TRI STATE OUTDOOR MEDIA GROUP INC, S-4/A, 1998-10-29

TRI STATE OUTDOOR MEDIA GROUP INC
S-4/A, 1998-10-29
ADVERTISING

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1998.

REGISTRATION NO. 333-59137
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 2 TO

FORM S-4
REGISTRATION STATEMENT

UNDER
THE SECURITIES ACT OF 1933

TRI-STATE OUTDOOR MEDIA GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
KANSAS 7312 48-1061763
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code)
organization)
</TABLE>

Tri-State Outdoor Media Group, Inc.
3416 Highway 41 South
Tifton, Georgia 31793
800-732-8261
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

SHELDON G. HURST
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TRI-STATE OUTDOOR MEDIA GROUP, INC.
3416 Highway 41 South
Tifton, Georgia 31793
800-732-8261
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
WITH COPIES TO:
ST. JOHN & WAYNE, L.L.C.
Two Penn Plaza East
Newark, New Jersey 07105-2249
Attn: David C. Freinberg, Esq.
Tel: 973-491-3600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
MAY DETERMINE.
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<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO CHANGE, COMPLETION OR AMENDMENT
WITHOUT NOTICE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE
PROSPECTUS IS DELIVERED IN FINAL FORM.

SUBJECT TO COMPLETION -- DATED OCTOBER 29, 1998

PRELIMINARY PROSPECTUS
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[TRI-STATE LOGO]

TRI-STATE OUTDOOR MEDIA GROUP, INC.
Offer to Exchange 11% Senior Notes due 2008 for Any and All
Existing Notes (as Defined Below)
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ALTHOUGH THE NOTES ARE ENTITLED SENIOR, (a) THE COMPANY HAS NOT ISSUED, AND DOES
NOT HAVE ANY CURRENT FIRM ARRANGEMENTS TO ISSUE, ANY SIGNIFICANT ADDITIONAL
INDEBTEDNESS TO WHICH THE NOTES WOULD BE SENIOR; AND (b) THE NOTES ALSO WILL BE
EFFECTIVELY SUBORDINATED TO ESSENTIALLY ALL OF THE OUTSTANDING INDEBTEDNESS OF
THE COMPANY, WHICH IS SECURED. THE NOTES WILL ALSO BE EFFECTIVELY SUBORDINATED
TO ANY SECURED INDEBTEDNESS OF THE COMPANY'S GUARANTOR SUBSIDIARIES, IF ANY.

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED. AS DESCRIBED HEREIN, WITHDRAWAL RIGHTS WITH
RESPECT TO THE EXCHANGE OFFER ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF THE
EXCHANGE OFFER.

Tri-State Outdoor Media Group, Inc., a Kansas corporation (the "Company"),
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus (the "Prospectus") and the accompanying
Letter of Transmittal (the "Letter of Transmittal") to exchange up to
$100,000,000 aggregate principal amount of its 11% Senior Notes due 2008 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act") pursuant to a Registration Statement of which
this Prospectus is a part, for a like principal amount of its issued and
outstanding 11% Senior Notes due 2008 (the "Existing Notes"). The Exchange Notes
and the Existing Notes, as the case may be, are referred to herein as the
"Notes." The Existing Notes were originally issued and sold by the Company in a
transaction that was exempt from registration under the Securities Act (the
"Initial Offering") and resold to certain qualified institutional buyers in
reliance on, and subject to the restrictions imposed pursuant to, Rule 144A
under the Securities Act ("Rule 144A") and Regulation S under the Securities
Act. The terms of the Exchange Notes are identical in all material respects to
the terms of the Existing Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes will have been registered under
the Securities Act, and thus will not bear restrictive legends restricting their
transfer pursuant to the Securities Act.

Interest on each of the Exchange Notes issued pursuant to the Exchange Offer
will accrue from the last interest payment date on which interest was paid or
duly provided for on the Existing Notes surrendered in exchange therefor or, if
no interest has been paid or duly provided for, from the original date of
issuance of the Existing Notes.

Interest on the Notes is payable semi-annually on May 15 and November 15 of each
year, commencing on November 15, 1998. The Notes will mature on May 15, 2008.
The Notes will be redeemable at the option of the Company, in whole or in part,
at any time, on or after May 15, 2003 at the redemption prices set forth herein,
plus accrued interest. Upon a Change of Control (as defined herein), the Company
will be required, subject to certain conditions, to offer to purchase all
outstanding Notes at 101% of the principal amount thereof, plus accrued interest
to the date of purchase. There can be no assurance that sufficient funds would
be available at the time of any Change of Control to make any required
repurchase of the Notes. In addition, the Company may, at its option, redeem
prior to May 15, 2001 the Notes at 111% of the principal amount thereof, plus
accrued interest, from the net proceeds of one or more Equity Offerings (as
defined herein); provided however that immediately after giving effect to any
such redemption, not less than $75 million aggregate principal amount of the
Notes remains outstanding.

On the date of the issuance of the Existing Notes (the "Closing Date"), the
Company deposited with IBJ Schroder Bank & Trust Company (the "Escrow Agent") a
portfolio of Pledged Securities (of approximately $10.4 million) consisting of
U.S. government securities that, together with the earnings thereon, will be
sufficient to pay when due the first two interest payments on the Notes, with
any balance to be retained by the Company.

The Notes are senior unsecured obligations of the Company ranking pari passu
with all existing and future unsubordinated debt of the Company, and will be
effectively subordinated to all of the Company's secured debt, to the extent of
the assets securing such debt. On September 30, 1998, the Company had $16.0
million outstanding under its $19.25 million Credit Facility (as defined herein)
which is effectively senior to the Notes.

Except for additional borrowings under the Credit Facility, the Company has no
current or pending arrangements or agreements to incur any additional
significant indebtedness to which the Notes would rank pari passu in right of
payment or be effectively subordinated.

The Existing Notes were offered under an Indenture dated as of May 15, 1998 (the
"Indenture"). The Indenture contains certain covenants, including, but not
limited to, covenants and limitations of the following: (i) the incurrence of
additional debt; (ii) restricted payments; (iii) asset dispositions; (iv)
transactions with affiliates; (vi) liens; and (vii) the merger, consolidation or
sale of assets of the Company. In addition, subsidiaries of the Company may, in
the future, be required to guarantee payment of the Notes.
SEE "RISK FACTORS" ON PAGES 12 TO 15 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this Prospectus is , 1998.
<PAGE> 3

The Exchange Offer is not conditioned upon any minimum number of Existing
Notes tendered. The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1998, unless extended by the Company (such date as it may be so
extended, the "Expiration Date"). The date of acceptance for exchange of its
Existing Notes (the "Exchange Date") will be promptly following the Expiration
Date, upon surrender of the Existing Notes. Existing Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date;
otherwise such tenders are irrevocable. Exchange Notes to be issued in exchange
for properly tendered Existing Notes will be delivered through the facilities of
The Depository Trust Company by the Exchange Agent (as defined herein) promptly
upon acceptance thereof.

The Existing Notes were originally issued and sold on May 20, 1998 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A and
Regulation S under the Securities Act. Accordingly, the Existing Notes may not
be offered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. Based upon
interpretations provided to third parties by the Staff (the "Staff") of the
Securities and Exchange Commission (the "Commission"), the Company believes that
the Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Existing Notes may be offered for resale, resold or otherwise transferred by
holders thereof (other than any holder which is (i) an "affiliate" of the
Company within the meaning of the Securities Act (an "Affiliate"), (ii) a
broker-dealer who acquired Existing Notes directly from the Company or (iii) a
broker-dealer who acquired Existing Notes as a result of market-making or other
trading activities) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement or understanding with any person to participate in a distribution
of such Exchange Notes, and that such holders are not engaged in and do not
intend to engage in a distribution of the Exchange Notes. Since 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 as in such other circumstances.
Each holder of Existing Notes that desires to participate in the Exchange Offer
will be required to make certain representations discussed in "The Exchange
Offer -- Terms and Conditions of the Letter of Transmittal." Any holder that
cannot rely upon such interpretations must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.

Each broker-dealer that receives Exchange 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 Exchange 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 Exchange Notes received in exchange for Existing Notes where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 120 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."

The Exchange Notes may be represented by one or more Global Notes (as
defined) registered in the name of a nominee of The Depository Trust Company, as
Depositary. Beneficial interest in the Global Notes will be shown on, and
transfers will be effected only through, records maintained by the Depositary
and its participants. See "Book Entry, Delivery, and Form."

The Exchange Notes constitute a new issue of securities with no established
public trading market. The Company does not intend to list the Exchange Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. Moreover, to the extent that Existing Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered, and tendered but unaccepted, Existing Notes could be adversely
affected. See "Risk Factors -- Absence of Public Market for the Exchange Notes;
Restrictions on Transfer."

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The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses it incurs for the Exchange Offer. No
dealer-manager is being utilized in connection with the Exchange Offer.

THE EXCHANGE OFFER IS NOT BEING MADE, NOR WILL THE COMPANY ACCEPT SURRENDER
FOR EXCHANGE FROM HOLDERS OF EXISTING NOTES, IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR "BLUE SKY" LAWS OF SUCH JURISDICTION.

Scotchlite(R) is a trademark of Minnesota Mining and Manufacturing Company
("3M").

ii
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and historical and pro forma
financial statements and notes thereto included in this Prospectus. Unless
otherwise indicated, as used herein, the term "Company" refers to Tri-State
Outdoor Media Group, Inc.

THE COMPANY

The Company is a leading highway directional outdoor advertising company,
operating over 9,420 advertising displays, including 7,627 bulletins and 1,793
posters, in 21 states in the eastern and central United States at June 30, 1998.
Essentially all of the Company's billboards are located along interstate
highways and primary and secondary roads outside of urban areas. For the year
ended December 31, 1997, over 95% of the Company's net revenues was generated by
local businesses, including local franchisees of national chains, with no one
customer accounting for as much as 2% of the Company's net revenues. The Company
offers a full line of outdoor advertising services to its customers, including
creative design, production, installation and maintenance of the displays.

According to recent estimates by the Outdoor Advertising Association of
America ("OAAA"), total outdoor advertising expenditures during 1997 were $2.1
billion, an 8.8% increase over such expenditures in 1996. The Company operates
primarily in the non-urban highway directional segment of the outdoor
advertising industry. Highway directional billboards are utilized by local
advertisers to alert motorists to an advertiser's place of business and provide
directions to that business. Many of the Company's principal customers, which
include motels and hotels, restaurants and gasoline retailers, depend on
strategically located billboards as the only effective and cost efficient means
to reach their target customers. As a result, these advertisers will usually
purchase a billboard display under long-term contracts and leave the original
advertising copy in place for the duration of the contract. On March 31, 1998,
over 85% of the Company's bulletin advertising contracts had an original term of
at least 18 months and 48% had an original term of at least 36 months. The
Company believes that its large number of long-term contracts has generated more
stable and predictable revenues, has reduced production, installation and
maintenance costs over the term of the contracts and has permitted it to more
efficiently leverage its sales personnel.

Since formation in 1986, the Company has pursued an aggressive acquisition
strategy, completing over 20 acquisitions of outdoor advertising businesses.
During this period, the Company completed both "new market" and "fill-in"
acquisitions. New market acquisitions are acquisitions outside of the Company's
then existing markets, while fill-in acquisitions are generally acquisitions in
or adjacent to the Company's existing markets that involve the purchase of
advertising displays only, resulting in the elimination of all personnel and
related costs. During the past 18 months, the Company completed three
significant acquisitions which are reflected in the Unaudited Pro Forma
Financial Statements included herein:

Western Acquisition. On September 18, 1998, the Company acquired
substantially all of the outdoor advertising assets of Western Outdoor
Advertising Co. ("Western") for a total acquisition cost of $26.8 million.
In this fill-in acquisition the Company acquired 2,439 display faces in 19
states concentrated in Iowa, Texas, Nebraska, Missouri, Oklahoma and
Kansas. The Company had existing operations in 11 of the 19 states served
by Western.

Unisign Acquisition. On March 2, 1998, the Company acquired
substantially all of the outdoor advertising assets of Unisign Corporation,
Inc. ("Unisign") and assumed certain capitalized leases for a total
acquisition cost of $22.0 million. As a result of this acquisition, the
Company acquired 1,421 display faces in Kentucky, West Virginia and Ohio.

Tri-State Systems Acquisition. On June 12, 1997, the Company acquired
substantially all of the assets of Tri-State Systems, Inc. ("TSS") for a
total acquisition cost of $32.0 million. In this acquisition, the Company
acquired 1,838 display faces in Georgia, Alabama, Florida, Kentucky,
Mississippi, South Carolina and Tennessee.

