregoing. See 'Ownership of          
Securities.'                                                                    

     The Refinancing Transactions consisted of (i) the defeasance by the Company
of all of its outstanding Senior Notes, (ii) the exchange of all outstanding    
shares of the Class A Preferred Stock for $34.7 million aggregate principal     
amount of the Exchange Debentures, (iii) the defeasance by the Company of all of
the then outstanding Exchange Debentures and (iv) the retirement of the         
Convertible Debentures.                                                         

    As a result of the Recapitalization, the Investor owns 90.3% of the common
stock of Parent (80.5% on a fully diluted basis). A majority of the economic    
interests of the Investor is owned by CCP, and a majority of the voting         
interests of the Investor is owned by an entity controlled by Robert E. King, a 
Director of the Company. However, pursuant to the Operating Agreement, the      
Investor granted to CCP the right to elect a majority of the directors of the   
Investor if certain triggering events occur and the Investor agreed not to take 
certain actions in respect of the common stock of Parent held by the Investor   
without the consent of CCP. See 'Ownership of Securities.'                      

In connection with the Recapitalization and the related refinancing   
transactions, the Company entered into the Credit Agreement providing for the   
$40 million Term Loan Facility and the $25 million Revolving Credit Facility,   
which is available for the Company's working capital requirements. See          
'Description of the Credit Agreement.'                                          

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CAPITALIZATION

The following table sets forth as of March 14, 1998 the (i) actual    
capitalization of the Company and (ii) pro forma capitalization of the Company, 
assuming the Transactions had occurred on March 14, 1998. This table should be  
read in conjunction with the information contained in 'Use of Proceeds,'        
'Unaudited Pro Forma Consolidated Financial Information' and the notes thereto  
and 'Management's Discussion and Analysis of Financial Condition and Results of 
Operations' as well as the Company's consolidated financial statements and the  
notes thereto included elsewhere in this Prospectus.                            

                                                        [Enlarge/Download Table]

                                                                                              MARCH 14, 1998     
                                                                                         ------------------------
                                                                                                      PRO FORMA  
                                                                                                       FOR THE   
                                                                                          ACTUAL     TRANSACTIONS
                                                                                         --------    ------------
                                                                                          (DOLLARS IN THOUSANDS) 
                                                                                                                 

Cash, cash equivalents and restricted cash(a)........................................... $ 27,533      $  1,100  
                                                                                         --------    ------------
                                                                                         --------    ------------
Long-term debt and capital lease obligations:...........................................                         
Revolving Credit Facility(b)............................................................ $     --      $    433  
Capital lease obligations (excluding current portion)(c)................................    1,679         1,679  
Term Loan Facility......................................................................       --        40,000  
Existing Senior Notes...................................................................   85,000            --  
Senior Notes offered hereby.............................................................       --       145,000  
Convertible Debentures(d)...............................................................      666            --  
                                                                                         --------    ------------
  Total debt............................................................................   87,345       187,112  
Class A Preferred Stock(e)..............................................................   34,698            --  
Stockholders' equity (deficit)(f).......................................................    2,396       (82,579) 
                                                                                         --------    ------------
  Total capitalization.................................................................. $124,439      $104,533  
                                                                                         --------    ------------
                                                                                         --------    ------------

------------------                                                              
(a) The pro forma amount consists entirely of the cash required to be deposited 
in the restricted cash investment accounts pursuant to the Company's    
self-insurance program.                                                 

(b) The Revolving Credit Facility provides for borrowings of up to $25.0        
million. See 'Description of the Credit Agreement.'                     

(c) Consists of capital lease obligations arising from computer hardware        
acquired in connection with the implementation of ADMIN, excluding the  
current portion of $857,000.                                            

(d) Presented net of unamortized debt discount of $184,000.                     

(e) This preferred stock is held by unrelated third parties.                    

(f) The pro forma amount represents the implied value of the stockholders'      
equity of Parent to be purchased and retained in the Transactions of    
approximately $110 million. See 'The Transactions.'                     

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA 

     The following table sets forth selected historical financial and other data
for Parent and the Company on a consolidated basis. The historical consolidated 
financial statements of the Company and its predecessor (the 'Predecessor')     
presented in the following table for the periods from January 1 to July 23, 1993
and July 24 to August 28, 1993 and the fiscal years ended August 27, 1994,      
August 26, 1995 and August 30, 1997 have been audited. The historical           
consolidated data for the 52 weeks ended August 26, 1995 and August 30, 1997    
have been derived from and should be read in conjunction with the audited       
consolidated financial statements and the related notes thereto. The            
consolidated financial statements for each of the fiscal years in the three-year
period ended August 30, 1997 are included elsewhere in this Prospectus. Such    
consolidated financial statements have been audited by Deloitte & Touche LLP,   
independent auditors. Fiscal 1996 was a 53 week year ending on August 31, 1996. 
For comparative purposes, the following table presents the unaudited results of 
the first 52 weeks of fiscal 1996, except with respect to balance sheet data,   
which is as of August 31, 1996 and has been audited. The historical unaudited   
consolidated financial data for the 28 weeks ended March 14, 1998 and March 15, 
1997 have been derived from and should be read in conjunction with the unaudited
consolidated financial statements and the related notes thereto included        
elsewhere in this Prospectus. In the opinion of management, all adjustments     
considered necessary for a fair presentation have been included in the unaudited
consolidated financial statements. The historical statement of operations and   
other data with respect to the fiscal 1994 and Predecessor and Company periods  
in 1993 and the balance sheet data for fiscal 1995, 1994 and 1993 are derived   
from audited financial statements not included in this Prospectus. Results for  
the fiscal year ended August 28, 1993 reflect a change in the Company's fiscal  
year. The following information should be read in conjunction with 'Unaudited   
Pro Forma Consolidated Financial Information,' 'Management's Discussion and     
Analysis of Financial Condition and Results of Operations' and the historical   
consolidated financial statements and the notes thereto included elsewhere in   
this Prospectus.                                                                

                                                        [Enlarge/Download Table]

                                                                (THE COMPANY)                  52 WEEKS ENDED                
                                                 (PREDECESSOR)   JULY 24, TO   ----------------------------------------------
                                                 JANUARY 1, TO   AUGUST 28,    AUGUST 27,  AUGUST 26,  AUGUST 24,  AUGUST 30,
                                                 JULY 23, 1993      1993          1994        1995      1996(A)     1997(A)  
                                                 -------------  -------------  ----------  ----------  ----------  ----------
                                                                 (DOLLARS IN THOUSANDS, EXCEPT ACADEMY DATA)                 
                                                                                                                             
STATEMENT OF OPERATIONS DATA:                                                                                                
Operating revenue...............................   $ 150,254      $  24,763     $274,195    $279,806    $294,836    $302,766 
Operating expenses:                                                                                                          
 Salaries, wages and benefits...................      74,173         12,350      135,765     142,757     152,234     159,236 
 Facility lease expense.........................      21,573          3,739       38,906      39,901      38,858      39,332 
 Depreciation...................................       5,484          1,099       12,535      13,501      13,680      13,825 
 Amortization of goodwill and other                                                                                          
   intangibles..................................          81            431        3,492       3,712       2,773       2,236 
 Restructuring charge(c)........................          --             --           --      11,700          --          -- 
 Other expenses(d)..............................      40,219          6,995       72,190      75,981      77,139      74,111 
                                                 -------------  -------------  ----------  ----------  ----------  ----------
   Total operating expenses.....................     141,530         24,614      262,888     287,552     284,684     288,740 
                                                 -------------  -------------  ----------  ----------  ----------  ----------
Operating income (loss).........................       8,724            149       11,307      (7,746)     10,152      14,026 
Interest expense(e).............................       1,251          1,119       12,665      11,110      10,126       9,245 
Minority interest in net income of subsidiary...                        244        2,452       2,824       3,561       3,693 
Interest income.................................        (551)           (29)        (825)     (1,063)       (884)       (959)
                                                 -------------  -------------  ----------  ----------  ----------  ----------
Income (loss) before income taxes and                                                                                        
 extraordinary items............................       8,024         (1,185)      (2,985)    (20,617)     (2,651)      2,047 
Provision (benefit) for income taxes............       3,330             97          642      (6,155)      1,267       3,264 
                                                 -------------  -------------  ----------  ----------  ----------  ----------
Income (loss) before extraordinary items........       4,694         (1,282)      (3,627)    (14,462)     (3,918)     (1,217)
Extraordinary item--loss on early retirement of                                                                              
 debt...........................................          --             --       (1,610)         --        (819)         -- 
                                                 -------------  -------------  ----------  ----------  ----------  ----------
Net income (loss)...............................   $   4,694      $  (1,282)    $ (5,237)   $(14,462)   $ (4,737)   $ (1,217)
                                                 -------------  -------------  ----------  ----------  ----------  ----------
                                                 -------------  -------------  ----------  ----------  ----------  ----------
OTHER FINANCIAL DATA:                                                                                                        
EBITDA(f).......................................   $  14,289          1,679     $ 27,334    $ 21,167    $ 26,605    $ 30,087 
Cash flows from operating activities............      14,388          2,121        3,124      17,140      15,208      14,886 
Cash flows from investing activities............       4,455       (117,490)      (5,097)     (2,956)     (6,045)     (7,239)
Cash flows from financing activities............     (32,066)       130,165       (1,360)     (9,348)    (12,671)      3,533 
Capital expenditures............................       6,575          1,755        8,496       9,101       8,570       7,691 
Ratio of earnings to fixed charges(g)...........         1.9x        (g)          (g)         (g)         (g)            1.1x
ACADEMY DATA:                                                                                                                
Number of Academies (at end of period)..........         784            788          787         786         751         745 
Operating Capacity (at end of period)(h)........          NA             NA       94,549      94,671      91,049      90,601 
FTE Utilization(i)..............................          NA             NA          59%         59%         64%         66% 
Average Weekly FTE Tuition(j)...................          NA             NA     $     94    $     96    $     97    $     98 
BALANCE SHEET DATA (AT END OF PERIOD):                                                                                       
Cash, cash equivalents and restricted cash......                  $  21,996     $ 19,111    $ 24,586    $ 22,018    $ 26,283 
Working capital (deficiency)....................                     (1,862)      (3,650)     (4,574)        196       7,398 
Total assets....................................                    216,000      204,885     195,604     177,133     171,160 
Total debt......................................                    108,787      102,352      99,186      86,590      85,903 
Redeemable preferred stock......................                     19,990       22,442      25,266      28,827      32,521 
Stockholder's equity............................                     28,753       23,658       9,175       4,787       3,374 


                                                   28 WEEKS ENDED(B)                                                         
                                                  --------------------                                                       
                                                  MARCH 15,  MARCH 14,                                                       
                                                    1997       1998                                                          
                                                  ---------  ---------                                                       

                                                                                                                             
STATEMENT OF OPERATIONS DATA:                                                                                                
Operating revenue...............................  $159,983   $166,701                                                        
Operating expenses:                                                                                                          
 Salaries, wages and benefits...................    84,077     87,772                                                        
 Facility lease expense.........................    21,143     21,328                                                        
 Depreciation...................................     7,444      7,073                                                        
 Amortization of goodwill and other                                                                                          
   intangibles..................................     1,204      1,204                                                        
 Restructuring charge(c)........................        --         --                                                        
 Other expenses(d)..............................    40,299     41,933                                                        
                                                  ---------  ---------                                                       
   Total operating expenses.....................   154,167    159,310                                                        
                                                  ---------  ---------                                                       
Operating income (loss).........................     5,816      7,391                                                        
Interest expense(e).............................     4,994      4,917                                                        
Minority interest in net income of subsidiary...     1,935      2,177                                                        
Interest income.................................      (493)      (601)                                                       
                                                  ---------  ---------                                                       
Income (loss) before income taxes and                                                                                        
 extraordinary items............................      (620)       898                                                        
Provision (benefit) for income taxes............     1,051      1,835                                                        
                                                  ---------  ---------                                                       
Income (loss) before extraordinary items........    (1,671)      (937)                                                       
Extraordinary item--loss on early retirement of                                                                              
 debt...........................................        --         --                                                        
                                                  ---------  ---------                                                       
Net income (loss)...............................  $ (1,671)  $   (937)                                                       
                                                  ---------  ---------                                                       
                                                  ---------  ---------                                                       
OTHER FINANCIAL DATA:                                                                                                        
EBITDA(f).......................................  $ 14,464   $ 15,668                                                        
Cash flows from operating activities............     2,739      6,321                                                        
Cash flows from investing activities............    (2,973)    (4,437)                                                       
Cash flows from financing activities............     3,862     (1,100)                                                       
Capital expenditures............................     3,061      4,776                                                        
Ratio of earnings to fixed charges(g)...........     (g)          1.1 x                                                      
ACADEMY DATA:                                                                                                                
Number of Academies (at end of period)..........       751        744                                                        
Operating Capacity (at end of period)(h)........    91,202     90,599                                                        
FTE Utilization(i)..............................       65%        65%                                                        
Average Weekly FTE Tuition(j)...................  $     97   $    101                                                        
BALANCE SHEET DATA (AT END OF PERIOD):                                                                                       
Cash, cash equivalents and restricted cash......             $ 27,533                                                        
Working capital (deficiency)....................               10,901                                                        
Total assets....................................              170,347                                                        
Total debt......................................               88,202                                                        
Redeemable preferred stock......................               34,698                                                        
Stockholder's equity............................                2,396                                                        

                                                        (Footnotes on next page)

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(Footnotes from previous page)                                                  

------------------                                                              
(a) Fiscal 1996 was a 53 week year ending on August 31, 1996. Balance sheet data
   set forth herein is as of August 31, 1996. Capital expenditures are for the
entire 53 week fiscal year.                                             

(b) The Company's fiscal year ends on the last Saturday in August. The first    
   quarter consists of 16 weeks and the second, third and fourth quarters each
   consist of 12 weeks. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview' for a discussion of      
seasonality.                                                            

(c) During fiscal 1995, the Company approved a plan to close 39 Academies       
located in areas where demographic conditions did not support an        
    economically viable operation and an initiative to restructure its operating
    management to better serve the remaining Academies. Accordingly, the Company
    recorded an $11.7 million restructuring charge ($7.0 million after taxes) to
provide for the costs associated with the Academy closures and          
restructuring. The charge included approximately $10.0 million for the  
  present value of rent and real estate taxes for the remaining lease terms.
The charge also included restructuring and other related costs. During  
fiscal 1996 and 1997 and the 28 weeks ended March 15, 1997 and March 14,
  1998, the amount of the restructuring reserve was reduced by $1.1 million,
 $1.8 million, $0.9 million and $0.7 million, respectively, as a result of
rent payments with respect to closed Academies.                         

(d) Other expenses includes expenses related to repairs and maintenance,        
  utilities, telephone, insurance, property taxes, advertising, supplies and
other expenses associated with the daily operations of the Academies.   

(e) Interest expense includes $1.4 million, $1.3 million, $0.9 million, $0.5    
million and $0.5 million of amortization of deferred financing costs and
accretion of the discount on the Convertible Debentures for fiscal 1995,
1996 and 1997 and the 28 weeks ended March 15, 1997 and March 14, 1998. 

(f) EBITDA is defined herein as net income before non-cash restructuring        
   charges, extraordinary items, net interest expense, taxes, depreciation and
   amortization. EBITDA is not intended to represent cash flow from operations
as defined by generally accepted accounting principles and should not be
   considered as an alternative to net income as an indicator of the Company's
   operating performance or to cash flows as a measure of liquidity. EBITDA is
presented because the Company believes that EBITDA represents a more    
    consistent financial indicator of the Company's ability to service its debt.

(g) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes and extraordinary items, plus 
fixed charges. Fixed charges consists of interest expense on all        
indebtedness, amortization of deferred financing costs, and one-third of
rental expense on operating leases representing that portion of rental  
    expense deemed by the Company to be attributable to interest. For the period
  from July 24, 1993 to August 28, 1993, the 52 weeks ended August 27, 1994,
   August 26, 1995 and August 24, 1996, and the 28 weeks ended March 15, 1997,
    the deficiency of earnings to fixed charges were $1.2 million, $3.0 million,
$20.6 million, $2.7 million and $.06 million, respectively.             

(h) As a result of the Company's targeted teacher-student ratios, the physical  
    layout of certain Residential Academies and the typical layout of Montessori
    Schools, the Company's Academies have an Operating Capacity approximately 8%
   below Licensed Capacity. Licensed Capacity measures the overall capacity of
  the Company's Academies based upon applicable state licensing regulations.

(i) FTE Utilization is the ratio of FTE students to the total Operating Capacity
  for all of the Company's Academies. FTE attendance is not a measure of the
    absolute number of students attending the Company's Academies. Rather, it is
an approximation of the full-time equivalent number of students based on
 Company estimates and weighted averages. For example, a student attending
   full-time is equivalent to one FTE, while a student attending only one-half
of each day is equivalent to 0.5 FTE.                                   

(j) The Company calculates the Average Weekly FTE Tuition by dividing total     
    operating revenue by the number of weeks in the applicable period and by the
number of FTE students for the applicable period.                       

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

   The following unaudited pro forma consolidated financial statements ('Pro
Forma Financial Statements') have been derived by the application of pro forma  
adjustments to the historical consolidated financial statements included        
elsewhere in this Prospectus. The pro forma data for the periods presented give 
effect to the Transactions as if they had been consummated on September 1, 1996 
for the fiscal year ended August 30, 1997 and as of August 31, 1997 for the 28  
weeks ended March 14, 1998. The unaudited pro forma balance sheet data gives    
effect to the Transactions as if they had occurred on March 14, 1998. The       
adjustments are described in the accompanying notes. The Pro Forma Financial    
Statements should not be considered indicative of actual results that would have
been achieved had the Transactions been consummated on the date or for the      
periods indicated and do not purport to indicate balance sheet data or results  
of operations as of any future date or any future period. The Pro Forma         
Financial Statements should be read in conjunction with the historical          
consolidated financial statements and the notes thereto included elsewhere in   
this Prospectus.                                                                

The pro forma adjustments were applied to the respective historical   
consolidated financial statements to reflect and account for the Transactions as
a recapitalization. Accordingly, the historical accounting basis of the assets  
and liabilities herein have not been impacted by the transaction.               

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LPA HOLDING CORP. 
(FORMERLY VESTAR/LPA INVESTMENT CORP.)

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 14, 1998

                                                        [Enlarge/Download Table]

                                                                                        PRO FORMA          PRO    
                                                                         HISTORICAL    ADJUSTMENTS        FORMA   
                                                                         ----------    -----------       -------- 
                                                                                  (DOLLARS IN THOUSANDS)          
                                                                                                                  
                                 ASSETS                                                                           

Current assets:                                                                                                   
  Cash, cash equivalents and restricted cash............................  $  27,533     $ (26,433)(a)    $  1,100 
  Receivables...........................................................      4,567            --           4,567 
  Prepaid expenses and supplies.........................................      9,485            --           9,485 
  Deferred income taxes.................................................      1,350            --           1,350 
                                                                         ----------    -----------       -------- 
Total current assets....................................................     42,935       (26,433)         16,502 
Property and equipment, net.............................................     60,839            --          60,839 
Deferred income taxes...................................................      4,469            --           4,469 
Other assets............................................................     62,104         6,527(b)       68,631 
                                                                         ----------    -----------       -------- 
Total assets............................................................  $ 170,347     $ (19,906)       $150,441 
                                                                         ----------    -----------       -------- 
                                                                         ----------    -----------       -------- 

                  LIABILITIES AND STOCKHOLDERS' EQUITY                                                            

Current liabilities:                                                                                              
  Accounts payable and overdrafts due banks.............................  $   7,582     $      --        $  7,582 
  Other current liabilities.............................................     24,452            --          24,452 
                                                                         ----------    -----------       -------- 
Total current liabilities...............................................     32,034            --          32,034 
Long-term debt and capital lease obligations............................     87,345        99,767(c)      187,112 
Other noncurrent liabilities............................................     13,874            --          13,874 
                                                                         ----------    -----------       -------- 
Total liabilities.......................................................    133,253        99,767         233,020 
Class A Preferred Stock.................................................     34,698       (34,698)(d)          -- 
Stockholders' equity....................................................      2,396       (84,975)(e)     (82,579)
                                                                         ----------    -----------       -------- 
Total liabilities and stockholders' equity..............................  $ 170,347     $ (19,906)       $150,441 
                                                                         ----------    -----------       -------- 
                                                                         ----------    -----------       -------- 

See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet

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LPA HOLDING CORP. 

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET 

(a) Pursuant to the terms of the Recapitalization, the Existing Stockholders    
will retain cash which at March 14, 1998 was $27.5 million. The Company 
maintains a minimum cash balance of $1.1 million in restricted cash     
investment accounts pursuant to the terms of its self-insurance program.

(b) To reflect the incurrence of deferred financing costs of approximately $9.6 
million as a result of the Recapitalization and the elimination of      
 approximately $3.1 million in deferred financing costs as a result of the
Refinancing Transactions.                                               

(c) To reflect the Refinancing Transactions, the Offering, and borrowings under 
the Revolving Credit Facility and the Term Loan Facility:               

                                                        [Enlarge/Download Table]

                                                                                   (DOLLARS IN THOUSANDS)
                                                                                                         
Repayment of the Senior Notes.....................................................       $  (85,000)     
Repayment of Convertible Debentures...............................................             (666)     
Revolving Credit Facility.........................................................              433      
Term Loan Facility................................................................           40,000      
Senior Notes offered hereby.......................................................          145,000      
                                                                                       ------------      
  Total adjustment................................................................       $   99,767      
                                                                                       ------------      
                                                                                       ------------      

(d) Represents the defeasance of the Exchange Debentures.                       

(e) To reflect the aggregate net adjustment as a result of the Recapitalization:

                                                        [Enlarge/Download Table]

                                                                                (DOLLARS IN THOUSANDS)  

                                                                                                        
Consideration for the Recapitalization:                                                                 
  Consideration for existing equity........................................... $  (148,404)             
  Repayment of prepaid rent...................................................      (1,857)             
  Repayment of funding for Academies under development........................      (1,826)             
  Less: Bank overdrafts.......................................................       1,950              
                                                                               -----------              
                                                                                  (150,137)             
Cash to Existing Stockholders.................................................     (27,533)             
  Total consideration to Existing Stockholders................................              $  (177,670)
Retained equity investment....................................................                   (7,500)
Prepayment costs:                                                                                       
  Senior Notes................................................................      (3,506)             
  Preferred stock.............................................................      (3,042)             
  Unamortized debt discount associated with the retirement of                                           
     Convertible Debentures...................................................        (184)             
                                                                               -----------              
  Total prepayment costs......................................................                   (6,732)
Write-off of deferred financing costs.........................................                   (3,073)
Equity Investment and retained equity investment..............................                  110,000 
                                                                                            ----------- 
  Total adjustment............................................................              $   (84,975)
                                                                                            ----------- 
                                                                                            ----------- 

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LPA HOLDING CORP. 

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                  52 WEEKS ENDED                            28 WEEKS ENDED            
                                                 AUGUST 30, 1997                            MARCH 14, 1998            
                                      --------------------------------------    --------------------------------------
                                      HISTORICAL    ADJUSTMENTS    PRO FORMA    HISTORICAL    ADJUSTMENTS    PRO FORMA
                                      ----------    -----------    ---------    ----------    -----------    ---------
                                                                   (DOLLARS IN THOUSANDS)                             
                                                                                                                      
Operating revenues...................  $ 302,766      $    --      $302,766      $ 166,701      $    --      $166,701 
Operating expenses...................    288,740         (700)(a)   288,040        159,310         (965)(a)   158,345 
                                      ----------    -----------    ---------    ----------    -----------    ---------
Operating income.....................     14,026          700        14,726          7,391          965         8,356 
Interest income......................       (959)         959(b)         --           (601)         601(b)         -- 
Minority interest in net income of                                                                                    
  subsidiary.........................      3,693                      3,693          2,177                      2,177 
Interest expense.....................      9,245        9,916(c)     19,161          4,917        5,416(c)     10,333 
                                      ----------    -----------    ---------    ----------    -----------    ---------
Income (loss) before income taxes....      2,047      (10,175)       (8,128)           898       (5,052)       (4,154)
Income tax expense (benefit).........      3,264       (4,070)(d)      (806)         1,835       (2,021)(d)      (186)
                                      ----------    -----------    ---------    ----------    -----------    ---------
Net income (loss)....................  $  (1,217)      (6,105)     $ (7,322)     $    (937)     $(3,031)     $ (3,968)
                                      ----------    -----------    ---------    ----------    -----------    ---------
                                      ----------    -----------    ---------    ----------    -----------    ---------
Ratio of earnings to fixed                                                                                            
  charges(e).........................                                    (e)                                       (e)

See accompanying Notes to Unaudited Pro Forma Consolidated Statement of 
Operations

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LPA HOLDING CORP. 

NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(a) The pro forma adjustments to operating expense reflect the following:       

                                                        [Enlarge/Download Table]

                                                            52 WEEKS ENDED                  
                                                              AUGUST 30,      28 WEEKS ENDED
                                                                 1997         MARCH 14, 1998
                                                            --------------    --------------
                                                                 (DOLLARS IN THOUSANDS)     
                                                                                            
Seller's fees:                                                                              
  Management fees..........................................    $    500          $    269   
  Board of Directors' fees and expenses....................         200               108   
Expenses related to a special directors' conference........          --               588   
                                                            --------------    --------------
  Total adjustment.........................................    $    700          $    965   
                                                            --------------    --------------
                                                            --------------    --------------

The above amounts represent non-recurring expenses the Company does not   
anticipate incurring after the Transactions.                              

(b) To reflect the elimination of cash on the balance sheet.                    

(c) The pro forma adjustment to interest expense reflects the following:        

                                                        [Enlarge/Download Table]

                                                             52 WEEKS ENDED                  
                                                               AUGUST 30,      28 WEEKS ENDED
                                                                  1997         MARCH 14, 1998
                                                             --------------    --------------
                                                                  (DOLLARS IN THOUSANDS)     
                                                                                             
Interest and fees on debt repaid in the Transactions.......     $ (8,356)         $ (4,426)  
Interest expense on Revolving Credit Facility..............           39                21   
Interest expense on Term Loan Facility.....................        3,600             1,938   
Interest expense on Senior Notes...........................       14,500             7,808   
Amortization of deferred financing costs on historical debt                                  
  and preferred stock......................................         (850)             (454)  
Amortization of deferred financing costs on new debt.......          983               529   
                                                             --------------    --------------
  Total adjustment.........................................     $  9,916          $  5,416   
                                                             --------------    --------------
                                                             --------------    --------------
Capital lease and miscellaneous interest expense, net of                                     
  capitalized interest.....................................     $     39          $     37   
                                                             --------------    --------------
                                                             --------------    --------------

An increase or decrease of 0.125% in the assumed interest rate on the     
Revolving Credit Facility and the Term Loan Facility would change the pro 
 forma interest expense by $51,000 for the fiscal year ended August 30, 1997
and by $27,000 for the 28 weeks ended March 14, 1998.                     

(d) To reflect the tax effects of the pro forma adjustments at a 40% effective  
income tax rate.                                                        

(e) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes and extraordinary items, plus 
fixed charges. Fixed charges consists of interest expense on all        
indebtedness, amortization of deferred financing costs, and one-third of
rental expense on operating leases representing that portion of rental  
 expense deemed by the Company to be attributable to interest. For the Pro
   Forma 52 weeks ended August 30, 1997 and the 28 weeks ended March 15, 1997,
the deficiency of earnings to fixed charges are $8.1 million and $4.2   
million, respectively.                                                  

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

INTRODUCTION                                                                    

The following discussion should be read in conjunction with the       
consolidated financial statements and the related notes thereto included        
elsewhere in this Prospectus. The financial information contained in the        
following discussion represents the results of operations of the Company for the
periods presented and is the same as the consolidated results of operations of  
Parent for the same periods. The information presented herein refers to the 28  
weeks ended March 14, 1998 and March 15, 1997 and fiscal 1997, fiscal 1996 and  
fiscal 1995. Fiscal 1997 and fiscal 1995 were 52 week fiscal years. Fiscal 1996 
was a 53 week fiscal year with an additional week included in the fourth        
quarter.                                                                        

OVERVIEW                                                                        

    The Company's operating revenue consists principally of tuition charges to
parents for children enrolled at La Petite Academies. Tuition payments are due  
on the first day of each week, in advance of the services provided. As a result 
of this policy, receivables from parents have historically represented a small  
percentage of revenues, averaging less than $0.5 million during the past three  
fiscal years. With the implementation of ADMIN, the Company has begun to collect
additional revenue from late fees and other charges previously not recorded and 
billed. As a result, in addition to the increase in revenue, the Company's      
average receivables from parents increased to $1.0 million in the 28 weeks ended
March 14, 1998. Some parents prepay for services to be provided in future weeks,
resulting in a prepayment balance averaging $0.9 million over the past three    
fiscal years. Tuition charges paid by third parties, such as social services    
agencies, are generally billed on a monthly basis at the end of the month and   
receivables relating to these payments have averaged $3.7 million over the past 
three fiscal years. Substantially all of the Company's expenses, other than     
rent, are paid in arrears. Consequently, the Company has limited working capital
requirements.                                                                   

     The Company's operating revenue follows the seasonality of the school year.
The number of new children attending the Academies is highest in September      
through October and January through February, generally referred to as the fall 
and winter enrollment periods. Enrollment and, therefore, operating revenue     
decline during the calendar year-end holiday period and during the summer. As a 
result of this seasonality, the Company concentrates its marketing efforts and  
new Academy openings immediately preceding these highest enrollment periods.    

    Labor costs represent more than 50% of operating revenue, and hourly wages
paid to Academy teachers and teachers' aides make up approximately 80% of total 
salary and wages. Labor scheduling for teachers and teachers' aides is based on 
attendance and teacher-student ratios. As a result, labor costs for teachers and
teachers' aides are variable and increase or decrease in relation to increases  
or decreases in attendance. Other labor costs do not change with changes in     
enrollment and include (i) salaries of Academy directors, field management and  
field support staff, (ii) corporate office salaries and wages, (iii) employee   
benefit costs and (iv) field and corporate office bonuses.                      

   In the last several years the Company has raised tuition rates by 3.5% to
4.0% in February of each year and has focused on increasing attendance of       
preschool children rather than infants. Although tuition rates for infants are  
higher than for preschool children, the costs of infant care, as a result of    
higher teacher-student ratios and larger space requirements, more than offset   
the higher revenues. The resulting change in student mix, together with the     
impact of changes in discount policies, has resulted in Average Weekly FTE      
Tuition increases of approximately 1% to 2%.                                    

    Facility lease costs are the second largest cost item, because the Company
leases 676 of its 744 facilities. Most Academy leases have 15-year terms, some  
have 20-year terms and many have renewal options. In addition, some of the      
leases provide for contingent rentals if the Academy's operating revenue exceeds
certain base levels.                                                            

  Other operating expenses include (i) occupancy costs such as repairs and
maintenance, utilities and telephone, insurance and property taxes and          
(ii) general and administrative costs such as food, supplies, transportation and
marketing. Food and supplies, like labor, are variable and increase or decrease 
in relationship                                                                 

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to increases or decreases in attendance. The remaining costs are relatively     
fixed and/or discretionary and do not increase or decrease directly with small  
changes in attendance.                                                          

  During the period from the Company's formation in 1968 through 1993, the
Company achieved significant growth in operating revenue and profits largely due
to an aggressive program of new Academy openings. In July 1993, Vestar Capital  
Partners, Inc. and the current management team completed a management buyout of 
La Petite. Following this transaction, management shifted its focus from        
aggressive growth and short-term profitability to improving the quality of and  
long-term growth in profitability by: (i) investing resources in existing       
Academies and building an operating structure focused on capacity utilization,  
(ii) opening new Academies more selectively in locations with targeted          
demographics, (iii) closing less efficient Academies, (iv) focusing on cash flow
management, (v) increasing emphasis on staff training and compensation and (vi) 
planning and developing a comprehensive management information system.          

During fiscal 1995, the Company approved a plan to close 39 Academies 
located in areas where the demographic conditions no longer supported an        
economically viable operation and to restructure its operating management to    
better serve the remaining Academies. Accordingly, the Company recorded an $11.7
million restructuring charge ($7.0 million after tax) to provide for costs      
associated with the Academy closures and restructuring, including approximately 
$10.0 million for the present value of rent and real estate taxes for the       
remaining lease terms. As of March 14, 1998, $5.3 million of costs related to   
the closings and restructuring had been charged against the restructuring       
reserve.                                                                        

At the end of fiscal 1997, management believed the Company was well   
positioned to increase the scope of its operations. Accordingly, in fiscal 1998,
management began implementing a growth strategy focused on building new         
Academies in areas with rapid growth and higher-end demographics. The Company   
has made significant investments in personnel and infrastructure to facilitate  
the future growth of the Company. The Company currently expects to open         
approximately 25 and 35 Academies in fiscal 1999 and fiscal 2000, respectively. 
The new Academies will stress preschool characteristics in design, classroom    
mix, staffing and curriculum. See '--New Academy Development and Financing.'    

28 WEEKS ENDED MARCH 14, 1998 COMPARED TO 28 WEEKS ENDED MARCH 15, 1997         

     The Company's operating results for the comparative 28 week periods were as
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                             28 WEEKS ENDED             28 WEEKS ENDED     
                                                         -----------------------    -----------------------
                                                         MARCH 15     PERCENT OF    MARCH 14,    PERCENT OF
                                                           1997        REVENUE        1998        REVENUE  
                                                         ---------    ----------    ---------    ----------
                                                                       (DOLLARS IN THOUSANDS)              
                                                                                                           
Operating revenue....................................... $ 159,983       100.0%     $ 166,701       100.0% 
Operating expenses:                                                                                        
  Salaries, wages and benefits..........................    84,077        52.6         87,772        52.7  
  Facility lease expense................................    21,143        13.2         21,328        12.8  
  Depreciation..........................................     7,444         4.6          7,073         4.2  
  Amortization of goodwill and other intangibles........     1,204         0.8          1,204         0.7  
  Other.................................................    40,299        25.2         41,933        25.2  
                                                         ---------    ----------    ---------    ----------
     Total operating expenses...........................   154,167        96.4        159,310        95.6  
                                                         ---------    ----------    ---------    ----------
Operating income........................................ $   5,816         3.6%     $   7,391         4.4% 
                                                         ---------    ----------    ---------    ----------
                                                         ---------    ----------    ---------    ----------
EBITDA.................................................. $  14,464         9.0%     $  15,668         9.4% 
                                                         ---------    ----------    ---------    ----------
                                                         ---------    ----------    ---------    ----------

    The results of operations for the Company for the 28 weeks ended March 14,
1998 are consistent and comparable with the 28 weeks ended March 15, 1997. Nine 
Academies in operation at the end of the second quarter of fiscal 1997 were     
closed and two new Academies were opened prior to the end of the second quarter 
of fiscal 1998. As a result, the Company operated 744 Academies at the end of   
the second quarter of fiscal year 1998, seven less than at the end of the same  
quarter of fiscal 1997. The closures resulted from management decisions not to  
renew the leases of certain Academies at lease expiration.                      

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     Operating revenue.  During the 28 weeks ended March 14, 1998 as compared to
the prior fiscal year, operating revenue increased 4.2%, FTE attendance declined
0.4% and Average Weekly FTE Tuition increased 4.7%. Excluding closed Academies  
from both years, operating revenue increased 5.1%, FTE attendance increased 0.5%
and Average Weekly FTE Tuition increased 4.6%. The increase in Average Weekly   
FTE Tuition was principally due to selective price increases that were put into 
place in the second quarter of fiscal 1997, based on geographic market          
conditions and class capacity utilization.                                      

    Salaries, wages and benefits.  Salaries, wages and benefits increased $3.7
million or 4.4% during the 28 weeks ended March 14, 1998 as compared to the same
period in the prior year. The increase was principally due to increased average 
hourly wage rates as staff hours worked were relatively stable. As a percentage 
of revenue, labor costs were 52.7% for the 28 weeks ended March 14, 1998 as     
compared to 52.6% during the same period in the prior year.                     

All other operating costs.  Many of the Company's operating costs are 
relatively fixed and do not decline or increase directly with small changes in  
attendance. Facility lease expense, depreciation, amortization and other        
operating costs all declined or remained unchanged as a percentage of revenue   
during the 28 weeks ended March 14, 1998 as compared to the same period in the  
prior year. In September 1997, the Company held a special conference to which   
all Academy Directors were invited at which the Company articulated its future  
business strategy for the growth of the Company. Total operating expenses for   
the 28 weeks ended March 14, 1998 include $0.6 million related to this          
conference.                                                                     

   Interest expense.  Interest expense for the 28 weeks ended March 14, 1998
decreased $0.1 million or 1.5% from the same period in the prior year.          

    Income tax rate.  After adding back nondeductible goodwill amortization to
pre-tax income, the effective income tax rate for the 28 weeks ended March 14,  
1998 was approximately 40%, unchanged from the same period in the prior year.   
State income taxes accounted for the difference between this effective rate and 
the statutory Federal rate.                                                     

Operating income and EBITDA.  As a result of the foregoing, operating 
income was $7.4 million for the 28 weeks ended March 14, 1998, an increase of   
$1.6 million or 27.1% from the same period in the prior year. EBITDA was $15.7  
million for the 28 weeks ended March 14, 1998 as compared to $14.5 million for  
the same period in the prior year, an increase of 8.3%.                         

52 WEEKS ENDED AUGUST 30, 1997 COMPARED TO 52 WEEKS ENDED AUGUST 24, 1996       

  The Company's operating results for the comparative fiscal years were as
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                              52 WEEKS ENDED              52 WEEKS ENDED     
                                                         ------------------------    ------------------------
                                                         AUGUST 24,    PERCENT OF    AUGUST 30,    PERCENT OF
                                                           1996,        REVENUE         1997        REVENUE  
                                                         ----------    ----------    ----------    ----------
                                                                        (DOLLARS IN THOUSANDS)               
                                                                                                             
Operating revenue.......................................  $ 294,836       100.0%      $ 302,766       100.0% 
Operating expenses:                                                                                          
  Salaries, wages and benefits..........................    152,234        51.6         159,236        52.6  
  Facility lease expense................................     38,858        13.2          39,332        13.0  
  Depreciation..........................................     13,680         4.7          13,825         4.6  
  Amortization of goodwill and other intangibles........      2,773         0.9           2,236         0.7  
  Other.................................................     77,139        26.2          74,111        24.5  
                                                         ----------    ----------    ----------    ----------
     Total operating expenses...........................    284,684        96.6         288,740        95.4  
                                                         ----------    ----------    ----------    ----------
Operating income........................................  $  10,152         3.4%      $  14,026         4.6% 
                                                         ----------    ----------    ----------    ----------
                                                         ----------    ----------    ----------    ----------
EBITDA..................................................  $  26,605         9.0%      $  30,087         9.9% 
                                                         ----------    ----------    ----------    ----------
                                                         ----------    ----------    ----------    ----------

   Operating results for fiscal 1996 contained a 'leap week,' or 53 weeks in
the year, to catch up with the calendar. The extra week in 1996 added $5.4      
million to revenue and $0.7 million to EBITDA and operating income. For         
comparative purposes, the above table presents the results of the first 52 weeks
of fiscal 1996. The following discussion of results is based on the 52 week     
comparison.                                                                     

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   Operating revenue.  During the 52 weeks ended August 30, 1997 as compared
to the prior fiscal year, operating revenue increased 2.7%, FTE attendance      
increased 1.6% and Average Weekly FTE Tuition increased 0.9%. Excluding closed  
Academies from both years, operating revenue increased 4.6%, FTE attendance     
increased 3.2% and Average Weekly FTE Tuition increased 1.4%. The increase in   
attendance during fiscal 1997 over fiscal 1996 was attributable to a successful 
fall enrollment period and retention of the children throughout the year. The   
increase in the Average Weekly FTE Tuition was principally due to selective     
increases in tuition rates which took place in the second quarter of fiscal     
1996, offset in part by increased discounts implemented at the beginning of     
fiscal 1997 in connection with the Parent's Partner Plan.                       

 The Company opened three new Academies and closed nine Academies during
fiscal 1997. As a result, the Company operated six fewer Academies at the end of
fiscal 1997 than at the end of fiscal 1996. Two of the closures were            
underperforming employer-based centers, one closure was an underperforming      
residential Academy, and the remaining six closures were due to management      
decisions not to renew the leases of certain Academies at lease expiration.     

    Salaries, wages and benefits.  Salaries, wages and benefits increased $7.0
million or 4.6% during the 52 weeks ended August 30, 1997 as compared to the    
same period in the prior year. As a percentage of revenue, labor costs were     
52.6% for the 52 weeks ended August 30, 1997 as compared to 51.6% during the    
same period in the prior year. The increase in labor cost as a percentage of    
revenue was principally due to staff merit increases effective January 1, 1997  
and increased health care benefit costs.                                        

     Facility lease expense.  Facility lease expense declined as a percentage of
revenue by 0.2% during the 52 weeks ended August 30, 1997 as compared to the    
same period in the prior year. This decrease was primarily due to the closing of
46 Academies at various times during fiscal 1996.                               

   Amortization of goodwill and other intangibles.  Amortization of goodwill
and other intangibles decreased 19.4% during the 52 weeks ended August 30, 1997,
as the intangible asset for an in-place workforce became fully amortized during 
fiscal 1996.                                                                    

All other operating costs.  Other operating expenses declined as a    
percentage of revenue by 1.7% to 24.5% for fiscal 1997 as compared to the same  
period in the prior year. The reduction was primarily due to new management cost
controls which reduced insurance, auto, food and other Academy supply costs.    

    Interest expense.  Interest expense for the 52 weeks ended August 30, 1997
declined $0.9 million or 8.7% from the same period in the prior year due to     
prepayment of a term loan facility in May 1996.                                 

Income tax rate.  The effective income tax rate, after adding back    
nondeductible goodwill amortization to pre-tax income, was approximately 40% for
both years. State income taxes accounted for the difference between the         
effective rate and the statutory Federal rate.                                  

Operating income and EBITDA.  As a result of the foregoing, operating 
income was $14.0 million for the 52 weeks ended August 30, 1997, an increase of 
$3.9 million or 38.2% from the same period in the prior year. EBITDA was $30.1  
million for the 52 weeks ended August 30, 1997 as compared to $26.6 million for 
the same period in the prior year.                                              

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52 WEEKS ENDED AUGUST 24, 1996 COMPARED TO 52 WEEKS ENDED AUGUST 26, 1995       

  The Company's operating results for the comparative fiscal years were as
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                              52 WEEKS ENDED              52 WEEKS ENDED     
                                                         ------------------------    ------------------------
                                                         AUGUST 24,    PERCENT OF    AUGUST 24,    PERCENT OF
                                                            1995        REVENUE         1996        REVENUE  
                                                         ----------    ----------    ----------    ----------
                                                                        (DOLLARS IN THOUSANDS)               
                                                                                                             
Operating revenue.......................................  $ 279,806       100.0%        294,836       100.0% 

Operating expenses:                                                                                          
  Salaries, wages and benefits..........................    142,757        51.0         152,234        51.6  
  Facility lease expense................................     39,901        14.3          38,858        13.2  
  Depreciation..........................................     13,501         4.8          13,680         4.7  
  Restructuring charge..................................     11,700         4.2                              
  Amortization of goodwill and other intangibles........      3,712         1.3           2,773         0.9  
  Other.................................................     75,981        27.2          77,139        26.2  
                                                         ----------    ----------    ----------    ----------
Total operating expenses................................    287,552       102.8         284,684        96.6  
                                                         ----------    ----------    ----------    ----------
Operating income (loss).................................  $ (7,746)       (2.8)%      $  10,152         3.4% 
                                                         ----------    ----------    ----------    ----------
                                                         ----------    ----------    ----------    ----------
EBITDA..................................................  $  21,167         7.6%      $  26,605         9.0% 
                                                         ----------    ----------    ----------    ----------
                                                         ----------    ----------    ----------    ----------

   Operating results for fiscal 1996 contained a 'leap week,' or 53 weeks in
the year, to catch up with the calendar. The extra week in 1996 added $5.4      
million to revenue and $0.7 million to EBITDA and operating income. For         
comparative purposes, the above table presents the results of the first 52 weeks
of fiscal 1996. The following discussion of results is based on the 52 week     
comparison.                                                                     

   Operating revenue.  During the 52 weeks ended August 24, 1996 as compared
to the prior fiscal year, operating revenue increased 5.4%, FTE attendance      
increased 4.4% and Average Weekly FTE Tuition increased 1.0%. Excluding closed  
Academies from both years, operating revenue increased 6.6%, FTE attendance     
increased 5.4% and Average Weekly FTE Tuition increased 1.2%. The increase in   
attendance during fiscal 1996 was attributable to (i) a successful fall         
enrollment period and retention of the children throughout the year, (ii)       
receipt of grants from the State of Georgia to provide pre-kindergarten         
education and (iii) increased management focus on enrollment and attendance. The
increase in the Average Weekly FTE Tuition was due to selective and limited     
price increases in February 1995, offset in part by increased promotional       
discounts.                                                                      

   The Company opened 11 new Academies and closed 46 Academies during fiscal
1996. As a result, the Company operated 35 fewer Academies at the end of fiscal 
1996 than at the end of fiscal 1995. Thirty-three of the Academy closures were  
part of a plan announced by the Company at the end of fiscal 1995 to close 39   
underperforming Academies located in areas where the demographics did not       
support an economically viable operation. Operating performance at the remaining
six Academies improved substantially as a result of new policies and,           
accordingly, management determined to keep those six Academies open. The        
remaining 13 closures were due to management decisions not to renew the leases  
of certain Academies at lease expiration.                                       

    Salaries, wages and benefits.  Salaries, wages and benefits increased $9.5
million or 6.6% during the 52 weeks ended August 24, 1996 as compared to the    
same period in the prior year. As a percentage of revenue, labor costs were     
51.6% for the 52 weeks ended August 24, 1996 as compared to 51.0% during the    
same period in the prior year. The increase in labor cost as a percentage of    
revenue was principally due to staff merit increases effective January 1, 1996, 
higher field level bonuses relating to increased operating income performance at
many Academies and additional support staff.                                    

     Facility lease expense.  Facility lease expense declined as a percentage of
revenue by 1.1% during the 52 weeks ended August 24, 1996 as compared to the    
same period in the prior year. The decrease was primarily attributable to the   
closing of 46 Academies in fiscal 1996.                                         

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   Amortization of goodwill and other intangibles.  Amortization of goodwill
and other intangibles decreased 25.3% during the 52 weeks ended August 24, 1996,
as the intangible asset for an in-place workforce became fully amortized in     
January 1996.                                                                   

All other operating costs.  Other operating expenses declined as a    
percentage of revenue by 1.0% to 26.2% for fiscal 1996 as compared to the same  
period in the prior year. The reduction was primarily due to decreases in       
insurance and repairs and maintenance costs.                                    

    Interest expense.  Interest expense for the 52 weeks ended August 24, 1996
declined $1.0 million or 8.9% from the same period in the prior year, due to    
prepayment of a term loan facility in May 1996.                                 

Income tax rate.  The effective income tax rate, after adding back    
nondeductible goodwill amortization to pre-tax income, was approximately 40% for
both the 52 weeks ended August 24, 1996 and August 26, 1995. State income taxes 
accounted for the difference between the effective rate and the statutory       
Federal rate.                                                                   

 Extraordinary loss.  On May 24, 1996, the Company retired the remaining
balance under its term loan facility in the amount of $5.5 million. The         
transaction resulted in a $0.8 million extraordinary loss on retirement of debt.
The loss reflects the write-off of related deferred financing costs, net of     
applicable income tax benefit. The prepayment was financed by available         
operating funds.                                                                

Operating income and EBITDA.  As a result of the foregoing, operating 
income was $10.2 million for the 52 weeks ended August 24, 1996, up $6.2 million
from the same period in the prior year, excluding the $11.7 million             
restructuring charge in fiscal 1995. EBITDA was $26.6 million for the 52 weeks  
ended August 24, 1996 as compared to $21.2 million for the same period in the   
prior year.                                                                     

LIQUIDITY AND CAPITAL RESOURCES                                                 

   The Company's principal sources of liquidity are from cash flow generated
by operations, borrowings under the Revolving Credit Facility and sale and      
leaseback financing for newly constructed facilities. The Company's principal   
uses of liquidity are to meet its debt service requirements, finance its capital
expenditures and provide working capital.                                       

The Company incurred substantial indebtedness in connection with the  
Transactions. See 'Capitalization.' On a pro forma basis to reflect the         
Transactions, the Company had approximately $187.1 million of consolidated      
long-term indebtedness as compared to $87.3 million at March 14, 1998. The      
Company's debt service obligations could have important consequences to holders 
of the Notes. See 'Risk Factors--Substantial Leverage and Debt Service          
Obligations.'                                                                   

   In connection with the Recapitalization and the Refinancing Transactions,
the Company entered into the Credit Agreement, consisting of the $40 million    
Term Loan Facility and the $25 million Revolving Credit Facility. On a pro forma
basis as of March 14, 1998, the Company would have borrowed the entire $40      
million available under the Term Loan Facility and approximately $0.4 million   
under the Revolving Credit Facility. In addition, on a pro forma basis as of    
March 14, 1998, the Company would have had outstanding letters of credit in an  
aggregate amount equal to $3.4 million and $21.2 million available for working  
capital purposes under the Revolving Credit Facility. The borrowings under the  
Credit Agreement, together with the proceeds from the sale of the Notes and the 
Equity Investment, were used to consummate the Recapitalization and the         
Refinancing Transactions and to pay the related fees and expenses related to the
foregoing.                                                                      

   The Term Loan Facility is subject to mandatory prepayment in the event of
certain equity or debt issuances or asset sales by Parent, the Company or any of
its subsidiaries and in amounts equal to specified percentages of the Company's 
excess cash flow. The Term Loan Facility will terminate seven years after the   
closing of the Transactions and provides for gradually increasing annual        
amortization. The Revolving Credit Facility will terminate seven years after the
closing of the Transactions. See 'Description of the Credit Agreement.'         

  New Academy Development and Financing.  The Company currently expects to
open approximately 25 and 35 Academies in fiscal 1999 and fiscal 2000,          
respectively. See 'Business-New Academy Development.' The cost to open a new    
Academy ranges from $1.0 million to $1.5 million, of which approximately 85% is 
typically financed through a sale and leaseback transaction. To open a new      
Academy, the Company normally acquires the land, constructs the facility and    
then seeks long-term financing for the Academy through a sale and leaseback     

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transaction. Alternatively, the Academy may be constructed on a build to suit   
basis, which reduces the working capital requirements during the construction   
process. In addition, the Company intends to explore other efficient real estate
financing transactions in the future.                                           

  Purchasers of Academies in sale and leaseback transactions have included
insurance companies, bank trust departments, pension funds, real estate         
investment trusts and individuals. The leases are operating leases and generally
have terms of 15 to 20 years with one or two five-year renewal options. Most of 
these transactions are structured with an annual rental designed to provide the 
owner/lessor with a fixed cash return on its capitalized cost over the term of  
the lease. In addition, many of the Company's leases provide for either         
contingent rentals if the Academy's operating revenue exceeds certain levels or 
a fixed percentage increase every five years. Although the Company expects sale 
and leaseback transactions to continue to finance its expansion, no assurance   
can be given that such funding will always be available.                        

  Capital Expenditures.  Total capital expenditures for fiscal 1995, 1996,
1997 and for the 28 weeks ended March 14, 1998 were $9.1 million, $8.6 million, 
$7.7 million and $4.8 million, respectively. The Company views all capital      
expenditures, other than those incurred in connection with the development of   
new Academies, to be maintenance capital expenditures. Maintenance capital      
expenditures for fiscal 1995, 1996, 1997 and for the 28 weeks ended March 14,   
1998 were $4.8 million, $6.7 million, $7.2 million and $3.3 million,            
respectively. Maintenance capital expenditures for the 28 weeks ended March 14, 
1998 included $0.6 million for the implementation of ADMIN. For fiscal 1998, the
Company expects total maintenance capital expenditures to be approximately $9.5 
million, including $1.3 million for the full implementation of ADMIN.           

In addition to maintenance capital expenditures, the Company expends  
additional funds to ensure that its facilities are in good working condition.   
Such funds are expensed in the periods in which they are incurred. The amounts  
of such expenses in fiscal 1995, 1996, 1997 and for the 28 weeks ended March 14,
1998 were $10.0 million, $9.4 million, $9.2 million and $5.2 million,           
respectively. Over the past three fiscal years, total expenditures for the      
maintenance and upkeep of the Company's Academies have averaged approximately   
$21,000 per Academy each year.                                                  

INFLATION AND GENERAL ECONOMIC CONDITIONS                                       

The Company has historically been able to increase tuition to offset  
increases in its costs. During the past two years, a period of low to moderate  
inflation, the Company implemented selective increases in tuition rates, based  
on geographic market conditions and class capacity utilization. The Company did 
not experience a material decline in attendance as a result of these increases. 

On September 1, 1997, the Federal minimum wage increased from $4.75 to
$5.15 per hour. This increase did not have a material impact on the Company's   
operations.                                                                     

    A sustained recession with high unemployment could have a material adverse
effect on the Company's operations. The recession during 1990 and 1991 adversely
affected attendance at the Company's Academies.                                 

MANAGEMENT INFORMATION SYSTEMS AND THE YEAR 2000                                

     The arrival of the year 2000 is not expected to have any significant impact
on the Company's computerized information systems and the cost of compliance is 
expected to be minimal.                                                         

    The most important new system for the Company has been the installation of
its ADMIN system nationwide. ADMIN is a PC based application which was written  
using a calendar dating system that is not sensitive to the year 2000 issue. See
'Business--Information Systems.'                                                

     The Company utilizes software under licensing arrangements for the purposes
of general ledger/financial reporting, accounts payable/disbursements, fixed    
assets record keeping and purchase order accounting. All of these systems have  
already been upgraded and are currently year 2000 compliant, and the cost of the
upgrades was included as part of the annual licensing fees.                     

     The Company utilizes software under licensing arrangements for the purposes
of payroll processing and human resources information systems. New releases for 
these systems which will be year 2000 compliant are expected to be installed    
during calendar 1998 as part of the annual licensing fees. In the event that the
licensor is                                                                     

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unable to deliver such upgrades, other comparable software packages at          
comparable costs which are year 2000 compliant are currently available in the   
market.                                                                         

RECENT ACCOUNTING PRONOUNCEMENTS                                                

  The Company adopted Statement of Financial Accounting Standards No. 121,
'Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of,' ('SFAS No. 121') as of the beginning of fiscal 1997. SFAS No.  
121 establishes accounting standards for the impairment of long-lived assets,   
certain intangibles and goodwill related to those assets. The adoption of SFAS  
No. 121 did not have an effect on the Company's consolidated financial          
statements.                                                                     

     The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, 'Accounting for Stock-Based Compensation' ('SFAS  
No. 123'). SFAS No. 123 encourages rather than requires companies to adopt a new
method that accounts for stock compensation awards based on their estimated fair
value at the date they are granted. Companies are permitted, however, to        
continue accounting for stock compensation awards under Accounting Principles   
Board ('APB') Opinion No. 25, which requires compensation cost to be recognized 
based on the excess, if any, between the quoted market price of the stock at the
date of grant and the amount an employee must pay to acquire the stock. The     
Company has elected to continue to apply APB Opinion No. 25 and has disclosed   
the pro forma net income (loss), determined as if the method under SFAS No. 123 
had been applied, in the notes to its consolidated financial statements included
elsewhere in this Prospectus.                                                   

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BUSINESS

GENERAL                                                                         

   La Petite Academy, founded in 1968, is the second largest operator of for
profit preschool educational facilities in the United States. The Company       
provides center-based educational and child care services five days a week      
throughout the year to children between the ages of six weeks and 12 years.     
Management believes the Company differentiates itself through its superior      
educational programs, which were developed and are regularly enhanced by its    
curriculum department. The Company's focus on quality educational services      
allows it to capitalize on the increased awareness of the benefits of premium   
educational instruction for preschool and elementary school age children. At its
residential and employer-based Academies, the Company utilizes its proprietary  
Journey curriculum with the intent of maximizing a child's cognitive and social 
development. The Company also operates Montessori schools which employ the      
Montessori method of learning, a classical approach that features the           
programming of tasks with materials presented in a sequence dictated by each    
individual child's capabilities.                                                

As of March 14, 1998, the Company operated 744 educational facilities,
including 692 residential Academies, 32 employer-based Academies and 20         
Montessori schools, located in 35 states and the District of Columbia, and had  
an enrollment of approximately 87,000 full and part-time children. The Company's
Operating Capacity as of March 14, 1998, was approximately 91,000 full-time     
children. For the 52 weeks ended March 14, 1998, estimated FTE Utilization was  
65% and the estimated Average Weekly FTE Tuition was $100.                      

THE CHILD CARE INDUSTRY                                                         

 Favorable Demographics and Social Trends.  The U.S. child care industry
(including home-based care, employer on-site care, and care delivered by private
facilities, government-sponsored institutions, church-affiliated centers,       
colleges and universities, group child care center chains and civic groups such 
as the YMCA) has grown at a compound annual growth rate of 12.1% from $5.7      
billion in revenues in 1982 to an estimated $31.6 billion in 1997, and is       
expected to grow at a 7.1% compound annual growth rate from 1998 until 2003,    
according to Marketdata Enterprises, Inc. This growth has been, and is expected 
to continue to be, driven by several demographic and social trends, including:  
(i) an increase in the number of births in the 1990s as compared generally to   
the 1970s and 1980s, (ii) an increase in the percentage of mothers in the       
workforce and (iii) a significant increase in the appreciation by parents of the
benefits of center-based preschool education and child care. According to the   
Census Bureau, in 1989 and each year since, the annual number of births has     
approximated 4.0 million per year and is expected to remain at that level       
through 2010. Furthermore, the number of children under the age of five has     
grown from approximately 16.1 million in 1975 to an estimated 20.2 million in   
1995, according to the Census Bureau. These trends are complemented by the      
continued increase in the number of mothers entering the work force. According  
to the U.S. Bureau of Labor Statistics, the labor force participation rate of   
mothers with children under the age of six relative to all mothers with children
under the age of six, has increased from approximately 39% in 1975 to an        
estimated 62% in 1995. In addition, the percentage of mothers in the work force 
that have children between the ages of five and 12, relative to all mothers of  
children between the ages of five and 12, has risen from 53% in 1975 to 75% in  
1995.                                                                           

     There has been a significant increase in the use of center-based child care
facilities by families with both working and non-working mothers. Center-based  
care typically offers a more structured curriculum, better educational          
materials, more experienced personnel and more children for social interaction  
than alternative forms of child care. In 1993, according to the most recent data
from the Census Bureau, 30% of families with working mothers of preschool aged  
children used center-based care as their primary form of non-parental care, up  
from 6% in 1965. Furthermore, 22% of children under the age of six with mothers 
not in the labor force were enrolled in center-based child care programs in     
1995, according to the U.S. Department of Education.                            

  Growing Awareness of the Importance of Early Childhood Development.  The
demand for quality child care is increasing as scientific research highlights   
the importance of education during a child's early developmental years. The     
Families and Work Institute, an organization devoted to the study of neurology, 
cognitive psychology and child development, has recently completed research the 
results of which management believes demonstrate the importance of early        
childhood experiences in a child's overall cognitive development.               

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Recent essays and other scientific research into early childhood development    
have drawn widespread media and political attention, increasing parents'        
awareness and demand for quality educational facilities for their children.     

  Fragmented Industry.  The U.S. child care industry is highly fragmented,
with the aggregate capacity of the top 50 for profit child care companies       
serving approximately 1% of the potential child care market, or approximately   
500,000 children out of an estimated 50 million children under the age of 12 in 
the United States as of January 1, 1997, according to Child Care Information    
Exchange. Based on a study sponsored by the National Association for the        
Education of Young Children, management estimates that approximately 35% of all 
child care centers are operated for profit, as independent businesses or as part
of a local or national chain. Non-profit centers, such as churches, employers,  
government agencies and YMCAs, account for the remaining 65%. Of the            
approximately 100,000 child care centers in the United States, only 4,400 are   
operated by the top 50 for profit child care companies. Furthermore, including  
La Petite, only ten companies have total capacity in excess of 10,000 children  
and only eight companies have more than 100 centers. Although other national    
child care chains operate in many of the Company's markets, in general, the     
Company primarily competes with local operators that typically do not have the  
substantial resources required to invest in the educational materials and       
curricula and staff training necessary for the educational development of       
children in their care.                                                         

COMPETITIVE STRENGTHS                                                           

Strong Market Position and Brand Identities.  Based on the number of  
centers operated, children served, operating revenue and operating income, La   
Petite Academy is the second largest provider of for profit preschool education 
and child care services in the United States, in an industry where the three    
largest center-based providers represent approximately 55% of the top 50 for    
profit center-based child care providers' total capacity. Operating since 1968, 
the Company has built brand equity in the markets it serves through the         
development of a network of Academies concentrated in clusters in               
demographically desirable MSAs. The Company's Academy clusters maintain close   
ties with local neighborhoods through public relations efforts, parent          
newsletters and brochures and support of community activities. The Company      
believes that it benefits significantly from word-of-mouth referrals from       
parents, educators and other school administrators. The Company's advertising   
reinforces its community-based reputation for quality service principally       
through targeted direct mailings and radio air time. In September 1995, the     
Company introduced the 'Parent's Partner Plan,' a program that, among other     
things, provides parents with individualized feedback on their child's          
development on at least a weekly basis. Management believes this program has    
contributed to the increase in overall student retention and added new          
enrollments at the Academies. The Company's high, customer-driven standards and 
well-trained and caring staff strengthens its image as an innovative education  
provider.                                                                       

  Focused Educational Curriculum.  The Company's focus is on educating the
child rather than simply providing traditional child care services. The         
Company's high quality proprietary Journey curriculum was originally developed  
in 1991 by La Petite educators with the assistance of experts in early childhood
education with the intent of maximizing a child's cognitive development while   
ensuring a positive experience for the child. The curriculum emphasizes         
individuality and allows children to progress at their own pace, building skills
in a logical pattern using a 'hands-on' approach. All programs and activities   
are developmentally appropriate, promote a child's intellectual, physical,      
emotional and social development and are enhanced by on-site efforts of the     
Company's educational staff. The Company also operates Montessori schools, which
target education conscious parents under the name Montessori Unlimited. The     
Montessori method is a classical approach that provides specific task-oriented  
educational materials or 'apparatus' presented in a sequence determined by each 
child's natural capabilities. Each activity in the prepared environment of the  
Montessori classroom has its roots in early development and serves as a         
foundation for future, more complex developments.                               

  Attractive Business Model.  Improvements in profitability at the Academy
level have been achieved through a combination of (i) revenue enhancement and   
cost management at the individual Academies and (ii) economies of scale and     
synergies realized through the clustering of Academies in economically and      
demographically attractive areas. The Company has increased estimated FTE       
Utilization from 59% in fiscal 1994 to 66% in fiscal 1997. During the four      
fiscal years ended August 1994, the Company opened 100 residential Academies    
with an estimated Operating Capacity of 125 children and an average facility    
size of 6,200 square feet. The average EBITDA for such Academies in fiscal 1997 
was approximately $54,700. In addition, the Company's Montessori schools have   
proved to be successful with higher student retention, tuition averaging        

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approximately 20% more than at the Company's residential and employer-based     
Academies and more favorable student-teacher ratios, resulting in increased     
profitability. The Company has focused on providing its Academies with the      
systems to improve capacity utilization and operational efficiency. In March    
1998, the Company completed the installation in all of its residential Academies
of the first phase of a newly developed proprietary management information      
system, ADMIN. The first phase of ADMIN is a unique point of sale system which  
enables the Company to more effectively monitor attendance, increase revenues   
and gather information throughout all of its markets. By eliminating clerical   
errors and ensuring that all service delivery is accounted for, the             
implementation of the ADMIN point of sale system has increased operating revenue
by more than 2% at the 246 Academies which have been operating on the system    
since January 1, 1998. ADMIN currently handles the tuition billing process,     
allowing Academy Directors to concentrate on communicating and interacting with 
parents, supervising staff and spending time with children. In subsequent       
phases, ADMIN will automate substantially all of the clerical functions at the  
Academies. The Company's size and scope also allows it to cost-effectively      
purchase supplies, conduct advertising and marketing outreach programs and train
employees.                                                                      

Geographically Diversified Operations.  The Company's operations are  
geographically diversified, with 744 Academies located throughout 35 states and 
the District of Columbia as of March 14, 1998. Although the highest number of   
the Company's Academies are located in Texas, Florida, California, Georgia and  
Virginia, these states account for less than half of the Company's Academies.   
The geographical diversity of the Company's operations and profitability        
mitigates the potential impact of regional economic downturns or adverse changes
in local regulations.                                                           

Experienced and Incentivized Management Team.  The top four members of
senior management of the Company average approximately ten years of experience  
with the Company. In addition, the Company's eight Area Vice Presidents and 77  
Regional Directors average over 15 years and 11 years with La Petite,           
respectively. Management has successfully reduced employee turnover, closed or  
revitalized underperforming Academies, implemented operational data systems and 
improved operating margins. On a pro forma basis, management will own or have   
the right to acquire, subject to certain performance requirements, approximately
16.5% of the common stock of Parent on a fully diluted basis.                   

BUSINESS STRATEGY                                                               

     Management believes the Company is well positioned for future growth as one
of the leading providers of quality educational care to preschool aged children.
The Company's objective is to grow its higher margin businesses and continue to 
be a leader in the markets in which it operates.                                

Emphasize Educational Curriculum.  The Company's curriculum department
continually evaluates and improves the quality of its educational materials and 
programs. The Company has invested significant resources in developing its      
proprietary Journey curriculum, utilized at both its residential and            
employer-based Academies, and intends to develop additional innovative          
curriculum both internally and with the assistance of educational consultants.  
The Company is investing in additional staff training, classroom facilities and 
educational materials to enhance the delivery of the Journey curriculum at      
approximately one-third of the Company's residential Academies for the school   
year beginning in the fall of 1998. The Company's Montessori schools are staffed
with certified Montessori lead teachers who follow traditional Montessori       
methods that appeal to education conscious parents.                             

    Capitalize on Reputation for Customer Driven Service.  Management believes
that the Company's knowledge of parents' objectives and desires for their       
children's education differentiates it from other child care providers. In order
to better understand customer needs, the Company conducts (i) focus groups with 
parents, (ii) bi-annual and annual customer and employee satisfaction surveys   
(conducted by the Company and third parties) and (iii) interviews with parents. 
The Company's Parent's Partner Plan was designed in part to bridge the gap      
between what parents look for on a tour of the facility and expect on a         
day-to-day basis and the requirements of a professionally designed curriculum.  
The program includes a video and a monthly newsletter that explain the          
curriculum being provided to the children and guarantees the delivery of daily  
or weekly (depending on the age of the child) individual progress reports. The  
Company continually strives to improve its customer retention and increase      
loyalty by interacting with parents on a daily basis and focusing on meeting    
and, if possible, exceeding their expectations.                                 

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Increase Academy Profitability.  The Company plans to improve Academy 
profitability by increasing capacity utilization and tuition rates, managing    
costs and leveraging its existing and newly built Academies to achieve economies
of scale and synergies. The Company intends to continue to increase capacity    
utilization by emphasizing local marketing programs and improving customer      
retention and loyalty. The Company believes it is an industry leader in its     
commitment to ongoing qualitative and quantitative research to determine        
customer needs and expectations. Academy Directors use their understanding of   
the markets in which they operate to cost effectively target parents through    
customer referrals, the support of community activities and print media and spot
radio advertising. In addition, with the implementation of ADMIN, which provides
the Company with the information necessary to implement targeted pricing, the   
Company has the ability to maximize revenue by charging its customers a premium 
for services in high demand. The ability to control revenue and increase        
operating efficiency at the point of sale through the implementation of ADMIN   
also presents an opportunity for the Company to better allocate an Academy      
Director's time. The Company achieves local economies of scale by employing a   
cluster strategy of either building in markets where it has existing Academies  
or entering new markets through the construction of a minimum number of         
Academies.                                                                      

    Build Academies and Montessori Schools in Attractive Markets.  The Company
intends to expand within existing markets and enter new markets with Academies  
and Montessori schools concentrated in clusters. Over the last three years, the 
Company has made significant investments in personnel and infrastructure to     
facilitate the future growth of the Company. The Company currently expects to   
open approximately 25 and 35 Academies in fiscal 1999 and fiscal 2000,          
respectively. The Company has targeted 25 MSAs that it believes have favorable  
characteristics for development, as measured by household income and education  
levels, population growth, existing competition, labor supply, appropriate real 
estate, and marketing possibilities. The Company expects to build residential   
Academies and Montessori schools primarily in higher-end neighborhoods, both of 
which are anticipated to generate higher operating margins than the average     
existing Academy. Because of the Montessori schools' success and popularity,    
management intends to build new Montessori schools and convert certain existing 
Academies to create new clusters of Montessori schools. Based upon significant  
input from the Company's field personnel, visits to competitors and focus groups
with parents, the Company has recently designed a new prototype for its         
Academies. New Academies will be approximately 9,500 square feet, built on sites
of approximately one acre, have an Operating Capacity of approximately 175      
children for residential Academies and 150 children for Montessori schools and  
incorporate a closed classroom concept. The Company will continue to target     
profitable opportunities for employer-based Academies and seek to leverage its  
residential Academy network to meet the needs of its corporate customers.       

  Pursue Strategic Opportunities.  In addition to accelerating new Academy
development, the Company may seek to acquire existing child care centers where  
demographics and facility conditions complement its business strategy.          
Management believes the Company's competitive position, economies of scale and  
financial strength will enable it to capitalize on selective acquisition        
opportunities in the fragmented child care industry. The Company may also engage
in cross-marketing opportunities with manufacturers and marketers of educational
products. These opportunities should enable La Petite to further its reputation 
as an educator and carry the residual benefit of an additional revenue stream.  

CURRICULUM                                                                      

   Residential and Employer-Based Academies.  In 1991, the Company, with the
assistance of outside educational experts, designed and developed the Journey   
curriculum to not only maximize a child's cognitive development but also to     
provide a positive learning experience for the child. The Company believes the  
Journey curriculum is unsurpassed by the educational materials of any of the    
major child care providers or its other competitors, many of whom purchase      
educational materials from third party vendors.                                 

Journey is an integrated approach to learning, giving children        
opportunities to learn through all of their senses while stimulating development
and learning in all areas. Children progress at their own pace, building skills 
and abilities in a logical pattern. The Journey curriculum covers children of   
all ages that La Petite Academy serves. Each level of the curriculum includes:  
(i) a parent component; (ii) built-in teacher training; (iii) carefully selected
age appropriate materials, equipment and activities; and (iv) a well planned and
developed environment.                                                          

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For infants and toddlers, Journey provides activities for a variety of
developmental areas such as listening and talking, physical development,        
creativity and learning from the world around them. As infants become toddlers, 
more activities focus on nurturing their need for independence and practicing   
small motor skills that help them to learn to feed themselves, walk and         
communicate with others. Journey provides songs, fingerplay, art ideas,         
storytelling tips, building activities and many activities to develop the bodies
of toddlers through climbing, pushing and pulling. These activities also build  
the foundation for social skills such as how to get along with others and how to
share.                                                                          

  The Journey preschool program includes a balance of teacher-directed and
child-directed activities which address both the physical and intellectual      
development of preschool children. Physical activities are designed to increase 
physical and mental dexterity, specifically hand-eye and large and small muscle 
coordination. Preschool children also engage in creative and expressive         
activities such as painting, crafts and music. Intellectual activities are      
designed to promote language development, pre-reading, writing and thinking     
skills, imagination through role playing, pretending and problem solving. In    
addition, Journey enables the children to experience the world around them      
through geography, Spanish, mathematics and sensorial activities.               