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The Company has been and will continue to be highly leveraged. The
following table sets forth the Company's net revenues, EBITDA and income (loss)
before extraordinary item on both a historical and pro forma basis for the past
18 months. The pro forma information gives effect to the Western, Unisign and
TSS acquisitions, the Initial Offering and the other transactions described in
the Unaudited Pro Forma Financial Statements.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
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HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenue.................................... $11,831 $22,579 $ 9,413 $12,257
EBITDA......................................... $ 5,597 $11,344 $ 4,768 $ 6,471
Income (loss) before extraordinary item........ $(2,021) $(8,380) $(2,018) $(3,633)
</TABLE>

BUSINESS STRATEGY

The Company's business strategy is to be a leading provider of highway
directional outdoor advertising to local advertisers in non-urban markets. The
Company entered this segment of the outdoor advertising business because it
believes that rural businesses have been underserved by the major outdoor
advertising companies. In order to implement this business strategy, the Company
focuses on the following key elements:

- Increase the Penetration of its Local Markets with 36-Month Advertising
Contracts. In order to better serve its local customers, the Company
customizes the size and pricing of its billboards to fit the budgets of
the local businesses that require these services. In addition, the
Company can produce a long-lasting sign that is strategically located
relative to the advertiser's place of business. For these reasons, the
Company believes that its local highway directional advertisers have been
willing to enter into long-term contracts and leave a display in place
for an extended period. As of June 30, 1998, 51% of the Company's
bulletin advertising contracts had an original term of at least 36
months. The billboards acquired by the Company in the TSS and Unisign
acquisitions were predominantly subject to contracts with an original
term of 18 months and 24 months, respectively. Excluding these
billboards, over 77% of the Company's bulletin advertising contracts had
an original term of at least 36 months. Accordingly, the Company believes
that the number of contracts with a 36-month original term will increase
as the Company seeks 36-month contracts for expiring TSS and Unisign
contracts. The Company believes that its large number of long-term
contracts has generated more stable and predictable revenues, has reduced
production, installation and maintenance costs over the term of the
contracts and has permitted it to more efficiently leverage its sales
personnel. As a result of these cost efficiencies and in order to
encourage advertisers to enter into long-term contracts, the Company
prices its longer term contracts with lower monthly rates than it prices
its shorter term contracts.

- Pursue Growth through Acquisitions. The Company intends to continue its
aggressive growth strategy of acquiring and developing highway
directional outdoor advertising businesses by continuing to seek both new
market and fill-in acquisitions, where the billboards are used, or can be
resold, as highway directional signs under long-term contracts. The
Company believes that the non-urban highway directional market remains
highly fragmented producing numerous acquisition opportunities that fit
its criteria. In addition, the Company is typically a major provider of
outdoor advertising services in the areas in which it operates, which, it
believes, allows it to more easily acquire and successfully integrate
fill-in acquisitions.

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primary highways, and on which, subject only to the receipt of routine
government permits, it plans to construct 94 new structures with up to
376 display faces of which 21 structures and 78 display faces were
completed as of June 30, 1998. In addition, the billboard structures
acquired by the Company in the Unisign acquisition have the capacity for
up to an additional 300 display faces of which 40 were installed by June
30, 1998. The Company believes that the economics of building new
advertising structures compare favorably with the economics of purchasing
structures through fill-in acquisitions.

- Control Costs and Quality through Centralization of Production and
Vertical Integration. The Company seeks to control production costs and
maintain consistent, high quality production standards by centralizing
essentially all of its production services related to billboards leased
under 36-month contracts and vertically integrating its production
operations, thereby reducing its use of outside contractors. In addition,
because of its large number of rural signs under long-term contracts, the
Company has been able to use Scotchlite, a highly reflective vinyl
manufactured by 3M, which causes the advertising copy to be brightly
illuminated by the headlights of passing vehicles. While somewhat more
expensive to construct, a Scotchlite billboard does not need any electric
lighting on the advertising structure and thus significantly reduces the
Company's operating expenses. Approximately 25% of the Company's
bulletins in service at June 30, 1998 used Scotchlite on the advertising
copy. The main facility in Baxter Springs, Kansas produces substantially
all of the Company's Scotchlite and non-reflective self-adhesive vinyl
advertising copy for installation throughout its markets. Each of the
Company's five divisions hires painters to produce hand painted bulletins
and employs other personnel to install and maintain bulletins and
posters. At Baxter Springs, the Company also employs staff artists to
design advertising copy for use in all of its divisions. The Company's
new billboard structures have generally been constructed by outside
contractors, although the Company has recently increased its capability
to build these structures with Company personnel.

The principal executive offices of the Company are located at 3416 Highway
41 South, Tifton, Georgia and its telephone number is (800) 732-8261.

RECENT FINANCINGS

On May 20, 1998, the Company sold $100,000,000 of its 11% Senior Notes due
2008 in a Rule 144A private placement. The Company used a total of $67.4 million
of the net proceeds to repay all borrowings under its existing senior secured
bank credit facility and a bridge note facility. The Company had originally
incurred these borrowings in large part to finance the TSS and Unisign
acquisitions. Both of these facilities were terminated upon repayment. The
Company also used $10.4 million of the net proceeds to purchase a portfolio of
U.S. government securities that were pledged as security for the first two
scheduled interest payments on the Senior Notes.

On September 18, 1998, the Company entered into a new $19.25 million senior
secured bank credit facility (the "Credit Facility"). The Credit Facility is
secured by substantially all of the Company's assets and is effectively senior
to the Notes. The Company used $16.0 million of the funds available under the
Credit Facility and the remaining proceeds from the Initial Offering to finance
the Western acquisition.

The Company consummated the TSS acquisition on June 12, 1997. In order to
finance this acquisition, the Company entered into a $45.0 million amended and
restated credit facility (the "Original Credit Facility") with The First
National Bank of Chicago ("First Chicago"), as agent for a syndicate of lenders.
On February 27, 1998, the Company amended and restated the Original Credit
Facility in order to increase the credit thereunder to $62.5 million (the
"Senior Credit Facility"). In addition, at that time, SGH Holdings, Inc.
("Holdings"), the parent corporation of the Company, sold $10.0 million of
bridge notes (the "Bridge Notes") to affiliates of the Initial Purchasers in the
Initial Offering, Prudential Securities Incorporated and First Chicago Capital
Markets, Inc. Holdings loaned the proceeds of this sale to the Company. The
proceeds of the Bridge Notes, together with a portion of borrowings under the
Senior Credit Facility, were used to fund the Unisign acquisition. The Company
used a portion of the net proceeds from the Initial Offering to repay all
outstanding borrowings under the Senior Credit Facility, which was thereupon
terminated, and repaid in full the loan from Holdings, which, in turn, has
repaid the Bridge Notes. See "Use of Proceeds".
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RECENT DEVELOPMENTS

On September 18, 1998, the Company acquired substantially all of the
outdoor advertising assets of Western with 2,439 display faces in 19 states
concentrated in Iowa, Texas, Nebraska, Missouri, Oklahoma and Kansas. The
Company would classify this acquisition as a fill-in-acquisition. The Company
had existing operations in 11 of the 19 states served by Western. The total
acquisition cost was $26.8 million.

On July 14, 1998, the Company purchased the outdoor advertising assets of
John R. Leslie, Sr., trading as Leslie Outdoor Advertising, including
approximately 244 advertising displays located in Georgia. The Company would
classify this acquisition as a fill-in acquisition in the Southeast division.
The total acquisition cost was $3.1 million.

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THE EXCHANGE OFFER

On May 20, 1998, the Company sold the Existing Notes to Prudential
Securities Incorporated ("PSI") and First Chicago Capital Markets ("FCCM" and,
together with PSI, the "Initial Purchasers") which then resold the Existing
Notes to qualified institutional buyers.

The Exchange Offer......... The Company is offering to exchange up to
$100,000,000 aggregate principal amount of 11%
Senior Notes due 2008 (the "Exchange Notes") for up
to $100,000,000 aggregate principal amount of its
outstanding 11% Senior Notes due 2008 that were
issued and sold on May 20, 1998 in reliance upon an
exemption from registration under the Securities
Act (the "Existing Notes"). The terms of the
Exchange Notes will be substantially identical in
all respects (including principal amount, interest
rate, maturity and ranking) to the terms of the
Existing Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the
Exchange Notes have been registered under the
Securities Act and therefore are not subject to
certain restrictions on transfer except as provided
herein (see "The Exchange Offer -- Terms of the
Exchange" and "-- Terms and Conditions of the
Letter of Transmittal") and will not be entitled to
registration rights except under certain limited
circumstances.

Resale of Exchange Notes... Based upon interpretations provided to third
parties by the Staff of the Commission, the Company
believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Existing Notes
may be offered for resale, resold and otherwise
transferred by holders thereof (other than any
holder which is (i) an Affiliate, (ii) a
broker-dealer who acquired Existing Notes directly
from the Company or (iii) a broker-dealer who
acquired Existing Notes as a result of
market-making or other trading activities) without
compliance with the registration and prospectus
delivery provisions of the Securities Act except as
provided herein and provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders have no
arrangement with any person to participate in a
distribution of such Exchange Notes.

By tendering Existing Notes in exchange for
Exchange Notes, each holder certifies (a) that it
is not an Affiliate, that it is not a broker-dealer
that owns Existing Notes acquired directly from the
Company or an Affiliate of the Company, that it is
acquiring the Exchange Notes offered hereby in the
ordinary course of such Transferor's business and
that such Transferor has no arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes and that it is
not engaged in and does not intend to engage in a
distribution of the Exchange Notes or (b) that it
is an Affiliate of the Company or of any of the
Initial Purchasers and that it will comply with the
registration and prospectus delivery requirements
of the Securities Act to the extent applicable to
it.

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<PAGE> 10

as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange
for Existing Notes where such Existing Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities. The Company has agreed that, for a
period of 120 days after the Expiration Date (as
defined herein), it will make this Prospectus
available to any broker-dealer for use in
connection with any such resale. Any holder that
cannot rely upon such interpretations must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with a secondary resale transaction. See "Plan of
Distribution."

Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Existing
Notes being tendered for exchange.

Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, or such
later date and time to which it is extended by the
Company (the "Expiration Date").

Exchange Date.............. The first date of acceptance for exchange for the
Existing Notes will be the first business day
following the Expiration Date.

Conditions to the Exchange
Offer...................... The obligation of the Company to consummate the
Exchange Offer is not subject to any conditions
other than that the Exchange Offer, or the making
of any exchange by a holder, does not violate
applicable law or any applicable interpretation of
the Staff of the Commission. The Company reserves
the right to terminate or amend the Exchange Offer
at any time prior to the Expiration Date upon the
occurrence of any such condition.

Procedures for Tendering
Existing Notes........... Each holder of Existing Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, with
any required signature guarantees, or an Agent's
Message (as defined herein) in accordance with the
instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or
such facsimile, together with any other required
documentation to the Exchange Agent (as defined
herein) at the address set forth herein and effect
a tender of Existing Notes pursuant to the
procedures for book-entry transfer as provided for
herein. Certain other procedures may apply with
respect to certain book-entry transfers. See "The
Exchange Offer -- How to Tender."

Guaranteed Delivery
Procedures................. Holders of Existing Notes who wish to tender their
Existing Notes and who cannot deliver their
Existing Notes and a properly completed Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior
to the Expiration Date may tender their Existing
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer -- How
to Tender -- Guaranteed Delivery Procedures."

Withdrawal Rights.......... Tenders may be withdrawn at any time prior to the
Expiration Date. Any Existing Notes not accepted
for any reason will be returned without expense to
the tendering holders thereof as promptly as
practicable after

6
<PAGE> 11

the expiration or termination of the Exchange
Offer. See "The Exchange Offer -- Withdrawal
Rights."

Federal Income Tax
Consequences............. The exchange of Existing Notes for Exchange Notes
by holders will not constitute an exchange for
federal income tax purposes, and U.S. holders will
not realize any gain or loss upon receipt of
Exchange Notes. See "The Exchange Offer -- Federal
Income Tax Consequences."

Effect on Holders of
Existing Notes........... As a result of the making of this Exchange Offer,
and upon acceptance for exchange of all validly
tendered Existing Notes pursuant to the terms of
this Exchange Offer, the Company will have
fulfilled covenants contained in the terms of the
Existing Notes and the Registration Rights
Agreement (the "Registration Rights Agreement")
dated as of May 13, 1998 between the Company and
the Initial Purchasers and, accordingly, the
holders of the Existing Notes will have no further
registration or other rights under the Registration
Rights Agreement, except under certain limited
circumstances. See "Existing Notes Registration
Rights." Holders of the Existing Notes who do not
tender their Existing Notes in the Exchange Offer
will continue to hold such Existing Notes and will
be entitled to all the rights and limitations
applicable thereto under the indenture covering the
Notes (the "Indenture"). All untendered, and
tendered but unaccepted, Existing Notes will
continue to be subject to the restrictions on
transfer provided for in the Existing Notes and the
Indenture. To the extent that Existing Notes are
tendered and accepted in the Exchange Offer, the
trading market, if any, for the Existing Notes
could be adversely affected. See "Risk
Factors -- Consequences of Exchange and Failure to
Exchange."

Fees and Expenses.......... Expenses incident to the Company's completion of
the Exchange Offer and compliance with the
Registration Rights Agreement will be borne by the
Company. See "The Exchange Offer -- Solicitation of
Tenders; Expenses."

Use of Proceeds............ The Company will not receive any proceeds from the
Exchange Offer. The Company used a portion of the
proceeds from the Initial Offering to repay in full
the Senior Credit Facility and the intercompany
loan, at which time Holdings repaid the Bridge
Notes. See "Use of Proceeds."

7
<PAGE> 12

TERMS OF THE NOTES

The Exchange Offer relates to the exchange of $100,000,000 aggregate
principal amount of Exchange Notes for an equal aggregate principal amount of
Existing Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Existing Notes except that the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same debt
as the Existing Notes and will be entitled to the benefits of the Indenture.
Although the Notes are entitled Senior, the Company has not issued, and does not
have any current firm arrangements to issue, any significant additional
indebtedness to which the Notes would be senior. See "Description of the Notes."

Issuer..................... Tri-State Outdoor Media Group, Inc.

Securities Offered......... $100,000,000 aggregate principal amount of 11%
Senior Notes due 2008 under an Indenture to be
dated as of May 15, 1998 (the "Indenture"). See
"Description of the Notes".

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

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

Mandatory Redemption....... None

Optional Redemption........ The Notes will be redeemable at the Company's
option, in whole or in part, at any time on or
after May 15, 2003 at the redemption prices set
forth herein, plus accrued interest to the date of
redemption. In addition, the Company may, at its
option, redeem prior to May 15, 2001 Notes at 111%
of the principal amount thereof, plus accrued
interest to the date of redemption, from the net
proceeds of one or more Equity Offerings; provided
that at least 75% of the aggregate principal amount
of the Notes issued remains outstanding after each
such redemption. See "Description of
Notes -- Optional Redemption".

Pledged Securities......... On the date of the issuance of the Existing Notes
(the "Closing Date"), the Company deposited with
IBJ Schroder Bank & Trust Company (the "Escrow
Agent") a portfolio of Pledged Securities
consisting of U.S. government securities that,
together with the earnings thereon, will be
sufficient to pay when due the first two interest
payments on the Notes, with any balance to be
retained by the Company. See "Description of the
Notes".

Ranking.................... Except as described above under "Pledged
Securities", the Notes are senior unsecured
obligations of the Company ranking pari passu with
all existing and future unsubordinated debt of the
Company, and will be effectively subordinated to
all of the Company's secured debt, to the extent of
the assets securing such debt. Although the Notes
are entitled Senior, the Company has not issued
(with the exception of the indebtedness evidenced
by the Credit Facility), and does not have any
current firm arrangements to issue, any significant
additional indebtedness to which the Notes would be
effectively subordinated. As of September 30, 1998,
$16.0 million was outstanding under the Credit
Facility which is effectively senior to the Notes.
The Notes will also be effectively subordinated to
any secured indebtedness of the Company's guarantor
subsidiaries.

Change of Control.......... Upon a Change of Control, the Company will be
required to offer to purchase all outstanding Notes
at 101% of the principal amount thereof,
8
<PAGE> 13

plus accrued interest to the date of purchase. See
"Description of the Notes".

At September 30, 1998 there was $16.0 million of
debt outstanding under the Credit Facility, which
must be repaid before the Company could purchase
the Notes. Due to the highly leveraged capital
structure of the Company, there can be no assurance
that the Company will have sufficient funds to
repay borrowings under the Credit Facility and
purchase any Notes upon a Change of Control.

Certain Covenants.......... The Indenture contains certain covenants,
including, but not limited to, covenants and
limitations of the following: (i) the incurrence of
additional debt; (ii) restricted payments; (iii)
asset dispositions; (iv) transactions with
affiliates; (v) dividend and other payment
restrictions affecting subsidiaries; (vi) liens;
and (vii) the merger, consolidation or sale of
assets of the Company. In addition, subsidiaries of
the Company may, in the future, be required to
guarantee payment of the Notes. See "Description of
the Notes".

Risk Factors............... Prospective purchasers of the Notes should
carefully consider all of the information contained
in this Prospectus, including the information set
forth under the caption "Risk Factors", on pages 13
to 17 including risks associated with the Company's
substantial leverage and history of net losses;
obstacles that may prevent or impede the Company's
growth strategy; risk that the Company may not be
able to effectively manage its growth and integrate
acquisitions; risks associated with governmental
regulation of the outdoor advertising industry; and
risks associated with general economic conditions,
before making an investment in the Notes.

9
<PAGE> 14

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA SIX MONTHS ENDED SIX MONTHS
YEARS ENDED DECEMBER 31, YEAR ENDED JUNE 30, ENDED
---------------------------------------------- DECEMBER 31, ------------------- JUNE 30,
1993 1994 1995 1996 1997 1997(1) 1997 1998 1998(1)
------ ------ ------- ------- -------- ------------ -------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............. $2,828 $4,096 $ 7,892 $ 8,021 $ 11,831 $ 22,579 $ 4,415 $ 9,413 $ 12,257
------ ------ ------- ------- -------- -------- -------- -------- --------
Operating expenses:
Direct operating
expenses........... 590 1,021 2,315 2,427 3,817 7,032 1,319 3,179 4,046
General and
administrative..... 717 1,230 1,934 2,345 2,417 4,203 996 1,466 1,740
Depreciation and
amortization....... 1,161 1,429 2,713 2,648 4,699 11,975 1,224 4,027 5,999
------ ------ ------- ------- -------- -------- -------- -------- --------
Total operating
expenses........... 2,468 3,680 6,962 7,420 10,933 23,210 3,539 8,672 11,785
------ ------ ------- ------- -------- -------- -------- -------- --------
Operating income
(loss)................. 360 416 930 601 898 (631) 876 741 472
Gain (loss) on sale of
assets................. -- -- 1,334 443 (143) -- -- -- --
Interest expense......... (476) (880) (2,094) (1,941) (4,200) (13,235) (1,132) (4,198) (6,618)
Other income (expense)... 1 (164) (153) 2 -- (100) (51) 92 92
------ ------ ------- ------- -------- -------- -------- -------- --------
Income (loss) before
income tax benefit..... (115) (628) 17 (895) (3,445) (13,966) (307) (3,365) (6,054)
Income tax benefit....... -- -- 8 324 1,424 5,586 129 1,347 2,421
------ ------ ------- ------- -------- -------- -------- -------- --------
Net income (loss) before
extraordinary item..... $ (115) $ (628) $ 25 $ (571) $ (2,021) $ (8,380) $ (178) $ (2,018) $ (3,633)(2)
====== ====== ======= ======= ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(3)................ $1,521 $1,845 $ 3,643 $ 3,249 $ 5,597 $ 11,344 $ 2,100 $ 4,768 $ 6,471
EBITDA margin(3)......... 53.8% 45.0% 46.2% 40.5% 47.3% 50.2% 47.6% 50.7% 52.8%
Cash flows from operating
activities............. 1,063 (170) 1,245 1,476 1,810 192 (151)
Cash flows from investing
activities............. (712) (616) (2,343) 1,165 (37,305) (32,471) (43,845)
Cash flows from financing
activities............. (362) (508) 1,132 (2,582) 35,494 32,178 53,202
Capital expenditures..... 672 1,301 1,083 1,655 2,334 1,123 2,303
Ratio of earnings to
fixed charges(4)....... -- -- 1.0x -- -- -- -- -- --
Pro forma ratios:
EBITDA to cash
interest expense... .9x 1.0x
Net debt to
EBITDA(5).......... 8.8x 7.7x
Number of displays(6)
Bulletins............ 2,506 3,570 3,815 3,975 6,106 7,627 10,066
Posters.............. 50 1,778 1,623 1,461 1,432 1,793 1,793
------ ------ ------- ------- -------- -------- --------
Total displays... 2,556 5,348 5,438 5,436 7,538 9,420 11,859
====== ====== ======= ======= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1998
--------------------------
ACTUAL PRO FORMA(1)
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(7)............................ $ 19,822 $ 17,389
Working capital......................................... 30,491 14,551
Total assets............................................ 110,340 127,242
Total debt (including current maturities)............... 100,817 116,817
Stockholder's equity.................................... 7,149 7,149
</TABLE>

(footnotes
on following page)
10
<PAGE> 15

(1) The unaudited pro forma statement of operations and other data give effect
to the Initial Offering and the application of the net proceeds thereof, the
conversion of $15.8 million of the subordinated intercompany promissory
notes payable to Holdings into equity and the TSS, Unisign and Western
acquisitions as if they had occurred on January 1, 1997. The unaudited pro
forma balance sheet data give effect to the Western acquisition as if it had
occurred on June 30, 1998. See "Unaudited Pro Forma Financial Statements".

(2) The pro forma financial information for the six months ended June 30, 1998
does not give effect to an extraordinary loss from the early extinguishment
of debt (net of income tax benefit of $2.1 million) the Company recorded in
May 1998.

(3) "EBITDA" is defined as operating income (loss) before depreciation and
amortization. EBITDA represents a measure that management believes is
customarily used to evaluate the financial performance of companies in the
media industry. However, EBITDA is not a measure of financial performance
under generally accepted accounting principles and should not be considered
an alternative to operating income (loss) as an indicator of the Company's
operating performance or to net cash provided by (used in) operating
activities as a measure of its liquidity. EBITDA margin is EBITDA stated as
a percentage of net revenues.

(4) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes plus fixed charges. Fixed charges
consist of interest expense (including amortization of deferred debt
issuance costs) and the portion of rental expense that is deemed
representative of the interest factor. Earnings were insufficient to cover
fixed charges by $11,000 in 1993, $628,000 in 1994, $895,000 in 1996, $3.4
million in 1997, $14.0 million in 1997 on a pro forma basis, $307,000 in the
six months ended June 30, 1997, $3.4 million in the six months ended June
30, 1998 and $6.1 million in the six months ended June 30, 1998 on a pro
forma basis.

(5) The pro forma ratio of net debt to EBITDA is calculated with net debt
representing total debt minus cash and cash equivalents of $17.4 million and
$17.4 million as of December 31, 1997 and June 30, 1998, respectively, both
of which include $10.5 million of cash pledged as security for the first two
interest payments on the Notes. The pro forma ratio of net debt to EBITDA
for the six months ended June 30, 1998 is calculated utilizing the pro forma
EBITDA for six months ended June 30, 1998 multiplied by two.

(6) All display faces, including unoccupied display faces, are classified based
on the last sale to an advertiser as either a bulletin or poster. For 1995,
the table does not reflect display faces located in and around Watertown,
New York that were acquired in November 1995 and disposed of in January
1996.

(7) Includes $10.5 million of securities as of June 30, 1998 pledged as security
for the first two interest payments on the Notes.

11
<PAGE> 16

RISK FACTORS

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

HIGHLY LEVERAGED CAPITAL STRUCTURE. The Company has been and will continue
to be highly leveraged. As of June 30, 1998, after giving pro forma effect to
the Western acquisition as described in the Notes to the Unaudited Pro Forma
Financial Statements, the Company's debt would have been $116.8 million, its
stockholder's equity would have been $7.2 million and its ratio of debt to
stockholder's equity would have been 16 to 1.0. See "Capitalization". In
addition, for the year ended December 31, 1997 and the six months ended June 30,
1998, the Company's pro forma earnings would have been insufficient to cover its
pro forma fixed charges by $14.0 million and $6.1 million, respectively. See
"Unaudited Pro Forma Financial Statements".

The Indenture permits the Company to incur additional debt, subject to
certain limitations. The degree to which the Company is leveraged could have
important consequences to holders of the Notes, including the following: (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of the principal of and interest on its debt and will not be
available for other purposes; (ii) the ability of the Company to obtain
additional financing in the future for working capital needs, capital
expenditures, acquisitions, investments, general corporate purposes or other
purposes may be materially limited or impaired; and (iii) the Company's leverage
may increase its vulnerability to economic downturns and limit its ability to
withstand competitive pressures and capitalize on significant business
opportunities.

The ability of the Company to meet its debt service obligations will depend
on the future operating performance and financial results of the Company, which
will be subject in part to factors beyond the control of the Company. There can
be no assurance that the Company will generate earnings in the future sufficient
to cover its fixed charges. If the Company is unable to generate earnings in the
future sufficient to cover its fixed charges and is unable to borrow sufficient
funds from other sources, it may be required to refinance all or a portion of
its existing debt (including the Notes) or to sell all or a portion of its
assets. There can be no assurance that a refinancing would be possible, nor can
there be any assurance as to the timing of any asset sales or the proceeds that
the Company could realize therefrom. In addition, the terms of the Indenture
restrict the Company's ability to sell assets and the use of the proceeds
therefrom. See "Management's Discussion and Analysis".