The Journey curriculum for SuperStars consists of providing (i) quiet,
private space for them to do homework, (ii) social interaction with children of 
their own age, (iii) participation in enrichment programs such as arts and      
crafts and fitness activities and (iv) transportation to and from their         
elementary schools.                                                             

     Montessori Schools.  Montessori is a non-traditional method of education in
which children work and learn in a highly individualized environment. Montessori
materials, combined with the Company's certified Montessori instructors, create 
a learning environment in which children become energized to explore,           
investigate and learn. Children work in mixed age group classrooms with         
attractive, state-of-the-art Montessori materials which have been designed to   
stimulate each child's interest in reading, mathematics, geography and science. 
In addition to the Montessori method, Montessori schools provide enrolled       
children foreign language and computer learning.                                

ACADEMY NETWORK                                                                 

The Company operates three types of child care centers: residential   
Academies, employer-based Academies and Montessori schools. Academies generally 
operate year round, five days a week and typically are open from 6:30 AM to 6:30
PM. A child may be enrolled in any of a variety of program schedules from a     
full-time, five-day-per-week plan to as little as two or three half-days a week.
A child attending full-time typically spends approximately nine hours a day,    
five days per week, at an Academy. The Company's SuperStars program for children
ages five to 12 provides extended child care before and after the elementary    
school day and transportation to and from the elementary school.                

   Academy employees include Academy Directors, Assistant Directors (who are
generally teachers), full-time and part-time teachers, temporary and substitute 
teachers, teachers' aides, and non-teaching staff. On average, there are 15 to  
20 employees per Academy. Each Academy is managed by an Academy Director. An    
Academy Director implements Company policies and procedures, but has the        
autonomy to individualize local operations. Responsibilities of Academy         
Directors include curriculum implementation, the establishment of daily, weekly 
and monthly operating schedules, staffing, marketing to develop and increase    
enrollment and control of operating expenses. Personnel involved in operations  
as Academy Director and above are compensated in part on the basis of the       
profitability and level of parent and employee satisfaction of each Academy for 
which they have managerial responsibility.                                      

Academy Directors are supervised by a Regional Director. The Company's
Regional Directors have an average of 11 years of experience with the Company,  
typically are responsible for six to 12 Academies and report to one of eight    
Area Vice Presidents. Regional Directors visit their Academies regularly and are
in frequent contact to help make decisions and improvements to program quality  
and profitability. The eight Area Vice Presidents average in excess of 15 years 
of experience with the Company.                                                 

Residential Academies.  As of March 14, 1998 the Company operated 692 
residential Academies in 33 states. Residential Academies are typically located 
in residential, middle income neighborhoods, and are usually one-story,         
air-conditioned buildings located on three-quarters of an acre to one acre of   
land. A typical Academy                                                         

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also has an adjacent playground designed to accommodate the full age range of   
children attending the school. The last 100 residential Academies built by the  
Company have an estimated Operating Capacity of 125 children and an average     
facility size of 6,200 square feet. The Company continues to improve, modernize 
and renovate existing residential Academies to improve efficiency and           
operations, to better compete, to respond to the requests of parents and to     
support the Journey curriculum.                                                 

 Residential Academies generally have programs to care for children from
toddlers to 12 years old arranged in five age groups. In addition, approximately
half of the Academies offer child care for infants, as young as six weeks old.  
Teacher-student ratios vary depending on state requirements but generally       
decrease with the older child groups.                                           

 Employer-Based Academies.  As of March 14, 1998 the Company operated 32
employer-based Academies, which are similar to residential Academies, but are   
designed to offer businesses, including government employers and hospitals,     
on-site employer-sponsored child care. To date, the Company's focus has been    
principally on developing on-site centers, operating employers' on-site centers 
through management contracts and providing consulting services for developing   
and managing centers. At most of the Company's employer-based Academies, the    
Company collects tuition from its students in the same way as at residential    
Academies. At some of the employer-based Academies, the Company receives        
additional payments or support services from the sponsoring employer. At other  
employer-based Academies, the Company receives a fee in addition to tuition.    

Montessori Schools.  As of March 14, 1998 the Company operated 20     
Montessori schools in Dallas, Houston, Atlanta and south Florida. Sixteen of the
Montessori schools were opened between 1983 and 1989. Two Montessori schools    
were residential Academies that were recently converted to Montessori formats,  
one in fiscal 1996 and one in early fiscal 1997. Montessori schools are         
typically located in upper-middle income areas and feature brick facades and    
closed classrooms. The Montessori schools typically have lower staff turnover,  
and their lead teachers are certified Montessori instructors, many of whom are  
certified through the Company's own training program. In addition, unlike       
students at residential Academies, Montessori students are enrolled for an      
entire school year, pay tuition monthly in advance and pay higher tuition rates.

NEW ACADEMY DEVELOPMENT                                                         

     The Company intends to expand within existing markets and enter new markets
with Academies and Montessori schools concentrated in clusters. In its existing 
markets, management believes it has developed an effective selection process to 
identify attractive markets for prospective Academy sites. In evaluating the    
suitability of a particular location, the Company concentrates on the           
demographics of its target customer within a two mile radius for residential    
Academies and a six mile radius for Montessori schools. The Company targets MSAs
with benchmark demographics which indicate parent education levels and family   
incomes combined with high child population growth, and considers the labor     
supply, cost of marketing and the likely speed and ease of development of       
Academies in the area. The Company has targeted 25 MSAs that it believes have   
favorable characteristics for Academy development.                              

 Newly constructed Academies are generally able to open approximately 36
weeks after the real estate contract is signed. Because a location's early      
performance is critical in establishing its ongoing reputation, the Academy     
staff is supported with a variety of special programs to help achieve quick     
enrollment gains and development of a positive reputation. These programs       
include special compensation for the Academy Director who opens the new site and
investment in local marketing prior to the opening. Historically, new Academies 
have been profitable within their second year of operation and reached maturity 
within three years. Management believes that the new site selection and         
development process, earlier selection and installment of the Academy Director  
and staff, the increased marketing investment prior to opening, the new design  
and the rapid access to attendance and tuition information provided by the ADMIN
system will reduce the time to maturity of Academies to two years.              

    The Company has recently designed new prototypes for residential Academies
and Montessori schools, both of which are 9,500 square foot facility prototypes 
to be built on one acre or more of commercially zoned property. The new         
residential Academy prototype will have an Operating Capacity for approximately 
175 children and is a closed classroom design, without infant rooms, that       
reflects a preschool environment and supports the latest curriculum             
improvements. The Montessori school prototype will be divided into six equal-   

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sized classrooms which will each support 25 children, resulting in an Operating 
Capacity for approximately 150 children. Management believes the new prototypes 
afford the Company more flexibility to better suit varying site plans and future
changes as residential neighborhoods evolve. The new exterior design was        
developed to enhance the appearance and image of the Academies. The cost to open
each of the prototype Academies is estimated at approximately $1.0 million to   
$1.5 million, of which approximately 85% is typically financed through a sale   
and leaseback transaction.                                                      

TUITION                                                                         

     Academy tuition depends upon a number of factors including, but not limited
to, location of an Academy, age of the child, full or part-time attendance and  
competition. The Company also provides various tuition discounts primarily      
consisting of sibling, staff, Corporate Referral Program and Parent's Partner   
Plan. The Company adjusts tuition for Academy programs by child age-group and   
program schedule within each Academy on an annual basis each February. Parents  
also pay an annual registration fee of $40 per child, which is reduced for      
families with more than one child attending an Academy. Tuition and fees are    
payable weekly and in advance for most residential and employer-based Academies 
and monthly and in advance for Montessori schools. Management estimates that    
state governments pay the tuition for approximately 5% to 10% of the children   
under the Company's care.                                                       

MARKETING AND ADVERTISING                                                       

The Company's marketing program reflects its commitment to ongoing    
qualitative and quantitative research to determine customer needs, expectations 
and interpretation of service delivery. For example, the Company's research was 
instrumental in the development of the Parent's Partner Plan, which was         
introduced in 1995. The Parent's Partner Plan was designed in part to bridge the
gap between what parents look for on a tour of the facility and expect on a     
day-to-day basis and the requirements of a professionally designed curriculum.  
This program offers parents such features as flexible absence day options,      
extended care during holidays and guaranteed parent communications. These       
features provide tangible benefits to parents, can be universally delivered in a
multi-unit environment and were developed directly in response to needs         
expressed by parents. Customer focus groups and research have also guided the   
Company in developing and enhancing communications to current and potential     
parent customers regarding its programs.                                        

The Company believes that retention of current parents is critical in 
building brand equity and generating favorable word-of-mouth promotion. The     
Company's retention activities include 'Gift of Time' (added free child care on 
certain weekends and during the Christmas holidays), focused parent             
communication (through videotapes, correspondence and face to face meetings) and
fall and spring preschool orientation meetings. The Company's marketing programs
include activities to attract new students to support fall enrollment programs. 
The Company is also establishing programs to broaden parent loyalty beyond the  
neighborhood Academy to the Company as a whole. These programs include personal 
welcome calls, e-mail access and a toll-free number to call the Company.        

   The remainder of the marketing budget is used to fund activities designed
to increase enrollments, with over 50% of the budget supporting the Fall        
enrollment period. Primary media vehicles are spot radio, which is centrally    
negotiated and locally approved, direct mail and local print media. The Company 
also has a web site that allows parents to find the closest La Petite Academy   
and to learn more about the Journey curriculum. Finally, the Company's Corporate
Referral Program offers tuition discounts to employees of preferred corporate   
clients such as AT&T, Federal Express and Wal-Mart. This program enables the    
Company to market directly to employees who need preschool and child care       
services.                                                                       

    In fiscal 1998, the Company will implement its first coordinated marketing
plan to broaden the awareness of its Montessori Unlimited brand. Based on       
extensive focus group research, the plan will first educate parents generally   
about Montessori philosophies and techniques, and then inform parents about the 
Company's Montessori schools and programs.                                      

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INFORMATION SYSTEMS                                                             

The Company has recently completed in its residential Academies the   
installation of the nationwide point of sale information phase of ADMIN. In     
subsequent phases, ADMIN will automate substantially all of the clerical record 
keeping functions at an Academy. ADMIN is a proprietary, state of the art,      
decentralized, multimedia PC-based network that processes transactions, stores  
data and produces reports locally. Remote host collection of data on a daily,   
weekly and as needed basis provides timely access to information by senior      
management, Regional Directors and Area Vice Presidents.                        

    The point of sale system has been operational in all residential Academies
since mid-March 1998 and is being expanded to the Company's Montessori schools  
and employer-based Academies. The system tracks attendance, revenues,           
receivables and pricing information. Parents sign their children in and out of  
an Academy using a ten key pad and PIN number, enabling the Academy Director to 
have real time access to parent receivables and an Academy's current, past and  
expected future enrollment by class, day and program. Previously, these records 
were maintained manually by Academy Directors, consuming eight to ten hours of  
their time each week, and were subject to clerical error. The time savings      
enable Academy Directors to spend this time on more valuable tasks such as      
communicating and interacting with parents and staff. By eliminating clerical   
errors and ensuring that all service delivery is accounted for, the             
implementation of the ADMIN point of sale system has increased operating revenue
by more than 2% at the 246 Academies which have been operating on the system    
since January 1, 1998.                                                          

   ADMIN provides management weekly access to detailed, accurate information
on the Company's operations, facilitating rapid response to any Academy         
requiring attention. In addition, the new attendance data by class by day will  
enable future pricing decisions to better target those classes and programs with
the greatest demand, enabling the Company to further increase revenues without  
impacting capacity utilization. By providing student turnover and tenure        
information, the point of sale system will create a new capability for focusing 
programs on customer satisfaction and retention.                                

Future phases of ADMIN will include labor (which encompasses payroll, 
benefits and scheduling), cash management, marketing, training and the          
automation of a number of manual tasks that are currently performed by the      
Academy Directors or their staff. The investment requirement by these           
applications is expected to be fairly minimal because the major cost was for the
hardware that has already been installed. Management is currently in the process
of specifying the functional requirements for the labor module, and the cash    
management application is in development.                                       

COMPETITION                                                                     

 The United States preschool education and child care industry is highly
fragmented and competitive. The Company's competition consists principally of   
local nursery schools and child care centers, some of which are non-profit      
(including church-affiliated centers), providers of services that operate out of
their homes and other for profit companies which may operate a number of        
centers. Local nursery schools and child care centers generally charge less for 
their services than the Company charges. Many church-affiliated and other       
non-profit child care centers have no or lower rental costs than the Company,   
may receive donations or other funding to cover operating expenses and may      
utilize volunteers for staffing. Consequently, tuition rates at these facilities
are commonly lower than the Company's rates. Additionally, fees for home-based  
care are normally lower than fees for center-based care because providers of    
home care are not always required to satisfy the same health, safety or         
operational regulations as the Company's Academies. The Company's competition   
also consists of other large, national, for profit child care companies that may
have more aggressive tuition discounting and other pricing policies than the    
Company. The Company competes principally by offering trained and qualified     
personnel, professionally planned educational and recreational programs,        
well-equipped facilities and additional services such as transportation. In     
addition, the Company offers a challenging and sophisticated program that       
emphasizes the individual development of the child. Management believes that the
quality of the staff and facilities and the unique programs offered are the     
principal factors in parents' choice of the Company, although price and location
of the facility are also important. For some of the Company's potential         
customers, the non-profit status of certain of the Company's competitors may be 
a significant factor in choosing a child care provider.                         

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GOVERNMENT REGULATION                                                           

    Child care centers are subject to numerous state and local regulations and
licensing requirements, and the Company has policies and procedures in place in 
order to comply with such regulations and requirements. Although state and local
regulations vary greatly from jurisdiction to jurisdiction, government agencies 
generally review the ratio of staff to enrolled children, the safety, fitness   
and adequacy of the buildings and equipment, the dietary program, the daily     
curriculum, staff training, record keeping and compliance with health and safety
standards. In certain jurisdictions, new legislation or regulations have been   
enacted or are being considered which establish requirements for employee       
background checks or other clearance procedures for new employees of child care 
centers. In most jurisdictions, governmental agencies conduct scheduled and     
unscheduled inspections of child care centers, and licenses must be renewed     
periodically. Failures by an Academy to comply with applicable regulations can  
subject it to state sanctions, which might include the Academy being placed on  
probation or, in more serious cases, suspension or revocation of the Academy's  
license to operate. Management believes the Company is in compliance with all   
material regulations and licensing requirements applicable to its businesses.   

 Certain tax incentives exist for child care programs. Section 21 of the
Code provides a federal income tax credit ranging from 20% to 30% of certain    
child care expenses for 'qualifying individuals' (as defined in the Code). The  
fees paid to the Company for child care services by eligible taxpayers qualify  
for the tax credit, subject to the limitations of Section 21 of the Code. In    
addition to the federal tax credits, various state programs provide child care  
assistance to low income families. Management estimates 5% to 10% of the        
Company's operating revenue is generated from such state programs. Although     
under new legislation, signed by President Clinton in August 1996, additional   
funding for child care will be available for low income families as part of     
welfare reform, no assurance can be given that the Company will benefit from any
such additional funding.                                                        

The Federal Americans With Disabilities Act (the 'Disabilities Act')  
prohibits discrimination on the basis of disability in public accommodations and
employment. The Disabilities Act became effective as to public accommodations in
January 1992 and as to employment in July 1992. Since effectiveness of the      
Disabilities Act, the Company has not experienced any material adverse impact as
a result of the legislation.                                                    

TRADEMARKS                                                                      

   The Company has various registered trademarks covering the name La Petite
Academy, its logos, and a number of other names, slogans and designs, including,
but not limited to: La Petite Journey, Parent's Partner, SuperStars and         
Montessori Unlimited. A federally registered trademark in the United States is  
effective for ten years subject only to a required filing and the continued use 
of the mark by the registrant. A federally registered trademark provides the    
presumption of ownership of the mark by the registrant in connection with its   
goods or services and constitutes constructive notice throughout the United     
States of such ownership. In addition the Company has registered various        
trademarks in Japan, Taiwan and the Peoples Republic of China. The Company      
believes that its name and logos are important to its operations and intends to 
continue to renew the trademark registrations thereof.                          

INSURANCE                                                                       

   The Company maintains insurance covering comprehensive general liability,
automotive liability, workers' compensation, property and casualty, crime and   
directors and officers insurance. The policies provide for a variety of         
coverages, are subject to various limits, and include substantial deductibles or
self-insured retention. There is no assurance that claims in excess of, or not  
included within, the Company's coverage will not be asserted, the effect of     
which could have an adverse effect on the Company.                              

The Company has instituted a number of initiatives to improve risk    
management and reduce insurance costs. In 1994, the Company switched to a       
self-insured program for workers' compensation, automotive and general          
liabilities up to certain retention levels. In 1995, the Company re-bid its     
entire insurance program, thereby reducing premium costs and increasing         
coverages. Also in 1995, the Company began a program of actively seeking to     
close all old open liability and workers' compensation claims and aggressively  
seeking to close new claims on a timely basis. All student accident and auto    
claims are now managed and administered in-house by the Company's General       
Counsel, which has reduced the frequency and severity of liability claims. As a 
result of all                                                                   

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of the aforementioned actions, insurance costs dropped from $9.5 million in     
fiscal 1995 to $6.2 million in fiscal 1997, representing a 35% reduction.       

EMPLOYEES                                                                       

    As of March 14, 1998, the Company employed 12,582 persons, including eight
Area Vice Presidents, 77 Regional Directors, 744 Academy Directors and 120      
employees at corporate headquarters. Approximately 93% of these employees are   
paid on an hourly basis; the remainder are salaried. Because of high employee   
turnover rates in the child care industry in general, the Company focuses on and
emphasizes recruiting and retaining qualified personnel. Management believes    
that the turnover of the Company's employees is in line with other companies in 
the industry. The Company's employees are not represented by any organized labor
unions or employee organizations and management believes relations with         
employees are good.                                                             

PROPERTIES                                                                      

     As of March 14, 1998, the Company operated 744 Academies, 675 of which were
leased under operating leases, 55 of which were owned and 14 of which were      
operated in employer-owned centers. In fiscal 1997, the Company opened three new
Academies, two of which were employer-based. Most of the Academy leases have    
15-year terms, some have 20-year terms, many have renewal options, and          
substantially all require the Company to pay utilities, maintenance, insurance  
and property taxes. In addition, some of the leases provide for contingent      
rentals if the Academy's operating revenue exceeds certain base levels.         

Because of the different licensing requirements and design features,  
Academies vary in size and Licensed Capacity. Academies typically contain 5,400,
6,700 or 7,800 square feet and Licensed Capacity for the same size building     
varies from state to state because of different licensing requirements.         

The following table summarizes Academy openings and closings for the  
indicated periods.                                                              

                                                        [Enlarge/Download Table]


FISCAL YEAR                                                                   1993(A)  1994   1995   1996   1997 
-----------                                                                   -------  ----   ----   ----   ---- 
                                                                                                                 
Academies:                                                                                                       
Open at Beginning of Period..................................................   785    788    787    786    751  
Opened During Period.........................................................     5     12      5     11      3  
Closed During Period.........................................................    (2)   (13 )   (6 )  (46 )   (9 )
                                                                              -------  ----   ----   ----   ---- 
Open at End of Period........................................................   788    787    786    751    745  
                                                                              -------  ----   ----   ----   ---- 
                                                                              -------  ----   ----   ----   ---- 

------------------                                                              
(a) Fiscal year end changed from December 31 to the last Saturday in August.    
  Fiscal 1993 represents the eight months from January 1, 1993 to August 28,
1993.                                                                   

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The residential and employer-based Academies and Montessori schools   
operated by the Company as of March 14, 1998 were located as follows:           

                                                        [Enlarge/Download Table]

                                                                                    EMPLOYER-                   
                                                                       RESIDENTIAL    BASED    MONTESSORI       
STATE                                                                   ACADEMICS   ACADEMICS   SCHOOLS    TOTAL
-----                                                                  -----------  ---------  ----------  -----
                                                                                                                
Alabama...............................................................      14           4         --        18 
Arizona...............................................................      23           1         --        24 
Arkansas..............................................................       8          --         --         8 
California............................................................      55           4         --        59 
Colorado..............................................................      24           1         --        25 
Delaware..............................................................       1          --         --         1 
Florida...............................................................      94           2          3        99 
Georgia...............................................................      48          --          6        54 
Illinois..............................................................      16          --         --        16 
Indiana...............................................................      15           2         --        17 
Iowa..................................................................       9          --         --         9 
Kansas................................................................      21           1         --        22 
Kentucky..............................................................       4          --         --         4 
Louisiana.............................................................      --           1         --         1 
Maryland..............................................................      11           3         --        14 
Minnesota.............................................................      --           1         --         1 
Mississippi...........................................................       3          --         --         3 
Missouri..............................................................      29           1         --        30 
Nebraska..............................................................      10          --         --        10 
Nevada................................................................       9          --         --         9 
New Jersey............................................................       2          --         --         2 
New Mexico............................................................       4          --         --         4 
North Carolina........................................................      30          --         --        30 
Ohio..................................................................      16           1         --        17 
Oklahoma..............................................................      23           2         --        25 
Oregon................................................................       4          --         --         4 
Pennsylvania..........................................................       3           3         --         6 
South Carolina........................................................      24          --         --        24 
Tennessee.............................................................      26           1         --        27 
Texas.................................................................     108          --         11       119 
Utah..................................................................       4           1         --         5 
Virginia..............................................................      36          --         --        36 
Washington............................................................      15           1         --        16 
Wisconsin.............................................................       2          --         --         2 
Wyoming...............................................................       1          --         --         1 
District of Columbia..................................................      --           2         --         2 
                                                                          -----        ----       ----     -----
                                                                           692          32         20       744 
                                                                          -----        ----       ----     -----
                                                                          -----        ----       ----     -----

LEGAL PROCEEDINGS                                                               

  From time to time, the Company is subject to legal proceedings and other
claims arising in the ordinary course of its business. The Company believes that
it is not presently a party to any litigation the outcome of which would have a 
material adverse effect on its financial condition or results of operations. The
Company maintains insurance coverage against claims in an amount which it       
believes to be adequate.                                                        

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MANAGEMENT

   The following table sets forth the name, age and current position held by
the persons who are the directors and executive officers of the Company:        

                                                        [Enlarge/Download Table]

NAME                                              AGE  POSITION                                        
------------------------------------------------  ---  ------------------------------------------------
                                                                                                       
James R. Kahl...................................  56   Chairman of the Board, Chief Executive Officer, 
                                                       President and Director                          

Rebecca L. Perry................................  43   Executive Vice President, Operations            

David J. Anglewicz..............................  50   Senior Vice President, Facility Services        

Phillip M. Kane.................................  50   Senior Vice President, Finance and Chief        
                                                       Financial Officer                               

Mary Jean Wolf..................................  60   Senior Vice President, Organizational Services  

Mitchell J. Blutt, M.D..........................  41   Director                                        

Robert E. King..................................  62   Director                                        

Stephen P. Murray...............................  35   Director                                        

Brian J. Richmand...............................  44   Director                                        

  The business experience during the last five years and other information
relating to each executive officer and director of the Company is set forth     
below:                                                                          

James R. Kahl became Chairman of the Board upon consummation of the   
Transactions. Mr. Kahl has been a Director of the Company since September 1993, 
the Chief Executive Officer of the Company since July 1993 and President since  
May 1997. Mr. Kahl was an Executive Vice President at Knott's Berry Farm from   
1991 to February 1993. From 1988 to 1991, Mr. Kahl was the Senior Vice          
President, Operations of the Contract Food and Services Division, Health Care   
and Education Group at the Marriott Corporation in Washington, D.C. From 1982 to
1988, Mr. Kahl held various other executive positions with the Marriott         
Corporation. Prior to joining the Marriott Corporation, Mr. Kahl held various   
positions with Arthur Andersen & Co. between 1964 and 1982, including Partner   
and Managing Partner. He has an M.B.A. from the University of Wisconsin and is a
Certified Public Accountant. Mr. Kahl is a director of Integrated Medical       
Resources.                                                                      

    Rebecca L. Perry has been Executive Vice President of Operations since May
1997. From July 1993 to May 1997, Ms. Perry was a Senior Vice President and     
Eastern Operating Officer. From 1988 to June 1993, she was Assistant Vice       
President of Operations with supervisory responsibility for the operations of   
the Company in 14 southern and midwestern states. From 1985 to 1988, she served 
as Divisional Director of Florida and from 1981 to 1985, she served as Regional 
Director of Tampa.                                                              

    David J. Anglewicz has been Senior Vice President, Facility Services since
March 1997. From July 1993 to March 1997, Mr. Anglewicz was Executive Vice      
President-Property Development and Chief Administrative Officer. Mr. Anglewicz  
has been involved in the development of over 500 of the Academies throughout the
United States since he joined the Company in 1985. Mr. Anglewicz has an M.B.A.  
from the University of Illinois and a B.S. from the Lawrence Institute of       
Technology.                                                                     

     Phillip M. Kane has been Senior Vice President, Finance and Chief Financial
Officer since 1994. From 1989 to 1993, Mr. Kane was the Chief Financial Officer 
of the U.S. Department of Housing and Urban Development. From 1974 to 1989, Mr. 
Kane held various financial management positions with Knight-Ridder, including  
Vice President and Controller. Prior to joining Knight-Ridder, Mr. Kane was     
associated with Arthur Andersen & Co. Mr. Kane has a B.A. from the University of
Miami (Fla.) and is a Certified Public Accountant.                              

Mary Jean Wolf has been Senior Vice President, Organizational Services
since August 1997. From September 1991 to August 1997, Ms. Wolf was an          
independent consultant specializing in executive transition and other human     
resources issues. From July 1987 to June 1991, she was a Senior Vice President  
and Chief Human Resource Officer with Dime Savings Bank of New York, and from   
September 1978 to December 1985, she was Vice President of Personnel with Trans 
World Airlines. Ms. Wolf has a B.S. from Drexel University and an M.B.A. from   
New York University Graduate School of Business.                                

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    Mitchell J. Blutt, M.D. became a Director of the Company upon consummation
of the Transactions. Dr. Blutt has been an Executive Partner of CCP since       
December 1992. From December 1988 to November 1992 he was a General Partner of  
CCP. Dr. Blutt has a B.A. and a M.D. from the University of Pennsylvania and an 
M.B.A. from The Wharton School of the University of Pennsylvania. He is a       
director of the Hanger Orthopedic Group, UtiliMed, Vista Healthcare Asia, Pte., 
Ltd., Senior Psychology Services Management, Medical Arts Press and Fisher      
Scientific International, Inc., among others.                                   

  Robert E. King became a Director of the Company upon consummation of the
Transactions. Mr. King is Chairman of Salt Creek Ventures, LLC, a company he    
founded in 1994. Salt Creek Ventures, LLC is an organization specializing in    
equity investments in software, computer services, transaction processing and   
other information-based companies. Mr. King has been involved over the past 33  
years as a corporate executive and entrepreneur in technology-based companies.  
From 1983 to 1994, he was President and Chief Executive Officer of The Newtrend 
Group. Mr. King has participated as a founding investor in five companies. Mr.  
King has a B.A. from Northwestern University. He serves on the Board of         
Directors of DeVRY, Inc., U.S. Servis, Inc., American Floral Services, Inc. and 
Collegis, Inc.                                                                  

     Stephen P. Murray became a Director of the Company upon consummation of the
Transactions. Mr. Murray has been a General Partner of CCP since June 1994. From
November 1988 to June 1994, Mr. Murray was a Principal at CCP. Prior thereto, he
was a Vice President with the Middle-Market Lending Division of Manufacturers   
Hanover. Mr. Murray has a B.A. from Boston College and an M.B.A. from Columbia  
Business School. He is a director of The Vitamin Shoppe, Home Products, Inc.,   
Futurecall Telemarketing, American Floral Services, The Cornerstone Group,      
Medical Arts Press and Regent Lighting Corporation.                             

     Brian J. Richmand became a Director of the Company upon consummation of the
Transactions. Mr. Richmand has been a General Partner of CCP since August 1993. 
From 1986 to August 1993, Mr. Richmand was a partner with the law firm of       
Kirkland & Ellis. He has a B.S. from The Wharton School of the University of    
Pennsylvania and a J.D. from Stanford Law School. Mr. Richmand is a director of 
OCI Holdings Corp., Riverwood International Corp., Qualitech Steel Corporation  
and Western Pork Production Corporation.                                        

Upon consummation of the Transactions, the Investor became entitled to
nominate four directors to Parent's board. One of such directors, Robert E.     
King, is entitled to three votes as a director.                                 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

    The Board of Directors of the Company has an Audit Committee consisting of
James R. Kahl, Robert E. King and Stephen P. Murray, and a Compensation         
Committee consisting of Mitchell J. Blutt, M.D., Brian J. Richmand and          
ex-officio member James R. Kahl. The Audit Committee reviews the scope and      
results of audits and internal accounting controls and all other tasks performed
by the independent public accountants of the Company. The Compensation Committee
determines compensation for executive officers of the Company and will          
administer the New Option Plan.                                                 

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS                                

     The members of the Board of Directors do not receive compensation for their
service on the Board of Directors or any committee thereof but will be          
reimbursed for their out-of-pocket expenses. The Company may, in the future,    
have persons who are neither officers of the Company nor affiliated with CCP or 
the Investor serve on its Board of Directors. Such persons may receive customary
compensation for services on the Board of Directors of the Company.             

The following table provides certain summary information concerning   
compensation earned for fiscal 1997, fiscal 1996 and fiscal 1995 paid to the    
Company's Chief Executive Officer and the three next most highly compensated    
executive officers of the Company.                                              

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SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                                                                      NUMBER OF 
                                                                    COMPENSATION FOR THE PERIOD(A)   SECURITIES 
                                                                    -------------------------------  UNDERLYING 
                                                                    FISCAL                           OPTIONS/SAR
NAME AND PRINCIPAL POSITION                                          YEAR      SALARY       BONUS      AWARDS   
------------------------------------------------------------------  ------    --------    ---------  -----------
                                                                                                                
James R. Kahl                                                                                                   
  Chief Executive Officer and President...........................    1997    $280,000    $ 125,000     10,000  
                                                                      1996     265,000      142,500             
                                                                      1995     239,200       20,000             
Rebecca L. Perry                                                                                                
  Executive Vice President, Operations............................    1997     130,000       60,000      1,000  
                                                                      1996     110,000       40,900      5,000  
                                                                      1995      90,000        9,000             
David J. Anglewicz                                                                                              
  Senior Vice President, Facility Services........................    1997     150,000       15,000             
                                                                      1996     142,000       35,000             
                                                                      1995     135,000        7,000             
Phillip M. Kane                                                                                                 
  Senior Vice President, Finance and Chief Financial Officer......    1997     160,000       28,000      1,000  
                                                                      1996     150,000       41,400      5,000  
                                                                      1995     125,000        9,500             

------------------                                                              
(a) Perquisites and other personal benefits for fiscal 1997, 1996 and 1995 paid 
to the named officers did not, as to any of them, exceed the lesser of  
$50,000 or 10 percent of the sum of their respective salary and bonus.  

  The Company previously issued stock options to James R. Kahl, Rebecca L.
Perry and Phillip M. Kane to purchase common stock of the Parent. As part of the
Recapitalization, Mr. Kahl and Mr. Kane continue to hold certain existing       
options.                                                                        

EMPLOYMENT CONTRACTS                                                            

   The Company entered into employment agreements, each dated as of the date
of the closing of the Transactions (the 'Employment Agreements'), with James R. 
Kahl, Rebecca L. Perry and Phillip M. Kane. The Employment Agreements provide   
for Mr. Kahl, Ms. Perry and Mr. Kane to receive a base salary, subject to annual
performance adjustments, of $297,500, $172,500 and $170,000, respectively, plus 
a bonus of up to 180%, 75% and 75%, respectively, of base salary. The terms of  
the Employment Agreement are as follows: for Mr. Kahl, four years, for Ms.      
Perry, one year and for Mr. Kane, one year, in each case subject to one year    
automatic renewals. Each Employment Agreement also provides that the executive  
is entitled to participate in the health and welfare benefit plans available to 
the Company's other senior executives. The Employment Agreements provide for    
severance in the case of a termination without 'cause' or a resignation with    
'good reason' (each as defined in the applicable Employment Agreement) in an    
amount equal to the base salary plus bonus for Mr. Kahl, and in an amount equal 
to the base salary for Ms. Perry and Mr. Kane. If Mr. Kahl terminates his       
employment with good reason after a change of control, Mr. Kahl would be        
entitled to two years' base salary and bonus. The Employment Agreements also    
contain customary non-disclosure, non-competition and non-solicitation          
provisions.                                                                     

NEW OPTION PLAN                                                                 

   After consummation of the Transactions, the Parent adopted the New Option
Plan pursuant to which options with respect to 8.5% of the Parent's common      
stock, on a fully diluted basis, are available for grant. The new options will  
be allocated in amounts to be agreed upon between the Investor and the Parent.  
Seventy-five percent of the new options will vest over four years and           
twenty-five percent of the new options will vest if certain transactions are    
consummated which generate certain minimum returns to the Investor. The exercise
price for the time vesting options will be 50% of the per share price paid by   
the Investor for its common stock of the Parent                                 

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and the exercise price for the remaining options will be 100% of the per share  
price paid by the Investor for its common stock of the Parent. The new options  
will expire 10 years from the date of grant.                                    

CHANGE IN CONTROL SEVERANCE ARRANGEMENTS                                        

   Pursuant to the severance policy of the Company, in the event of a change
in control of the Company, certain employees will be entitled to severance      
payments if they are terminated or constructively discharged within 12 months of
the change of control. The amounts of such severance payments are as follows:   
(a) executive or senior level officers reporting to the Chief Executive Officer 
and President: 12 months' salary, (b) other officers: 6 months' salary, (c)     
other directors (not including board members) and managers: 3 months' salary,   
(d) Regional Directors: 2 months' salary and (e) Academy Directors: 6 weeks'    
salary.                                                                         

TRANSACTION BONUSES                                                             

In connection with the Recapitalization, the former controlling       
stockholders of the Company paid transaction bonuses to certain employees of the
Company upon the close of the Transactions. The former controlling stockholders 
paid transaction bonuses of $400,000, $150,000, $75,000, $150,000 and $10,000 to
James R. Kahl, Rebecca L. Perry, David J. Anglewicz, Phillip M. Kane and Mary   
Jean Wolf, respectively.                                                        

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OWNERSHIP OF SECURITIES 

     All of the common stock of the Company is held by Parent. The Investor owns
approximately 90.3% of the outstanding common stock of Parent (approximately    
80.5% on a fully diluted basis, including the warrants described below) and     
Vestar and management of the Company (including James R. Kahl) own approximately
9.7% of the outstanding common stock of Parent (approximately 19.5% on a fully  
diluted basis). In connection with the purchase of preferred stock of Parent,   
the Investor received warrants to purchase up to 6.0% of Parent's outstanding   
common stock on a fully diluted basis.                                          

    In connection with the Recapitalization, the Investor purchased redeemable
preferred stock of Parent (the 'Preferred Stock') and warrants to purchase up to
6.0% of the Parent's common stock on a fully diluted basis for aggregate cash   
consideration of $30.0 million, the proceeds of which were contributed by Parent
to the Company as common equity. The Preferred Stock is not redeemable at the   
option of the holder prior to the maturity of the Notes and dividends are not   
payable in cash prior to the seventh anniversary of the consummation of the     
Transactions. Thereafter, dividends may be paid in cash by Parent subject to any
restrictions contained in the Company's indebtedness, including the Credit      
Agreement and the Indenture.                                                    

Following the consummation of the Recapitalization, Parent and its    
stockholders, including all holders of options and warrants, entered into a     
stockholders' agreement (the 'Stockholders' Agreement'). The Stockholders'      
Agreement contains restrictions on the transferability of Parent's common stock,
subject to certain exceptions. The Stockholders' Agreement also contains        
provisions regarding the designation of members of the Board of Directors and   
other voting arrangements. The Stockholders' Agreement will terminate at such   
time as the Parent consummates a qualified public offering.                     