HISTORY OF NET LOSSES. The Company reported net losses for the years ended
December 31, 1996 and 1997 of $571,000 and $2.0 million, respectively, and $4.1
million for the six months ended June 30, 1998. For each of the past five years
the Company reported a stockholder's deficiency. The net losses primarily
reflect high levels of depreciation and amortization charges relating to the
depreciation of assets obtained in acquisitions, as well as high levels of
interest expense relating to debt incurred to finance these acquisitions.
Interest expense and depreciation and amortization charges will continue at high
levels throughout 1998 and future years as a result of previously completed
acquisitions. The Company expects to continue incurring substantial losses for
at least the next two years, and there can be no assurance if or when the
Company will have net income. In May 1998, the Company incurred an extraordinary
loss to reflect the write-off of existing loan and financing costs and other
related costs (net of income tax benefit of approximately $2.1 million) upon
completion of the Initial Offering. See "Note (m) to the Unaudited Pro Forma
Financial Statements".

OBSTACLES TO GROWTH. The Company's growth has been facilitated by
strategic acquisitions that have substantially increased the Company's inventory
of advertising display faces. One facet of the Company's operating strategy is
to make acquisitions in new and existing markets. There can be no assurance that
suitable acquisition candidates can be found. The Company is likely to face
competition from other outdoor advertising and media companies for acquisition
opportunities. In addition, the prices sought by sellers of outdoor advertising
display faces and companies have been rising, and, if they continue to rise, the
Company may find fewer acceptable acquisition opportunities or be unsuccessful
in its acquisitions. As part of its on-going evaluation of strategic
opportunities, the Company may from time to time engage in discussions
concerning possible acquisitions for which the Company may require additional
debt or equity financing. The Company had approximately $17.3 million of net
proceeds from the Initial Offering for general corporate purposes, capital
expenditures and potential future acquisitions. If additional funds are needed,
there can be no
12
<PAGE> 17

assurance that the Company will have sufficient capital resources to complete
acquisitions or that acquisitions can be completed on terms acceptable to the
Company if at all.

POTENTIAL INABILITY TO MANAGE GROWTH AND RESOURCES. The Company is
undergoing substantial growth. This growth places significant demands on the
Company's management and its technical, financial and other resources. To manage
its growth effectively, the Company must maintain a high level of operational
quality and efficiency, continue to enhance its operational, financial and
management systems and expand, train and manage its management and staff. There
can be no assurance that the Company will be able to manage its growth
effectively or attract suitable management and other personnel and maintain its
operational systems, and any failure to do so could have a material adverse
effect on the Company.

POTENTIAL ELIMINATION OR REDUCTION OF TOBACCO ADVERTISING. In August 1996,
the U.S. Food and Drug Administration (the "FDA") issued final regulations that,
among other things, sought to regulate cigarettes and other tobacco products.
These regulations also sought to prohibit tobacco product billboard
advertisements within 1,000 feet of schools and playgrounds and require that
tobacco product advertisements on billboards be printed in black and white color
and contain only text. In 1997 a federal district court in North Carolina upheld
the right of the FDA to regulate cigarettes and tobacco products, but ruled that
the FDA did not have the authority to control tobacco advertising. In August
1998 a three-judge panel of the 4th U.S. Circuit Court of Appeals overturned the
federal district court decision which would have permitted the FDA to regulate
cigarettes and tobacco products. The appeals panel ruled that the FDA needed
explicit authority from the U.S. Congress to regulate tobacco products. It is
anticipated that this decision will be appealed to the full appellate court, and
thereafter may eventually be reviewed by the U.S. Supreme Court.

In June 1997, a majority of the major United States tobacco companies and
certain state attorneys general agreed to a proposed settlement of litigation.
The proposed settlement included a ban on all outdoor advertising of tobacco
products commencing nine months after finalization of the settlement. The
settlement was subject to numerous conditions, including the enactment of
legislation by the U.S. Congress. As a result of the failure of the U.S.
Congress to enact legislation, this proposed settlement was not completed.
Currently, a group of eight states is involved in settlement discussions with
four of the major tobacco companies. In addition, the states of Mississippi,
Florida, Texas and Minnesota have entered into separate settlements of
litigation with the tobacco industry. None of these completed settlements is
conditioned on federal government approval and each reportedly eliminates all
outdoor advertising of tobacco products.

According to the Outdoor Advertising Association of America, Inc. ("OAAA"),
tobacco product advertising accounted for approximately 7.3% of all outdoor
billboard advertising revenues for the year ended December 31, 1997. A reduction
in billboard advertising by the tobacco industry due to a proposed settlement or
federal legislation could cause an immediate reduction in industry revenues from
such advertisers and would simultaneously increase the available space on the
existing inventory of billboards in the outdoor advertising industry. This could
in turn result in a lowering of rates throughout the outdoor advertising
industry or limit the ability of industry participants to increase rates for
some period of time. Thus, even though less than 3% of the Company's annual net
revenues is typically derived from tobacco advertising, if outdoor advertising
of tobacco products were reduced or eliminated and the industry were unable to
replace the lost revenues, the change could have a material adverse effect on
the Company by forcing advertising rates down or inhibiting rate increases. See
"Management's Discussion and Analysis" and "Business -- Government Regulation".

REGULATION OF OUTDOOR ADVERTISING. Outdoor advertising displays are
subject to governmental regulation at the federal, state and local levels. These
regulations, in some cases, limit the height, size, location and operation of
billboards and, in limited circumstances, regulate the content of the
advertising copy displayed on the billboards. Some governmental regulations
restrict the construction of new billboards or the replacement, relocation,
enlargement or upgrading of existing structures. Such regulations limit the
ability of the Company to expand its operations in the affected markets. The
inability to expand its operations in such areas or replace lost structures
could have a negative impact on the Company's growth opportunities and potential
results of operations. In addition, some jurisdictions have adopted
"amortization" ordinances under which, after the expiration of a specified
period of time, billboards must be removed at the owner's expense and without
the

13
<PAGE> 18

payment of compensation. Ordinances requiring the removal of a billboard without
compensation, whether through amortization or otherwise, are being challenged in
various state and federal courts with conflicting results. Currently, none of
the Company's existing inventory is subject to any amortization ordinance.
However, no assurance can be given as to the effect on the Company of additional
laws and regulations that may be adopted in the future. See "-- Potential
Elimination or Reduction of Tobacco Advertising" above and
"Business -- Government Regulation".

NATURAL DISASTERS. A significant portion of the Company's structures are
located in the southeast and central regions of the United States. These areas
are susceptible to flooding, tornadoes and/or hurricanes during certain periods
of the year. The Company has determined that it is not economically feasible at
this time to obtain insurance against losses from hurricanes or other
weather-related casualties. The Company has not incurred any material losses in
the past due to weather-related incidents, but there can be no assurance that
the Company will not suffer such losses in the future or that, in pursuing its
acquisition strategy, the Company will not acquire companies or properties that
are particularly susceptible to weather-related incidents.

DEPENDENCE ON FAVORABLE ECONOMIC CONDITIONS AND ADVERTISING TRENDS. The
Company relies on sales of advertising space for its revenues, and its operating
results therefore are affected by general economic conditions as well as trends
in the advertising industry. A reduction in advertising expenditures available
for the Company's displays could result from a general decline in economic
conditions, a decline in economic conditions in particular markets in which the
Company operates or a reallocation of advertising expenditures to other
available media by significant users of the Company's displays.

COMPETITION. The Company faces competition for advertising revenues from
other outdoor advertising companies, highway logo sign operators, and companies
that install commercial signs on an advertiser's own property, as well as from
other media such as radio, television, print and direct mail marketing. The
Company also competes with a wide variety of other out-of-home advertising
media, the range and diversity of which have increased substantially over the
past several years, including advertising displays in shopping centers and
malls, airports, stadiums, movie theaters and supermarkets and on buses. Some of
the Company's competitors are substantially larger, better capitalized and have
access to greater resources than the Company. There can be no assurance that the
outdoor advertising medium will be able to compete with other types of media, or
that the Company will be able to compete either within the outdoor advertising
industry or with other media. See "Business -- Competition".

RELIANCE ON KEY EXECUTIVES. The Company's success depends to a significant
extent upon the continued services of its executive officers and other key
personnel. The loss of the services of any one or more of such key personnel
could have an adverse effect on the Company and there can be no assurance that
the Company would be able to find suitable replacements for such key personnel.
See "Management".

COMPLIANCE WITH ENVIRONMENTAL LAWS. As the owner, lessee or operator of
various real properties and facilities, the Company is subject to various
federal, state and local environmental laws and regulations.

CONTROL OF THE COMPANY BY STOCKHOLDERS. The Company is a wholly-owned
subsidiary of Holdings. The capital stock of Holdings is privately held. The
officers and directors of the Company and Mesirow Capital Partners VI ("Mesirow
VI") and Mesirow Capital Partners VII ("Mesirow VII") (Mesirow VI and Mesirow
VII collectively, "Mesirow"), or entities affiliated with such persons, hold all
of the issued and outstanding capital stock of Holdings. All of Holdings'
stockholders are party to a Second Amended and Restated Stockholders Agreement
(the "Holdings Stockholders Agreement") pursuant to which the parties to the
agreement agree to vote their shares in favor of persons nominated to the Board
of Directors by the Company's management and Mesirow. As a result, such
stockholders can effectively control the affairs and policies of Holdings and
its subsidiary, the Company. There can be no assurance that the interests of
Holdings' controlling stockholders and those of the holders of the Notes will
not conflict. There may be circumstances in which actions taken by the Company
in the interests of its stockholders will diverge from the interests of holders
of the Notes. See "Description of Notes -- Limitation on Transactions with
Affiliates".

14
<PAGE> 19

POSSIBILITY OF INSUFFICIENT FUNDS TO REPURCHASE NOTES. Upon a Change of
Control, the Company will, subject to certain conditions, be obligated to offer
to repurchase the Notes at a purchase price equal to 101% of the outstanding
principal amount thereof, plus accrued interest to the date of redemption. The
Change of Control repurchase feature may make more difficult a sale or takeover
of the Company. There can be no assurance that sufficient funds would be
available at the time of any Change of Control to make any required repurchase
of the Notes. Furthermore, these provisions would not necessarily afford
protection to holders of the Notes in the event of a highly leveraged
transaction that does not result in a Change in Control.

LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES; RESTRICTIONS ON RESALE. The
Exchange Notes are a new issue of securities for which there is currently no
trading market. Although the Initial Purchasers have informed the Company that
they currently intend to make a market in the Exchange Notes, they are not
obligated to do so and any such market-making may be discontinued at any time
without notice. In addition, such market-making activity may be limited during
the pendency of the Exchange Offer or the effectiveness of a shelf registration
statement in lieu thereof. Accordingly, there can be no assurance as to the
liquidity of any market that may develop for the Exchange Notes. The Existing
Notes are eligible for trading by qualified buyers in the Private Offerings,
Resales and Trading through Automated Linkages (PORTAL) market. The Company does
not currently intend to apply for listing of the Notes or, if issued, the
Exchange Notes, on any securities exchange or for quotation of the Notes through
the National Association of Securities Dealers Automated Quotation System
("Nasdaq").

To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered or tendered but not
accepted Existing Notes could be adversely affected. Because the Company
anticipates that most holders of the Existing Notes will elect to exchange such
Existing Notes for Exchange Notes due to the absence of restrictions on the
resale of Exchange Notes under the Securities Act, the Company anticipates that
the liquidity of the market for any Existing Notes remaining after the
consummation of the Exchange Offer may be substantially limited.

The liquidity of, and trading market for, the Existing Notes or the
Exchange Notes also may be adversely affected by general declines in the market
or by declines in the market for similar securities. Such declines may adversely
affect such liquidity and trading markets independent of the financial
performance of, and prospects for, the Company.

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management, as well as
assumptions made by and information currently available to management. These
forward-looking statements are principally contained in the sections "Prospectus
Summary", "Risk Factors", "Management's Discussion and Analysis" and "Business"
and include, without limitation, management's expectations and estimates as to
the Company's business operations, including future financial performance,
financing plans, trends affecting the Company's financial condition or results
of operations, impact of competition, acquisition opportunities and expansion of
the Company's operations. In addition, in those and other portions of this
Prospectus, the words "believes", "may", "will", "estimates", "continue",
"anticipates", "intends", "expects" and words of similar import, as they relate
to the Company or its management, are intended to identify forward-looking
statements. Such statements reflect the current views of the Company and its
management with respect to future events and are subject to certain risks,
uncertainties and assumptions, including, among others, the following: general
economic and business conditions, both nationally and in the Company's markets;
competition; changes in business strategy; the significant leverage of the
Company; existing governmental regulations and changes in the governmental
regulations affecting the outdoor advertising of tobacco or of products
generally; losses from natural disasters and other risk factors set forth under
"Risk Factors" in this Prospectus. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company does not intend to update these
forward-looking statements.

15
<PAGE> 20

USE OF PROCEEDS

There will be no cash proceeds payable to the Company for the issuance of
the Exchange Notes pursuant to the Exchange Offer. The net proceeds to the
Company from the sale of the Existing Notes (the "Initial Offering") were
approximately $95.3 million after deducting discounts and fees and expenses
incurred in connection therewith. The Company used such net proceeds as follows:

(i) To repay in full all outstanding borrowings and accrued interest
under the Senior Credit Facility, which totaled $57.4 million on the
Closing Date. The Senior Credit Facility has been terminated.

(ii) To repay the $10.0 million loan, plus accrued interest thereon of
$232,000, from Holdings to permit Holdings to repay a like amount of Bridge
Notes.

(iii) To purchase approximately $10.4 million of Pledged Securities,
consisting of U.S. government securities, which were pledged to the Escrow
Agent as security for the first two interest payments on the Notes.

The remaining net proceeds (approximately $17.3 million) were used for
general corporate purposes, including capital expenditures and acquisitions.
Pending the application of the net proceeds as described above, the Company
invested the proceeds in short-term investment grade securities.

Borrowings under the Senior Credit Facility and the predecessor Original
Credit Facility were used to help finance the TSS and Unisign acquisitions and
for general corporate purposes. These borrowings bore interest at the weighted
average rate of 8.8% per annum on March 31, 1998. The Bridge Notes were used to
help finance the Unisign acquisition, bore interest at the rate of 10.4% per
annum on March 31, 1998 and mature on February 27, 1999.

16
<PAGE> 21

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1998 on an actual basis and as adjusted to give pro forma effect to the
Western acquisition, as if such transaction occurred on June 30, 1998. See "Use
of Proceeds". The following table should be read in conjunction with the
Unaudited Pro Forma Financial Statements and related notes thereto and the
Company's financial statements and accompanying notes thereto included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents(1)................................ $ 19,822 $ 17,389
======== ========
Long-term debt:(2)
Credit Facility(3)........................................ $ -- $ 16,000
Senior Notes.............................................. 100,000 100,000
Other debt................................................ 817 817
-------- --------
Total long-term debt.............................. 100,817 116,817
-------- --------
Stockholder's equity:
Common stock, par value -- $10 per share; authorized
10,000 shares; 200 shares issued and outstanding....... 2 2
Paid-in capital........................................... 16,165 16,165
Accumulated deficit....................................... (9,018) (9,018)
-------- --------
Total stockholder's equity........................ 7,149 7,149
-------- --------
Total capitalization.............................. $107,966 $123,966
======== ========
</TABLE>

- ---------------
(1) Includes $10.5 million of securities pledged as security for the first two
interest payments on the Notes.

(2) See Notes 5 and 11 to the Company's audited financial statements included
elsewhere herein for a description of the terms of the Company's long-term
debt.

(3) In connection with the acquisition of Western, the Company entered into a
certain Credit Agreement with The First National Bank of Chicago,
individually and as Agent (the "Credit Facility"), which Credit Facility and
attachments thereto evidence: (i) a single-draw term loan in the aggregate
amount of $14,000,000 ("Facility A"); (ii) a letter of credit facility and a
multi-draw term loan facility in the aggregate amount of $1,250,000
("Facility B"); and (iii) a revolving credit facility in the aggregate
amount of $4,000,000 ("Facility C") (Facility A, Facility B and Facility C
are collectively, the "Facilities"). The aggregate commitments of the
Facilities are $19,250,000. Approximately $5.0 million represents the
current portion of the Credit Facility.

17
<PAGE> 22

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following unaudited pro forma financial statements have been prepared
by the Company's management from its historical financial statements which are
contained elsewhere in this Prospectus. The Unaudited Pro Forma Statements of
Operations present the Company's results of operations adjusted to give effect
to the Initial Offering, the conversion of $15.8 million of subordinated
intercompany promissory notes payable to Holdings into equity, and the TSS,
Unisign and Western acquisitions (accounted for as purchases) as if they had
occurred on January 1, 1997. The Unaudited Pro Forma Balance Sheet presents the
Company's financial position adjusted to give effect to the Western acquisition
as if it had occurred on June 30, 1998. The pro forma adjustments described in
the accompanying notes are based upon estimates and certain assumptions that
management of the Company believes are reasonable in such circumstances.

The unaudited pro forma financial statements are not necessarily indicative
of what the financial position or results of operations actually would have been
if the Initial Offering, the debt-to-equity conversion and the TSS, Unisign and
Western acquisitions had occurred on the applicable dates indicated. Moreover,
they are not intended to be indicative of future results of operations or
financial position. The unaudited pro forma financial statements should be read
in conjunction with the historical financial statements of the Company, TSS,
Unisign and Western and the related notes thereto which are included elsewhere
in this Prospectus.

The unaudited pro forma financial statements do not reflect the financial
impact of various acquisitions completed during 1998 and 1997 as these
acquisitions were not individually or in the aggregate significant to the
financial position or results of operations of the Company for the periods
presented. See "Business -- General".

18
<PAGE> 23

TRI-STATE OUTDOOR MEDIA GROUP, INC.

UNAUDITED PRO FORMA BALANCE SHEET

AS OF JUNE 30, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADJUSTMENTS
WESTERN OUTDOOR FOR THE
HISTORICAL HISTORICAL(A) ACQUISITION PRO FORMA
---------- --------------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash........................................ $ 9,338 $ 361 $ (361)(b) $ 6,905
(2,433)(e)
Restricted cash............................. 10,484 -- 10,484
Investments................................. 7,965 -- (7,965)(e) --
Accounts receivable, net.................... 2,146 123 71(b) 2,340
Other current assets........................ 2,932 766 (600)(b) 3,098
-------- ------ -------- --------
Total current assets................ 32,865 1,250 (11,288) 22,827

Property and Equipment, net................... 44,140 1,598 10,042(c) 55,780
14,733(d)
Intangible Assets, net........................ 27,643 -- 550(d) 42,926
Prepaid commissions, long-term portion........ 312 243 (226)(b) 329
Deferred taxes................................ 5,273 -- -- 5,273
Other Assets.................................. 107 -- -- 107
-------- ------ -------- --------
Total assets........................ $110,340 $3,091 $ 13,811 $127,242
======== ====== ======== ========

LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Current portion of long-term debt........... $ -- $ -- $ 5,000(f) $ 5,000
550(f)
Other current liabilities................... 2,374 224 128(b) 3,276
-------- ------ -------- --------
Total current liabilities........... 2,374 224 5,678 8,276

Long-Term Debt................................ 100,817 -- 11,000(f) 111,817
-------- ------ -------- --------
Total liabilities................... 103,191 224 16,678 120,093
-------- ------ -------- --------
Stockholder's Equity
Common stock................................ 2 -- -- 2
Divisional equity........................... -- 2,867 (2,867)(g) --
Paid-in capital............................. 16,165 -- -- 16,165
Accumulated deficit......................... (9,018) -- -- (9,018)
-------- ------ -------- --------
7,149 2,867 (2,867) 7,149
-------- ------ -------- --------
Total liabilities and stockholder's
equity............................ $110,340 $3,091 $ 13,811 $127,242
======== ====== ======== ========
</TABLE>

See Notes to Unaudited Pro Forma Financial Statements.
19
<PAGE> 24

TRI-STATE OUTDOOR MEDIA GROUP, INC.

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
ACQUIRED FOR FOR THE
HISTORICAL COMPANIES(H) ACQUISITIONS SUBTOTAL INITIAL OFFERING PRO FORMA
---------- ------------ ------------ -------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............. $ 9,413 $2,844 $ -- $12,257 $ -- $12,257
------- ------ ------- ------- ------- -------
Operating expenses:
Direct operating
expenses............ 3,179 867 -- 4,046 -- 4,046
General and
administrative...... 1,466 274 -- 1,740 -- 1,740
Depreciation and
amortization........ 4,027 576 1,396(i) 5,999 -- 5,999
------- ------ ------- ------- ------- -------
8,672 1,717 1,396 11,785 -- 11,785
------- ------ ------- ------- ------- -------
Operating income.... 741 1,127 (1,396) 472 -- 472
Interest expense......... (4,198) (16) (908)(j) (5,122) (1,496)(k) (6,618)
Other income (expense)... 92 -- -- 92 -- 92
------- ------ ------- ------- ------- -------
Income (loss) before
income tax benefit and
extraordinary item..... (3,365) 1,111 (2,304) (4,558) (1,496) (6,054)
Income tax benefit....... 1,347 -- 476(l) 1,823 598(l) 2,421
------- ------ ------- ------- ------- -------
Income (loss) before
extraordinary
item................ $(2,018)(m) $1,111 $(1,828) $(2,735) $ (898) $(3,633)(m)
======= ====== ======= ======= ======= =======
OTHER DATA:
Ratio of earnings to
fixed charges(n)....... -- --
</TABLE>

See Notes to Unaudited Pro Forma Financial Statements.
20
<PAGE> 25

TRI-STATE OUTDOOR MEDIA GROUP, INC.

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
ACQUIRED FOR THE FOR THE
HISTORICAL COMPANIES(O) ACQUISITIONS SUBTOTAL INITIAL OFFERING PRO FORMA
---------- ------------ ------------ -------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues................... $ 11,831 $10,748 $ -- $22,579 $ -- $ 22,579
-------- ------- ------- ------- ------- --------
Operating expenses:
Direct operating expenses.... 3,817 3,215 -- 7,032 -- 7,032
General and administrative... 2,417 1,786 -- 4,203 -- 4,203
Depreciation and
amortization.............. 4,699 1,921 5,355(i) 11,975 -- 11,975
-------- ------- ------- ------- ------- --------
10,933 6,922 5,355 23,210 -- 23,210
-------- ------- ------- ------- ------- --------
Operating income (loss)... 898 3,826 (5,355) (631) -- (631)
Interest expense............... (4,200) (767) (1,815)(j) (6,782) (6,453)(k) (13,235)
Other income (expense)......... (143) 43 -- (100) -- (100)
-------- ------- ------- ------- ------- --------
Income (loss) before income tax
benefit and extraordinary
item......................... (3,445) 3,102 (7,170) (7,513) (6,453) (13,966)
Income tax benefit............. 1,424 -- 1,581 3,005 2,581(l) 5,586
-------- ------- ------- ------- ------- --------
Income (loss) before
extraordinary item........ $ (2,021) $ 3,102 $(5,589) $(4,508) $(3,872) $ (8,380)(m)
======== ======= ======= ======= ======= ========
OTHER DATA:
Ratio of earnings to fixed
charges(n)................... -- --
</TABLE>

See Notes to Unaudited Pro Forma Financial Statements.
21
<PAGE> 26

TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

(a) Represents the historical balance sheet of Western as of July 31, 1998.

(b) Reflects adjustments to the balance sheet of Western at July 31, 1998
for assets which were not acquired by the Company and for changes in balances
from July 31, 1998 to the acquisition date.

(c) Reflects the adjustment of the carrying value of the property and
equipment acquired by the Company from Western (as reflected in the historical
financial statements of Western at July 31, 1998) to the estimated fair value of
such assets as recorded in purchase accounting.

(d) Reflects the adjustment of the intangible assets acquired by the
Company from Western (as reflected in the historical financial statements of
Western at July 31, 1998) as follows (in thousands):

<TABLE>
<S> <C>
Goodwill.................................................... $12,194
Value of purchased contracts................................ 2,529
Noncompete agreements....................................... 10
-------
$14,733
=======
</TABLE>

Additionally, adjustment reflects capitalization of financing costs of
$550,000 incurred in connection with the financing of the Western acquisition.

(e) Reflects the utilization of existing cash and investments in connection
with the Western acquisition.

(f) Reflects the increased borrowing to finance the Western acquisition and
$550,000 of related accrued financing costs.

(g) Reflects the elimination of the divisional equity of Western at July
31, 1998.

(h) Reflects the revenues and expenses of Unisign for the period from
January 1, 1998 to March 2, 1998, the date of acquisition and of Western for the
six months ended July 31, 1998 as follows:

<TABLE>
<CAPTION>
UNISIGN WESTERN TOTAL
------- ------- ------
<S> <C> <C> <C>
Net revenues..................................... $596 $2,248 $2,844
---- ------ ------
Expenses
Direct operating expenses...................... 167 700 867
General and administrative..................... 87 187 274
Depreciation and amortization.................. 71 505 576
---- ------ ------
325 1,392 1,717
---- ------ ------
Operating Income................................. 271 856 1,127
Interest expense................................. (16) -- (16)
---- ------ ------
Income before income taxes....................... $255 $ 856 $1,111
==== ====== ======
</TABLE>

(i) Reflects the increase in depreciation and amortization expense arising
from purchase accounting adjustments in connection with the TSS, Unisign and
Western acquisitions as follows (dollars in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1997 JUNE 30, 1998
AMORTIZATION ------------------------------------- ---------------------------
ASSETS PERIOD TSS UNISIGN WESTERN TOTAL UNISIGN WESTERN TOTAL
- ------ ------------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Property and
equipment............ 5-30 years $ 990 $ 460 $1,371 $ 2,821 $ 230 $ 685 $ 915
Goodwill............... 15 years 585 679 812 2,076 340 406 746
Value of purchased
contracts............ 1-2 years 1,695 1,510 843 4,048 480 422 902
Noncompete agreements.. 5 years -- 100 2 102 50 1 51
------- ------- ------ ------- ------ ------- -------
</TABLE>

22
<PAGE> 27
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1997 JUNE 30, 1998
AMORTIZATION ------------------------------------- ---------------------------
ASSETS PERIOD TSS UNISIGN WESTERN TOTAL UNISIGN WESTERN TOTAL
- ------ ------------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total depreciation and
amortization
expense.............. 3,270 2,749 3,028 9,047 1,100 1,514 2,614
Less amounts recorded
in the historical
financial
statements........... (2,362)* (391) (939) (3,692) (713)** (505) (1,218)
------- ------- ------ ------- ------ ------- -------
$ 908 $ 2,358 $2,089 $ 5,355 $ 387 $ 1,009 $ 1,396
======= ======= ====== ======= ====== ======= =======
</TABLE>

- ---------------
* Reflects $1,771,000 recorded in the Company's financial statements subsequent
to the TSS acquisition and $591,000 recorded in the historical financial
statements of TSS prior to the acquisition.