   The Stockholders' Agreement restricts transfers of common stock of Parent
by, among other things, (a) granting rights to all stockholders to tag along on 
certain sales of stock by the Investor and management, (b) granting rights to   
the Investor to force the other stockholders to sell their common stock on the  
same terms as sales of common stock by the Investor and (c) granting preemptive 
rights to all holders of 2% or more of the Parent's common stock in respect of  
sales by other stockholders.                                                    

    The Stockholders' Agreement provides that Parent's Board of Directors will
be comprised initially of five directors. The Investor is entitled to designate 
four of the directors and James R. Kahl serves as the fifth director (so long as
he is employed by the Company). One of such directors, Robert E. King, is       
entitled to three votes as a director.                                          

The Stockholders' Agreement also contains covenants in respect of the 
delivery of certain financial information to Parent's stockholders and granting 
access to Parent's records to holders of more than 2% of the Parent's common    
stock.                                                                          

    A majority of the economic interests of the Investor is owned by CCP and a
majority of the voting interests of the Investor is owned by an entity          
controlled by Robert E. King, a Director of the Company. However, pursuant to   
the Operating Agreement, the Investor has granted to CCP the right to elect a   
majority of the directors of the Investor if certain triggering events occur and
the Investor agreed not to take certain actions in respect of the common stock  
of Parent held by the Investor without the consent of CCP.                      

In connection with the Recapitalization, Parent and its stockholders  
following consummation of the Recapitalization entered into a registration      
rights agreement (the 'Registration Rights Agreement'). The Registration Rights 
Agreement grants stockholders demand and incidental registration rights with    
respect to shares of capital stock held by them and contains customary terms and
provisions with respect to such registration rights.                            

All of the common stock of the Company is held by Parent. All the     
outstanding shares of preferred stock is owned by the Investor, and             
approximately 80.5% of the fully diluted common stock of Parent is owned by the 
Investor. A majority of the voting interests of the Investor is owned by an     
entity controlled by Robert E. King, a Director of the Company, and a majority  
of the economic interests of the Investor is owned by CB Capital Investors, L.P.
('CBCI'), an affiliate of CCP. As a licensed small business investment company  
(an 'SBIC'), CBCI is subject to certain restrictions imposed upon SBICs by the  
regulations established and enforced by the United States Small Business        
Administration. Among these restrictions are certain limitations on the extent  
to                                                                              

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which an SBIC may exercise control over companies in which it invests. As a     
result of these restrictions, unless certain events described in the Operating  
Agreement occur, CBCI may not own or control a majority of the outstanding      
voting stock of the Investor or designate a majority of the members of the Board
of Directors. Accordingly, while CBCI owns a majority of the economic interests 
of the Investor, CBCI owns less than a majority of the Investor's voting stock. 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Chase Securities Inc. ('CSI'), one of the Initial Purchasers, is an   
affiliate of Chase (as defined), an agent and a lender to the Company under the 
Credit Agreement. The Investor, an affiliate of CCP and CSI, owns approximately 
90.3% of the outstanding common stock of the Parent (approximately 80.5% on a   
fully diluted basis). The Investor owns $30 million of redeemable preferred     
stock of Parent and warrants to purchase 6.0% of the common stock of Parent on a
fully diluted basis. Certain Partners of CCP are members of the Board of        
Directors of the Company. See 'Management.' In addition, CSI, Chase and their   
affiliates perform various investment banking and commercial banking services on
a regular basis for affiliates of the Company.                                  

In connection with the Recapitalization, CBCI entered into an         
indemnification agreement with Robert E. King, a director of the Company,       
pursuant to which CBCI has agreed to indemnify Mr. King for any losses, damages 
or liabilities and all expenses incurred or sustained by Mr. King in his        
capacity as a manager, officer or director of the Investor or any of its        
subsidiaries, including Parent and the Company.                                 

     NationsBanc Montgomery Securities LLC, one of the Initial Purchasers, is an
affiliate of NationsBank (as defined), an agent and a lender to the Company     
under the Credit Agreement.                                                     

In connection with the Recapitalization, the Company paid transaction 
bonuses to certain employees of the Company. See 'Management--Transaction       
Bonuses.'                                                                       

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DESCRIPTION OF THE CREDIT AGREEMENT 

  The following is a summary of the material terms of the Credit Agreement
among the Company, Parent, certain financial institutions party thereto,        
NationsBank, N.A. ('NationsBank'), as administrative agent, and The Chase       
Manhattan Bank ('Chase'), as syndication agent. The following summary is        
qualified in its entirety by reference to the Credit Agreement, which is filed  
as an exhibit to the Registration Statement of which this Prospectus forms a    
part.                                                                           

THE FACILITIES                                                                  

    Structure. The Credit Agreement provides for (a) the Term Loan Facility in
an aggregate principal amount of $40 million and (b) the Revolving Credit       
Facility providing for revolving loans to the Company, swingline loans to the   
Company and the issuance of letters of credit for the account of the Company in 
an aggregate principal amount (including swingline loans and the aggregate      
stated amount of letters of credit) of $25 million.                             

     Availability. Availability under the Credit Agreement is subject to various
conditions precedent typical of bank loans, and the commitment of Chase and     
NationsBank to provide financing under the Credit Agreement is also subject to, 
among other things, the absence of any event, condition or circumstance that has
had or is reasonably likely to have a material adverse effect on the business,  
operations, properties, assets, liabilities or financial condition of Parent,   
the Company and its subsidiaries, taken as a whole. The full amount of the Term 
Loan Facility was drawn at the closing of the Transactions and amounts repaid or
prepaid will not be able to be reborrowed. Amounts under the Revolving Credit   
Facility will be available on a revolving basis.                                

INTEREST                                                                        

Borrowings under the Credit Agreement will bear interest at a rate per
annum equal (at the Company's option) to: (a) an adjusted London inter-bank     
offered rate ('LIBOR') plus a percentage based on the Company's financial       
performance or (b) a rate equal to the highest of Chase's published prime rate, 
a certificate of deposit rate plus 1% and the Federal Funds effective rate plus 
1/2 of 1% ('ABR') plus, in each case a percentage based on the Company's        
financial performance. The borrowing margins applicable to the Credit Agreement 
are initially 3.25% for LIBOR loans and 2.25% for ABR loans. Amounts outstanding
under the Credit Agreement not paid when due bear interest at a default rate    
equal to 2.00% above the rates otherwise applicable to the loans under the      
Credit Agreement.                                                               

FEES                                                                            

The Company has agreed to pay certain fees with respect to the Credit 
Agreement, including (i) fees on the unused commitments of the lenders equal to 
1/2 of 1% on the undrawn portion of the commitments in respect of the Credit    
Agreement (subject to a reduction based on the Company's financial performance);
(ii) letter of credit fees on the aggregate face amount of outstanding letters  
of credit equal to the then applicable borrowing margin for LIBOR loans under   
the Revolving Credit Facility and a 1/4 of 1% per annum issuing bank fee for the
letter of credit issuing bank; (iii) annual administration fees; and (iv) agent,
arrangement and other similar fees.                                             

SECURITY; GUARANTEES                                                            

   The obligations of the Company under the Credit Agreement are irrevocably
guaranteed, jointly and severally, by Parent and by each existing and           
subsequently acquired or organized subsidiary of the Company. In addition, the  
Credit Agreement and the guarantees thereunder are secured by substantially all 
of the assets of the Parent, the Company and its domestic subsidiaries          
(collectively, the 'Collateral'), including but not limited to (i) a first      
priority pledge of all the capital stock of the Company and of each existing and
subsequently acquired or organized subsidiary of the Company and (ii) a         
perfected first priority security interest in, and mortgage on, substantially   
all tangible and intangible assets of the Company and the guarantors (including,
but not limited to, accounts receivable, documents, inventory, equipment,       
investment property, general intangibles, real property, cash and cash accounts 
and proceeds of the foregoing, but excluding leasehold interests), in each case 
subject to certain exceptions.                                                  

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COMMITMENT REDUCTIONS AND REPAYMENTS                                            

    The Credit Agreement will mature on the date that is seven years after the
closing of the Transactions. The Term Loan Facility amortizes in an amount equal
to (a) $1.0 million in each of the first five years of the Term Loan Facility,  
(b) $10.0 million in the sixth year thereof and (c) $25.0 million in the seventh
year thereof. In addition, the Term Loan Facility is subject to mandatory       
prepayment and reductions in an amount equal to (a) 100% of the net cash        
proceeds of certain equity issuances by Parent, the Company or any of its       
subsidiaries, (b) 100% of the net cash proceeds of certain debt issuances of    
Parent, the Company or any of its subsidiaries, (c) 75% of the Company's excess 
cash flow (subject to a reduction to 50% based on the Company's financial       
performance) and (d) 100% of the net cash proceeds of certain asset sales or    
other dispositions of property by Parent, the Company or any of its             
subsidiaries, in each case subject to certain exceptions.                       

AFFIRMATIVE, NEGATIVE AND FINANCIAL COVENANTS                                   

The Credit Agreement contains a number of covenants that, among other 
things, restrict the ability of Parent, the Company and its subsidiaries to     
dispose of assets, incur additional indebtedness, incur or guarantee            
obligations, prepay other indebtedness or amend other debt instruments, pay     
dividends, create liens on assets, make investments, loans or advances, make    
acquisitions, engage in mergers or consolidations, change the business conducted
by the Company and its subsidiaries, make capital expenditures, or engage in    
certain transactions with affiliates and otherwise restrict certain corporate   
activities. In addition, the Credit Agreement requires Parent to comply with    
specified financial ratios and tests, including a maximum leverage ratio, a     
fixed charge coverage ratio and a minimum EBITDA (to be defined in the Credit   
Agreement) test. The Credit Agreement also contains provisions that will        
prohibit any modifications of the Indenture in any manner adverse to the lenders
under the Credit Agreement and that limit the Company's ability to refinance or 
otherwise prepay the Notes without the consent of such lenders.                 

EVENTS OF DEFAULT                                                               

The Credit Agreement contains customary events of default, including  
non-payment of principal, interest or fees, violation of covenants, inaccuracy  
of representations or warranties in any material respect, cross default to      
certain other indebtedness, bankruptcy, ERISA events, material judgments and    
liabilities, actual or asserted invalidity of any material security interest and
change of control.                                                              

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DESCRIPTION OF NOTES

GENERAL                                                                         

  The Old Notes were, and the New Notes will be, issued under an Indenture
(the 'Indenture') among the Company, Capital Corp., the Guarantors and PNC Bank,
National Association, as trustee (the 'Trustee'). The terms of the New Notes are
identical in all respects to the Old Notes, except that the New Notes have been 
registered under the Securities Act and, therefore, will not bear legends       
restricting their transfer and will not contain provisions providing for the    
payment of liquidated damages under certain circumstances relating to the       
Registration Rights Agreement, which provisions will terminate upon the         
consummation of the Exchange Offer. The following summary of the material       
provisions of the Indenture does not purport to be complete and is subject to,  
and is qualified in its entirety by reference to, the Trust Indenture Act of    
1939, as amended (the 'Trust Indenture Act'), and to all of the provisions of   
the Indenture, including the definitions of certain terms therein and those     
terms made a part of the Indenture by reference to the Trust Indenture Act, as  
in effect on the date of the Indenture. The definitions of certain capitalized  
terms used in the following summary are set forth below under 'Certain          
Definitions.'                                                                   

   Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the   
Issuers in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee in New York, New York), except     
that, at the option of the Issuers, payment of interest may be made by check    
mailed to the registered holders of the Notes at their registered addresses.    

 The Notes are issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge  
will be made for any registration of transfer or exchange of Notes, but the     
Issuers may require payment of a sum sufficient to cover any transfer tax or    
other similar governmental charge payable in connection therewith.              

 The Indenture provides for the issuance of up to $100 million aggregate
principal amount of additional Notes having terms and conditions identical to   
those of the Notes offered hereby (the 'Additional Notes'), subject to          
compliance with the covenants contained in the Indenture. Any Additional Notes  
will be part of the same issue as the Notes offered hereby and will vote on all 
matters with the Notes offered hereby. Unless the context otherwise requires,   
for purposes of this 'Description of Notes,' references to the Notes include    
Additional Notes.                                                               

TERMS OF THE NOTES                                                              

    The Notes are unsecured senior obligations of the Issuers, limited to $145
million aggregate principal amount, and mature on May 15, 2008. Each Note bears 
interest at a rate of 10% per annum from May 11, 1998, or from the most recent  
date to which interest has been paid or provided for, payable semiannually to   
Holders of record at the close of business on the May 1 or November 1           
immediately preceding the interest payment date on May 15 and November 15 of    
each year, commencing November 15, 1998. The Company will pay interest on       
overdue principal at 1% per annum in excess of such rate, and it will pay       
interest on overdue installments of interest at such higher rate to the extent  
lawful.                                                                         

OPTIONAL REDEMPTION                                                             

Except as set forth in the following paragraph, the Notes are not     
redeemable at the option of the Company prior to May 15, 2003. From and after   
May 15, 2003, the Notes will be redeemable at the option of the Company, in     
whole or in part, on not less than 30 nor more than 60 days' prior notice, at   
the following redemption prices (expressed as percentages of principal amount), 
plus accrued and unpaid interest, if any, to the redemption date                

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(subject to the right of holders of record on the relevant record date to       
receive interest due on the relevant interest payment date), if redeemed during 
the 12-month period commencing on May 15 of the years set forth below:          

                                                                [Download Table]


YEAR                                                       REDEMPTION PRICE
--------------------------------------------------------   ----------------
                                                                           
2003....................................................   105.000%....    
2004....................................................   103.333%....    
2005....................................................   101.667%....    
2006 and thereafter.....................................   100.000%....    

   In addition, at any time and from time to time prior to May 15, 2001, the
Issuers may redeem up to a maximum of 35% of the original aggregate principal   
amount of the Notes (calculated giving effect to any issuance of Additional     
Notes) with the proceeds of one or more Public Equity Offerings by the Company  
or Parent following which there is a Public Market, at a redemption price equal 
to 110% of the principal amount thereof, plus accrued and unpaid interest       
thereon, if any, to the redemption date (subject to the right of holders of     
record on the relevant record date to receive interest due on the relevant      
interest payment date); provided, however, that after giving effect to any such 
redemption, at least 65% of the original aggregate principal amount of the Notes
(calculated giving effect to any issuance of Additional Notes) remains          
outstanding. Any such redemption shall be made within 60 days of such Public    
Equity Offering upon not less than 30 nor more than 60 days' notice mailed to   
each holder of Notes being redeemed and otherwise in accordance with the        
procedures set forth in the Indenture.                                          

SELECTION                                                                       

In the case of any partial redemption, selection of the Notes for     
redemption will be made by the Trustee on a pro rata basis, by lot or by such   
other method as the Trustee in its sole discretion shall deem to be fair and    
appropriate, although no Note of $1,000 in original principal amount or less    
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of the principal    
amount thereof to be redeemed. A new Note in principal amount equal to the      
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest   
will cease to accrue on Notes or portions thereof called for redemption so long 
as the Issuers have deposited with the Paying Agent funds sufficient to pay the 
principal of, plus accrued and unpaid interest (if any) on, the Notes to be     
redeemed.                                                                       

RANKING                                                                         

     The indebtedness evidenced by the Notes is unsecured Senior Indebtedness of
the Issuers, ranks pari passu in right of payment with all existing and future  
Senior Indebtedness of the Issuers and is senior in right of payment to all     
existing and future Subordinated Obligations of the Issuers. The Notes are      
effectively subordinated to any Secured Indebtedness of the Issuers and their   
respective Subsidiaries to the extent of the value of the assets securing such  
Indebtedness.                                                                   

As of March 14, 1998, after giving pro forma effect to the            
Recapitalization, the Offering, the Transactions and the application of the net 
proceeds therefrom as described under 'Use of Proceeds,' (i) the outstanding    
Senior Indebtedness of the Company would have been $187.1 million, of which     
$42.1 million would have been Secured Indebtedness (exclusive of unused         
commitments under the Credit Agreement), and (ii) the Guarantor would have had  
no Senior Indebtedness outstanding (exclusive of guarantees of Indebtedness     
under the Credit Agreement (all of which would have been Secured Indebtedness)  
and the Guarantee). Although the Indenture will contain limitations on the      
amount of additional Indebtedness which the Company may Incur, under certain    
circumstances the amount of such Indebtedness could be substantial and, in any  
case, such Indebtedness may be Senior Indebtedness and may be Secured           
Indebtedness. See '--Certain Covenants--Limitation on Indebtedness.'            

GUARANTEES                                                                      

  The Company's existing Subsidiary and certain future Subsidiaries of the
Company (as described below), as primary obligors and not merely as sureties,   
jointly and severally irrevocably and unconditionally guarantee on an unsecured 
senior basis the performance and full and punctual payment when due, whether at 
Stated Maturity,                                                                

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by acceleration or otherwise, of all obligations of the Issuers under the       
Indenture and the Notes, whether for payment of principal of, or interest on,   
and liquidated damages in respect of, the Notes, expenses, indemnification or   
otherwise (all such obligations guaranteed by such Guarantors being herein      
called the 'Guaranteed Obligations') by executing a Guarantee dated on and as of
the Closing Date (or the date a Subsidiary becomes a Restricted Subsidiary).    
Such Guarantors agree to pay, in addition to the amount stated above, any and   
all costs and expenses (including reasonable counsel fees and expenses) incurred
by the Trustee or the Holders in enforcing any rights under any Guarantee. Each 
Guarantee will be limited in amount to an amount not to exceed the maximum      
amount that can be guaranteed by the applicable Guarantor without rendering the 
Guarantee, as it relates to such Guarantor, voidable under applicable laws      
relating to fraudulent conveyance or fraudulent transfer or similar laws        
affecting the rights of creditors generally. After the Closing Date, the Company
will cause each Restricted Subsidiary that Incurs Indebtedness to execute and   
deliver to the Trustee a Guarantee pursuant to which such Restricted Subsidiary 
will guarantee payment of the Notes. See '--Certain Covenants--Future           
Guarantors.'                                                                    

     Each Guarantee is a continuing guarantee and shall (a) remain in full force
and effect until payment in full of all the Guaranteed Obligations, (b) be      
binding upon each Guarantor and its successors and (c) inure to the benefit of, 
and be enforceable by, the Trustee, the Holders and their successors,           
transferees and assigns.                                                        

CHANGE OF CONTROL                                                               

Upon the occurrence of any of the following events (each a 'Change of 
Control'), each Holder will have the right to require the Issuers to repurchase 
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase (subject to the right of Holders of record on the relevant   
record date to receive interest due on the relevant interest payment date):     

           (i) prior to the earlier to occur of (A) the first public offering of
    common stock of Parent or (B) the first public offering of common stock of
   the Company, the Permitted Holders cease to be the 'beneficial owner' (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or 
     indirectly, of a majority in the aggregate of the total voting power of the
    Voting Stock of the Company, whether as a result of issuance of securities
of Parent or the Company, any merger, consolidation, liquidation or   
  dissolution of Parent or the Company, any direct or indirect transfer of
securities by any Permitted Holder or otherwise (for purposes of this 
    clause (i) and clause (ii) below, the Permitted Holders shall be deemed to
 beneficially own any Voting Stock of an entity (the 'specified entity')
 held by any other entity (the 'parent entity') so long as the Permitted
  Holders beneficially own (as so defined), directly or indirectly, in the
    aggregate a majority of the voting power of the Voting Stock of the parent
entity);                                                              

       (ii) (A) any 'person' (as such term is used in Sections 13(d) and
     14(d) of the Exchange Act), other than one or more Permitted Holders, is or
   becomes the beneficial owner (as defined in clause (i) above, except that
for purposes of this clause (ii) such person shall be deemed to have  
    'beneficial ownership' of all shares that any such person has the right to
  acquire, whether such right is exercisable immediately or only after the
 passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of the Company and (B) the Permitted 
  Holders 'beneficially own' (as defined in clause (i) above), directly or
    indirectly, in the aggregate a lesser percentage of the total voting power
   of the Voting Stock of the Company than such other person and do not have
 the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors (for the  
purposes of this clause (ii), such other person shall be deemed to    
  beneficially own any Voting Stock of a specified entity held by a parent
  entity, if such other person is the beneficial owner (as defined in this
    clause (ii)), directly or indirectly, of more than 35% of the voting power
of the Voting Stock of such parent entity and the Permitted Holders   
'beneficially own' (as defined in clause (i) above), directly or      
     indirectly, in the aggregate a lesser percentage of the voting power of the
    Voting Stock of such parent entity and do not have the right or ability by
  voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of such parent entity);            

        (iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company or Parent, as the case may be (together with any new          

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     directors whose election by such Board of Directors or whose nomination for
   election by the shareholders of the Company or Parent, as applicable, was
approved (x) in accordance with the Stockholders Agreement, (y) by the
Permitted Holders or (z) by a vote of 66 2/3% of the directors of the 
Company or Parent, as applicable, then still in office who were either
   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 Board of Directors of the Company or Parent,
as applicable, then in office;                                        

(iv) the adoption of a plan relating to the liquidation or
dissolution of the Company or Parent; or                              

           (v) the merger or consolidation of the Company or Parent with or into
    another Person or the merger of another Person with or into the Company or
   Parent, or the sale of all or substantially all the assets of the Company
    or Parent to another Person (other than a Person that is controlled by the
   Permitted Holders), and, in the case of any such merger or consolidation,
the securities of the Company or Parent, as the case may be, that are 
    outstanding immediately prior to such transaction and which represent 100%
     of the aggregate voting power of the Voting Stock of the Company or Parent,
as applicable, are changed into or exchanged for cash, securities or  
   property, unless pursuant to such transaction such securities are changed
   into or exchanged for, in addition to any other consideration, securities
 of the surviving Person or transferee that represent, immediately after
    such transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving Person or transferee.                   

  Within 30 days following any Change of Control, the Issuers shall mail a
notice to each Holder with a copy to the Trustee (the 'Change of Control Offer')
stating: (1) that a Change of Control has occurred and that such Holder has the 
right to require the Issuers to purchase such Holder's Notes at a purchase price
in cash equal to 101% of the principal amount thereof, plus accrued and unpaid  
interest, if any, to the date of repurchase (subject to the right of Holders of 
record on the relevant record date to receive interest on the relevant interest 
payment date); (2) the circumstances and relevant facts and financial           
information regarding such Change of Control; (3) the repurchase date (which    
shall be no earlier than 30 days nor later than 60 days from the date such      
notice is mailed); and (4) the instructions determined by the Issuers,          
consistent with this covenant, that a Holder must follow in order to have its   
Notes purchased.                                                                

   The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the     
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of     
Control Offer.                                                                  

     The Issuers will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations  
in connection with the repurchase of Notes pursuant to this covenant. To the    
extent that the provisions of any securities laws or regulations conflict with  
provisions of this covenant, the Issuers will comply with the applicable        
securities laws and regulations and will not be deemed to have breached its     
obligations under this covenant by virtue thereof.                              

    The Change of Control purchase feature is a result of negotiations between
the Issuers and the Initial Purchasers. Management has no present intention to  
engage in a transaction involving a Change of Control, although it is possible  
that the Company or Parent would decide to do so in the future. Subject to the  
limitations discussed below, the Issuers could, in the future, enter into       
certain transactions, including acquisitions, refinancings or other             
recapitalizations, that would not constitute a Change of Control under the      
Indenture, but that could increase the amount of indebtedness outstanding at    
such time or otherwise affect the Company's or Parent's capital structure or    
credit ratings. Restrictions on the ability of the Issuers to incur additional  
Indebtedness are contained in the covenant described under '--Certain           
Covenants--Limitation on Indebtedness'. Such restrictions can only be waived    
with the consent of the Holders of a majority in principal amount of the Notes  
then outstanding. Except for the limitations contained in such covenants,       
however, the Indenture will not contain any covenants or provisions that may    
afford holders of the Notes protection in the event of a highly leveraged       
transaction.                                                                    

    The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the Credit Agreement. Future Senior    
Indebtedness of the Company may contain prohibitions of certain events which    
would constitute a Change of Control or require such Senior Indebtedness to be  
repurchased                                                                     

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upon a Change of Control. Moreover, the exercise by the Holders of their right  
to require the Issuers to repurchase the Notes could cause a default under such 
Senior Indebtedness, even if the Change of Control itself does not, due to the  
financial effect of such repurchase on the Issuers. Finally, the Issuers'       
ability to pay cash to the Holders upon a repurchase may be limited by the      
Issuers' then existing financial resources. There can be no assurance that      
sufficient funds will be available when necessary to make any required          
repurchases. The provisions under the Indenture relative to the Issuers'        
obligation to make an offer to repurchase the Notes as a result of a Change of  
Control may be waived or modified with the written consent of the holders of a  
majority in principal amount of the Notes.                                      

CERTAIN COVENANTS                                                               

  The Indenture contains covenants including, among others, the following:

  Limitation on Indebtedness.  (a) The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, Incur, directly or  
indirectly, any Indebtedness; provided, however, that the Company or any        
Restricted Subsidiary may Incur Indebtedness if on the date of such Incurrence  
and after giving effect thereto the Consolidated Coverage Ratio would be greater
than 2.00:1.00.                                                                 

(b) Notwithstanding the foregoing paragraph (a), the Company and its  
Restricted Subsidiaries may Incur the following Indebtedness:                   

          (i) Bank Indebtedness Incurred pursuant to the Credit Agreement in
an aggregate principal amount not to exceed $65.0 million less the    
 aggregate amount of all prepayments of principal applied to permanently
reduce any such Indebtedness;                                         

       (ii) Indebtedness of the Company owed to, and held by, any Wholly
  Owned Subsidiary or Indebtedness of a Restricted Subsidiary owed to, and
 held by, the Company or any Wholly Owned Subsidiary; provided, however,
  that (i) any subsequent issuance or transfer of any Capital Stock or any
    other event that results in any such Wholly Owned Subsidiary ceasing to be
a Wholly Owned Subsidiary or any subsequent transfer of any such      
    Indebtedness (except to the Company or a Wholly Owned Subsidiary) shall be
    deemed, in each case, to constitute the Incurrence of such Indebtedness by
the issuer thereof and (ii) if the Company is the obligor on such     
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the Notes; 

        (iii) Indebtedness (A) represented by the Notes (not including any
   Additional Notes) and the Guarantees, (B) outstanding on the Closing Date
    (other than the Indebtedness described in clauses (i) and (ii) above), (C)
consisting of Refinancing Indebtedness Incurred in respect of any     
Indebtedness described in this clause (iii) or clause (v) (including  
Indebtedness Refinancing, Refinancing Indebtedness) or the foregoing  
     paragraph (a) or (D) consisting of guarantees of any Indebtedness permitted
under clauses (i) and (ii) of this paragraph (b);                     

     (iv) Indebtedness (A) in respect of performance bonds, bankers'
   acceptances, letters of credit and surety or appeal bonds provided by the
 Company and the Restricted Subsidiaries in the ordinary course of their
    business and (B) under Interest Rate Agreements entered into for bona fide
hedging purposes of the Company in the ordinary course of business;   
   provided, however, that such Interest Rate Agreements do not increase the
    Indebtedness of the Company outstanding at any time other than as a result
 of fluctuations in interest rates or by reason of fees, indemnities and
compensation payable thereunder;                                      

    (v) Purchase Money Indebtedness (including Capitalized Lease
Obligations) in an aggregate principal amount not in excess of $10.0  
million at any time outstanding;                                      

    (vi) Indebtedness arising from the honoring by a bank or other
     financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
  Indebtedness is extinguished within two Business Days of its incurrence;

    (vii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,   
     adjustment of purchase price or similar obligations, in each case, incurred
    or assumed in connection with the disposition of any business, assets or a
Subsidiary, other than guarantees of                                  

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  Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such    
     acquisition; provided, however, that (a) such Indebtedness is not reflected
 on the balance sheet of the Company or any Restricted Subsidiary of the
    Company (provided that contingent obligations referred to in a footnote to
    financial statements and not otherwise reflected on the balance sheet will
  be deemed not to be reflected on such balance sheet for purposes of this
    clause (a)) and (b) the maximum assumable liability in respect of all such
    Indebtedness shall at no time exceed the gross proceeds, including noncash
    proceeds (the fair market value of such noncash proceeds being measured at
     the time it is received and without giving effect to any subsequent changes
     in value), actually received by the Company and its Restricted Subsidiaries
in connection with such disposition; or                               

         (viii) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to the foregoing paragraph (a) or any other clause of this   
   paragraph (b)) in an aggregate principal amount on the date of Incurrence
     that, when added to all other Indebtedness Incurred pursuant to this clause
(viii) and then outstanding, shall not exceed $10.0 million.          

(c) Notwithstanding the foregoing, the Company may not Incur any      
Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used,  
directly or indirectly, to repay, prepay, redeem, defease, retire, refund or    
refinance any Subordinated Obligations unless such Indebtedness will be         
subordinated to the Notes to at least the same extent as such Subordinated      
Obligations.                                                                    

(d) Notwithstanding any other provision of this covenant, the maximum 
amount of Indebtedness that the Company or any Restricted Subsidiary may Incur  
pursuant to this covenant shall not be deemed to be exceeded solely as a result 
of fluctuations in the exchange rates of currencies. For purposes of determining
the outstanding principal amount of any particular Indebtedness Incurred        
pursuant to this covenant, (i) Indebtedness Incurred pursuant to the Credit     
Agreement prior to or on the Closing Date shall be treated as Incurred pursuant 
to clause (i) of paragraph (b) above, (ii) Indebtedness permitted by this       
covenant need not be permitted solely by reference to one provision permitting  
such Indebtedness but may be permitted in part by one such provision and in part
by one or more other provisions of this covenant permitting such Indebtedness   
and (iii) in the event that Indebtedness meets the criteria of more than one of 
the types of Indebtedness described in this covenant, the Company, in its sole  
discretion, shall classify such Indebtedness and only be required to include the
amount of such Indebtedness in one of such clauses.                             

 Limitation on Restricted Payments.  (a) The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary, directly or    
indirectly, to (i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any      
merger or consolidation involving the Company) or similar payment to the direct 
or indirect holders of its Capital Stock except dividends or distributions      
payable solely in its Capital Stock (other than Disqualified Stock) and except  
dividends or distributions payable to the Company or another Restricted         
Subsidiary (and, if such Restricted Subsidiary has shareholders other than the  
Company or other Restricted Subsidiaries, to its other shareholders on a pro    
rata basis), (ii) purchase, redeem, retire or otherwise acquire for value any   
Capital Stock of the Company or any Restricted Subsidiary held by Persons other 
than the Company or another Restricted Subsidiary, (iii) purchase, repurchase,  
redeem, defease or otherwise acquire or retire for value, prior to scheduled    
maturity, scheduled repayment or scheduled sinking fund payment any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of        
Subordinated Obligations purchased in anticipation of satisfying a sinking fund 
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iv) make any Investment (other than a      
Permitted Investment) in any Person (any such dividend, distribution, purchase, 
redemption, repurchase, defeasance, other acquisition, retirement or Investment 
being herein referred to as a 'Restricted Payment') if at the time the Company  
or such Restricted Subsidiary makes such Restricted Payment: (1) a Default will 
have occurred and be continuing (or would result therefrom); (2) the Company    
could not Incur at least $1.00 of additional Indebtedness under paragraph (a) of
the covenant described under '--Limitation on Indebtedness'; or (3) the         
aggregate amount of such Restricted Payment and all other Restricted Payments   
(the amount so expended, if other than in cash, to be determined in good faith  
by the Board of Directors, whose determination will be conclusive and evidenced 
by a resolution of the Board of Directors) declared or made subsequent to the   
Closing Date would exceed the sum of: (A) 50% of the Consolidated Net Income    
accrued during the period (treated as one accounting period) from the beginning 
of the fiscal quarter immediately following the fiscal quarter during which the 
Closing Date occurs to the end of the most recent fiscal                        

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quarter ending at least 45 days prior to the date of such Restricted Payment    
(or, in case such Consolidated Net Income will be a deficit, minus 100% of such 
deficit); (B) the aggregate Net Cash Proceeds received by the Company from the  
issue or sale of its Capital Stock (other than Disqualified Stock) subsequent to
the Closing Date (other than an issuance or sale to (x) a Subsidiary of the     
Company or (y) an employee stock ownership plan or other trust established by   
the Company or any of its Subsidiaries); (C) the amount by which Indebtedness of
the Company or its Restricted Subsidiaries is reduced on the Company's balance  
sheet upon the conversion or exchange (other than by a Subsidiary of the        
Company) subsequent to the Closing Date of any Indebtedness of the Company or   
its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of any cash or the fair
market value of other property distributed by the Company or any Restricted     
Subsidiary upon such conversion or exchange); (D) 100% of the aggregate amount  
of cash and marketable securities contributed to the capital of the Company     
after the Closing Date; and (E) the amount equal to the net reduction in        
Investments in Unrestricted Subsidiaries resulting from (i) payments of         
dividends, repayments of the principal of loans or advances or other transfers  
of assets to the Company or any Restricted Subsidiary from Unrestricted         
Subsidiaries or (ii) the redesignation of Unrestricted Subsidiaries as          
Restricted Subsidiaries (valued in each case as provided in the definition of   
'Investment') not to exceed, in the case of any Unrestricted Subsidiary, the    
amount of Investments previously made by the Company or any Restricted          
Subsidiary in such Unrestricted Subsidiary, which amount was included in the    
calculation of the amount of Restricted Payments.                               

  (b) The provisions of the foregoing paragraph (a) will not prohibit: (i)
any Restricted Payment made by exchange for, or out of the proceeds of the      
substantially concurrent sale of, Capital Stock of the Company (other than      
Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary  
of the Company or an employee stock ownership plan or other trust established by
the Company or any of its Subsidiaries); provided, however, that (A) such       
Restricted Payment will be excluded in the calculation of the amount of         
Restricted Payments and (B) the Net Cash Proceeds from such sale applied in the 
manner set forth in this clause (i) will be excluded from the calculation of    
amounts under clause (3)(B) of paragraph (a) above; (ii) any purchase,          
repurchase redemption, defeasance or other acquisition or retirement for value  
of Subordinated Obligations of the Company made by exchange for, or out of the  
proceeds of the substantially concurrent sale of, Indebtedness of the Company   
that is permitted to be Incurred pursuant to paragraph (b) of the covenant      
described under '--Limitation on Indebtedness'; provided, however, that such    
purchase, repurchase, redemption, defeasance or other acquisition or retirement 
for value will be excluded in the calculation of the amount of Restricted       
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net 
Available Cash to the extent permitted by the covenant described under          
'--Limitation on Sales of Assets and Subsidiary Stock'; provided, however, that 
such purchase or redemption will be excluded in the calculation of the amount of
Restricted Payments; (iv) dividends paid within 60 days after the date of       
declaration thereof if at such date of declaration such dividend would have     
complied with this covenant; provided, however, that such dividend will be      
included in the calculation of the amount of Restricted Payments; (v) the       
repurchase or other acquisition of shares of, or options to purchase shares of, 
common stock of the Company or any of its Subsidiaries from employees, former   
employees, directors or former directors of the Company or any of its           
Subsidiaries (or permitted transferees of such employees, former employees,     
directors or former directors), pursuant to the terms of the agreements         
(including employment agreements) or plans (or amendments thereto) approved by  
the Board of Directors under which such individuals purchase or sell or are     
granted the option to purchase or sell, shares of such common stock; provided,  
however, that the aggregate amount of such repurchases shall not exceed $250,000
in any calendar year; provided further, however, that such repurchases and other
acquisitions shall be included in the calculation of the amount of Restricted   
Payments; (vi) payment of dividends, other distributions or other amounts by the
Company for the purposes set forth in clauses (A) through (C) below; provided,  
however, that such dividend, distribution or amount set forth in clause (C)     
shall be included in the calculation of the amount of Restricted Payments for   
the purposes of paragraph (a) above: (A) to Parent in amounts equal to the      
amounts required for Parent to pay franchise taxes and other fees required to   
maintain its corporate existence and provide for other operating costs of up to 
$500,000 per fiscal year; (B) to Parent in amounts equal to amounts required for
Parent to pay Federal, state and local income taxes to the extent such income   
taxes are attributable to the income of the Company and its Restricted          
Subsidiaries (and, to the extent of amounts actually received from its          
Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent  
attributable to the income of such Unrestricted Subsidiaries); (C) to Parent in 
amounts equal to amounts expended by Parent to repurchase Capital               

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Stock of Parent owned by former employees of the Company or its Subsidiaries or 
their assigns, estates and heirs; provided, however, that the aggregate amount  
paid, loaned or advanced to Parent pursuant to this clause (C) shall not, in the
aggregate, exceed $1.5 million per fiscal year of the Company plus any unused   
amounts from any immediately preceding fiscal year, up to a maximum aggregate   
amount of $5.0 million during the term of the Indenture, plus any amounts       
contributed by Parent to the Company as a result of resales of such repurchased 
shares of Capital Stock; or (vii) the payment of dividends on the Company's     
Common Stock, following the first public offering of the Company's Common Stock 
after the Closing Date, of up to 6% per annum of the net proceeds received by   
the Company in such public offering, other than public offerings with respect to
the Company's Common Stock registered on Form S-8, provided, however, that such 
dividends will be included in the calculation of the amount of Restricted       
Payments for purposes of paragraph (a) above.                                   