** Reflects $642,000 recorded in the Company's financial statements subsequent
to the Unisign acquisition and $71,000 recorded in the historical financial
statements of Unisign prior to the acquisition.

(j) Reflects incremental interest and amortization expense as if the
financing for the Western acquisitions took place on January 1, 1997 as follows
(dollars in thousands):

<TABLE>
<CAPTION>
JUNE 30,
AVERAGE 1997 1998
BORROWINGS INTEREST RATE EXPENSE EXPENSE
---------- ------------- ------- --------
<S> <C> <C> <C> <C>
Western............................................. $16,000 11% $1,760 $880
Financing costs (ten-year amortization period)...... 550 -- 55 28
------- ------ ----
$16,550 $1,815 $908
======= ====== ====
</TABLE>

The incremental interest expense related to the TSS and Unisign
acquisitions is included in the adjustment in note (k) as borrowings for these
acquisitions were repaid with proceeds from the Initial Offering.

(k) Reflects incremental interest expense and amortization of deferred
financing fees as if the Initial Offering had occurred on January 1, 1997 and
the application of the estimated net proceeds as described in "Use of Proceeds"
occurred on that date as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
1997 1998
EXPENSE EXPENSE
------------ --------
<S> <C> <C>
Interest expense and amortization of deferred financing
costs on the Existing Notes............................... $11,420 $ 5,710
Less amounts included in the historical financial
statements*
Unisign................................................... (95) (16)
TSS....................................................... (672) --
The Company............................................... (4,200) (4,198)
------- -------
$ 6,453 $ 1,496
======= =======
</TABLE>

The $4,200,000 and $4,198,000 include interest on the $15.8 million of
subordinated intercompany promissory notes which were converted into equity.

* Historical interest expense has been eliminated in the determination of pro
forma interest expense as the debt obligations creating interest expense in
the historical financial statements of Unisign and TSS were not assumed by
the Company and would therefore not have existed during the periods
presented. The interest expense in the Company's historical financial
statements represents the interest actually incurred versus the amount that
would have been incurred had the Initial Offering occurred on January 1,
1997.

(l) The provision for income taxes has been adjusted to reflect the tax
effect of the historical income of the acquired companies and the pro forma
adjustments based on the statutory rate in effect during the period of 40%.

(m) Does not reflect an extraordinary loss related to the early
extinguishment of debt (net of income tax benefit of approximately $2,089,000)
which the Company incurred in connection with the Initial Offering.
23
<PAGE> 28
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

(n) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income before income taxes plus fixed charges. Fixed
charges consist of interest expense (including amortization of deferred debt
issuance costs) and the portion of rental expense that is deemed representative
of the interest factor totaling $571,000 and $1.0 million in 1997 on a
historical and pro forma basis, respectively and by $450,000 and $542,000 in the
six months ended June 30, 1998 on a historical and pro forma basis,
respectively. Earnings were insufficient to cover fixed charges by $3.4 million
and $14.0 million in 1997 on a historical and pro forma basis, respectively, and
by $3.4 million and $6.1 million in the six months ended June 30, 1998 on a
historical and pro forma basis, respectively.

(o) The results of operations of TSS have been included in the historical
results of the Company from the date of acquisition. Set forth below are the
revenues and expenses of TSS, Unisign and Western for the period from January 1,
1997 to June 11, 1997 in the case of TSS, and for the year ended December 31,
1997 in the case of Unisign and for the year ended October 31, 1997 in the case
of Western (in thousands).

<TABLE>
<CAPTION>
TSS UNISIGN WESTERN TOTAL
------ ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues........................... $2,690 $3,675 $4,383 $10,748
------ ------ ------ -------
Expenses
Direct operating expenses............ 718 1,134 1,363 3,215
General and administrative........... 769 660 357 1,786
Depreciation and amortization........ 591 391 939 1,921
------ ------ ------ -------
2,078 2,185 2,659 6,922
------ ------ ------ -------
Operating income....................... 612 1,490 1,724 3,826
Interest expense....................... (672) (95) -- (767)
Other income (expenses)................ 82 (39) -- 43
------ ------ ------ -------
Income before income taxes............. $ 22 $1,356 $1,724 $ 3,102
====== ====== ====== =======
</TABLE>

(p) The EBITDA for the Company for year ended December 31, 1997 on a
historical and pro forma basis was $5,597 and $11,344, respectively and for the
six months ended June 30, 1998 on a historical and pro forma basis was $4,768
and $6,471, respectively.

(q) In addition to the above pro forma adjustments, the Company expects to
realize reduction of costs reflected in the historical financial statements of
the Company, TSS, Unisign and Western which the Company believes would not have
been incurred had the acquisitions occurred as of January 1, 1997 (in
thousands).

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1997 JUNE 30, 1998
------------------------------------------ -------------------------
COMPANY TSS UNISIGN WESTERN TOTAL UNISIGN WESTERN TOTAL
------- ---- ------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Executive compensation............. $-- $107 $297 $ 70 $474 $49 $ 35 $ 84
Other employees' compensation...... -- 41 31 183 255 5 91 96
Directors' fees.................... -- 11 -- -- 11 -- -- --
Advertising........................ -- -- 31 -- 31 5 -- 5
Facility costs..................... 60 -- -- 30 90 -- 15 15
Other administrative costs......... -- -- 15 -- 15 3 -- 3
--- ---- ---- ---- ---- --- ---- ----
$60 $159 $374 $283 $876 $62 $141 $203
=== ==== ==== ==== ==== === ==== ====
</TABLE>

In conjunction with the Western acquisition, the annual cost savings
expected to be realized through the integration of the Western business include
$70,000 from the elimination of prior management's compensation, $183,000 from
eliminating accounting, artists and other clerical functions and $30,000 of
facility costs. In response to the growth through acquisitions and in
anticipation of future growth, the Company created a new position of Director of
Marketing and hired additional accounting and clerical personnel in the
corporate office in Tifton. The estimated annual cost of these additional
personnel is $215,000.

24
<PAGE> 29

SELECTED HISTORICAL FINANCIAL AND OTHER DATA

The selected financial data presented below for and as of the end of each
of the years in the five-year period ended December 31, 1997 are derived from
the financial statements of the Company, of which (i) the financial statements
as of and for the year ended December 31, 1997 were audited by McGladrey &
Pullen, LLP, independent auditors, (ii) the financial statements as of and for
the years ended December 31, 1995 and 1996 were audited by McGrail Merkel Quinn
& Associates, independent auditors, and (iii) the financial statements as of and
for the years ended December 31, 1993 and 1994 and for the six months ended June
30, 1997 and 1998 are unaudited. In the opinion of management, the unaudited
financial statements for the six months ended June 30, 1997 and 1998 and the
years ended December 31, 1993 and 1994 include all adjustments, consisting only
of normal recurring adjustments, necessary to fairly present the results of
operations and financial position for such periods. The results for the six
months ended June 30, 1998 are not necessarily indicative of the results for the
full fiscal year. The following data should be read in conjunction with the
historical financial statements and notes related thereto of the Company and
"Management's Discussion and Analysis", included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ -------------------
1993 1994(1) 1995(1) 1996 1997(1) 1997(1) 1998(1)
------- ------- ------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................. $ 2,828 $ 4,096 $ 7,892 $ 8,021 $ 11,831 $ 4,415 $ 9,413
------- ------- ------- ------- -------- -------- --------
Operating expenses:
Direct operating
expenses.............. 590 1,021 2,315 2,427 3,817 1,319 3,179
General and
administrative........ 717 1,230 1,934 2,345 2,417 996 1,466
Depreciation and
amortization.......... 1,161 1,429 2,713 2,648 4,699 1,224 4,027
------- ------- ------- ------- -------- -------- --------
Total operating
expenses.............. 2,468 3,680 6,962 7,420 10,933 3,539 8,672
------- ------- ------- ------- -------- -------- --------
Operating income............. 360 416 930 601 898 876 741
Gain (loss) on sale of
assets..................... -- -- 1,334 443 (143) -- --
Interest expense............. (476) (880) (2,094) (1,941) (4,200) (1,132) (4,198)
Other income (expense)....... 1 (164) (153) 2 -- (51) 92
------- ------- ------- ------- -------- -------- --------
Income (loss) before income
tax benefit................ (115) (628) 17 (895) (3,445) (307) (3,365)
Income tax benefit........... -- -- 8 324 1,424 129 1,347
------- ------- ------- ------- -------- -------- --------
Income (loss) before
extraordinary item......... $ (115) $ (628) $ 25 $ (571) $ (2,021) $ (178) $ (2,018)
======= ======= ======= ======= ======== ======== ========
Basic income (loss) from
continuing operations
per share.................. $ (575) $(3,140) $ 125 $(2,855) $(10,105) $ (890) $(10,090)
======= ======= ======= ======= ======== ======== ========
OTHER DATA:
EBITDA(2).................... $ 1,521 $ 1,845 $ 3,643 $ 3,249 $ 5,597 $ 2,100 $ 4,768
EBITDA margin(2)............. 53.8% 45.0% 46.2% 40.5% 47.3% 47.6% 50.7%
Cash flows from operating
activities................. 1,063 (170) 1,245 1,476 1,810 192 (151)
Cash flows from investing
activities................. (712) (616) (2,343) 1,165 (37,305) (32,471) (43,845)
Cash flows from financing
activities................. (362) (508) 1,132 (2,582) 35,494 32,178 53,202
Capital expenditures......... 672 1,301 1,083 1,655 2,334 1,123 2,303
Ratio of earnings to fixed
charges(3)................. -- -- 1.0x -- -- -- --
Number of displays(4)
Bulletins............... 2,506 3,570 3,815 3,975 6,106 7,627
Posters................. 50 1,778 1,623 1,461 1,432 1,793
------- ------- ------- ------- -------- --------
Total displays...... 2,556 5,348 5,438 5,436 7,538 9,420
======= ======= ======= ======= ======== ========
</TABLE>

(continued on following page)
25
<PAGE> 30

<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------------------------------- ------------------
1993 1994(1) 1995(1) 1996 1997(1) 1997(1) 1998(1)
------- ------- ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............. $ -- $ 39 $ 74 $ 133 $ 132 $ 32 $ 19,822(5)
Working capital
(deficit)............... 4 (879) (2,057) (195) 2,733 2,396 30,491
Total assets.............. 3,902 17,579 19,214 17,128 54,106 49,645 110,340
Total debt (including
current
maturities)............. 5,708 19,724 19,798 19,474 57,998 52,535 100,817
Stockholder's equity
(deficiency)............ (1,967) (3,268) (3,194) (2,863) (4,884) (4,131) 7,149
</TABLE>

- ---------------
(1) See "Prospectus Summary -- The Company", "Prospectus Summary -- Recent
Financing" and "Business" regarding acquisitions made by the Company in
1994, 1997 and 1998, which affect the comparability of the information
contained in "Selected Historical Financial and Other Data".

(2) "EBITDA" is defined as operating income before depreciation and
amortization. EBITDA represents a measure that management believes is
customarily used to evaluate the financial performance of companies in the
media industry. However, EBITDA is not a measure of financial performance
under generally accepted accounting principles and should not be considered
an alternative to operating income as an indicator of the Company's
operating performance or to net cash provided by (used in) operating
activities as a measure of its liquidity. EBITDA margin is EBITDA stated as
a percentage of net revenues.

(3) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes plus fixed charges. Fixed charges
consist of interest expense (including amortization of deferred debt
issuance costs) and the portion of rental expense that is deemed
representative of the interest factor. Earnings were insufficient to cover
fixed charges by $11,000 in 1993, $628,000 in 1994, $895,000 in 1996, $3.4
million in 1997, $307,000 in the six months ended June 30, 1997 and $3.4
million in the six months ended June 30, 1998.