Limitation on Restrictions on Distributions from Restricted           
Subsidiaries.  The Indenture provides that the Company will not, and will not   
permit any Restricted Subsidiary to, create or otherwise cause or permit to     
exist or become effective any consensual encumbrance or restriction on the      
ability of any Restricted Subsidiary to (i) pay dividends or make any other     
distributions on its Capital Stock or pay any Indebtedness or other obligations 
owed to the Company, (ii) make any loans or advances to the Company or (iii)    
transfer any of its property or assets to the Company, except: (1) any          
encumbrance or restriction pursuant to applicable law or an agreement in effect 
at or entered into on the Closing Date; (2) any encumbrance or restriction with 
respect to a Restricted Subsidiary pursuant to an agreement relating to any     
Indebtedness Incurred by such Restricted Subsidiary prior to the date on which  
such Restricted Subsidiary was acquired by the Company (other than Indebtedness 
Incurred as consideration in, in contemplation of, or to provide all or any     
portion of the funds or credit support utilized to consummate the transaction or
series of related transactions pursuant to which such Restricted Subsidiary     
became a Restricted Subsidiary or was otherwise acquired by the Company) and    
outstanding on such date; (3) in the case of clause (iii), any encumbrance or   
restriction (A) that restricts in a customary manner the subletting, assignment 
or transfer of any property or asset that is subject to a lease, license or     
similar contract, (B) that is or was created by virtue of any transfer of,      
agreement to transfer, option or right with respect to, or Lien on, any property
or assets of the Company or any Restricted Subsidiary not otherwise prohibited  
by the Indenture or (C) contained in security agreements securing Indebtedness  
of a Restricted Subsidiary to the extent such encumbrance or restriction        
restricts the transfer of the property subject to such security agreements; (4) 
with respect to a Restricted Subsidiary, any restriction imposed pursuant to an 
agreement entered into for the sale or disposition of all or substantially all  
the Capital Stock or assets of such Restricted Subsidiary pending the closing of
such sale or disposition; (5) customary provisions in joint venture agreements  
and other similar agreements entered into in the ordinary course of business; or
(6) an agreement governing Indebtedness incurred to Refinance the Indebtedness  
issued, assumed or incurred pursuant to an agreement referred to in clauses (1) 
through (5) above; provided, however, that the provisions relating to such      
encumbrance or restriction contained in any agreement relating to such          
Indebtedness are no less favorable to the Company in any material respect as    
determined by the Board of Directors of the Company in their reasonable and good
faith judgment than the provisions relating to such encumbrance or restriction  
contained in agreements relating to the Indebtedness being Refinanced.          

Limitation on Sales of Assets and Subsidiary Stock.  (a) The Indenture
provides that the Company will not, and will not permit any Restricted          
Subsidiary to, make any Asset Disposition unless (i) the Company or such        
Restricted Subsidiary receives consideration (including by way of relief from,  
or by any other Person assuming sole responsibility for, any liabilities,       
contingent or otherwise) at the time of such Asset Disposition at least equal to
the fair market value of the shares and assets subject to such Asset            
Disposition, (ii) at least 85% of the consideration thereof received by the     
Company or such Restricted Subsidiary is in the form of cash, provided that with
respect to the sale or other disposition of an operational Academy, the Company 
shall be deemed to be in compliance with this clause (ii) if the Consolidated   
Coverage Ratio after giving effect to such sale or disposition and the          
application of proceeds received therefrom is greater than or equal to the      
Consolidated Coverage Ratio immediately prior to giving effect to such sale or  
disposition and (iii) an amount equal to 100% of the Net Available Cash from    
such Asset Disposition is applied by the Company (or such Restricted Subsidiary,
as the case may be) (A) first, to the extent the Company elects (or is required 
by the terms of any Indebtedness) to prepay, repay, redeem or purchase          
Indebtedness of the Company outstanding under the Credit Agreement within 18    
months after the later of the date of such Asset Disposition or the receipt of  
such Net Available Cash; (B) second, to the extent of the balance of Net        
Available Cash after application in accordance with clause (A), to              

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the extent the Company or such Restricted Subsidiary elects, to reinvest in     
Additional Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Available Cash received by the Company or another
Restricted Subsidiary) within 18 months from the later of such Asset Disposition
or the receipt of such Net Available Cash; (C) third, to the extent of the      
balance of such Net Available Cash after application in accordance with clauses 
(A) and (B), to make an Offer (as defined below) to purchase Notes pursuant to  
and subject to the conditions set forth in section (b) of this covenant;        
provided, however, that if the Company elects (or is required by the terms of   
any other Senior Indebtedness), such Offer may be made ratably to purchase the  
Notes and other Senior Indebtedness of the Company, and (D) fourth, to the      
extent of the balance of such Net Available Cash after application in accordance
with clauses (A), (B) and (C), to (x) acquire Additional Assets (other than     
Indebtedness and Capital Stock) or (y) prepay, repay or purchase Indebtedness of
the Company (other than Indebtedness owed to an Affiliate of the Company and    
other than Disqualified Stock of the Company) or Indebtedness of any Restricted 
Subsidiary (other than Indebtedness owed to the Company or an Affiliate of the  
Company), in each case described in this clause (D) within 18 months from the   
receipt of such Net Available Cash or, if the Company has made an Offer pursuant
to clause (C), six months from the date such Offer is consummated; provided,    
however, that in connection with any prepayment, repayment or purchase of       
Indebtedness pursuant to clause (A), (C) or (D) above, the Company or such      
Restricted Subsidiary will retire such Indebtedness and will cause the related  
loan commitment (if any) to be permanently reduced in an amount equal to the    
principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing 
provisions of this covenant, the Company and the Restricted Subsidiaries will   
not be required to apply any Net Available Cash in accordance with this covenant
except to the extent that the aggregate Net Available Cash from all Asset       
Dispositions that is not applied in accordance with this covenant exceeds $10   
million.                                                                        

   For the purposes of clause (ii) of the preceding paragraph, the following
are deemed to be cash: (x) the assumption of Indebtedness of the Company (other 
than Disqualified Stock of the Company) or any Restricted Subsidiary and the    
release of the Company or such Restricted Subsidiary from all liability on such 
Indebtedness in connection with such Asset Disposition and (y) securities       
received by the Company or any Restricted Subsidiary from the transferee that   
are promptly converted by the Company or such Restricted Subsidiary into cash.  

(b) In the event of an Asset Disposition that requires the purchase of
Notes (and other Senior Indebtedness) pursuant to clause (a)(iii)(C) of this    
covenant, the Company will be required to purchase Notes (and other Senior      
Indebtedness) tendered pursuant to an offer by the Company for the Notes (and   
other Senior Indebtedness) (the 'Offer') at a purchase price of 100% of their   
principal amount plus accrued and unpaid interest, if any, to the date of       
purchase in accordance with the procedures (including prorationing in the event 
of oversubscription) set forth in the Indenture. If the aggregate purchase price
of Notes (and other Senior Indebtedness) tendered pursuant to the Offer is less 
than the Net Available Cash allotted to the purchase of the Notes (and other    
Senior Indebtedness), the Company will apply the remaining Net Available Cash in
accordance with clause (a)(iii)(D) of this covenant. The Company will not be    
required to make an Offer for Notes (and other Senior Indebtedness) pursuant to 
this covenant if the Net Available Cash available therefor (after application of
the proceeds as provided in clauses (A) and (B) of this covenant section        
(a)(iii)) is less than $10 million for any particular Asset Disposition (which  
lesser amount will be carried forward for purposes of determining whether an    
Offer is required with respect to the Net Available Cash from any subsequent    
Asset Disposition).                                                             

(c) The Company will comply, to the extent applicable, with the       
requirements of Section 14(e) of the Exchange Act and any other securities laws 
or regulations in connection with the repurchase of Notes pursuant to this      
covenant. To the extent that the provisions of any securities laws or           
regulations conflict with provisions of this covenant, the Company will comply  
with the applicable securities laws and regulations and will not be deemed to   
have breached its obligations under this covenant by virtue thereof.            

 Limitation on Transactions with Affiliates.  (a) The Indenture provides
that the Company will not, and will not permit any Restricted Subsidiary to,    
directly or indirectly, enter into or conduct any transaction (including the    
purchase, sale, lease or exchange of any property or the rendering of any       
service) with any Affiliate of the Company (an 'Affiliate Transaction') (i) on  
terms that are less favorable to the Company or such Restricted Subsidiary, as  
the case may be, than those that could be obtained at the time of such          
transaction in arm's-length dealings with a Person who is not such an Affiliate,
(ii) if such Affiliate Transaction involves an aggregate amount in excess of    
$1.0 million, such terms (1) are set forth in writing and (2) have been approved
by a majority                                                                   

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of the members of the Board of Directors having no personal stake in such       
Affiliate Transaction and (iii) if such Affiliate Transaction involves an amount
in excess of $5.0 million, such terms have also been determined by a nationally 
recognized appraisal or investment banking firm to be fair, from a financial    
standpoint, to the Company and its Restricted Subsidiaries.                     

     (b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
'Limitation on Restricted Payments', (ii) any issuance of securities, or other  
payments, awards or grants in cash, securities or otherwise pursuant to, or the 
funding of, employment arrangements, stock options and stock ownership plans    
approved by the Board of Directors, (iii) the grant of stock options or similar 
rights to employees and directors of the Company pursuant to plans approved by  
the Board of Directors, (iv) loans or advances to employees in the ordinary     
course of business in accordance with past practices of the Company, but in any 
event not to exceed $1.0 million in the aggregate outstanding at any one time,  
(v) any transaction between the Company and a Wholly Owned Subsidiary or between
Wholly Owned Subsidiaries, (vi) reasonable fees and compensation paid to, and   
indemnity provided on behalf of, officers, directors, employees, consultants or 
agents of the Company or any Restricted Subsidiary of the Company as determined 
in good faith by the Company's Board of Directors; (vii) any transactions       
undertaken pursuant to any contractual obligations in existence on the Closing  
Date (as in effect on the Closing Date); (viii) the provision by Persons who may
be deemed Affiliates of the Company of investment banking, commercial banking,  
trust lending or financing, investment, underwriting, placement agent, financial
advisory or similar services to the Company or its Subsidiaries; (ix)           
transactions with customers, clients, suppliers or purchasers or sellers of     
goods or services, in each case in the ordinary course of business and otherwise
in compliance with the terms of the Indenture, which are fair to the Company or 
its Restricted Subsidiaries in the reasonable determination of the Board of     
Directors of the Company or the senior management thereof or are on terms no    
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could be obtained at the time of such transaction in            
arm's-length dealings with a Person who is not an Affiliate; and (x) any        
contribution to the capital of the Company by Parent or any purchase of common  
stock of the Company by Parent.                                                 

Limitation on the Sale or Issuance of Capital Stock of Restricted     
Subsidiaries.  The Indenture provides that the Company will not sell or         
otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary, and
will not permit any Restricted Subsidiary, directly or indirectly, to issue or  
sell or otherwise dispose of any shares of its Capital Stock except: (i) to the 
Company or a Wholly Owned Subsidiary; (ii) if, immediately after giving effect  
to such issuance, sale or other disposition, neither the Company nor any of its 
Subsidiaries own any Capital Stock of such Restricted Subsidiary or (iii) if,   
immediately after giving effect to such issuance or sale, such Restricted       
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect thereto would have been permitted  
to be made under the covenant described under '--Limitation on Restricted       
Payments' if made on the date of such issuance, sale or other disposition. The  
proceeds of any sale of such Capital Stock permitted hereby will be treated as  
Net Available Cash from an Asset Disposition and must be applied in accordance  
with the terms of the covenant described under '--Limitation on Sales of Assets 
and Subsidiary Stock.'                                                          

     Limitation on Liens.  The Indenture provides that the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, Incur or  
permit to exist any Lien of any nature whatsoever on any of its property or     
assets (including Capital Stock of a Restricted Subsidiary), whether owned at   
the Closing Date or thereafter acquired, other than Permitted Liens, without    
effectively providing that the Notes shall be secured equally and ratably with  
(or prior to) the obligations so secured for so long as such obligations are so 
secured.                                                                        

     Future Guarantors.  The Indenture provides that the Company will cause each
Domestic Subsidiary to become a Guarantor, and, if applicable, execute and      
deliver to the Trustee a supplemental indenture in the form set forth in the    
Indenture pursuant to which such Restricted Subsidiary will guarantee payment of
the Notes. Each Guarantee will be limited to an amount not to exceed the maximum
amount that can be guaranteed by that Restricted Subsidiary without rendering   
the Guarantee, as it relates to such Restricted Subsidiary, voidable under      
applicable law relating to fraudulent conveyance or fraudulent transfer or      
similar laws affecting the rights of creditors generally.                       

     Reports.  The Indenture provides that, notwithstanding that the Company may
not be subject to the reporting requirements of Section 13 or 15(d) of the      
Exchange Act, the Company will file with the Commission                         

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and provide the Trustee and Noteholders and prospective Noteholders (upon       
request) within 15 days after it files them with the Commission copies of its   
annual report and the information, documents and other reports that are         
specified in Sections 13 and 15(d) of the Exchange Act. In addition, following a
Public Equity Offering, the Company shall furnish to the Trustee and the        
Noteholders, promptly upon their becoming available, copies of the annual report
to shareholders and any other information provided by the Company or Parent to  
its public shareholders generally. The Company also will comply with the other  
provisions of Section 314(a) of the TIA.                                        

MERGER AND CONSOLIDATION                                                        

     The Indenture provides that neither the Company nor Parent will consolidate
with or merge with or into, or convey, transfer or lease all or substantially   
all its assets to, any Person, unless: (i) the resulting, surviving or          
transferee Person (the 'Successor Company') will be a corporation organized and 
existing under the laws of the United States of America, any State thereof or   
the District of Columbia and the Successor Company (if not the Company or       
Parent) will expressly assume, by a supplemental indenture executed and         
delivered to the Trustee, in form satisfactory to the Trustee, all the          
obligations of the Company under the Notes and the Indenture; (ii) immediately  
after giving effect to such transaction (and treating any Indebtedness which    
becomes an obligation of the Successor Company or any Restricted Subsidiary as a
result of such transaction as having been Incurred by the Successor Company or  
such Restricted Subsidiary at the time of such transaction), no Default will    
have occurred and be continuing; and (iii) immediately after giving effect to   
such transaction, the Successor Company would be able to Incur an additional    
$1.00 of Indebtedness under paragraph (a) of the covenant described under       
'--Certain Covenants--Limitation on Indebtedness.'                              

In the event of any transaction (other than a lease) described in, and
complying with, the immediately preceding paragraph in which the Company or     
Parent, as applicable, is not the surviving Person and the surviving Person     
assumes all the obligations of the Company or Parent, as applicable, under the  
Notes and the Indenture pursuant to a supplemental indenture, such surviving    
Person shall succeed to, and be substituted for, and may exercise every right   
and power of, the Company or Parent, as applicable, and the Company or Parent,  
as applicable, will be discharged from its obligations under the Indenture and  
the Notes; provided that solely for the purpose of calculating amounts described
in clause (3) under '--Limitation on Restricted Payments,' any such surviving   
Person shall only be deemed to have succeeded to, and be substituted for, the   
Company or Parent, as applicable, with respect to the period subsequent to the  
effective time of such transaction, and the Company or Parent, as applicable,   
(before giving effect to such transaction) shall be deemed to be the 'Company'  
or 'Parent,' as applicable for such purposes for all prior periods.             

Parent will not and the Company will not permit any Guarantor to      
consolidate with or merge with or into, or convey, transfer or lease, in one    
transaction or series of transactions, all or substantially all of its assets to
any Person unless: (i) the resulting, surviving or transferee Person (if not    
such Guarantor) shall be a Person organized and existing under the laws of the  
jurisdiction under which such Guarantor was organized or under the laws of the  
United States of America, or any State hereof or the District of Columbia, and  
such Person shall expressly assume, by an amendment to the Indenture, in a form 
acceptable to the Trustee, all the obligations of such Guarantor under its      
Guarantee; (ii) immediately after giving effect to such transaction or          
transactions on a pro forma basis (and treating any Indebtedness which becomes  
an obligation of the resulting, surviving or transferee Person as a result of   
such transaction as having been issued by such Person at the time of such       
transaction), no Default shall have occurred and be continuing; and (iii) the   
Issuers deliver to the Trustee an Officers' Certificate and an Opinion of       
Counsel, each stating that such consolidation, merger or transfer and such      
amendment to the Indenture, if any, complies with the Indenture.                

Notwithstanding the foregoing, (a) any Restricted Subsidiary may      
consolidate with, merge into or transfer all or part of its properties and      
assets to the Company and (b) the Company may merge with an Affiliate           
incorporated solely for the purpose of reincorporating the Company in another   
jurisdiction to realize tax or other benefits.                                  

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DEFAULTS                                                                        

 An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due and payable, and the default continues 
for 30 days, (ii) a default in the payment of principal of any Note when due and
payable at its Stated Maturity, upon required redemption or repurchase, upon    
acceleration or otherwise, (iii) the failure by Parent or the Company to comply 
with its obligations under the covenant described under '--Merger and           
Consolidation,' (iv) the failure by the Company or Parent to comply for 30 days 
after notice with any of its obligations under the covenants described under    
'--Change of Control' or '--Certain Covenants' (in each case, other than a      
failure to purchase Notes), (v) the failure by the Company or Parent to comply  
for 60 days after notice with its other agreements contained in the Notes or the
Indenture, (vi) the failure by the Company, Parent or any Significant Subsidiary
to pay any Indebtedness within any applicable grace period after final maturity 
or the acceleration of any such Indebtedness by the holders thereof because of a
default if the total amount of such Indebtedness unpaid or accelerated exceeds  
$10.0 million (the 'cross acceleration provision') and such failure continues   
for 10 days after receipt of the notice specified in the Indenture, (vii)       
certain events of bankruptcy, insolvency or reorganization of the Company,      
Parent or a Significant Subsidiary (the 'bankruptcy provisions'), (viii) the    
rendering of any judgment or decree for the payment of money in excess of $10.0 
million at the time it is entered against the Company, Parent or a Significant  
Subsidiary and is not discharged, waived or stayed if (A) an enforcement        
proceeding thereon is commenced by any creditor or (B) such judgment or decree  
remains outstanding for a period of 60 days following such judgment and is not  
discharged, waived or stayed (the 'judgment default provision') or (ix) any     
Guarantee ceases to be in full force and effect (except as contemplated by the  
terms thereof) or any Guarantor or Person acting by or on behalf of such        
Guarantor denies or disaffirms such Guarantor's obligations under the Indenture 
or any Guarantee and such Default continues for 10 days after receipt of the    
notice specified in the Indenture.                                              

     The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected 
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.       

However, a default under clause (iv), (v) or (viii) above will not    
constitute an Event of Default until the Trustee or the Holders of at least 25% 
in principal amount of the outstanding Notes notify the Issuers of the default  
and the Issuers do not cure such default within the time specified in clause    
(iv), (v) or (viii) above after receipt of such notice.                         

    If an Event of Default (other than an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Issuers) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of   
the outstanding Notes by notice to the Issuers may declare the principal of, and
accrued but unpaid interest on, all the Notes to be due and payable. Upon such a
declaration, such principal and interest will be due and payable immediately. If
an Event of Default relating to certain events of bankruptcy, insolvency or     
reorganization of the Issuers occurs, the principal of, and interest on, all the
Notes will become immediately due and payable without any declaration or other  
act on the part of the Trustee or any Holders. Under certain circumstances, the 
Holders of a majority in principal amount of the outstanding Notes may rescind  
any such acceleration with respect to the Notes and its consequences.           

  Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will 
be under no obligation to exercise any of the rights or powers under the        
Indenture at the request or direction of any of the Holders unless such Holders 
have offered to the Trustee reasonable indemnity or security against any loss,  
liability or expense. Except to enforce the right to receive payment of         
principal, premium (if any) or interest when due, no Holder may pursue any      
remedy with respect to the Indenture or the Notes unless (i) such Holder has    
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have       
requested the Trustee in writing to pursue the remedy, (iii) such Holders have  
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days  
after the receipt of the request and the offer of security or indemnity and (v) 
the Holders of a majority in principal amount of the outstanding Notes have not 
given the Trustee a direction inconsistent with such request within such 60-day 
period. Subject to certain restrictions, the Holders of a majority in principal 
amount of the outstanding Notes will be given the right to direct the time,     
method and place of conducting any proceeding for                               

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any remedy available to the Trustee or of exercising any trust or power         
conferred on the Trustee. The Trustee, however, may refuse to follow any        
direction that conflicts with law or the Indenture or that the Trustee          
determines is unduly prejudicial to the rights of any other Holder or that would
involve the Trustee in personal liability. Prior to taking any action under the 
Indenture, the Trustee will be entitled to indemnification satisfactory to it in
its sole discretion against all losses and expenses caused by taking or not     
taking such action.                                                             

  The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within the earlier of 90 days after it occurs or 30 days after it is known to a 
Trust Officer or written notice of it is received by the Trustee. Except in the 
case of a Default in the payment of principal of, premium (if any) or interest  
on any Note (including payments pursuant to the redemption provisions of such   
Note), the Trustee may withhold notice if and so long as a committee of its     
Trust Officers in good faith determines that withholding notice is in the       
interests of the Noteholders. In addition, the Issuers will be required to      
deliver to the Trustee, within 120 days after the end of each fiscal year, a    
certificate indicating whether the signers thereof know of any Default that     
occurred during the previous year. The Issuers will also be required to deliver 
to the Trustee, within 30 days after the occurrence thereof, written notice of  
any event which would constitute certain Events of Default, the status of any   
such event and the action the Issuers is taking or proposes to take in respect  
thereof.                                                                        

AMENDMENTS AND WAIVERS                                                          

  Subject to certain exceptions, the Indenture or the Notes may be amended
with the written consent of the Holders of a majority in principal amount of the
Notes then outstanding, and any past default or compliance with any provisions  
may be waived with the consent of the Holders of a majority in principal amount 
of the Notes then outstanding. However, without the consent of each Holder of an
outstanding Note affected, no amendment may, among other things, (i) reduce the 
amount of Notes whose Holders must consent to an amendment, (ii) reduce the rate
of or extend the time for payment of interest or any liquidated damages on any  
Note, (iii) reduce the principal of, or extend the Stated Maturity of, any Note,
(iv) reduce the premium payable upon the redemption of any Note or change the   
time at which any Note may be redeemed as described under '--Optional           
Redemption,' (v) make any Note payable in money other than that stated in the   
Note, (vi) impair the right of any Holder to receive payment of principal of,   
and interest or any liquidated damages on, such Holder's Notes on or after the  
due dates therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Notes, (vii) make any change in the amendment     
provisions which require each Holder's consent or in the waiver provisions or   
(viii) modify the Guarantees in any manner adverse to the Holders.              

  Without the consent of any Holder, the Issuers and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide  
for the assumption by a successor corporation of the obligations of the Issuers 
under the Indenture, to provide for uncertificated Notes in addition to, or in  
place of, certificated Notes (provided that the uncertificated Notes are issued 
in registered form for purposes of Section 163(f) of the Code, or in a manner   
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the 
Code), to add additional Guarantees with respect to the Notes, to secure the    
Notes, to add to the covenants of the Issuers for the benefit of the Noteholders
or to surrender any right or power conferred upon the Issuers, to make any      
change that does not adversely affect the rights of any Holder, subject to the  
provisions of the Indenture, to provide for the issuance of the Exchange Notes, 
Private Exchange Notes or Additional Notes or to comply with any requirement of 
the Commission in connection with the qualification of the Indenture under the  
TIA.                                                                            

     The consent of the Noteholders will not be necessary under the Indenture to
approve the particular form of any proposed amendment. It will be sufficient if 
such consent approves the substance of the proposed amendment.                  

    After an amendment under the Indenture becomes effective, the Issuers will
be required to mail to Noteholders a notice briefly describing such amendment.  
However, the failure to give such notice to all Noteholders, or any defect      
therein, will not impair or affect the validity of the amendment.               

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TRANSFER AND EXCHANGE                                                           

A Noteholder may transfer or exchange Notes in accordance with the    
Indenture. Upon any transfer or exchange, the registrar and the Trustee may     
require a Noteholder, among other things, to furnish appropriate endorsements   
and transfer documents, and the Issuers may require a Noteholder to pay any     
taxes required by law or permitted by the Indenture. The Issuers are not        
required to transfer or exchange any Note selected for redemption or to transfer
or exchange any Note for a period of 15 days prior to a selection of Notes to be
redeemed. The Notes will be issued in registered form and the registered holder 
of a Note will be treated as the owner of such Note for all purposes.           

DEFEASANCE                                                                      

     The Issuers at any time may terminate all their obligations under the Notes
and the Indenture ('legal defeasance'), except for certain obligations,         
including those respecting the defeasance trust and obligations to register the 
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or     
stolen Notes and to maintain a registrar and paying agent in respect of the     
Notes. The Issuers at any time may terminate their obligations under the        
covenants described under '--Certain Covenants,' the operation of the cross     
acceleration provision, the bankruptcy provisions with respect to Significant   
Subsidiaries and the judgment default provision described under '--Defaults' and
the limitations contained in clause (iii) under the first paragraph of '--Merger
and Consolidation' ('covenant defeasance'). In the event that the Issuers       
exercise their legal defeasance option or its covenant defeasance option, each  
Guarantor will be released from all of its obligations with respect to its      
Guarantee.                                                                      

The Issuers may exercise their legal defeasance option notwithstanding
their prior exercise of their covenant defeasance option. If the Issuers        
exercise their legal defeasance option, payment of the Notes may not be         
accelerated because of an Event of Default with respect thereto. If the Issuers 
exercise their covenant defeasance option, payment of the Notes may not be      
accelerated because of an Event of Default specified in clause (iv), (vi), (vii)
(with respect only to Significant Subsidiaries), (viii) (with respect only to   
Significant Subsidiaries) or (ix) under '--Defaults' or because of the failure  
of the Company or Parent to comply with clause (iii) under the first paragraph  
of '--Merger and Consolidation.'                                                

     In order to exercise either defeasance option, the Issuers must irrevocably
deposit in trust (the 'defeasance trust') with the Trustee money or U.S.        
Government Obligations for the payment of principal, premium (if any) and       
interest on the Notes to redemption or maturity, as the case may be, and must   
comply with certain other conditions, including delivery to the Trustee of an   
Opinion of Counsel to the effect that holders of the Notes will not recognize   
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amounts and
in the same manner and at the same times as would have been the case if such    
deposit and defeasance had not occurred (and, in the case of legal defeasance   
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue 
Service or other change in applicable Federal income tax law).                  

CONCERNING THE TRUSTEE                                                          

   PNC Bank, National Association is the Trustee under the Indenture and has
been appointed by the Issuers as Registrar and Paying Agent with regard to the  
Notes.                                                                          

GOVERNING LAW                                                                   

     The Indenture provides that it and the Notes are governed by, and are to be
construed in accordance with, the laws of the State of New York without giving  
effect to applicable principles of conflicts of law to the extent that the      
application of the law of another jurisdiction would be required thereby.       

CERTAIN DEFINITIONS                                                             

'Additional Assets' means (i) any property or assets (other than      
Indebtedness and Capital Stock) to be used by the Company or a Restricted       
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that       
becomes a Restricted Subsidiary as a result of the acquisition of such Capital  
Stock by the Company or another Restricted                                      

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Subsidiary; or (iii) Capital Stock constituting a minority interest in any      
Person that at such time is a Restricted Subsidiary; provided, however, that any
such Restricted Subsidiary described in clause (ii) or (iii) above is primarily 
engaged in a Related Business.                                                  

   'Affiliate' of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common     
control with such specified Person. For the purposes of this definition,        
'control' when used with respect to any Person means the power to direct the    
management and policies of such Person, directly or indirectly, whether through 
the ownership of voting securities, by contract or otherwise; and the terms     
'controlling' and 'controlled' have meanings correlative to the foregoing.      

'Asset Disposition' means any sale, lease, sale-leaseback transaction,
transfer or other disposition (or series of related sales, leases, transfers or 
dispositions) by the Company or any Restricted Subsidiary, including any        
disposition by means of a merger, consolidation or similar transaction (each    
referred to for the purposes of this definition as a 'disposition'), of (i) any 
shares of Capital Stock of a Restricted Subsidiary (other than directors'       
qualifying shares or shares required by applicable law to be held by a Person   
other than the Company or a Restricted Subsidiary), (ii) all or substantially   
all the assets of any division or line of business of the Company or any        
Restricted Subsidiary or (iii) any other assets of the Company or any Restricted
Subsidiary other than property or equipment that has become worn out, obsolete, 
damaged or otherwise unsuitable for use in connection with the business of the  
Company or any Restricted Subsidiary, as the case may be (other than, in the    
case of (i), (ii) and (iii) above, (w) a disposition by a Restricted Subsidiary 
to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned   
Subsidiary, (x) for purposes of the provisions described under '--Certain       
Covenants--Limitation on Sales of Assets and Subsidiary Stock' only, a          
disposition subject to the covenant described under '--Certain                  
Covenants--Limitation on Restricted Payments,' (y) the sale, lease, transfer or 
other disposition of all or substantially all the assets of the Company as      
permitted by the covenant described under 'Merger and Consolidation' and (x) a  
disposition of assets with a fair market value of less than $100,000).          

    'Average Life' means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum  
of the products of the numbers of years from the date of determination to the   
dates of each successive scheduled principal payment of such Indebtedness or    
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.                

   'Bank Indebtedness' means any and all amounts payable under or in respect
of the Credit Agreement and any Refinancing Indebtedness with respect thereto,  
as amended from time to time, including principal, premium (if any), interest   
(including interest accruing on or after the filing of any petition in          
bankruptcy or for reorganization relating to the Company whether or not a claim 
for post-filing interest is allowed in such proceedings), fees, charges,        
expenses, reimbursement obligations, guarantees and all other amounts payable   
thereunder or in respect thereof.                                               

     'Board of Directors' means the Board of Directors of the Company or Parent,
as applicable, or any committee thereof duly authorized to act on behalf of such
Board of Directors.                                                             

'Business Day' means each day which is not a Legal Holiday.           

   'Capital Stock' of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of, or      
interests in (however designated), equity of such Person, including any         
Preferred Stock, but excluding any debt securities convertible into such equity.

    'Capitalized Lease Obligations' means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting     
purposes in accordance with GAAP, and the amount of Indebtedness represented by 
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the  
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be prepaid by the lessee without payment of a    
penalty.                                                                        

'CCP' means Chase Capital Partners and its Affiliates.                

'Closing Date' means the date of the Indenture.                       

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'Code' means the Internal Revenue Code of 1986, as amended.           

'Commission' means the Securities and Exchange Commission.            

 'Consolidated Coverage Ratio' as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent   
four consecutive fiscal quarters for which financial statements are available to
(ii) Consolidated Interest Expense for such four fiscal quarters; provided,     
however, that (A) if the Company or any Restricted Subsidiary has Incurred any  
Indebtedness since the beginning of such period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and    
Consolidated Interest Expense for such period shall be calculated after giving  
effect on a pro forma basis to such Indebtedness as if such Indebtedness had    
been Incurred on the first day of such period and the discharge of any other    
Indebtedness repaid, repurchased, defeased or otherwise discharged with the     
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (B) if the Company or any Restricted Subsidiary has repaid, 
repurchased, defeased or otherwise discharged any Indebtedness since the        
beginning of such period or if any Indebtedness is to be repaid, repurchased,   
defeased or otherwise discharged (in each case other than Indebtedness Incurred 
under any revolving credit facility unless such Indebtedness has been           
permanently repaid and has not been replaced) on the date of the transaction    
giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and
Consolidated Interest Expense for such period shall be calculated on a pro forma
basis as if such discharge had occurred on the first day of such period and as  
if the Company or such Restricted Subsidiary has not earned the interest income 
actually earned during such period in respect of cash or Temporary Cash         
Investments used to repay, repurchase, defease or otherwise discharge such      
Indebtedness, (C) if since the beginning of such period the Company or any      
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly 
attributable to the assets that are the subject of such Asset Disposition for   
such period or increased by an amount equal to the EBITDA (if negative) directly
attributable thereto for such period and Consolidated Interest Expense for such 
period shall be reduced by an amount equal to the Consolidated Interest Expense 
directly attributable to any Indebtedness of the Company or any Restricted      
Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to
the Company and its continuing Restricted Subsidiaries in connection with such  
Asset Disposition for such period (or, if the Capital Stock of any Restricted   
Subsidiary is sold, the Consolidated Interest Expense for such period directly  
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (D) if since the beginning of such period the    
Company or any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person that becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of assets    
occurring in connection with a transaction causing a calculation to be made     
hereunder, which constitutes all or substantially all of an operating unit of a 
business, EBITDA and Consolidated Interest Expense for such period shall be     
calculated after giving pro forma effect thereto (including the Incurrence of   
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period and (E) if since the beginning of such period any Person (that   
subsequently became a Restricted Subsidiary or was merged with or into the      
Company or any Restricted Subsidiary since the beginning of such period) shall  
have made any Asset Disposition or any Investment or acquisition of assets that 
would have required an adjustment pursuant to clause (C) or (D) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and           
Consolidated Interest Expense for such period shall be calculated after giving  
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
of assets occurred on the first day of such period. For purposes of this        
definition, whenever pro forma effect is to be given to an acquisition of       
assets, the amount of income or earnings relating thereto, including related    
cost savings measures, and the amount of Consolidated Interest Expense          
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or    
accounting Officer of the Company. If any Indebtedness bears a floating rate of 
interest and is being given pro forma effect, the interest expense on such      
Indebtedness shall be calculated as if the rate in effect on the date of        
determination had been the applicable rate for the entire period (taking into   
account any Interest Rate Agreement applicable to such Indebtedness if such     
Interest Rate Agreement has a remaining term as at the date of determination in 
excess of 12 months).                                                           

   'Consolidated Interest Expense' means, for any period, the total interest
expense of the Company and its Consolidated Restricted Subsidiaries, plus, to   
the extent Incurred by the Company and its Subsidiaries in such                 

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period but not included in such interest expense, (i) interest expense          
attributable to Capitalized Lease Obligations, (ii) amortization of debt        
discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash      
interest expense, (v) commissions, discounts and other fees and charges         
attributable to letters of credit and bankers' acceptance financing, (vi)       
interest accruing on any Indebtedness of any other Person to the extent such    
Indebtedness is guaranteed by the Company or any Restricted Subsidiary, (vii)   
net costs associated with Hedging Obligations (including amortization of fees), 
(viii) dividends in respect of (A) all Preferred Stock of the Company and any of
the Subsidiaries of the Company and (B) Disqualified Stock of the Company, in   
each of (A) and (B) to the extent held by Persons other than the Company or a   
Wholly Owned Subsidiary, (ix) interest Incurred in connection with investments  
in discontinued operations and (x) the cash contributions to any employee stock 
ownership plan or similar trust to the extent such contributions are used by    
such plan or trust to pay interest or fees to any Person (other than the        
Company) in connection with Indebtedness Incurred by such plan or trust.        

'Consolidated Net Income' means, for any period, the net income of the
Company and its Consolidated Subsidiaries for such period; provided, however,   
that there shall not be included in such Consolidated Net Income: (i) any net   
income of any Person (other than the Company) if such Person is not a Restricted
Subsidiary, except that (A) subject to the limitations contained in clause (iv) 
below, the Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of 
cash actually distributed by such Person during such period to the Company or a 
Restricted Subsidiary as a dividend or other distribution (subject, in the case 
of a dividend or other distribution made to a Restricted Subsidiary, to the     
limitations contained in clause (iii) below) and (B) the Company's equity in a  
net loss of any such Person for such period shall be included in determining    
such Consolidated Net Income; (ii) any net income (or loss) of any person       
acquired by the Company or a Subsidiary in a pooling of interests transaction   
for any period prior to the date of such acquisition; (iii) any net income (or  
loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to  
restrictions, directly or indirectly, on the payment of dividends or the making 
of distributions by such Restricted Subsidiary, directly or indirectly, to the  
Company, except that (A) subject to the limitations contained in clause (iv)    
below, the Company's equity in the net income of any such Restricted Subsidiary 
for such period shall be included in such Consolidated Net Income up to the     
aggregate amount of cash actually distributed by such Restricted Subsidiary     
during such period to the Company or another Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other distribution 
made to another Restricted Subsidiary, to the limitation contained in this      
clause) and (B) the Company's equity in a net loss of any such Restricted       
Subsidiary for such period shall be included in determining such Consolidated   
Net Income; (iv) any gain or loss realized upon the sale or other disposition of
any asset of the Company or its Consolidated Subsidiaries that is not sold or   
otherwise disposed of in the ordinary course of business and any gain or loss   
realized upon the sale or other disposition of any Capital Stock of any Person; 
(v) any extraordinary gain or loss; (vi) the cumulative effect of a change in   
accounting principles; (vii) any bonuses paid to members of the Management Group
in connection with the Transactions; and (viii) any expenses relating to cash   
payments made in respect of the termination of outstanding options in connection
with the Transactions. Notwithstanding the foregoing, for the purpose of the    
covenant described under '--Certain Covenants--Limitation on Restricted         
Payments' only, there shall be excluded from Consolidated Net Income any        
dividends, repayments of loans or advances or other transfers of assets from    
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the      
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof.    

'Consolidation' means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP       
consistently applied; provided, however, that 'Consolidation' will not include  
consolidation of the accounts of any Unrestricted Subsidiary, but the interest  
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will  
be accounted for as an investment. The term 'Consolidated' has a correlative    
meaning.                                                                        

    'Credit Agreement' means the credit agreement dated as of May 11, 1998, as
amended, waived or otherwise modified from time to time (except to the extent   
that any such amendment, waiver or other modification thereto would be          
prohibited by the terms of the Indenture, unless otherwise agreed to by the     
Holders of at least a majority in aggregate principal amount of Notes at the    
time outstanding), among the Company, the Parent, the financial institutions    
signatory thereto, NationsBank, N.A., as Administrative Agent, and The Chase    
Manhattan Bank, as Syndication Agent.                                           

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   'Default' means any event which is, or after notice or passage of time or
both would be, an Event of Default.                                             

   'Disqualified Stock' means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any    
event (i) matures or is mandatorily redeemable pursuant to a sinking fund       
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,  
in whole or in part, in each case on or prior to the first anniversary of the   
Stated Maturity of the Notes; provided, however, that any Capital Stock that    
would not constitute Disqualified Stock but for provisions thereof giving       
holders thereof the right to require such Person to repurchase or redeem such   
Capital Stock upon the occurrence of an 'asset sale' or 'change of control'     
occurring prior to the first anniversary of the Stated Maturity of the Notes    
shall not constitute Disqualified Stock if the 'asset sale' or 'change of       
control' provisions applicable to such Capital Stock are not more favorable to  
the holders of such Capital Stock than the provisions of the covenants described
under '--Change of Control' and '--Certain Covenants--Limitation on Sale of     
Assets and Subsidiary Stock.'                                                   

'Domestic Subsidiary' means any direct or indirect Subsidiary of the  
Company that is organized and existing under the laws of the United States, any 
state thereof or the District of Columbia.                                      

    'EBITDA' for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net  
Income: (i) income tax expense of the Company and its Consolidated Restricted   
Subsidiaries, (ii) Consolidated Interest Expense, (iii) depreciation expense of 
the Company and its Consolidated Restricted Subsidiaries, (iv) amortization     
expense of the Company and its Consolidated Restricted Subsidiaries (excluding  
amortization expense attributable to a prepaid cash item that was paid in a     
prior period) and (v) all non-cash charges associated with the granting of New  
Options during such period. Notwithstanding the foregoing, the provision for    
taxes based on the income or profits of, and the depreciation and amortization  
and non-cash charges of, a Restricted Subsidiary of the Company 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 Restricted Subsidiary was included in   
calculating Consolidated Net Income and only if a corresponding amount would be 
permitted at the date of determination to be dividended to the Company by such  
Restricted 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 such
Restricted Subsidiary or its stockholders.                                      

'Exchange Act' means the Securities Exchange Act of 1934, as amended. 

'Foreign Subsidiary' means any Subsidiary of the Company that is not a
Domestic Subsidiary.                                                            

    'GAAP' means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the       
American Institute of Certified Public Accountants, (ii) statements and         
pronouncements of the Financial Accounting Standards Board, (iii) such other    
statements by such other entity as approved by a significant segment of the     
accounting profession and (iv) the rules and regulations of the Commission      
governing the inclusion of financial statements (including pro forma financial  
statements) in periodic reports required to be filed pursuant to Section 13 of  
the Exchange Act, including opinions and pronouncements in staff accounting     
bulletins and similar written statements from the accounting staff of the       
Commission. All ratios and computations based on GAAP contained in the Indenture
shall be computed in conformity with GAAP.                                      

  'guarantee' means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any 
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase 
or payment of) such Indebtedness or other obligation of such other Person       
(whether arising by virtue of partnership arrangements, or by agreement to      
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into   
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss 
in respect thereof (in whole or in part); provided, however, that the term      
'guarantee' shall not                                                           

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include endorsements for collection or deposit in the ordinary course of        
business. The term 'guarantee' used as a verb has a corresponding meaning.      

 'Guarantee' means each guarantee of the obligations with respect to the
Notes issued by a Subsidiary of the Company pursuant to the terms of the        
Indenture.                                                                      

'Guarantor' means any Person that has issued a Guarantee.             

  'Hedging Obligations' of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement.                                        

'Holder' or 'Noteholder' means the Person in whose name a Note is     
registered on the registrar's books.                                            

  'Incur' means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person      
existing at the time such Person becomes a Subsidiary (whether by merger,       
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such 
Person at the time it becomes a Subsidiary. The term 'Incurrence' when used as a
noun shall have a correlative meaning. The accretion of principal of a          
non-interest bearing or other discount security shall be deemed the Incurrence  
of Indebtedness.                                                                

'Indebtedness' means, with respect to any Person on any date of       
determination (without duplication), (i) the principal of and premium (if any)  
in respect of indebtedness of such Person for borrowed money; (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by   
bonds, debentures, notes or other similar instruments; (iii) all obligations of 
such Person in respect of letters of credit or other similar instruments        
(including reimbursement obligations with respect thereto); (iv) all obligations
of such Person to pay the deferred and unpaid purchase price of property or     
services (except Trade Payables), which purchase price is due more than six     
months after the date of placing such property in service or taking delivery and
title thereto or the completion of such services; (v) all Capitalized Lease     
Obligations of such Person; (vi) the amount of all obligations of such Person   
with respect to the redemption, repayment or other repurchase of any            
Disqualified Stock or, with respect to any Subsidiary of such Person, any       
Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all 
Indebtedness of other Persons secured by a Lien on any asset of such Person,    
whether or not such Indebtedness is assumed by such Person; provided, however,  
that the amount of Indebtedness of such Person shall be the lesser of (A) the   
fair market value of such asset at such date of determination and (B) the amount
of such Indebtedness of such other Persons or (viii) to the extent not otherwise
included in this definition, Hedging Obligations of such Person; all obligations
of the type referred to in clauses (i) through (ii) of other Persons and all    
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor, guarantor or      
otherwise, including by means of any guarantee. The amount of Indebtedness of   
any Person at any date shall be the outstanding balance at such date of all     
unconditional obligations as described above and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent  
obligations at such date.                                                       

 'Interest Rate Agreement' means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option 
agreement, interest rate swap agreement, interest rate cap agreement, interest  
rate collar agreement, interest rate hedge agreement or other similar agreement 
or arrangement as to which such Person is party or a beneficiary.               

'Investment' in any Person means any direct or indirect advance, loan 
(other than advances to customers in the ordinary course of business that are   
recorded as accounts receivable on the balance sheet of the lender) or other    
extension of credit (including by way of guarantee or similar arrangement) or   
capital contribution to (by means of any transfer of cash or other property to  
others or any payment for property or services for the account or use of        
others), or any purchase or acquisition of Capital Stock, Indebtedness or other 
similar instruments issued by such Person. For purposes of the definition of    
'Unrestricted Subsidiary' and the covenant described under '--Certain           
Covenants--Limitation on Restricted Payments', (i) 'Investment' shall include   
the portion (proportionate to the Company's equity interest in such Subsidiary) 
of the fair market value of the net assets of any Subsidiary of the Company at  
the time that such Subsidiary is designated an Unrestricted Subsidiary;         
provided, however, that upon a redesignation of such Subsidiary as a Restricted 
Subsidiary, the Company shall be deemed to continue to have a permanent         
'Investment' in an Unrestricted Subsidiary in an amount (if positive) equal to  
(x) the Company's 'Investment' in such Subsidiary at the time of such           
redesignation less (y) the                                                      

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portion (proportionate to the Company's equity interest in such Subsidiary) of  
the fair market value of the net assets of such Subsidiary at the time of such  
redesignation; and (ii) any property transferred to or from an Unrestricted     
Subsidiary shall be valued at its fair market value at the time of such         
transfer, in each case as determined in good faith by the Board of Directors.   

 'King Investor' means an entity a majority of the economic interests of
which are owned by CCP and a majority of the voting interests of which are owned
by (i) Robert E. King, his descendants or, in the event of the death or         
incompetence of any of the foregoing individuals, such Person's estate,         
executor, administrator, committee or other personal representative or (ii) any 
other Person approved by CCP.                                                   

    'Lien' means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention     
agreement or lease in the nature thereof).                                      

'Management Group' means the group consisting of the directors and    
executive officers of the Company.                                              

     'Net Available Cash' from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal   
pursuant to a note or installment receivable or otherwise and proceeds from the 
sale or other disposition of any securities received as consideration, but only 
as and when received, but excluding any other consideration received in the form
of assumption by the acquiring Person of Indebtedness or other obligations      
relating to the properties or assets that are the subject of such Asset         
Disposition or received in any other non-cash form) therefrom, in each case net 
of (i) all legal, title and recording tax expenses, commissions and other fees  
and expenses incurred, and all Federal, state, provincial, foreign and local    
taxes required to be paid or accrued as a liability under GAAP, as a consequence
of such Asset Disposition, (ii) all payments made on any Indebtedness which is  
secured by any assets subject to such Asset Disposition, in accordance with the 
terms of any Lien upon or other security agreement of any kind with respect to  
such assets, or which must by its terms, or in order to obtain a necessary      
consent to such Asset Disposition, or by applicable law be repaid out of the    
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to minority interest holders in Subsidiaries or joint       
ventures as a result of such Asset Disposition and (iv) appropriate amounts to  
be provided by the seller as a reserve, in accordance with GAAP, against any    
liabilities associated with the property or other assets disposed of in such    
Asset Disposition and retained by the Company or any Restricted Subsidiary after
such Asset Disposition.                                                         

     'Net Cash Proceeds,' with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,        
accountants' fees, underwriters' or placement agents' fees, discounts or        
commissions and brokerage, consultant and other fees actually incurred in       
connection with such issuance or sale and net of taxes paid or payable as a     
result thereof.                                                                 

  'New Options' means the options granted to certain members of management
pursuant to the New Option Plan.                                                

   'New Option Plan' means the New Option Plan adopted by the Parent as part
of the Recapitalization.                                                        

     'Officer' means the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company or Parent.                                             

'Officers' Certificate' means a certificate signed by two Officers.   

'Opinion of Counsel' means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the  
Company or the Trustee.                                                         

'Parent' means LPA Holding Corp., a Delaware corporation.             

    'Permitted Holders' means CCP, the Management Group, the King Investor and
any Person acting in the capacity of an underwriter in connection with a public 
or private offering of the Company's or Parent's Capital Stock.                 

     'Permitted Investment' means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, a Restricted Subsidiary or a Person that will,   
upon the making of such Investment, become a Restricted Subsidiary; provided,   
however, that the primary business of such Restricted Subsidiary is a Related   
Business; (ii) another Person if as a result of such Investment such other      
Person is merged or consolidated with or                                        

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into, or transfers or conveys all or substantially all its assets to, the       
Company or a Restricted Subsidiary; provided, however, that such Person's       
primary business is a Related Business; (iii) Temporary Cash Investments; (iv)  
receivables owing to the Company or any Restricted Subsidiary, if created or    
acquired in the ordinary course of business and payable or dischargeable in     
accordance with customary trade terms; provided, however, that such trade terms 
may include such concessionary trade terms as the Company or any such Restricted
Subsidiary deems reasonable under the circumstances; (v) payroll, travel and    
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made  
in the ordinary course of business; (vi) loans or advances to employees made in 
the ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary and not exceeding $1.0 million in the aggregate      
outstanding at any one time; (vii) stock, obligations or securities received in 
settlement of debts created in the ordinary course of business and owing to the 
Company or any Restricted Subsidiary or in satisfaction of judgments, (viii) any
Person to the extent such Investment represents the non-cash portion of the     
consideration received for an Asset Disposition that was made pursuant to and in
compliance with the covenant described under '--Certain Covenants--Limitation on
Sale of Assets and Subsidiary Stock'; (ix) Interest Rate Agreements entered into
in the ordinary course of the Company's or its Restricted Subsidiaries'         
businesses and otherwise in compliance with the Indenture; (x) additional       
Investments (including joint ventures) in an amount that, when added to all     
other Investments made pursuant to this clause (x), does not exceed 10% of the  
Total Assets as of the end of the most recent fiscal quarter preceding the date 
of such Investment for which financial statements are available; (xi)           
Investments in securities of trade debtors of customers received pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or insolvency 
of such trade debtors or customers; (xii) Investments made by the Company or its
Restricted Subsidiaries as a result of consideration received in connection with
an Asset Disposition made in compliance with the covenant described under       
'Limitation on Sales of Assets and Subsidiary Stock'; and (xiii) Investments of 
a Person or any of its Subsidiaries existing at the time such Person becomes a  
Restricted Subsidiary of the Company or at the time such Person merges or       
consolidates with the Company or any of its Restricted Subsidiaries, in either  
case in compliance with the Indenture; provided that such Investments were not  
made by such Person in connection with, or in anticipation or contemplation of, 
such Person becoming a Restricted Subsidiary of the Company or such merger or   
consolidation.                                                                  

'Permitted Liens' means, with respect to any Person:                  

   (a) Liens imposed by law for taxes or other governmental charges that are
not yet due or are being contested in good faith by appropriate proceedings;    

   (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and
other like Liens imposed by law, arising in the ordinary course of business and 
securing obligations that are not overdue by more than 60 days or are being     
contested in good faith by appropriate proceedings;                             

(c) pledges and deposits made in the ordinary course of business in   
compliance with workers' compensation, unemployment insurance and other social  
security laws or regulations;                                                   

  (d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other     
obligations of a like nature (other than for the payment of Indebtedness), in   
each case in the ordinary course of business;                                   

    (e) judgment liens in respect of judgments that do not constitute an Event
of Default under '--Events of Default';                                         

    (f) easements, zoning restrictions, rights-of-way and similar encumbrances
on real property imposed by law or arising in the ordinary course of business   
that do not secure any monetary obligations and do not materially detract from  
the value of the affected property or interfere with the ordinary conduct of    
business of such Person;                                                        

   (g) any interest of a landlord in or to property of the tenant imposed by
law, arising in the ordinary course of business and securing lease obligations  
that are not overdue by more than 60 days or are being contested in good faith  
by appropriate proceedings, or any possessory rights of a lessee to the leased  
property under the provisions of any lease permitted by the terms of the        
Indenture;                                                                      

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   (h) Liens of a collection bank arising in the ordinary course of business
under Section 4-208 of the Uniform Commercial Code in effect in the relevant    
jurisdiction;                                                                   

     (i) Liens to secure Indebtedness permitted pursuant to clause (b)(i) of the
covenant described under '--Certain Covenants--Limitation on Indebtedness';     

(j) Liens existing on the Closing Date provided, that (i) except as   
permitted under subclause (D) of clause (l) of this definition such Lien shall  
not apply to any other property or asset of such Person except assets financed  
solely by the same financing source that provided the Indebtedness secured by   
such Lien, and (ii) such Lien shall secure only those obligations that it       
secures on the Closing Date and extensions, renewals and replacements thereof   
that do not increase the outstanding principal amount thereof;                  

 (k) any Lien existing on any property or asset prior to the acquisition
thereof by such Person or existing on any property or asset of another Person   
that becomes a Subsidiary after the date hereof prior to the time such other    
Person becomes a Subsidiary, provided that (A) such Lien is not created in      
contemplation of or in connection with such acquisition or such other Person    
becoming a Subsidiary, as the case may be, (B) such Lien shall not apply to any 
other property or assets of such Person except assets financed solely by the    
same financing source in existence on the date of such acquisition that provided
the Indebtedness secured by such Lien and (C) except as permitted under         
subclause (D) of clause (l) of this definition such Lien shall secure only those
obligations that it secures on the date of such acquisition or the date such    
other Person becomes a Subsidiary, as the case may be, and extensions, renewals 
and replacements thereof that do not increase the outstanding principal amount  
thereof;                                                                        

   (l) Liens on fixed or capital assets acquired, constructed or improved by
such Person and extensions, renewals and replacements thereof that do not       
increase the outstanding principal amount of the Indebtedness secured thereby,  
provided that (A) such security interests secure Indebtedness permitted under   
'--Limitation on Indebtedness,' (B) such security interests and the Indebtedness
secured thereby are incurred prior to or within 12 months after such acquisition
or the completion of such construction or improvement, (C) the Indebtedness     
secured thereby does not exceed 100% of the cost of acquiring, constructing or  
improving such fixed or capital assets and other fixed or capital assets        
financed solely by the same financing source and (D) such security interests    
shall not apply to any other property or assets of such Person except assets    
financed solely by the same financing source;                                   

     (m) licenses of intellectual property rights granted in the ordinary course
of business and not interfering in any material respect with the conduct of the 
business;                                                                       

(n) Liens securing Indebtedness or other obligations of a Restricted  
Subsidiary owing to the Company or a Restricted Subsidiary;                     

    (o) Liens securing Hedging Obligations so long as the related Indebtedness
is secured by a Lien on the same property securing such Hedging Obligation;     

(p) Liens securing the Notes pursuant to the covenants described under
'--Certain Covenants--Limitation on Liens';                                     

    (q) Liens securing Refinancing Indebtedness of any Indebtedness secured by
any Lien referred to in clauses (j), (k) and (l); and                           

    (r) Liens (other than those permitted by paragraphs (a) through (r) above)
securing liabilities permitted under the Indenture in an aggregate amount not   
exceeding $1.0 million at any time outstanding.                                 

    'Person' means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated 
organization, government or any agency or political subdivision thereof or any  
other entity.                                                                   

 'Preferred Stock,' as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred as 
to the payment of dividends, or as to the distribution of assets upon any       
voluntary or involuntary liquidation or dissolution of such Person, over shares 
of Capital Stock of any other class of such Person.                             

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    'principal' of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the     
relevant time.                                                                  

   'Public Equity Offering' means an underwritten primary public offering of
common stock of the Company or Parent pursuant to an effective registration     
statement under the Securities Act.                                             

    'Public Market' means any time after (i) a Public Equity Offering has been
consummated and (ii) at least 15% of the total issued and outstanding common    
stock of the Company or Parent (as applicable) has been distributed by means of 
an effective registration statement under the Securities Act.                   

'Purchase Money Indebtedness' means Indebtedness of the Company or any
Subsidiary Incurred to finance the acquisition, construction or improvement of  
any fixed or capital assets, including Capital Lease Obligations and any        
Indebtedness assumed in connection with the acquisition of any such assets or   
secured by a Lien on any such assets prior to the acquisition thereof, and      
extensions, renewals and replacements of any such Indebtedness that do not      
increase the outstanding principal amount thereof or result in an earlier       
maturity date or decreased weighted average life thereof, provided that such    
Indebtedness is incurred prior to or within 12 months after such acquisition or 
the completion of such construction or improvement.                             

  'Refinance' means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other      
Indebtedness in exchange or replacement for, such Indebtedness in whole or in   
part. 'Refinanced' and 'Refinancing' shall have correlative meanings.           

   'Refinancing Indebtedness' means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) any Indebtedness of the Company or any Restricted       
Subsidiary existing on the Closing Date or Incurred in compliance with the      
Indenture (including Indebtedness of the Company that Refinances Refinancing    
Indebtedness; provided, however, that (i) the Refinancing Indebtedness has a    
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being   
Refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time   
such Refinancing Indebtedness is Incurred that is equal to or greater than the  
Average Life of the Indebtedness being Refinanced, (iii) such Refinancing       
Indebtedness is Incurred in an aggregate principal amount (or if issued with    
original issue discount, an aggregate issue price) that is equal to or less than
the aggregate principal amount (or if issued with original issue discount, the  
aggregate accreted value) then outstanding of the Indebtedness being Refinanced 
(plus the amount of any premium required to be paid under the terms of the      
instrument governing such Indebtedness and plus the amount of reasonable        
expenses incurred by the Company in connection with such Refinancing) and (iv)  
if the Indebtedness being Refinanced is subordinated in right of payment to the 
Notes, such Refinancing Indebtedness is subordinated in right of payment to the 
Notes at least to the same extent as the Indebtedness being Refinanced; provided
further, however, that Refinancing Indebtedness shall not include (x)           
Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of the     
Company or (y) Indebtedness of the Company or a Restricted Subsidiary that      
Refinances Indebtedness of an Unrestricted Subsidiary.                          

   'Related Business' means any business related, ancillary or complementary
(as determined in good faith by the Board of Directors of the Company) to the   
businesses of the Company and the Restricted Subsidiaries on the Closing Date.  

   'Restricted Subsidiary' means any Subsidiary of the Company other than an
Unrestricted Subsidiary.                                                        

   'Secured Indebtedness' means any Indebtedness of the Company secured by a
Lien. 'Secured Indebtedness' of a Guarantor has a correlative meaning.          

  'Senior Indebtedness' of the Company means the principal of, premium (if
any) and accrued and unpaid interest (including interest accruing on or after   
the filing of any petition in bankruptcy or for reorganization of the Company,  
regardless of whether or not a claim for post-filing interest is allowed in such
proceedings) on, and fees and other amounts owing in respect of, Bank           
Indebtedness and all other Indebtedness of the Company, whether outstanding on  
the Closing Date or thereafter incurred, unless in the instrument creating or   
evidencing the same or pursuant to which the same is outstanding it is provided 
that such obligations are subordinated in right of payment to the Notes. 'Senior
Indebtedness' of Parent or any Guarantor has a correlative meaning.             

  'Significant Subsidiary' means any Restricted Subsidiary that would be a
'Significant Subsidiary' of the Company within the meaning of Rule 1-02 under   
Regulation S-X promulgated by the Commission.                                   

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   'Stated Maturity' means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of   
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such     
security at the option of the holder thereof upon the happening of any          
contingency beyond the control of the issuer unless such contingency has        
occurred).                                                                      

  'Subordinated Obligation' means any Indebtedness of the Company (whether
outstanding on the Closing Date or thereafter Incurred) that is subordinate or  
junior in right of payment to the Notes pursuant to a written agreement.        
'Subordinated Obligation' of Parent or a Guarantor has a correlative meaning.   

    'Subsidiary' of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of    
shares of Capital Stock or other interests (including partnership interests)    
entitled (without regard to the occurrence of any contingency) to vote in the   
election of directors, managers or trustees thereof is at the time owned or     
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such   
Person.                                                                         

     'Temporary Cash Investments' means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or  
obligations guaranteed by the United States of America or any agency thereof,   
(ii) investments in time deposit accounts, certificates of deposit and money    
market deposits maturing within one year of the date of acquisition thereof     
issued by a bank or trust company that is organized under the laws of the United
States of America, any state thereof or any foreign country recognized by the   
United States of America having capital, surplus and undivided profits          
aggregating in excess of $250,000,000 (or the foreign currency equivalent       
thereof) and whose long-term debt is rated 'A' (or such similar equivalent      
rating) or higher by at least one nationally recognized statistical rating      
organization (as defined in Rule 436 under the Securities Act), (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of   
the types described in clause (i) above entered into with a bank meeting the    
qualifications described in clause (ii) above, (iv) investments in commercial   
paper, maturing not more than one year after the date of acquisition, issued by 
a corporation (other than an Affiliate of the Company) organized and in         
existence under the laws of the United States of America or any foreign country 
recognized by the United States of America with a rating at the time as of which
any investment therein is made of 'P-1' (or higher) according to Moody's        
Investors Service, Inc. or 'A-1' (or higher) according to Standard and Poor's   
Ratings Service, a division of The McGraw-Hill Companies, Inc. ('S&P'), (v)     
investments in securities with maturities of six months or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory  
of the United States of America, or by any political subdivision or taxing      
authority thereof, and rated at least 'A' by S&P or 'A' by Moody's Investors    
Service, Inc. and (vi) investments in money market funds that invest            
substantially all their assets in securities of the types described in clauses  
(i) through (v) above.                                                          

'TIA' means the Trust Indenture Act of 1939 (15 U.S.C. Section        
77aaa-77bbbb) as in effect on the date of the Indenture.                        

   'Total Assets' means the total consolidated assets of the Company and its
Restricted Subsidiaries as shown on the most recent balance sheet of the        
Company.                                                                        

     'Trade Payables' means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or  
guaranteed by such Person arising in the ordinary course of business in         
connection with the acquisition of goods or services.                           

    'Trustee' means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.                               

     'Trust Officer' means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to          
administer its corporate trust matters.                                         

   'Unrestricted Subsidiary' means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the 
Board of Directors in the manner provided below and (ii) any Subsidiary of an   
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of 
the Company (including any newly acquired or newly formed Subsidiary of the     
Company) to be an Unrestricted Subsidiary                                       

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unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or     
Indebtedness of, or owns or holds any Lien on any property of, the Company or   
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary  
to be so designated; provided, however, that either (A) the Subsidiary to be so 
designated has total Consolidated assets of $1,000 or less or (B) if such       
Subsidiary has Consolidated assets greater than $1,000, then such designation   
would be permitted under the covenant entitled 'Limitation on Restricted        
Payments'. The Board of Directors may designate any Unrestricted Subsidiary to  
be a Restricted Subsidiary; provided, however, that immediately after giving    
effect to such designation (x) the Company could Incur $1.00 of additional      
Indebtedness under paragraph (a) of the covenant entitled 'Limitation on        
Indebtedness' and (y) no Default shall have occurred and be continuing. Any such
designation of a Subsidiary as a Restricted Subsidiary or Unrestricted          
Subsidiary by the Board of Directors shall be evidenced to the Trustee by       
promptly filing with the Trustee a copy of the resolution of the Board of       
Directors giving effect to such designation and an Officers' Certificate        
certifying that such designation complied with the foregoing provisions.        

 'U.S. Government Obligations' means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of 
America (including any agency or instrumentality thereof) for the payment of    
which the full faith and credit of the United States of America is pledged and  
which are not callable or redeemable at the issuer's option.                    

'Voting Stock' of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and 
normally entitled (without regard to the occurrence of any contingency) to vote 
in the election of directors, managers or trustees thereof.                     

    'Wholly Owned Subsidiary' means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or another Wholly Owned Subsidiary.                                 

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS 

The following is a summary of certain United States federal income tax
considerations to U.S. Holders and Non-U.S. Holders (as defined herein) relating
to the purchase, ownership and disposition of the Notes, but does not purport to
be a complete analysis of all the potential tax considerations relating thereto.
The terms 'U.S. Holder' and 'Non-U.S. Holder' refer, respectively, to persons   
that are or are not classified as United States persons. As used herein, the    
term 'United States person' means a holder which will hold Notes as 'capital    
assets' (within the meaning of Section 1221 of the Code) and which is (i) a     
citizen or resident of the United States, (ii) a corporation or other entity    
taxable as a corporation created in, or organized under the laws of, the United 
States or any political subdivision thereof, (iii) an estate the income of which
is subject to U.S. federal income taxation regardless of its source or (iv) a   
trust (a) the administration over which a United States court can exercise      
primary supervision and (b) all of the substantial decisions of which one or    
more United States persons have the authority to control. Notwithstanding the   
preceding sentence, to the extent provided in Treasury Regulations, certain     
trusts in existence on August 20, 1996, and treated as United States persons    
prior to such date, that elect to continue to be treated as United States       
persons will also be a U.S. Holder. This summary does not address tax           
considerations applicable to investors that may be subject to special tax rules,
such as banks, tax-exempt organizations, insurance companies, dealers in        
securities or currencies, or persons that will hold Notes as a position in a    
hedging transaction, 'straddle' or 'conversion transaction' for tax purposes.   
This summary discusses the material federal income tax considerations applicable
to the Initial Purchasers of the Notes which purchase the Notes at par and those
applicable to subsequent purchasers of the Notes. This summary does not consider
the effect of any applicable foreign, state, local or other tax laws. This      
summary is based on the Code, existing, temporary, and proposed Treasury        
Regulations, laws, rulings and decisions now in effect, all of which are subject
to change. Any such changes may be applied retroactively in a manner that could 
adversely affect a holder of the Notes.                                         

    THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, INVESTORS          
CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH    
RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND ESTATE TAX   
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING     
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY  
APPLICABLE TAX TREATY.                                                          

U.S. HOLDERS                                                                    

  Payment of Interest.  Interest on a Note generally will be includable in
the income of a holder as ordinary interest income at the time such interest is 
received or accrued, in accordance with such holder's method of accounting for  
United States federal income tax purposes. The Company expects that the Notes   
will not be considered to be issued with original issue discount for U.S.       
federal income tax purposes.                                                    

 Market Discount on Resale of Notes.  A holder of a Note should be aware
that the purchase or resale of a Note may be affected by the 'market discount'  
provisions of the Code. The market discount rules generally provide that if a   
holder of a Note purchases the Note at a market discount (i.e., a discount other
than at original issue), any gain recognized upon the disposition of the Note by
the holder will be taxable as ordinary income, rather than as capital gain, to  
the extent such gain does not exceed the accrued market discount on such Note at
the time of such disposition. 'Market discount' generally means the excess, if  
any, of a Note's stated redemption price at maturity over the price paid by the 
holder therefor, unless a de minimis exception applies. A holder who acquires a 
Note at a market discount also may be required to defer the deduction of a      
portion of the amount of interest that the holder paid or accrued during the    
taxable year on indebtedness incurred or maintained to purchase or carry such   
Note, if any.                                                                   

   Any principal payment on a Note acquired by a holder at a market discount
will be included in gross income as ordinary income to the extent that it does  
not exceed the accrued market discount at the time of such payment. The amount  
of the accrued market discount for purposes of determining the tax treatment of 
subsequent payments on, or dispositions of, a Note is to be reduced by the      
amounts so treated as ordinary income.                                          

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A holder of a Note acquired at a market discount may elect to include 
market discount in gross income, for U.S. federal income tax purposes, as such  
market discount accrues, either on a straight-line basis or on a constant       
interest rate basis. This current inclusion election, once made, applies to all 
market discount obligations acquired on or after the first day of the first     
taxable year to which the election applies, and may not be revoked without the  
consent of the Internal Revenue Service ('IRS'). If a holder of a Note makes    
such an election, the foregoing rules regarding the recognition of ordinary     
income on sales and other dispositions and the receipt of principal payments    
with respect to such Note, and regarding the deferral of interest deductions on 
indebtedness incurred or maintained to purchase or carry such Note, will not    
apply.                                                                          

     Notes Purchased at a Premium.  In general, if a holder purchases a Note for
an amount in excess of its stated redemption price at maturity, the holder may  
elect to treat such excess as 'amortizable bond premium,' in which case the     
amount required to be included in the holder's income each year with respect to 
interest on the Note will be reduced by the amount of amortizable bond premium  
allocable (based on the Note's yield to maturity) to such year. Any such        
election would apply to all bonds (other than bonds the interest on which is    
excludable from gross income) held by the holder at the beginning of the first  
taxable year to which the election applies or which thereafter are acquired by  
the holder, and such election is irrevocable without the consent of the IRS.    

Sale, Exchange or Retirement of the Notes.  Upon the sale, exchange or
redemption of a Note, a holder generally will recognize capital gain or loss    
equal to the difference between (i) the amount of cash proceeds and the fair    
market value of any property received on the sale, exchange or redemption       
(except to the extent such amount is attributable to either liquidated damages, 
discussed below, or accrued interest income not previously included in income   
which is taxable as ordinary income) and (ii) such holder's adjusted tax basis  
in the Note. A holder's adjusted tax basis in a Note generally will equal the   
purchase price of the Note to such holder. Such capital gain or loss will be    
short-term or long-term if the holder is a corporation, or short-term, mid-term,
or long-term if the holder is not a corporation, depending in each case on the  
holder's holding period in the Note at the time of sale, exchange or redemption.