(4) All display faces, including unoccupied display faces, are classified based
on the last sale to an advertiser as either a bulletin or poster. For 1995,
the table does not reflect display faces located in and around Watertown,
New York that were acquired in November 1995 and disposed of in January
1996.

(5) Includes $10.5 million of securities pledged as security for the first two
interest payments on the Notes.

26
<PAGE> 31

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion and analysis, together with the accompanying
financial statements and related notes thereto, are intended to aid in
understanding the Company's results of operations as well as its financial
position, cash flows, debt, liquidity and other key financial information.

OVERVIEW

The Company was formed in 1986, and since then net revenues and EBITDA have
grown significantly primarily through the acquisition of outdoor advertising
businesses and individual display faces in specific markets and the construction
of new display faces in existing markets.

Net revenues are a function of the number of display faces operated by the
Company, the occupancy levels of the Company's display faces and the rates that
the Company charges for their use. The Company focuses its sales efforts on
selling 36-month contracts to maximize both the occupancy of its display
inventory and its sales force efficiency. The Company believes that it has
opportunities to improve its occupancy levels and rates for a number of reasons,
including the recent expansion of the Company's sales force, benefits derived
from the application of the Company's existing incentive compensation-based
sales strategy in its newly acquired operations and general economic conditions
in its new markets. Operating results are affected by general economic
conditions, as well as trends in the advertising industry.

The Company's net revenues are gross revenues net of withheld commissions
retained by advertising agencies that contract for the use of advertising
displays on behalf of their advertisers and other miscellaneous credits. Agency
commissions are typically 15% of gross revenues per contract. The Company enters
into agreements with advertising agencies on a customer-by-customer basis.
Because of the Company's reliance on local advertisers, many of which do not
employ agencies, the Company believes that it depends less on the placement of
advertising through agencies than most other major outdoor advertising companies
and that its agency commission levels are lower than industry averages. In 1997,
direct sales to local advertisers represented over 95% of the Company's net
revenues.

Direct operating expenses consist of sales, production and lease expense.
Selling expense primarily consists of compensation to the Company's sales force,
travel and entertainment related to sales, and outside commissions other than to
advertising agencies. Commissions to the Company's sales force are based on the
total advertising contract value and are paid upon contract receipt. The total
advertising contract value is the monthly billing multiplied by the number of
months in the contract. Therefore, a salesperson would receive a commission
payment three times higher on a 36-month contract than on a 12-month contract
with the same monthly billing. Production expense mainly consists of
illumination expense, maintenance of billboard structures, the cost of
purchasing and applying poster advertisements and a prorata portion of the cost
of producing display faces for contracts of 18 months or less (which are
deferred and charged to production expense over the term of the related
contracts). The cost of producing advertising display faces for any contract
longer than 18 months is capitalized and depreciated over the life of the
contract. The Company believes that its illumination expense is generally lower
than industry averages because it produces a significant number of bulletins
(25% of its bulletins as of June 30, 1998) using Scotchlite, which require no
illumination expense, and many of the remaining displays are not illuminated.
The Company's illumination expense in 1997 was 3.2% of net revenues. Lease
expense consists mainly of rental payments to owners of the land underlying
billboard structures. Lease costs are generally lower in the non-urban segment
of the outdoor advertising market because landlords in rural areas generally
have fewer alternative uses for their properties, many of which are located in
agricultural areas. The Company's site lease expense was 13.8% of net revenues
in 1997.

General and administrative expenses include salaries, bonuses and other
compensation, permit fees, utilities, supplies, professional fees, rent for its
executive offices and facilities and travel.

ACQUISITIONS

The Company's display faces grew from 2,556 faces at December 31, 1993 to
7,538 faces at December 31, 1997, a 31.1% compounded annual growth rate,
primarily as a result of acquisitions. The Company's acquisitions can be
classified into two categories: new market acquisitions and fill-in
acquisitions.

27
<PAGE> 32

New market acquisitions are acquisitions outside of the Company's then existing
markets, while fill-in acquisitions are generally acquisitions in or adjacent to
the Company's existing markets that involve the purchase of advertising displays
only, resulting in the elimination of all personnel and related costs. From
January 1, 1995 to June 30, 1998, the Company completed two new market
acquisitions, TSS and Unisign, and nine fill-in acquisitions (excluding the
Watertown, New York acquisition).

The Company achieves operating leverage through both new market and fill-in
acquisitions by spreading acquired contract revenues over relatively fixed
general and administrative costs. With new market acquisitions, the Company
eliminates duplicative management personnel, thereby reducing compensation
expense, and generally integrates the art and accounting functions into the
Company's existing general and administrative structure. The Company's corporate
office, established in 1995, provides all billing and collection functions for
all of the Company's divisions, as well as cash management, payable functions
and strategic marketing directions. In the TSS acquisition, the Company was able
to reduce certain annual executive costs, including approximately $259,000 of
chief executive officer compensation and directors' fees. Additional annual
savings of $98,000 were generated by replacing the general manager and
eliminating the art department. In addition, the Company expects to realize net
savings of $80,000 annually from closing its Southeast divisional headquarters
following the TSS acquisition. Similarly, annual cost savings to be realized
through the integration of the Unisign business include $297,000 from the
elimination of prior management's compensation and $77,000 from eliminating
Unisign's accounting functions and realigning general and administrative
personnel (including the elimination of local artists). In conjunction with the
Western acquisition, the annual cost savings expected to be realized through the
integration of the Western business include $70,000 from the elimination of
prior management's compensation, $183,000 from eliminating accounting, artists
and other clerical functions and $30,000 of facility costs. In response to the
growth through acquisitions and in anticipation of future growth, the Company
created a new position of Director of Marketing and hired additional accounting
and clerical personnel in the corporate office in Tifton. The estimated annual
cost of these additional personnel is $215,000.

In addition to growth through acquisitions, the Company seeks opportunities
for growth through the development of newly built outdoor advertising
structures. The Company actively monitors changes in local zoning restrictions
and the availability of new land lease sites in each of its existing markets so
as to develop new build opportunities. The Company erected 78 structures and 146
display faces in 1997 and anticipates erecting approximately 70 structures with
up to 250 display faces in 1998 of which 62 structures and 186 faces were
completed by June 30, 1998. A substantial portion of these new structures and
display faces results from the Unisign acquisition, in which the Company
acquired 94 leases in Kentucky, predominantly located along primary highways,
and on which, subject only to the receipt of routine government permits, it
plans to construct 94 new structures with up to 376 display faces of which 21
new structures and 78 display faces were completed by June 30, 1998. In
addition, the billboard structures acquired by the Company in the Unisign
acquisition have the capacity for up to an additional 300 display faces of which
40 faces were installed by June 30, 1998. The Company believes that the
economics of building new advertising structures compare favorably with the
economics of purchasing structures through fill-in acquisitions.

In June 1995, the Company sold certain outdoor advertising assets in and
around Erie, Pennsylvania, which assets were acquired by the Company in October
1994. These assets accounted for $140,000 of net revenue in 1995.

In January 1996, the Company sold for $3.1 million certain outdoor
advertising assets located in and around Watertown, New York, which assets were
acquired by the Company in November 1995. These assets did not have a material
impact on revenues in either 1995 or 1996.

28
<PAGE> 33

PRODUCT MIX; REGIONAL OPERATIONS

The following table sets forth information on the bulletins and posters
operated by each of the Company's divisions at the dates indicated. The Company
did not acquire its Mid-Atlantic division until March 1998.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1995 1996 1997 JUNE 30, 1998
-------------------- -------------------- -------------------- --------------------
DIVISION BULLETINS POSTERS BULLETINS POSTERS BULLETINS POSTERS BULLETINS POSTERS
-------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Midwest.............. 2,288 -- 2,284 -- 2,308 -- 2,717 --
Northeast(1)......... 833 476 903 443 923 450 966 468
Northcentral......... 477 490 476 485 513 463 550 460
Southeast............ 217 657 312 533 2,362(2) 519 2,357 519
Mid-Atlantic(3)...... -- -- -- -- -- -- 1,037 346
----- ----- ----- ----- ----- ----- ----- -----
Total................ 3,815 1,623 3,975 1,461 6,106 1,432 7,627 1,793
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

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

(1) Does not reflect display faces in and around Watertown, New York that were
acquired in November 1995 and disposed of in January 1996.

(2) Increase reflects primarily the TSS acquisition.

(3) Reflects the acquisition of Unisign.

The Company derived over 72%, 72% and 75% of its net revenues from the sale
of advertising on bulletins in 1995, 1996 and 1997, respectively, and the
balance from the sale of advertising on posters. Because of this large
percentage of bulletin revenues and the long-term nature of its bulletin
contracts, the Company's net revenues have experienced little seasonality,
historically varying less than 2% per quarter. However, poster revenues are
typically lower during the first quarter, reflecting seasonal patterns in
advertising spending.

The Company emphasizes the sale of long-term (36-month) contracts for its
bulletins. In the Northeast and Midwest divisions, which have been operated by
current management for approximately 12 and 9 years, respectively, over 90% of
all bulletin advertising contracts in effect on December 31, 1997 had an
original term of at least 36 months. Because of the acquisition of the
shorter-term contracts of TSS and Unisign, at June 30, 1998 approximately 51% of
the Company's bulletin advertising contracts had an original term of 36 months
of more. As the advertising contracts assumed by the Company in the TSS and
Unisign acquisitions expire, the Company is seeking to sell 36-month contracts
for these bulletins. As a result, the Company believes that the percentage of
bulletins subject to 36-month contracts will increase over time in these
markets.

The average monthly rate per display varies in each region in which the
Company operates, primarily as a result of the average size and location of
displays in each division. In the Midwest and Northeast divisions, the majority
vary in size from 6 feet high by 12 feet wide to 14 feet high by 48 feet wide.
In addition, the Company's displays in these divisions are located primarily
along secondary roads, rather than along interstate highways or primary roads.
Both the smaller size and location of the signs result in lower rates. In the
Northcentral division, the Company's displays are substantially larger and are
located along primary roads and interstate highways. The average rates for
displays in this division are the highest of all the Company's divisions. In the
Southeast, the average display size increased as result of the TSS acquisition.
In addition, the TSS displays were located to a greater extent along interstate
highways. The TSS acquisition resulted in higher average rates in the Southeast
division.

In some of the localities in which the Company operates, outdoor
advertising is subject to restrictive zoning regulations. Although the Company
believes the existence of those regulations continue to be a factor in the
operation of the Company's business, such regulations have not had a significant
effect on the results of operations.

29
<PAGE> 34

RESULTS OF OPERATIONS

The following table sets forth the specified components of expense for the
Company expressed as a percentage of net revenues for the last three years.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------- ----------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Direct operating expenses................ 29.3 30.3 32.3 29.9 33.8
General and administrative............... 24.5 29.2 20.4 22.6 15.5
Depreciation and amortization............ 34.4 33.0 39.7 27.7 42.8
----- ----- ----- ----- -----
Total operating expenses............ 88.2 92.5 92.4 80.2 92.1
----- ----- ----- ----- -----

Operating income......................... 11.8 7.5 7.6 19.8 7.9
----- ----- ----- ----- -----
Interest expense......................... (26.5) (24.2) (35.5) (25.6) (44.6)
Other income (expense)................... 15.0 5.5 (1.2) (1.1) 1.0
----- ----- ----- ----- -----
Total other income (expense)........ (11.5) (18.7) (36.7) (26.7) (43.6)
----- ----- ----- ----- -----

Income (loss) before income tax
benefit................................ 0.3 (11.2) (29.1) (6.9) (35.7)
Income tax benefit....................... 0.0 4.1 12.0 2.9 14.3
----- ----- ----- ----- -----
Income (loss) before extraordinary loss
on early extinguishment of debt........ 0.3% (7.1)% (17.1)% (4.0)% (21.4)%
===== ===== ===== ===== =====
</TABLE>

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997

Net revenues. Net revenues increased 113.2% to $9.4 million for the six
months ended June 30, 1998 from $4.4 million for the six months ended June 30,
1997. Most of this increase was the result of the acquisition of Unisign,
completed in March 1998, and TSS, completed in June 1997. These acquisitions
accounted for approximately $4.5 million of the period-to-period revenue growth.

Direct operating expenses. Direct operating expenses (which include sales,
lease and production expense) increased to $3.2 million for the six month period
ending June 30, 1998 from $1.3 million for the comparable period in 1997. Most
of this increase was the result of the acquisition of Unisign, completed in
March 1998, and TSS, completed in June 1997. Sales expense decreased as a
percentage of net sales from 8.4% in the six month period ending June 30, 1997
to 7.6% in 1998, due to increased operating leverage in the sales force. Lease
expense increased as a percentage of net revenues from 12.9% in the six month
period ending June 30, 1997 to 14.8% in 1998, due to higher lease costs assumed
in the TSS acquisition, reflecting the higher costs of TSS's interstate highway
locations. Production expense increased as a percentage of net revenues from
8.6% in the six month period ending June 30, 1997 to 11.4% in 1998, due to
production costs associated with the shorter-term contracts assumed in the TSS
acquisition.