   Exchange of Notes for Exchange Notes.  The exchange of Notes for Exchange
Notes pursuant to the Exchange Offer should not be considered a taxable exchange
for U.S. federal income tax purposes because the Exchange Notes should not      
constitute a material modification of the terms of the Notes. Accordingly, such 
exchange should have no U.S. federal income tax consequences to holders of      
Notes, and a holder's adjusted basis and holding period in an Exchange Note will
be the same as such holder's adjusted tax basis and holding period in the Note  
exchanged therefor.                                                             

    Notwithstanding the foregoing, the IRS might attempt to treat the Exchange
Offer as an 'exchange' for federal income tax purposes. In such event the       
Exchange Offer could be treated as a taxable transaction, in which case a holder
would be required to recognize gain or loss equal to the difference, if any,    
between such holder's adjusted tax basis in the Notes and the issue price of the
Exchange Notes.                                                                 

    Liquidated Damages.  The Company believes that liquidated damages, if any,
described above under 'Exchange and Registration Rights Agreement' will be      
taxable to the holder as ordinary income in accordance with the holder's method 
of accounting for federal income tax purposes. The IRS may take a different     
position, however, which could affect the timing of a holder's income with      
respect to liquidated damages, if any.                                          

NON-U.S. HOLDERS                                                                

Payments of Interest.  A Non-U.S. Holder will not be subject to United
States federal income tax by withholding or otherwise on payments of interest on
a Note (provided that the beneficial owner of the Note fulfills the statement   
requirements set forth in applicable Treasury regulations) unless (A) such      
Non-U.S. Holder (i) actually or constructively owns 10% or more of the total    
combined voting power of all classes of stock of the Company entitled to vote,  
(ii) is a controlled foreign corporation related, directly or indirectly, to the
Company through stock ownership, or (iii) is a bank receiving interest described
in Section 881(c)(3)(A) of the Code or (B) such interest is effectively         
connected with the conduct of a trade or business by the Non-U.S. Holder in the 
United States.                                                                  

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     Gain on Disposition of the Notes.  A Non-U.S. Holder will not be subject to
United States federal income tax by withholding or otherwise on any gain        
realized upon the disposition of a Note unless (i) in the case of a Non-U.S.    
Holder who is an individual, such Non-U.S. Holder is present in the United      
States for a period or periods aggregating 183 days or more during the taxable  
year of the disposition and certain other requirements are met or (ii) the gain 
is effectively connected with the conduct of a trade or business by the Non-U.S.
Holder in the United States.                                                    

   Effectively Connected Income.  To the extent that interest income or gain
on the disposition of a Note is effectively connected with the conduct of a     
trade or business of the Non-U.S. Holder in the United States, such income will 
be subject to United States federal income tax on a net income basis in the same
manner as if such holder were a United States person. Additionally, in the case 
of a Non-U.S. Holder which is a corporation, such effectively connected income  
may be subject to the United States branch profits tax at the rate of 30%.      

    Treaties.  A tax treaty between the United States and a country in which a
Non-U.S. Holder is a resident may alter the tax consequences described above.   

INFORMATION REPORTING AND BACKUP WITHHOLDING                                    

  In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note and payments of the proceeds 
of the sale of a Note to certain noncorporate holders, and a 31% backup         
withholding tax may apply to such payments if the holder (i) fails to furnish or
certify its correct taxpayer identification number to the payor in the manner   
required, (ii) is notified by the IRS that it has failed to report payments of  
interest and dividends properly or (iii) under certain circumstances, fails to  
certify that it has not been notified by the IRS that it is subject to backup   
withholding for failure to report interest and dividend payments. Any amounts   
withheld under the backup withholding rules from a payment to a holder will be  
allowed as a credit against such holder's United States federal income tax and  
may entitle the holder to a refund, provided that the required minimum          
information is furnished to the IRS.                                            

   Generally, such information reporting and backup withholding may apply to
payments of principal, interest and premium (if any) to Non-U.S. Holders which  
are not 'Exempt Recipients' and which fail to provide certain information as may
be required by United States law and applicable regulations. The payment of the 
proceeds of the disposition of Notes to or through the United States office of a
broker will be subject to information reporting and backup withholding at a rate
of 31% unless the owner certifies its status as a Non-U.S. Holder under         
penalties of perjury or otherwise establishes an exemption.                     

Holders should consult their tax advisors regarding the application of
information reporting and backup withholding in their particular situation and  
the availability of an exemption therefrom, and the procedures for obtaining any
such exemption.                                                                 

 The United States Department of the Treasury recently promulgated final
regulations regarding the information reporting and backup reporting rules      
discussed above. In general, the final regulations do not significantly alter   
the substantive information reporting and backup withholding requirements but   
rather unify current certification procedures and forms and clarify reliance    
standards. In addition, the final regulations permit the shifting of primary    
responsibility for withholding to certain financial intermediaries acting on    
behalf of beneficial owners. The final regulations are generally effective for  
payments made on or after January 1, 2000, subject to certain transition rules. 
Prospective purchasers of the Notes should consult their own tax advisors       
concerning the effect of such regulations on their particular situations.       

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BOOK-ENTRY; DELIVERY AND FORM 

     The New Notes initially will be represented by one or more permanent global
certificates in definitive, fully registered form (the 'Global Notes'). The     
Global Notes will be deposited with, or on behalf of, The Depository Trust      
Company ('DTC') and registered in the name of a nominee of DTC.                 

THE GLOBAL NOTES                                                                

    The Issuers expect that pursuant to procedures established by DTC (i) upon
the issuance of the Global Notes, DTC or its custodian will credit, on its      
internal system, the principal amount of New Notes of the individual beneficial 
interests represented by the Global Notes to the respective accounts of persons 
who have accounts with DTC and (ii) ownership of beneficial interests in the    
Global Notes will be shown on, and the transfer of such ownership will be       
effected only through, records maintained by DTC or its nominee (with respect to
interests of Participants (as defined herein)) and the records of Participants  
(with respect to interests of persons other than Participants). Ownership of    
beneficial interests in the Global Notes will be limited to persons who have    
accounts with DTC ('Participants') or persons who hold interests through        
Participants. Interests in the Global Notes may be held directly through DTC, by
Participants, or indirectly through organizations which are Participants.       

  So long as DTC, or its nominee, is the registered owner or holder of the
Global Notes, DTC or such nominee, as the case may be, will be considered the   
sole owner or holder of the Notes represented by such Global Notes for all      
purposes under the Indenture. No beneficial owner of an interest in the Global  
Notes will be able to transfer that interest except in accordance with DTC's    
procedures, in addition to those provided for under the Indenture.              

   Payments of the principal of, premium, if any, and interest on the Global
Notes will be made to DTC or its nominee, as the case may be, as the registered 
owner thereof. None of the Issuers, the Trustee or any paying agent will have   
any responsibility or liability for any aspect of the records relating to or    
payments made on account of beneficial ownership interests in the Global Notes  
or for maintaining, supervising or reviewing any records relating to such       
beneficial ownership interest.                                                  

    The Issuers expect that DTC or its nominee, upon receipt of any payment of
principal premium, if any payment of principal, premium, if any, or interest in 
respect of the Global Notes, will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal 
amount of the Global Notes as shown on the records of DTC or its nominee. The   
Issuers also expect that payments by Participants to owners of beneficial       
interests in the Global Notes held through such Participants will be governed by
standing instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees for such 
customers. Such payments will be the responsibility of such Participants.       

Transfers between Participants will be effected in the ordinary way in
accordance with DTC rules and will be settled in clearinghouse funds. If a      
Holder requires physical delivery of a Certificated Note (as defined below) for 
any reason, including to sell New Notes to persons in states which require      
physical delivery of the New Notes, or to pledge such securities, such Holder   
must transfer its interest in a Global Note in accordance with the normal       
procedures of DTC and with the procedures set fourth in the Indenture.          

  DTC has advised the Issuers that it will take any action permitted to be
taken by a Holder of Notes (including the presentation of Exchange Notes for    
exchange) only at the direction of one or more Participants to whose account the
DTC interests in the Global Notes are credited and only in respect of such      
portion of the aggregate principal amount of Notes as to which such Participant 
or Participants has or have given such direction. However, if there is an Event 
of Default under the Indenture, DTC will exchange the Global Notes in whole for 
Certificated Notes, which it will distribute to the Participants.,              

DTC has advised the Issuers as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the      
Federal Reserve System, a 'clearing corporation' within the meaning of the      
Uniform Commercial Code and a 'Clearing Agency' registered pursuant to the      
provisions of Section 17A of the Exchange Act. DTC was created to hold          
securities for Participants and facilitate the clearance and settlement of      
securities transactions between Participants through electronic book-entry      
changes in accounts of its                                                      

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Participants, thereby eliminating the need for physical movement of             
certificates. Participants include securities brokers and dealers, banks, trust 
companies and clearing corporations and certain other organizations. Indirect   
access to the DTC System is available to others such as banks, brokers, dealers 
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly ('Indirect Participants').         

    Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among Participants, it is under no   
obligation to perform such procedures, and such procedures may be discontinued  
at any time. Neither the Issuers nor the Trustee will have any responsibility   
for the performance by DTC or the Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their           
operations.                                                                     

CERTIFICATED NOTES                                                              

If (i) the Issuers notify the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a      
clearing agency under the Exchange Act and a successor depositary is not        
appointed within 90 days of such notice or cessation, (ii) the Issuers, at their
option, notify the Trustee in writing that they elect to cause the issuance of  
Notes in definitive form under the Indenture or (iii) upon the occurrence of    
certain other events as provided in the Indenture, then, upon surrender by DTC  
of the Global Notes, Certificated Notes will be issued to each person that DTC  
identifies as the beneficial owner of the Notes represented by the Global Notes.
Upon any such issuance, the Trustee is required to register such Certificated   
Notes in the name of such person or persons (or the nominee of any thereof) and 
cause the same to be delivered thereto.                                         

    None of the Issuers or the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of 
the related Notes and each such person may conclusively rely on, and shall be   
protected in relying on, instructions from DTC for all purposes (including with 
respect to the registration and delivery, and the respective principal amounts, 
of the Notes to be issued).                                                     

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PLAN OF DISTRIBUTION

Based on interpretations by the staff of the Commission set forth in  
no-action letters issued to third parties, the Issuers believe that the New     
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be    
offered for resale, resold and otherwise transferred by any holder thereof      
(other than any such holder that is an 'affiliate' of the Issuers within the    
meaning of Rule 405 promulgated under the Securities Act) without compliance    
with the registration and prospectus delivery provisions of the Securities Act, 
provided that such New Notes are acquired in the ordinary course of such        
holder's business, such holder has no arrangement with any person to participate
in the distribution of such New Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes. 
Accordingly, any holder who is an affiliate of the Issuers or any holder using  
the Exchange Offer to participate in a distribution of the New Notes will not be
able to rely on such interpretations by the staff to the Commission and must    
comply with the registration and prospectus delivery requirements of the        
Securities Act in connection with a resale transaction. Notwithstanding the     
foregoing, each broker-dealer that receives New Notes for its own account       
pursuant to the Exchange Offer must acknowledge that it will deliver a          
prospectus in connection with any resale of such New Notes. This Prospectus, as 
it may be amended or supplemented from time to time, may be used by a           
broker-dealer in connection with any resale of New Notes received in exchange   
for Old Notes where such Old Notes were acquired as a result of market-making   
activities or other trading activities (other than Old Notes acquired directly  
from the Issuers). The Issuers have agreed that, for a period of 180 days from  
the date of this Prospectus, it will make this Prospectus, as amended or        
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until September 28, 1998 (90 days from the date of this    
Prospectus), all dealers effecting transactions in the New Notes may be required
to deliver a prospectus.                                                        

 The Issuers will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account      
pursuant to the Exchange Offer may be sold from time to time in one or more     
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of     
resale, at market prices prevailing at the time of resale, at prices related to 
such prevailing market prices or negotiated prices. Any such resale may be made 
directly to purchasers or to or through brokers or dealers who may receive      
compensation in the form of commissions or concessions from any such            
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer    
that resells New Notes that were received by it for its own account pursuant to 
the Exchange Offer and any broker-dealer that participates in a distribution of 
such New Notes may be deemed to be an 'underwriter' within the meaning of the   
Securities Act and any profit on any such resale of New Notes and any           
commissions or concessions received by any such persons may be deemed to be     
underwriting compensation under the Securities Act. The Letter of Transmittal   
states that by acknowledging that it will deliver, and by delivering, a         
prospectus as required, a broker-dealer will not be deemed to admit that it is  
an 'underwriter' within the meaning of the Securities Act.                      

     For a period of 180 days from the date of this Prospectus, the Issuers will
send a reasonable number of additional copies of this Prospectus and any        
amendment or supplement to this Prospectus to any broker-dealer that requests   
such documents in the Letter of Transmittal. The Issuers will pay all the       
expenses incident to the Exchange Offer (including the expenses of one counsel  
for the Holders) other than commissions or concessions of any broker-dealers.   
The Issuers have agreed to indemnify the Initial Purchasers and any             
broker-dealers participating in the Exchange Offer against certain liabilities, 
including liabilities under the Securities Act.                                 

   This Prospectus has been prepared for use in connection with the Exchange
Offer and may be used by CSI in connection with offers and sales related to     
market-making transactions in the Notes. CSI may act as principal or agent in   
such transactions. Such sales will be made at prices related to prevailing      
market prices at the time of sale. The Company will not receive any of the      
proceeds of such sales. CSI has no obligation to make a market in the Notes and 
may discontinue its market-making activities at any time without notice, at its 
sole discretion. The Company has agreed to indemnify CSI against certain        
liabilities, including liabilities under the Securities Act of 1933, and to     
contribute to payments which CSI might be required to make in respect thereof.  

    For a description of certain relationships between the Company and CSI and
its affiliates, see 'Certain Relationships and Related Transactions' and        
'Ownership of Securities'.                                                      

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LEGAL MATTERS 

    The validity of the Notes offered hereby will be passed upon by O'Sullivan
Graev & Karabell, LLP, New York, New York.                                      

EXPERTS 

  The financial statements of the Parent and the Company on a consolidated
basis as of August 30, 1997 and August 31, 1996 and for each of the years ended 
August 30, 1997, August 31, 1996 and August 26, 1995 included in this           
Prospectus, the related financial statement schedules included elsewhere in the 
Registration Statement, and the financial statements for the years ended August 
30, 1997, August 26, 1995, August 27, 1994 and the periods from July 24, 1993 to
August 28, 1993 (the Parent and Company on a consolidated basis) and January 1, 
1993 to July 23, 1993 (Predecessor Company) from which the 'Selected Financial  
Data' included in this Prospectus have been derived, have been audited by       
Deloitte & Touche LLP, independent auditors, as stated in their reports         
appearing herein and elsewhere in the Registration Statement. Such financial    
statements, financial statement schedules, and 'Selected Financial Data' have   
been included in the Registration Statement in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.          

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INDEX TO FINANCIAL STATEMENTS 

                                                        [Enlarge/Download Table]

                                                                                                            PAGE
                                                                                                            ----
                                                                                                                
Consolidated Financial Statements                                                                               
Independent Auditors' Report...............................................................................  F-2
Consolidated Balance Sheets as of August 31, 1996 and August 30, 1997......................................  F-3
Consolidated Statements of Operations for the fiscal years ended August 30, 1997, August 31, 1996 and           
  August 26, 1995..........................................................................................  F-4
Consolidated Statements of Stockholders' Equity for the fiscal years ended August 30, 1997,                     
  August 31, 1996 and August 26, 1995......................................................................  F-5
Consolidated Statements of Cash Flows for the fiscal years ended August 30, 1997,                               
  August 31, 1996 and August 26, 1995......................................................................  F-6
Notes to Consolidated Financial Statements.................................................................  F-7
Unaudited Consolidated Financial Statements                                                                     
Consolidated Balance Sheets as of (unaudited) March 14, 1998 and                                                
  (audited) August 30, 1997................................................................................ F-16
Consolidated Statements of Operations for the (unaudited) 28 weeks                                              
  ended March 14, 1998 and March 15, 1997.................................................................. F-17
Consolidated Statements of Cash Flows for the (unaudited) 28 weeks                                              
  ended March 14, 1998 and March 15, 1997.................................................................. F-18
Notes to Unaudited Consolidated Financial Statements....................................................... F-19

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INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors of                                      
Vestar/LPA Investment Corp.:                                                    

We have audited the accompanying consolidated balance sheets of Vestar/LPA      
Investment Corp. and its subsidiaries as of August 30, 1997 and August 31, 1996 
and the related consolidated statements of operations, stockholders' equity and 
cash flows for the 52 weeks ended August 30, 1997, the 53 weeks ended August 31,
1996 and the 52 weeks ended August 26, 1995. These financial statements are the 
responsibility of the Company's management. Our responsibility is to express an 
opinion on these financial statements based on our audits.                      

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

In our opinion, such consolidated financial statements present fairly, in all   
material respects, the financial position of Vestar/LPA Investment Corp. and its
subsidiaries as of August 30, 1997 and August 31, 1996 and the results of their 
operations and their cash flows for the 52 weeks ended August 30, 1997, the 53  
weeks ended August 31, 1996 and the 52 weeks ended August 26, 1995 in conformity
with generally accepted accounting principles.                                  

DELOITTE & TOUCHE LLP                                                           

Kansas City, Missouri                                                           
October 3, 1997                                                                 

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VESTAR/LPA INVESTMENT CORP. 

CONSOLIDATED BALANCE SHEETS 
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

                                                        [Enlarge/Download Table]

                                                                                            AUGUST 31,  AUGUST 30,
                                                                                               1996        1997   
                                                                                            ----------  ----------
                                                                                                                  
                                          ASSETS                                                                  
Current assets:                                                                                                   
  Cash and cash equivalents...............................................................   $ 12,791    $ 23,971 
  Restricted cash investments (Note 1)....................................................      9,227       2,312 
  Accounts and notes receivable, net......................................................      3,615       4,976 
  Prepaid food and supplies...............................................................      6,409       5,954 
  Other prepaid expenses..................................................................      2,210       3,645 
  Refundable income taxes (Note 5)........................................................      1,405         559 
  Current deferred income taxes (Note 5)..................................................      1,719       1,024 
                                                                                            ----------  ----------
    Total current assets..................................................................     37,376      42,441 
Property and equipment, at cost:                                                                                  
  Land....................................................................................      6,867       6,927 
  Buildings and leasehold improvements....................................................     60,995      64,811 
  Equipment...............................................................................     24,078      22,529 
  Facilities under construction...........................................................        377         317 
                                                                                            ----------  ----------
                                                                                               92,317      94,584 
Less accumulated depreciation and amortization............................................     24,497      33,460 
                                                                                            ----------  ----------
    Net property and equipment............................................................     67,820      61,124 
Other assets (Note 2).....................................................................     69,001      64,187 
Deferred income taxes (Note 5)............................................................      2,936       3,408 
                                                                                            ----------  ----------
                                                                                             $177,133    $171,160 
                                                                                            ----------  ----------
                                                                                            ----------  ----------
                           LIABILITIES AND STOCKHOLDERS' EQUITY                                                   

Current liabilities:                                                                                              
  Overdrafts due banks....................................................................   $  5,229    $  2,356 
  Accounts payable........................................................................      3,005       6,224 
  Current reserve for closed academies (Note 11)..........................................      2,700       1,860 
  Accrued salaries, wages and other payroll costs.........................................     10,317      10,717 
  Accrued insurance liabilities...........................................................      4,361       4,156 
  Accrued property and sales taxes........................................................      4,254       4,128 
  Accrued interest payable................................................................        739         719 
  Other current liabilities...............................................................      6,575       4,883 
                                                                                            ----------  ----------
    Total current liabilities.............................................................     37,180      35,043 
Long-term debt and capital lease obligations (Note 3).....................................     86,590      85,903 
Other long-term liabilities (Note 4 and 11)...............................................     19,749      14,319 
Minority interest--Series A cumulative redeemable exchangeable preferred stock ($.01 par                          
  value per share, 2,000,000 shares authorized; 800,000 shares issued and outstanding at                          
  aggregate liquidation preference) (Note 7)..............................................     28,827      32,521 
Commitments and contingencies.............................................................                        
Stockholders' equity:                                                                                             
10% cumulative convertible preferred stock ($.01 par value per share; 80,000 shares                               
  authorized; 80,000 issued and outstanding)..............................................          1           1 
10% nonconvertible preferred stock ($.01 par value per share; 150,000 shares authorized;                          
  40,036 and 38,068 issued and outstanding, respectively).................................         --          -- 
Junior preferred stock ($.01 par value per share; 650,000 authorized; 213,750 issued and                          
  outstanding)............................................................................          2           2 
Class A common stock ($.01 par value per share; 1,500,000 shares authorized; 852,160                              
  issued and outstanding).................................................................          9           9 
Class B common stock ($.01 par value per share; 350,000 shares authorized, none issued and                        
  outstanding)............................................................................         --          -- 
Additional paid-in capital................................................................     33,105      34,234 
Accumulated deficit.......................................................................    (28,227)    (30,573)
Less cost of treasury shares..............................................................       (103)       (299)
                                                                                            ----------  ----------
    Total Stockholders' Equity............................................................      4,787       3,374 
                                                                                            ----------  ----------
                                                                                             $177,133    $171,160 
                                                                                            ----------  ----------
                                                                                            ----------  ----------

See notes to consolidated financial statements. 

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VESTAR/LPA INVESTMENT CORP. 

CONSOLIDATED STATEMENTS OF OPERATIONS 
(IN THOUSANDS OF DOLLARS) 

                                                        [Enlarge/Download Table]

                                                               52 WEEKS ENDED  53 WEEKS ENDED  52 WEEKS ENDED
                                                                 AUGUST 26,      AUGUST 31,      AUGUST 30,  
                                                                    1995            1996            1997     
                                                               --------------  --------------  --------------
                                                                                                             
Operating revenue.............................................    $279,806        $300,277        $302,766   
Operating expenses:                                                                                          
  Salaries, wages and benefits................................     142,757         155,046         159,236   
  Facility lease expense......................................      39,901          39,587          39,332   
  Depreciation................................................      13,501          13,680          13,825   
  Amortization of goodwill and other intangibles..............       3,712           2,774           2,236   
  Restructuring charge (Note 11)..............................      11,700                                   
  Other.......................................................      75,981          78,310          74,111   
                                                               --------------  --------------  --------------
                                                                   287,552         289,397         288,740   
                                                               --------------  --------------  --------------
Operating income (loss).......................................      (7,746)         10,880          14,026   
                                                               --------------  --------------  --------------
Interest expense..............................................      11,110          10,256           9,245   
Minority interest in net income of subsidiary.................       2,824           3,561           3,693   
Interest income...............................................      (1,063)           (903)           (959)  
                                                               --------------  --------------  --------------
Net interest costs............................................      12,871          12,914          11,979   
                                                               --------------  --------------  --------------
Income (loss) before income taxes and extraordinary item......     (20,617)         (2,034)          2,047   
Provision (benefit) for income taxes (Note 5).................      (6,155)          1,518           3,264   
                                                               --------------  --------------  --------------
Loss before extraordinary item................................     (14,462)         (3,552)         (1,217)  
Extraordinary loss on retirement of debt, net of applicable                                                  
  income taxes of $546........................................                        (819)                  
Net loss......................................................    $(14,462)       $ (4,371)       $ (1,217)  
                                                               --------------  --------------  --------------
                                                               --------------  --------------  --------------

See notes to consolidated financial statements. 

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VESTAR/LPA INVESTMENT CORP. 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
(IN THOUSANDS OF DOLLARS) 

                                                        [Enlarge/Download Table]

                                            ADDITIONAL                                                      
                                              COMMON    PREFERRED  PAID-IN  ACCUMULATED  TREASURY           
                                              STOCK       STOCK    CAPITAL    DEFICIT     STOCK     TOTAL   
                                            ----------  ---------  -------  -----------  --------  -------- 
                                                                                                            
Balance, August 27, 1994...................    $  9        $ 3     $31,188    $ (7,477)    $( 65)  $ 23,658 
Dividends on preferred stock (Note 8)......                            911        (911)                     
Repurchase of common stock.................                                                  (21)       (21)
Net loss...................................                                    (14,462)             (14,462)
                                                ---        ---     -------  -----------  --------  -------- 
Balance, August 26, 1995...................       9          3      32,099     (22,850)      (86)     9,175 
  Dividends on preferred stock (Note 8)....                          1,006      (1,006)                  -- 
  Repurchase of common stock...............                                                  (17)       (17)
  Net loss.................................                                     (4,371)              (4,371)
                                                ---        ---     -------  -----------  --------  -------- 
Balance, August 31, 1996...................       9          3      33,105     (28,227)     (103)     4,787 
  Dividends on preferred stock (Note 8)....                          1,129      (1,129)                  -- 
  Repurchase of common stock...............                                                 (196)      (196)
Net loss...................................                                     (1,217)              (1,217)
                                                ---        ---     -------  -----------  --------  -------- 
Balance, August 30, 1997...................    $  9        $ 3     $34,234    $(30,573)    $(299)  $  3,374 
                                                ---        ---     -------  -----------  --------  -------- 
                                                ---        ---     -------  -----------  --------  -------- 

See notes to consolidated financial statements. 

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VESTAR/LPA INVESTMENT CORP. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 
(IN THOUSANDS OF DOLLARS) 

                                                        [Enlarge/Download Table]

                                                                   52 WEEKS         53 WEEKS         52 WEEKS    
                                                                     ENDED            ENDED            ENDED     
                                                                AUGUST 26, 1995  AUGUST 31, 1996  AUGUST 30, 1997
                                                                ---------------  ---------------  ---------------
                                                                                                                 
Cash flows from operating activities:                                                                            
  Net loss.....................................................    $ (14,462)       $  (4,371)        $(1,217)   
  Adjustments to reconcile net loss to net cash from operating                                                   
     activities:                                                                                                 
     Noncash portion of extraordinary loss on retirement of                                                      
       debt....................................................           --            1,365              --    
     Restructuring charge......................................       11,700               --              --    
     Depreciation and amortization.............................       18,638           17,704          16,911    
     Deferred income taxes.....................................       (7,225)             225             223    
     Minority interest in net income of subsidiary.............        2,824            3,561           3,693    
     Changes in assets and liabilities:                                                                          
       Account and notes receivable............................         (951)             (72)         (1,402)   
       Prepaid expenses and supplies...........................        2,955              253            (980)   
       Accrued property and sales taxes........................          (94)            (699)           (125)   
       Accrued interest payable................................         (261)              81             (20)   
       Other changes in assets and liabilities, net............        4,016           (2,839)         (2,197)   
                                                                ---------------  ---------------  ---------------
          Net cash from operating activities...................       17,140           15,208          14,886    
                                                                ---------------  ---------------  ---------------
Cash flows used for investing activities:                                                                        
  Capital expenditures.........................................       (9,101)          (8,570)         (7,691)   
  Proceeds from sale of assets.................................        6,145            2,525             452    
                                                                ---------------  ---------------  ---------------
          Net cash used for investing activities...............       (2,956)          (6,045)         (7,239)   
                                                                ---------------  ---------------  ---------------
Cash flows from financing activities:                                                                            
  Repayment of long-term debt and capital lease obligations....       (3,200)         (12,631)           (900)   
  Deferred financing costs.....................................           --             (225)             --    
  Increase (decrease) in bank overdrafts.......................       (5,510)           1,126          (2,873)   
  Decrease (increase) in restricted cash investments...........         (638)            (941)          6,915    
  Proceeds from capital lease..................................           --               --             391    
                                                                ---------------  ---------------  ---------------
          Net cash from (used for) financing activities........       (9,348)         (12,671)          3,533    
                                                                ---------------  ---------------  ---------------
Net increase (decrease ) in cash and cash equivalents..........        4,836           (3,508)         11,180    
Cash and cash equivalents at beginning of period...............       11,463           16,299          12,791    
                                                                ---------------  ---------------  ---------------
Cash and cash equivalents at end of period.....................    $  16,299           12,791          23,971    
                                                                ---------------  ---------------  ---------------
                                                                ---------------  ---------------  ---------------
Supplemental cash flow information:                                                                              
  Cash paid during the period for:                                                                               
     Interest (net of amounts capitalized).....................    $   9,948        $   8,926         $ 8,415    
     Income taxes..............................................        1,636            1,031           5,470    
  Cash received during the period for:                                                                           
     Interest..................................................    $   1,031        $     903         $   848    
     Income taxes..............................................          805              650           1,154    

See notes to consolidated financial statements. 

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                  

Vestar/LPA Investment Corp. ('Investment'), a privately-held Delaware 
corporation, was formed in 1993 for the purpose of holding the capital stock of 
La Petite Holdings Corp. ('Holdings'), a Delaware corporation.                  

     Holdings was formed in 1993 for the purpose of holding the capital stock of
La Petite Acquisition Corp. ('Acquisition'). On July 23, 1993, ('Closing Date') 
as a result of a series of transactions, Holdings acquired all the outstanding  
shares of common stock, par value $.01 (the 'Common Stock'), of La Petite       
Academy, Inc. ('La Petite').                                                    

     In order to finance the transactions, Holdings (a) (i) sold common stock of
Holdings to Investment for approximately $30,000,000 (ii) sold to unaffiliated  
investment firms $85,000,000 aggregate principal amount of 9 5/8% Senior Secured
Notes due August 1, 2001 (the 'Senior Notes') and (iii) sold to unaffiliated    
investment firms $19,750,000, net of discount, Series A Cumulative Redeemable   
Exchangeable Preferred Stock, par value $.01 per share (the 'Preferred          
Stock-A'), (b) used $7,000,000 of cash and cash equivalents of La Petite and (c)
contributed to the capital of, or loaned to, Acquisition the portion of the     
aggregate proceeds of such sales necessary to fund the payments made by         
Acquisition in connection with the acquisition of La Petite.                    

    In conjunction with these transactions at the Closing Date, Investment (i)
sold to Vestar/LPT Limited Partnership, certain employees and unaffiliated      
investment firms 811,960 shares of Class A Common Stock (par value $.01 per     
share) for $5 per share, or an aggregate amount of $4,059,800, (ii) sold to     
Vestar/LPT Limited Partnership 213,750 shares of 10% Junior Preferred Stock (par
value $.01 per share) for approximately $84 per share, or an aggregate amount of
$17,975,000, (iii) sold to an unaffiliated party 80,000 shares of 10% Cumulative
Convertible Preferred Stock (par value $.01 per share) for $100 per share, or an
aggregate amount of $8 million, which are convertible on or after July 23, 1993 
into 150,000 shares of Investment's Class A Common Stock. Subsequent to the     
Closing Date and through August 30, 1997, Investment had paid stock dividends on
the 10% Cumulative Convertible Preferred Stock of 38,068 shares at a value of   
$100 per share, of an aggregate amount of $3,806,800, in the form of shares of  
10% Cumulative Nonconvertible Preferred Stock (par value $.01 per share).       

On May 31, 1997, Holdings was merged into La Petite in a tax-free     
transaction with La Petite as the surviving entity. As a result of the          
transaction all of the shares of La Petite were retired, with Holdings shares   
being reissued in the name of La Petite Academy, Inc.                           

On August 28, 1997, LPA Services, Inc. ('Services'), a wholly owned   
subsidiary of La Petite, was incorporated. Services will provide third party    
administrative services on insurance claims to La Petite beginning in fiscal    
year 1998. La Petite, consolidated with Services, is referred to in these notes 
as the 'Company'.                                                               

Investment is a holding company with all of its operations conducted  
through La Petite, its wholly-owned subsidiary.                                 

The Company offers educational, developmental and child care programs,
which are available on a full-time or part-time basis, for children between six 
weeks and twelve years old. The La Petite Academy schools are located in 35     
states and the District of Columbia, primarily in the southern, Atlantic coast, 
midwestern and western regions of the United States.                            

Principles of Consolidation                                                 

  The consolidated financial statements include the accounts of Investment
and its wholly-owned subsidiary, La Petite and its wholly-owned subsidiary,     
Services, after elimination of all significant intercompany accounts and        
transactions.                                                                   

Fiscal Year End                                                             

     The Company has a 52-53 week fiscal year which ends on the last Saturday in
August.                                                                         

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)     

Use of Estimates                                                            

The preparation of financial statements in conformity with generally  
accepted accounting principles requires management to make estimates and        
assumptions that affect the 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.             

Recognition of Revenues and Preopening Expenses                             

    The Company operates preschool education and child care Academies. Revenue
is recognized as the services are performed. Expenses associated with opening   
new Academies are charged to expense as incurred.                               

Depreciation and Amortization                                               

Buildings, furniture and equipment are depreciated over the estimated 
useful lives of the assets using the straight-line method. For financial        
reporting purposes, buildings are depreciated over 29 to 40 years, furniture and
equipment over five to 10 years and leasehold improvements over the term of the 
related lease or five to 10 years, whichever is less.                           

 Maintenance and repairs are charged to expense as incurred. The cost of
additions and improvements is capitalized and depreciated over the remaining    
useful lives of the assets. The cost and accumulated depreciation of assets sold
or retired are removed from the accounts, and any gain or loss is recognized in 
the year of disposal, except gains and losses on property and equipment which   
have been sold and leased back which are recognized over the terms of the       
related lease agreements.                                                       

Restricted Cash Investments                                                 

The restricted cash investment balance represents cash deposited in an
escrow account as security for the self-insured portion of the Company's workers
compensation and automobile insurance coverage.                                 

Excess of Purchase Price Over the Net Assets Acquired                       

The excess of the purchase price over the fair value of tangible and  
identifiable intangible assets and liabilities acquired related to the          
acquisition of La Petite is being amortized over a period of 30 years on the    
straight-line method.                                                           

Deferred Financing Costs                                                    

     The costs of obtaining financing are included in other assets and are being
amortized over the life of the related debt.                                    

Other Assets                                                                

Other assets include the fair value of identifiable intangible assets 
acquired in connection with the acquisition of La Petite and are being amortized
over periods ranging from two to 10 years on the straight-line method.          

Cash Equivalents                                                            

     The Company's cash equivalents consist of commercial paper and money market
funds with original maturities of three months or less.                         

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)     

Income Taxes                                                                

  The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards ('SFAS') No. 109, which requires the Company to establish  
deferred tax assets and liabilities, as appropriate, for all temporary          
differences, and to adjust deferred tax balances to reflect changes in tax rates
expected to be in effect during the periods the temporary differences reverse.  
Management has evaluated the recoverability of the deferred income tax asset    
balances and has determined that the deferred balances will be realized based on
future taxable income.                                                          

Disclosures Regarding Financial Instruments                                 

The carrying values of the Company's financial instruments, with the  
exception of the Company's Senior Notes, Convertible Debentures and Preferred   
Stock-A, approximate fair value. The estimated fair values of Senior Notes,     
Convertible Debentures and Preferred Stock-A at August 30, 1997 were $86.9      
million, $0.9 million and $33.3 million, respectively. The estimated fair values
of Senior Notes, Convertible Debentures and Preferred Stock-A at August 31, 1996
were $80.0 million, $1.6 million and $27.1 million, respectively.               

Impairment of Long-Lived Assets                                             

The Company adopted SFAS No. 121, 'Accounting for the Impairment of   
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,' as of the       
beginning of its 1997 fiscal year. SFAS No. 121, establishes accounting         
standards for the impairment of long-lived assets, certain intangibles, and     
goodwill related to those assets. The adoption of this Statement did not have an
effect on the Company's consolidated financial statements.                      

Stock Based Compensation                                                    

The Company has adopted the disclosure provisions of SFAS No. 123,    
'Accounting for Stock-Based Compensation'. The Statement encourages rather than 
requires companies to adopt a new method that accounts for stock compensation   
awards based on their estimated fair value at the date they are granted.        
Companies are permitted, however, to continue accounting for stock compensation 
awards under Accounting Principles Board ('APB') Opinion No. 25, which requires 
compensation cost to be recognized based on the excess, if any, between the     
quoted market price of the stock at the date of grant and the amount an employee
must pay to acquire the stock. The Company has elected to continue to apply APB 
Opinion No. 25 and has disclosed the pro forma net income (loss), determined as 
if the method under SFAS No. 123 had been applied, in Note 13.                  

Reclassifications                                                           

    Certain reclassifications to prior year amounts have been made in order to
conform to the current year presentation.                                       

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

2. OTHER ASSETS                                                                 

                                                        [Enlarge/Download Table]

                                                                                 AUGUST 31, 1996    AUGUST 30, 1997
                                                                                 ---------------    ---------------
                                                                                     (IN THOUSANDS OF DOLLARS)     
                                                                                 ----------------------------------
                                                                                                                   
Intangible assets:                                                                                                 
  Excess purchase price over net assets acquired................................    $  64,277          $  64,277   
  Curriculum....................................................................        1,497              1,497   
  Workforce.....................................................................        3,248              3,248   
  Accumulated amortization......................................................      (10,395)           (12,714)  
                                                                                 ---------------    ---------------
                                                                                       58,627             56,308   
Deferred financing costs........................................................       12,854             12,752   
Accumulated amortization........................................................       (6,271)            (8,176)  
Other assets....................................................................        3,791              3,303   
                                                                                 ---------------    ---------------
                                                                                    $  69,001          $  64,187   
                                                                                 ---------------    ---------------
                                                                                 ---------------    ---------------

3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS                                 

                                                        [Enlarge/Download Table]

                                                                                 AUGUST 31, 1996    AUGUST 30, 1997
                                                                                 ---------------    ---------------
                                                                                     (IN THOUSANDS OF DOLLARS)     
                                                                                 ----------------------------------
                                                                                                                   
Convertible Debentures, 6.5% payable through June 1, 2011.......................     $ 2,100            $   850    
Senior Notes, 9.625% payable through August 1, 2001.............................      85,000             85,000    
Capital lease obligations.......................................................          --                244    
                                                                                 ---------------    ---------------
Total long-term debt and capital lease obligations..............................      87,100             86,094    
Less unamortized discount.......................................................        (510)              (191)   
                                                                                 ---------------    ---------------
                                                                                     $86,590            $85,903    
                                                                                 ---------------    ---------------
                                                                                 ---------------    ---------------

     The Convertible Debentures, as a result of purchase accounting adjustments,
are shown net of a discount. The discount is being accreted on a level-yield    
basis over the remaining life of the Convertible Debentures and is reflected in 
interest expense in the Consolidated Statements of Operations. The holders of   
the Convertible Debentures have the right to receive, upon conversion thereof,  
$10.00 in cash for each $19.50 of principal amount converted.                   

The Senior Notes have a required redemption of $42.5 million in August
2000. Interest is payable semi-annually in February and August. Commencing      
August 1997, the Senior Notes are redeemable, at various redemption prices, at  
the Company s option. The Senior Notes contain certain covenants that, among    
other things, limit the ability of La Petite to incur additional indebtedness,  
transfer or sell assets and pay dividends. As of August 30, 1997, LaPetite would
not be permitted to pay cash dividends on its common or preferred stock. The    
stock of La Petite is pledged as collateral for the Senior Notes.               

 On July 10, 1996, La Petite entered into a Credit Facility (the 'Credit
Facility') providing for a $15 million revolving credit facility for working    
capital and other general corporate purposes through July 2000. Borrowings under
the Credit Facility are secured by a pledge of substantially all the assets of  
the Company. Loans under the Credit Facility will bear interest at 1% above     
prime rate or 2.25% above the Eurodollar rate, at La Petite's option. La Petite 
is required to pay quarterly commitment fees of 0.5% per annum on the unused    
revolving credit facility.                                                      

As of August 30, 1997, no amounts were outstanding under the Credit   
facility; however, letters of credit issued under the facility in the amount of 
$5.7 million were outstanding as of August 30, 1997. The letters of credit were 
issued as security for the self-insured portion of the Company's workers'       
compensation and automobile insurance coverages.                                

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS--(CONTINUED)                    

    During fiscal year 1997, the Company entered into a master lease agreement
to provide computer equipment to the Company. The leases are recorded as a      
capital lease at the time of delivery at a discount rate of 1.5% over the       
interest rate of three year US Treasury notes.                                  

Scheduled maturities and mandatory prepayments of long-term debt and  
capital lease obligations during the five years subsequent to August 30, 1997   
are as follows (in thousands of dollars):                                       

1999...........................................................   $   126       
2000...........................................................    42,618       
2001 and thereafter............................................    43,350       
                                                           -------
                                                           $86,094
                                                           -------
                                                           -------

4. OTHER LONG-TERM LIABILITIES                                                  

                                        AUGUST 31, 1996    AUGUST 30, 1997
                                        ---------------    ---------------
                                       (IN THOUSANDS OF DOLLARS)
                                        ----------------------------------
Unfavorable leases, net of accumulated                                          
amortization..........................       $ 7,323            $ 6,085     
Non-current reserve for closed                                                  
academies.............................         8,193              5,609     
Long-term insurance liabilities.........         4,233              2,625       
                                        ---------------    ---------------
                                        $19,749            $14,319
                                        ---------------    ---------------
                                        ---------------    ---------------

  In connection with the acquisition of La Petite, an intangible liability
for unfavorable operating leases was recorded, which is being amortized over the
average remaining life of the leases.                                           

   The reserve for closed academies includes the long-term liability related
to leases for Academies which were closed and are no longer operated by the     
Company.                                                                        

5. INCOME TAXES                                                                 

Tax Sharing Agreement                                                       

    Investment and La Petite file a consolidated Federal income tax return and
have entered into a Tax Sharing Agreement, pursuant to which La Petite agreed to
pay to Investment an amount equal to the Federal and state income taxes La      
Petite would have been required to pay if La Petite were not part of            
Investment's consolidated                                                       

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

5. INCOME TAXES--(CONTINUED)                                                    

group for income tax purposes. The provisions for income taxes recorded in the  
Consolidated Statements of Operations consisted of the following:               

                                                        [Enlarge/Download Table]

                                                                   52 WEEKS           52 WEEKS           52 WEEKS    
                                                                     ENDED              ENDED              ENDED     
                                                                AUGUST 26, 1995    AUGUST 31, 1996    AUGUST 30, 1997
                                                                ---------------    ---------------    ---------------
                                                                              (IN THOUSANDS OF DOLLARS)              
                                                                -----------------------------------------------------
                                                                                                                     
Payable currently:                                                                                                   
  Federal......................................................     $   910            $ 1,481            $ 2,921    
  State........................................................         160                262                567    
                                                                ---------------    ---------------    ---------------
       Total...................................................       1,070              1,743              3,488    
                                                                ---------------    ---------------    ---------------
Deferred:                                                                                                            
  Federal......................................................      (6,141)              (190)              (187)   
  State........................................................      (1,084)               (35)               (37)   
                                                                ---------------    ---------------    ---------------
       Total...................................................      (7,225)              (225)              (224)   
                                                                ---------------    ---------------    ---------------
Income tax provision (benefit).................................     $(6,155)           $ 1,518            $ 3,264    
                                                                ---------------    ---------------    ---------------
                                                                ---------------    ---------------    ---------------

  The difference between the provision for income taxes as reported in the
Consolidated Statements of Operations and the provision computed at the         
statutory Federal rate of 34 percent is due primarily to state income taxes and 
nondeductible amortization of the excess of purchase price over the net assets  
acquired of $2.1 million, $2.1 million, and $2.2 million in the 52 weeks ended  
August 30, 1997, the 53 weeks ended August 31, 1996 and the 52 weeks ended      
August 26, 1995, respectively.                                                  

Deferred income taxes result from differences between the financial   
reporting and tax basis of the Company's assets and liabilities. The sources of 
these differences and their cumulative tax effects at August 30, 1997 and August
31, 1996 are estimated as follows:                                              

                                                        [Enlarge/Download Table]

                                                                                 AUGUST 31, 1996    AUGUST 30, 1997
                                                                                 ---------------    ---------------
                                                                                     (IN THOUSANDS OF DOLLARS)     
                                                                                 ----------------------------------
                                                                                                                   
Current deferred taxes:                                                                                            
  Accruals not currently deductible.............................................     $ 4,576            $ 3,817    
  Supplies......................................................................      (2,596)            (2,386)   
  Prepaids and other............................................................        (261)              (407)   
                                                                                 ---------------    ---------------
       Net current deferred tax assets..........................................     $ 1,719            $ 1,024    
                                                                                 ---------------    ---------------
Noncurrent deferred taxes:                                                                                         
  Unfavorable leases............................................................     $ 2,973            $ 2,471    
  Insurance reserves............................................................       1,719              1,067    
  Reserve for closed academies..................................................       3,326              2,277    
  Other.........................................................................         361                342    
  Property and equipment........................................................      (3,528)            (1,534)   
  Long-term debt and capital lease obligations..................................        (207)               (78)   
  Intangible assets.............................................................        (385)              (311)   
  Deferred financing costs and other............................................      (1,323)              (826)   
                                                                                 ---------------    ---------------
       Net noncurrent deferred tax assets.......................................     $ 2,936            $ 3,408    
                                                                                 ---------------    ---------------
                                                                                 ---------------    ---------------

    As of August 30, 1997, only the income tax returns for years subsequent to
1992 are open to examination.                                                   

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

6. LEASES                                                                       

  Academy facilities are leased for terms ranging from 15 to 20 years. The
leases provide renewal options and require the Company to pay utilities,        
maintenance, insurance and property taxes. Some leases provide for annual       
increases in the rental payment and many leases require the payment of          
additional rentals if operating revenue exceeds stated amounts. These additional
rentals range from 2% to 10% of operating revenue in excess of the stated       
amounts and are recorded as rental expense. Vehicles are also rented under      
various lease agreements, most of which are cancelable within 30 days after a   
one-year lease obligation. Substantially all Academy and vehicle leases are     
operating leases. Rental expense for these leases were $44.9 million, $45.1     
million, and $44.8 million, for the 52 weeks ended August 30, 1997, 53 weeks    
ended August 31, 1996, and 52 weeks ended August 26, 1995, respectively.        
Contingent rental expense of $1.5 million, $1.2 million and $0.9 million were   
included in rental expense for the 52 weeks ended August 30, 1997, 53 weeks     
ended August 31, 1996 and 52 weeks ended August 26, 1995, respectively.         

     Aggregate minimum future rentals payable under facility leases as of August
30, 1997 were:                                                                  

             FISCAL YEAR ENDING:                   (IN THOUSANDS OF DOLLARS)
                                                   -------------------------
1998..............................................            $ 38,948          
1999..............................................              36,783          
2000..............................................              34,264          
2001..............................................              30,445          
2002 and thereafter...............................              94,790          
                                                 -----------
                                                    $235,230
                                                 -----------
                                                 -----------

7. REDEEMABLE PREFERRED STOCK                                                   

   The Company has outstanding 800,000 shares of Preferred Stock-A (see Note
1) as of July 24, 1993. The carrying value of the Preferred Stock-A is being    
accreted to its redemption value of $20.0 million on August 1, 2003. The        
Preferred Stock-A is nonvoting and mandatorily redeemable in August 2003, with  
La Petite having an option to redeem the Preferred Stock-A, in whole or in part,
on or after August 1, 1998. Dividends at 12.125% are cumulative and if not paid 
upon quarterly declaration are added to the liquidation value. The liquidation  
values per share as of August 30, 1997 and August 31, 1996 were $40.836 and     
$36.250, respectively. The Preferred Stock-A may be exchanged for 12.125%       
Subordinated Exchange Debentures due 2003, at the Company's option, subject to  
certain conditions, in whole, but not in part, on any scheduled dividend payment
date.                                                                           

    The Preferred Stock contains certain restrictive provisions that limit the
ability of the La Petite to incur additional indebtedness, pay cash dividends or
make certain other restricted payments, or merge or consolidate with or sell all
or substantially all of its assets.                                             

8. STOCKHOLDERS' EQUITY                                                         

    As of August 30, 1997 and August 31, 1996, the Company has outstanding the
following issues of non-redeemable preferred stock:                             

   10% Cumulative Convertible Preferred Stock ('Convertible Preferred') (par
value $.01 per share) each share of which is convertible into 1.875 shares of   
Class A common Stock of the Company. Quarterly stock dividends are paid on the  
Convertible Preferred in the form of 10% Cumulative Non-Convertible Preferred   
Stock (par value $.01 per share) ('Non-Convertible Preferred'). Dividends are   
declared quarterly on the Non-Convertible Preferred. Subsequent to the 52 weeks 
ended August 30, 1997, a quarterly stock dividend consisting of Non-Convertible 
Preferred was declared on September 30, 1997, which included 1,968 shares       
aggregating $196,780 related to July and August 1997.                           

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

8. STOCKHOLDERS' EQUITY--(CONTINUED)                                            

    10% Junior Preferred Stock (par value $.01 per share) ('Junior Preferred')
with a liquidation value of $150.04 per share or $32,072,007, and $135.93 per   
share or $29,055,656 at August 30, 1997 and August 31, 1996, respectively.      

9. BENEFIT PLAN                                                                 

La Petite sponsors a defined contribution plan (the 'Plan') for       
substantially all employees. Eligible participants may make contributions to the
Plan from 1% to 20% of their compensation (as defined). La Petite may also make 
contributions at the discretion of the Board of Directors. Contribution expense 
attributable to this Plan was $425,000, $405,000, and $0, for the 52 weeks ended
August 30, 1997, the 53 weeks ended August 31, 1996, and the 52 weeks ended     
August 26, 1995.                                                                

   The Plan is currently under audit by the Internal Revenue Service ('IRS')
which has raised several issues concerning the Plan's operation. La Petite      
believes that the Plan, as amended, continues to operate pursuant to IRS and    
Department of Labor regulations.                                                

10. RELATED PARTY TRANSACTIONS                                                  

Management Consulting Agreement                                             

The Company has entered into an agreement for management consulting   
services (the 'Management Consulting Agreement') with Vestar Management Partners
('Vestar') pursuant to which Vestar will make available to the Company          
management consulting, corporate finance and investment advice for which the    
Company pays to Vestar an annual fee of $500,000.                               

Transactions with Certain Investors                                         

In 1992, the Company entered into a joint venture with Benesse Corp.  
('Benesse'), formerly known as Fukutake Publishing Company, Ltd. The Company    
agreed in principle to grant to Benesse exclusive rights to develop and operate 
La Petite Academies in certain Asian countries. Under the terms of the pilot    
program, Benesse operates 10 La Petite Academies in Japan. The Company is       
reimbursed for all of its out-of-pocket expenses associated with assisting      
Benesse with the pilot program. Benesse is a stockholder of the Company and     
certain directors of the Company are affiliates of Benesse.                     

11. CONTINGENCIES                                                               

  The Company has litigation pending which arose in the ordinary course of
business. Litigation is subject to many uncertainties and the outcome of the    
individual matters is not presently determinable. It is management's opinion    
that this litigation will not result in liabilities that would have a material  
adverse effect on the Company's financial position or results of operations.    

12. RESTRUCTURING CHARGE                                                        

    During fiscal year 1995, the Company approved a plan to close 39 Academies
located in areas where the demographic conditions no longer support an          
economically viable operation and to restructure its operating management to    
better serve the remaining Academies. Accordingly, the Company recorded an $11.7
million restructuring charge ($7.0 million after tax) to provide for costs      
associated with the Academy closures and restructuring. The charge includes     
approximately $10.0 million for the present value of rent and real estate taxes 
for the remaining lease terms. The charge also includes restructuring and other 
costs related to the closures. As of August 30, 1997, $4.5 million of costs     
related to the closings and restructuring had been charged against the          
restructuring reserve.                                                          

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

13. STOCK BASED COMPENSATION                                                    

From time to time, the Board of Directors of Investment, in their sole
discretion, grant non-qualified stock options, with respect to the common stock 
of Investment, to key executives of the Company. Options are granted pursuant to
an agreement at the time of grant, and typically become exercisable in equal    
cumulative installments over a five-year period beginning one year after the    
date of grant. To date, all options granted expire on the tenth anniversary of  
the grant date. No market exists for the common stock of Investment, but options
are granted at prices that, in the opinion of the Board of Directors, are equal 
to or greater than the fair value of the stock at the time of grant. Options on 
62,794 shares have been granted to employees through August 30, 1997, of which  
36,315 were exercisable at that date.                                           

     The Company accounts for the options in accordance with APB Opinion No. 25,
which requires compensation cost to be recognized only on the excess, if any,   
between the fair value of the stock at the date of grant and the amount an      
employee must pay to acquire the stock. Under this method, no compensation cost 
has been recognized for stock options granted.                                  

  Had compensation cost for these options been recognized as prescribed by
SFAS No. 123, the Company's loss would have been increased by (in thousands) $19
in 1997 and $17 in 1996. The Company is privately owned and there is no market  
for the stock of Investment. The estimated compensation element is based on the 
time value of money at the US Treasury rates assuming that the value of the     
stock will be at least equal to the grant price five years out when fully       
exercisable. The estimated compensation expense above is assumed to be amortized
over the vesting period.                                                        

14. SUBSEQUENT EVENTS                                                           

     On March 17, 1998, LPA Investment LLC (the 'Investor'), a limited liability
company owned by an affiliate of Chase Capital Partners ('CCP') and by an entity
controlled by Robert E. King, a Director of the Company, and Investment, the    
parent company of the Company, which was renamed LPA Holding Corp. ('Parent'),  
entered into a Merger Agreement pursuant to which a wholly owned subsidiary of  
the Investor was merged into Parent (the 'Recapitalization'). In the            
Recapitalization (i) all of the then outstanding shares of preferred stock and  
common stock of Parent (other than the shares of common stock retained by       
Vestar/LPT Limited Partnership and management of the Company) owned by the      
existing stockholders of the Parent (the 'Existing Stockholders') were converted
into the right to receive cash and (ii) the Existing Stockholders received the  
cash of the Company as of the date of the closing of the Transactions. As part  
of the Recapitalization, the Investor purchased $72.5 million (less the value of
options retained by management) of common stock of the Parent (representing     
approximately 74.5% of the common stock of Parent on a fully diluted basis) and 
$30 million of redeemable preferred stock of Parent (collectively, the 'Equity  
Investment'). In addition, in connection with the purchase of preferred stock of
Parent, the Investor received warrants to purchase up to 6.0% of Parent's common
stock on a fully diluted basis (resulting in an aggregate fully diluted         
ownership of 80.5% of the common stock of Parent). Vestar/LPT Limited           
Partnership retained common stock of Parent having a value (based on the amount 
paid by the Investor for its common stock of Parent) of $2.8 million            
(representing 3.0% of the outstanding common stock of Parent on a fully diluted 
basis). Management retained common stock of Parent having a value (based on the 
amount paid by the Investor for its common stock of Parent) of $4.7 million     
(representing 5.0% of the common stock of Parent on a fully diluted basis) and  
retained existing options to acquire 3.0% of Parent's fully diluted common      
stock. In addition, Parent adopted a new option plan (the 'New Option Plan')    
covering 8.5% of its fully diluted common stock. Accordingly, management owns or
has the right to acquire, subject to certain performance requirements,          
approximately 16.5% of the common stock of Parent on a fully diluted basis. The 
Equity Investment was used, together with the proceeds of the offering of $145  
million of 10% Senior Notes due 2008 and borrowings under a new credit          
agreement, consisting of a term loan facility of $40 million and a revolving    
credit facility providing loans of up to $25 million, to finance the            
Recapitalization, to refinance substantially all of the Company's outstanding   
indebtedness and outstanding preferred stock (the 'Refinancing Transactions')   
and to pay the fees and expenses relating to the foregoing. These transactions  
closed on May 11, 1998.                                                         

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VESTAR/LPA INVESTMENT CORP. 

CONSOLIDATED BALANCE SHEETS 

28 WEEKS ENDED MARCH 14, 1998 
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

                                                        [Enlarge/Download Table]

                                                                                          AUGUST 30,   MARCH 14,  
                                                                                             1997        1998     
                                                                                          ----------  ----------- 
                                                                                                       (UNAUDITED)
                                                                                                                  
                                         ASSETS                                                                   
Current assets:                                                                                                   
  Cash and cash equivalents..............................................................  $ 23,971    $  24,755  
  Restricted cash investments............................................................     2,312        2,778  
  Accounts and notes receivable, net.....................................................     4,976        4,567  
  Prepaid food and supplies..............................................................     5,954        5,506  
  Other prepaid expenses.................................................................     3,645        3,605  
  Refundable income taxes................................................................       559          374  
  Current deferred income taxes..........................................................     1,024        1,350  
                                                                                          ----------  ----------- 
    Total current assets.................................................................    42,441       42,935  
Property and equipment, at cost:                                                                                  
  Land...................................................................................     6,927        7,008  
  Buildings and leasehold improvements...................................................    64,811       67,373  
  Equipment..............................................................................    22,529       25,740  
  Facilities under construction..........................................................       317        1,251  
                                                                                          ----------  ----------- 
                                                                                             94,584      101,372  
  Less accumulated depreciation..........................................................    33,460       40,533  
                                                                                          ----------  ----------- 
    Net property and equipment...........................................................    61,124       60,839  
Other assets (Note 3)....................................................................    64,187       62,104  
Deferred income taxes....................................................................     3,408        4,469  
                                                                                          ----------  ----------- 
                                                                                           $171,160    $ 170,347  
                                                                                          ----------  ----------- 
                                                                                          ----------  ----------- 
                          LIABILITIES AND STOCKHOLDERS' EQUITY                                                    

Current liabilities:                                                                                              
  Overdrafts due banks...................................................................  $  2,356    $   1,950  
  Accounts payable.......................................................................     6,224        5,632  
  Current reserve for closed academies...................................................     1,860        1,623  
  Accrued salaries, wages and other payroll costs........................................    10,717       10,830  
  Accrued insurance liabilities..........................................................     4,156        3,990  
  Accrued property and sales taxes.......................................................     4,128        2,779  
  Accrued interest payable...............................................................       719          970  
  Other current liabilities..............................................................     4,883        4,260  
                                                                                          ----------  ----------- 
    Total current liabilities............................................................    35,043       32,034  
Long-term debt and capital lease obligations (Note 4)....................................    85,903       87,345  
Other long-term liabilities (Note 5).....................................................    14,319       13,874  
Commitments and contingencies (Note 6)...................................................                         
Minority interest--Series A cumulative redeemable exchangeable preferred stock ($.01 par                          
  value per share, 2,000,000 shares authorized; 800,000 shares issued and outstanding at                          
  aggregate liquidation preference; per share liquidation preference of $43.541 and                               
  $40.836, respectively).................................................................    32,521       34,698  
Stockholders' equity:                                                                                             
  10% cumulative convertible preferred stock ($.01 par value per share; 80,000 shares                             
    authorized; 80,000 issued and outstanding)...........................................         1            1  
  10% nonconvertible preferred stock ($.01 par value per share; 150,000 shares                                    
    authorized; 46,579 and 40,036 issued and outstanding, respectively)..................        --           --  
  Junior preferred stock ($.01 par value per share; 650,000 authorized; 213,750 issued                            
    and outstanding).....................................................................         2            2  
  Class A common stock ($.01 par value per share; 1,500,000 shares authorized; 852,160                            
    issued and outstanding)..............................................................         9            9  
  Class B common stock ($.01 par value per share; 350,000 shares authorized, none issued                          
    and outstanding).....................................................................        --           --  
  Additional paid-in capital.............................................................    34,234       34,888  
  Accumulated deficit....................................................................   (30,573)     (32,164) 
  Less cost of treasury shares...........................................................      (299)        (340) 
                                                                                          ----------  ----------- 
    Total stockholders' equity...........................................................     3,374        2,396  
                                                                                          ----------  ----------- 
                                                                                           $171,160    $ 170,347  
                                                                                          ----------  ----------- 
                                                                                          ----------  ----------- 

See notes to consolidated financial statements. 

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VESTAR/LPA INVESTMENT CORP. 

CONSOLIDATED STATEMENTS OF OPERATIONS 

28 WEEKS ENDED MARCH 14, 1998 (UNAUDITED) 
(IN THOUSANDS OF DOLLARS) 

                                                        [Enlarge/Download Table]

                                                                                              28 WEEKS ENDED    
                                                                                           ---------------------
                                                                                           MARCH 15,   MARCH 14,
                                                                                             1997        1998   
                                                                                           ---------   ---------
                                                                                                                
Operating revenue......................................................................... $159,983    $166,701 
Operating expenses:                                                                                             
  Salaries, wages and benefits............................................................   84,077      87,772 
  Facility lease expense..................................................................   21,143      21,328 
  Depreciation............................................................................    7,444       7,073 
  Amortization of goodwill and other intangibles..........................................    1,204       1,204 
  Other...................................................................................   40,299      41,933 
                                                                                           --------    -------- 
                                                                                            154,167     159,310 
                                                                                           --------    -------- 
Operating income..........................................................................    5,816       7,391 
                                                                                           --------    -------- 
Interest expense..........................................................................    4,994       4,917 
Minority interest in net income of subsidiary.............................................    1,935       2,177 
Interest income...........................................................................     (493)       (601)
                                                                                           --------    -------- 
  Net interest costs......................................................................    6,436       6,493 
Income (loss) before income taxes.........................................................     (620)        898 
Provision for income taxes................................................................    1,051       1,835 
                                                                                           --------    -------- 
Net loss.................................................................................. $ (1,671)   $   (937)
                                                                                           --------    -------- 
                                                                                           --------    -------- 

See notes to consolidated financial statements. 

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VESTAR/LPA INVESTMENT CORP. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

28 WEEKS ENDED MARCH 14, 1998 
(IN THOUSANDS OF DOLLARS) 

                                                        [Enlarge/Download Table]

                                                                                                28 WEEKS ENDED    
                                                                                            ----------------------
                                                                                            MARCH 15,    MARCH 14,
                                                                                              1997         1998   
                                                                                            ---------    ---------
                                                                                                 (UNAUDITED)      
                                                                                                                  
Cash flows from operating activities:                                                                             
  Net loss.................................................................................  $(1,671)     $  (937)
     Adjustments to reconcile net loss to net cash from operating activities:                                     
       Depreciation and amortization.......................................................    9,109        8,731 
       Deferred income taxes...............................................................   (2,198)      (1,387)
       Minority interest in net income of subsidiary.......................................    1,935        2,177 
     Changes in assets and liabilities:                                                                           
       Account and notes receivable........................................................     (628)         373 
       Prepaid expenses and supplies.......................................................     (130)         488 
       Accrued property and sales taxes....................................................   (1,115)      (1,349)
       Accrued interest payable............................................................      301          251 
       Other changes in assets and liabilities, net........................................   (2,864)      (2,026)
                                                                                            ---------    ---------
          Net cash from operating activities...............................................    2,739        6,321 
                                                                                            ---------    ---------
Cash flows used for investing activities:                                                                         
  Capital expenditures.....................................................................   (3,061)      (4,776)
  Proceeds from sale of assets.............................................................       88          339 
                                                                                            ---------    ---------
          Net cash used for investing activities...........................................   (2,973)      (4,437)
                                                                                            ---------    ---------
Cash flows from (used for) financing activities:                                                                  
  Repayment of long-term debt and capital lease obligations................................     (875)        (229)
  Reduction in bank overdrafts.............................................................   (1,793)        (406)
  Decrease (increase) in restricted cash investments.......................................    6,530         (465)
                                                                                            ---------    ---------
          Net cash from (used for) financing activities....................................    3,862       (1,100)
                                                                                            ---------    ---------
Net increase in cash and cash equivalents..................................................    3,628          784 
Cash and cash equivalents at beginning of period...........................................   12,791       23,971 
                                                                                            ---------    ---------
Cash and cash equivalents at end of period.................................................  $16,419      $24,755 
                                                                                            ---------    ---------
                                                                                            ---------    ---------
Supplemental cash flow information:                                                                               
  Cash paid during the period for:                                                                                
     Interest (net of amounts capitalized).................................................  $ 4,232      $ 4,211 
     Income taxes..........................................................................    4,375        1,951 
  Cash received during the period for:                                                                            
     Interest..............................................................................  $   470      $   665 
     Income taxes..........................................................................    1,141          204 

Non-cash investing and financing activities:                                    

     Capital lease obligations of $2,399 were incurred during the 28 weeks ended
 March 14, 1998, when the Company entered into leases for new computer
equipment.                                                          

See notes to consolidated financial statements. 

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATIONAL STRUCTURE AND RECAPITALIZATION TRANSACTION                    

Vestar/LPA Investment Corp. ('Investment'), a privately-held Delaware 
corporation, was formed in 1993 for the purpose of holding the capital stock of 
La Petite Holdings Corp. ('Holdings'), a Delaware corporation. Holdings was     
formed in 1993 for the purpose of holding the capital stock of La Petite        
Acquisitions Corp. ('Acquisition'). On July 23, 1993, as a result of a series of
transactions, Holdings acquired all the outstanding shares of common stock, par 
value $.01 (the 'Common Stock'), of La Petite Academy, Inc. ('La Petite'). The  
transaction was accounted for as a purchase and the excess of purchase price    
over the net assets acquired is being amortized over 30 years. On May 31, 1997, 
Holdings was merged with and into its wholly-owned subsidiary La Petite, a      
Delaware corporation, with La Petite as the surviving corporation. On August 28,
1997, LPA Services, Inc. ('Services'), a wholly owned subsidiary of La Petite,  
was incorporated. Services will provide third party administrative services on  
insurance claims to La Petite. La Petite, consolidated with Services, is        
referred to herein as the 'Company'.                                            

     On March 17, 1998, LPA Investment LLC (the 'Investor'), a limited liability
company owned by an affiliate of Chase Capital Partners ('CCP') and by an entity
controlled by Robert E. King, a Director of the Company, and Investment, the    
parent company of the Company, which was renamed LPA Holding Corp. ('Parent'),  
entered into a Merger Agreement pursuant to which a wholly owned subsidiary of  
the Investor was merged into Parent (the 'Recapitalization'). In the            
Recapitalization (i) all of the then outstanding shares of preferred stock and  
common stock of Parent (other than the shares of common stock retained by       
Vestar/LPT Limited Partnership and management of the Company) owned by the      
existing stockholders of the Parent (the 'Existing Stockholders') were converted
into the right to receive cash and (ii) the Existing Stockholders received the  
cash of the Company as of the date of the closing of the Transactions. As part  
of the Recapitalization, the Investor purchased $72.5 million (less the value of
options retained by management) of common stock of the Parent (representing     
approximately 74.5% of the common stock of Parent on a fully diluted basis) and 
$30 million of redeemable preferred stock of Parent (collectively, the 'Equity  
Investment'). In addition, in connection with the purchase of preferred stock of
Parent, the Investor received warrants to purchase up to 6.0% of Parent's common
stock on a fully diluted basis (resulting in an aggregate fully diluted         
ownership of 80.5% of the common stock of Parent). Vestar/LPT Limited           
Partnership retained common stock of Parent having a value (based on the amount 
paid by the Investor for its common stock of Parent) of $2.8 million            
(representing 3.0% of the outstanding common stock of Parent on a fully diluted 
basis). Management retained common stock of Parent having a value (based on the 
amount paid by the Investor for its common stock of Parent) of $4.7 million     
(representing 5.0% of the common stock of Parent on a fully diluted basis) and  
retained existing options to acquire 3.0% of Parent's fully diluted common      
stock. In addition, Parent adopted a new option plan (the 'New Option Plan')    
covering 8.5% of its fully diluted common stock. Accordingly, management owns or
has the right to acquire, subject to certain performance requirements,          
approximately 16.5% of the common stock of Parent on a fully diluted basis. The 
Equity Investment was used, together with the proceeds of the offering of $145  
million of 10% Senior Notes due 2008 and borrowings under a new credit          
agreement, consisting of a term loan facility of $40 million and a revolving    
credit facility providing loans of up to $25 million, to finance the            
Recapitalization, to refinance substantially all of the Company's outstanding   
indebtedness and outstanding preferred stock (the 'Refinancing Transactions')   
and to pay the fees and expenses relating to the foregoing. These transactions  
closed on May 11, 1998.                                                         

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

   The Company utilizes a 52-week fiscal year ending of the last Saturday in
August composed of 13 four-week periods. The first quarter contains four such   
periods or 16 weeks and each remaining quarter contains three periods or 12     
weeks.                                                                          

    The information included in these interim financial statements reflect all
normal recurring adjustments which are, in the opinion of management, necessary 
to fairly state the Company's financial position and the results of its         
operations for the periods presented.                                           

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VESTAR/LPA INVESTMENT CORP. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

  The Consolidated Financial Statements include the accounts of Investment
and its wholly owned subsidiary, La Petite and its wholly owned subsidiary,     
Services, after elimination of all significant intercompany accounts and        
transactions.                                                                   

3. OTHER ASSETS                                                                 

                                                        [Enlarge/Download Table]

                                                                                           AUGUST 30,    MARCH 14, 
                                                                                              1997         1998    
                                                                                           ----------    --------- 
                                                                                          (IN THOUSANDS OF DOLLARS)
                                                                                                                   
Intangible assets:                                                                                                 
  Excess purchase price over net assets acquired.........................................   $ 64,277      $64,277  
  Curriculum.............................................................................      1,497        1,497  
  Workforce..............................................................................      3,248        3,248  
  Accumulated amortization...............................................................    (12,714)     (13,962) 
                                                                                           ----------    --------- 
                                                                                              56,308       55,060  

Deferred financing costs.................................................................     12,752       12,754  
Accumulated amortization.................................................................     (8,176)      (9,240) 
Other assets.............................................................................      3,303        3,530  
                                                                                           ----------    --------- 
                                                                                            $ 64,187      $62,104  
                                                                                           ----------    --------- 
                                                                                           ----------    --------- 

4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS                                 

                                                        [Enlarge/Download Table]

                                                                                           AUGUST 30,    MARCH 14, 
                                                                                              1997         1998    
                                                                                           ----------    --------- 
                                                                                          (IN THOUSANDS OF DOLLARS)
                                                                                                                   
Convertible Debentures, 6.5% payable through June 1, 2011................................   $    850      $   850  
Senior Notes, 9.625% payable through August 1, 2001......................................     85,000       85,000  
Capital lease obligations................................................................        366        2,536  
                                                                                           ----------    --------- 
  Total-long term debt and capital lease obligations.....................................     86,216       88,386  
Less unamortized discount................................................................       (191)        (184) 
                                                                                           ----------    --------- 
                                                                                              86,025       88,202  
Less current maturities of capital lease obligations.....................................       (122)        (857) 
                                                                                           ----------    --------- 
                                                                                            $ 85,903      $87,345  
                                                                                           ----------    --------- 
                                                                                           ----------    --------- 

5. OTHER LONG-TERM LIABILTIES                                                   

                                                        [Enlarge/Download Table]

                                                                                           AUGUST 30,    MARCH 14, 
                                                                                              1997         1998    
                                                                                           ----------    --------- 
                                                                                          (IN THOUSANDS OF DOLLARS)
                                                                                                                   
Unfavorable leases, net of accumulated amortization......................................   $  6,085      $ 5,419  
Non-current reserve for closed Academies.................................................      5,609        4,919  
Long-term insurance liabilities..........................................................      2,625        3,536  
                                                                                           ----------    --------- 
                                                                                            $ 14,319      $13,874  
                                                                                           ----------    --------- 
                                                                                           ----------    --------- 

6. COMMITMENTS AND CONTINGENCIES                                                

  The Company has litigation pending which arose in the ordinary course of
business. Litigation is subject to many uncertainties and the outcome of the    
individual maters is not presently determinable. It is management's opinion that
this litigation will not result in liabilities that would have a material       
adverse effect on the Company's financial position or results of operations.    

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY  
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR 
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE         
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO     
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY    
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS     
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER   
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO   
CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF OR THAT THE          
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.  

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

TABLE OF CONTENTS 

                                                                [Download Table]

                                                  PAGE
                                                  ----
                                                      
Available Information..........................    ii 
Prospectus Summary.............................     1 
Risk Factors...................................    13 
The Exchange Offer.............................    19 
The Transactions...............................    27 
Use of Proceeds................................    27 
Capitalization.................................    28 
Selected Historical Consolidated Financial and        
  Other Data...................................    29 
Unaudited Pro Forma Consolidated Financial            
  Information..................................    31 
Management's Discussion and Analysis of               
  Financial Condition and Results of                  
  Operations...................................    36 
Business.......................................    44 
Management.....................................    55 
Ownership of Securities........................    59 
Certain Relationships and Related                     
  Transactions.................................    60 
Description of the Credit Agreement............    61 
Description of Notes...........................    63 
Certain United States Federal Income Tax              
  Considerations...............................    88 
Book Entry; Delivery and Form..................    91 
Plan of Distribution...........................    93 
Legal Matters..................................    94 
Experts........................................    94 
Index to Financial Statements..................   F-1 

$145,000,000

LA PETITE ACADEMY, INC. 
LPA HOLDING CORP. 

10% SERIES B SENIOR NOTES DUE 2008

------------------------
PROSPECTUS
------------------------

JUNE 30, 1998 

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

Dates Referenced Herein   and   Documents Incorporated by Reference

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