General and administrative expenses. General and administrative expenses
increased by 47.2% to $1.5 million for the six month period ending June 30, 1998
from $1.0 million in 1997, but decreased as a percentage of net revenues to
15.5% from 22.6%, respectively. The decrease in general and administrative
expense as a percentage of net revenues was due to increased operating leverage
provided by higher net revenues from the Unisign and TSS acquisitions over
relatively fixed general and administrative expenses. In addition, the Company
was able to reduce Unisign's and TSS' general and administrative expenses
through a reduction of executive compensation, and the elimination of the
general manager and art and accounting personnel.

Depreciation and amortization expense. Depreciation and amortization
expense increased to $4.0 million for the six month period ending June 30, 1998
from $1.2 million in 1997 due primarily to the Unisign and TSS acquisitions.

Interest expense. Interest expense, net of interest income, increased to
$4.2 million for the six month period ending June 30, 1998 from $1.1 million for
the comparable period in 1997. This increase was primarily the result of
additional debt incurred in connection with the financing of the Unisign and TSS
acquisitions.

30
<PAGE> 35

Income taxes. The Company recorded a $1.3 million income tax benefit for
the six month period ended June 30, 1998 due to losses resulting from the
increase in interest expense, depreciation, amortization and write-off of
finance and loan costs on early extinguishment of debt.

Extraordinary Loss. Effective May 20, 1998, the proceeds from the Initial
Offering were used for the early extinguishment of the outstanding debt related
to the prior credit facility. Accordingly, the Company recorded an extraordinary
loss of $3.5 million related to the early retirement of debt ($2.1 million, net
of income taxes of $1.4 million). The extraordinary loss was comprised of
deferred financing fees of $3.1 million and a $400,000 unrealized loss resulting
from the early extinguishment of the interest rate swap agreements used to
change the fixed/variable interest rate mix of the debt portfolio to reduce the
Company's aggregate risk to movements in interest rates. The fair value of the
swap agreements were not previously recognized in the financial statements since
they were accounted for as a hedge. With the extinguishment of the debt, the
swap agreements are no longer hedge transactions and therefore the related
unrealized loss can no longer be deferred.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

Net revenues. Net revenues increased 47.5% to $11.8 million for the year
ended December 31, 1997 from $8.0 million for the year ended December 31, 1996.
Most of this increase was the result of the acquisition of TSS completed in June
1997. This acquisition accounted for approximately $3.4 million of the
year-over-year revenue growth.

Direct operating expenses. Direct operating expenses (which include sales,
lease and production expense) increased to $3.8 million for 1997 from $2.4
million for the prior year. Most of this increase was the result of the
acquisition of TSS. Sales expense decreased as a percentage of net revenues to
8.2% in 1997 from 8.9% in 1996, due to increased operating leverage in the sales
force and minimal selling expense required for acquired contracts until they are
resold. Lease expense increased as a percentage of net revenues to 13.8% in 1997
from 12.6% in 1996, due to higher lease costs assumed in the TSS acquisition,
reflecting the higher costs of TSS's interstate highway locations. Production
expense increased as a percentage of net revenues to 10.0% in 1997 from 8.6% in
1996, due to production costs associated with the shorter-term contracts assumed
in the TSS acquisition.

General and administrative expenses. General and administrative expenses
increased slightly to $2.4 million for 1997 from $2.3 million for 1996, but
decreased sharply as a percentage of net revenues. The increase in
administrative expenses was more than accounted for by a one-time expense of
$250,000 relating to the relocation of the Company's personnel and offices to
Tifton, Georgia. However, the overall decrease in general and administrative
expenses as a percentage of net revenues was due to increased operating leverage
provided by higher net revenues from the TSS acquisition over relatively fixed
general and administrative expenses. In addition, the Company was able to reduce
TSS's general and administrative expenses through a reduction of executive
compensation and directors' fees, and the elimination of the general manager and
accounting personnel.

Depreciation and amortization expense. Depreciation and amortization
expense increased to $4.7 million for 1997 from $2.6 million for 1996, due
primarily to the TSS acquisition. Depreciation and amortization as a percentage
of net revenues increased from 1996 to 1997 as a result of amortization related
to the intangible assets acquired in the TSS acquisition.

Interest expense. Interest expense increased to $4.2 million for 1997 from
$1.9 million for 1996. This increase was the result of additional debt incurred
in connection with the financing of the TSS acquisition.

Income taxes. The Company recorded a $1.4 million income tax benefit for
1997 due to losses resulting from increased interest expense and depreciation
and amortization.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995

Net revenues. Net revenues increased to $8.0 million for 1996 from $7.9
million for 1995. Net revenues remained substantially unchanged since no
significant acquisitions occurred in 1995 or 1996 due to capital constraints and
management's exercise of price discipline on the available new market
acquisition opportunities.

31
<PAGE> 36

Direct operating expenses. Direct operating expenses increased to $2.4
million for 1996 from $2.3 million for 1995. This increase was due to certain
salary increases and the fixed costs retained upon the disposal of the Erie,
Pennsylvania displays.

General and administrative expenses. General and administrative expenses
increased 21.3% to $2.3 million for 1996 from $1.9 million for 1995. This
increase was due to the Company's establishment at the end of 1995 of separate
corporate offices for its executives and centralizing accounting and billing
operations in order to support the anticipated growth of the Company's
operations.

Depreciation and amortization expense. Depreciation and amortization
expense decreased to $2.6 million for 1996 from $2.7 million for 1995. This
decrease was due to the sale of the Erie displays.

Interest expense. Interest expense decreased to $1.9 million for 1996 from
$2.1 million for 1995. This decrease was due primarily to lower interest rates.

Income taxes. The Company recorded a $324,000 income tax benefit for 1996
due to losses resulting from interest expense and depreciation and amortization.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically satisfied its cash requirements with cash from
operations, revolving credit borrowings and other long-term debt financings and
sales of assets. Its acquisitions have been financed primarily with borrowed
funds.

The Company financed its acquisition activity in 1994 through the
combination of a $16.5 million credit facility with First Chicago, as agent for
a syndicate of lenders, and an equity and subordinated debt investment of $3.9
million from Mesirow in Holdings (the proceeds of which were loaned by Holdings
to the Company). See "Principal Stockholders".

In June 1997, this credit facility was amended and restated by the Original
Credit Facility in order to increase the available credit to $45.0 million. The
Original Credit Facility, together with an additional equity and subordinated
debt investment of $9.0 million from Mesirow in Holdings (the proceeds of which
were loaned by Holdings to the Company), were used to finance the TSS
acquisition.

In February 1998, the Original Credit Facility was amended and restated by
the Senior Credit Facility in order to increase the available credit to $62.5
million. Borrowings under the Senior Credit Facility, together with the proceeds
of the Bridge Notes ($10.0 million) sold by Holdings (the proceeds of which were
loaned by Holdings to the Company), were used to finance the Unisign
acquisition. The Company used a portion of the proceeds of the Initial Offering
to repay all borrowings and accrued interest under the Senior Credit Facility,
which totaled $57.4 million, whereupon the Senior Credit Facility was
terminated. The Company used the proceeds of the Initial Offering to repay the
$10.0 million loan, plus $232,000 of accrued interest, from Holdings at which
time Holdings repaid the Bridge Notes. Additionally, in conjunction with the
Initial Offering, $15.8 million of subordinated intercompany promissory notes
due Holdings were converted into stockholder's equity. The Senior Credit
Facility bore interest at rates specified in the agreement (with an aggregate
effective interest rate at December 31, 1997 of 9.125%), was collateralized by
substantially all of the assets of the Company, as well as by a pledge from
Holdings of the Company's common stock, required the maintenance of certain
financial covenants and matured in varying amounts through March 2006. The
subordinated intercompany promissory notes payable to Holdings bore interest at
rates ranging from 12% to 15% and were due and payable during 2003 and 2005. The
$10.0 million intercompany loan from Holdings (which was made by Holdings on
March 2, 1998 with the proceeds of the Bridge Notes) bore interest at LIBOR,
plus 4.75% (10.4% at March 2, 1998), and was due on demand. See "Use of
Proceeds".

On May 20, 1998 the Company put in place a $3.0 million credit facility
used principally to fund potential obligations on outstanding letters of credit.
The facility was secured by certificates of deposit. This facility was
terminated when the Company entered into the Credit Facility on September 18,
1998.

Net cash provided by operating activities increased to $1.8 million for
1997 from $1.5 million for 1996, and decreased to $(151,000) for the first half
of 1998 from $192,000 for the first half of 1997. Net cash provided by operating
activities reflects the Company's net loss adjusted for non-cash items and net
changes in working capital components. The Company had working capital of $30.5
million as of June 30, 1998, working capital of $2.7 million as of December 31,
1997 and a deficit of $195,000 as of December 31, 1996.

32
<PAGE> 37

After completion of the Initial Offering of the Existing Notes, the Company
had approximately $17.3 million available for general corporate purposes. In
September, 1998, the Company acquired substantially all of the outdoor
advertising assets of Western for an acquisition cost of $26.8 million. The
Company also entered into a new Credit Facility with available borrowings of
$19.25 million. The Credit Facility is secured by substantially all of the
Company's assets. The Company used $10.4 million of cash on hand and borrowed
$16.0 million under the Credit Facility to fund the acquisition of Western.

The Company's net cash used in investing activities of $37.3 million for
the year ended December 31, 1997 included cash used for acquisitions of $34.8
million and capital expenditures of $2.3 million. For the six months ended June
30, 1998, the Company's net cash used in investing activities of $43.8 million
included $23.1 million used for acquisitions, primarily Unisign, and $2.3
million of capital expenditures.

For the year ended December 31, 1997, $35.5 million was provided by
financing activities, primarily as a result of additional borrowings under the
Company's various credit facilities and equity and debt investments in Holdings
by Mesirow, which proceeds were loaned to the Company. For the year ended
December 31, 1996, $2.6 million was used in financing activities, primarily
relating to principal repayments of debt, with the proceeds from the sale of the
Watertown assets. For the six months ended June 30, 1998, $53.2 million was
provided by financing activities, primarily as a result of the Initial Offering
net of repayment under existing credit facilities.

Capital expenditures are made to build new billboard structures and display
faces, to upgrade the Company's existing display faces, to produce advertising
display faces under contracts longer than 18 months and for other capital items.
Management estimates that capital expenditures will total approximately $4.5
million in 1998, which includes the planned construction of up to 70 structures
and up to 250 display faces, the estimated cost of producing display faces sold
under new long-term contracts and other capital items.

The Company has funded one year of cash interest expense with the net
proceeds of the Initial Offering. Following the disbursement of all of the funds
in the escrow account in May 1999, a substantial portion of the Company's cash
flow will be devoted to interest payments on the Notes. See "Unaudited Pro Forma
Financial Statements".

The Company believes that its cash from operations, together with amounts
available for borrowing under the Credit Facility, will be sufficient to satisfy
its cash requirements, including anticipated capital expenditures, for at least
the next several years. However, in the event these cash sources are
insufficient to satisfy its cash requirements, including as a result of future
acquisitions, the Company may require additional debt or equity. There can be no
assurance that additional debt or equity financing will be available on terms
satisfactory to the Company, if at all, or that the Company will be able to
incur such additional debt under the terms of the Notes. See "Description of
Notes -- Certain Covenants -- Limitation on Additional Debt".

INFLATION

In the last three years, inflation has not had a significant impact on the
Company or its predecessors.

INCOME TAXES

At December 31, 1997, the Company had net operating loss carryforwards of
approximately $6,010,000 for federal and state income tax purposes, which expire
in varying amounts from 2009 through 2017.

Although realization is not assured, the Company believes, based on its
expectations for the future, that taxable income of the Company will more likely
than not be sufficient to utilize all of the $6,010,000 net operating loss
carryforwards prior to their ultimate expiration in 2017. The amount of the
deferred tax asset considered realizable, however, could be reduced in the near
term if estimates of future taxable income during the carryforward period are
reduced.

YEAR 2000 ISSUE

The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 issue. Based on the
review of its computer systems, management does not believe there will be any
material impact to the Company's financial position or results of operations.
Based upon a preliminary review, the Company believes that the Year 2000 issue
will not have a material impact on the operations of any of its significant
suppliers.

33
<PAGE> 38

BUSINESS

GENERAL

The Company is a leading highway directional outdoor advertising company,
operating over 9,426 advertising displays, including 7,627 bulletins and 1,793
posters, in 21 states in the eastern and central United States at June 30, 1998.
Essentially all of the Company's billboards are located along interstate
highways and primary and secondary roads outside of urban areas. For the year
ended December 31, 1997, over 95% of the Company's net revenues was generated by
local businesses, including local franchisees of national chains, with no one
customer accounting for as much as 2% of the Company's net revenues. The Company
offers a full line of outdoor advertising services to its customers, including
creative design, production, installation and maintenance of the displays. After
giving pro forma effect to the transactions described in the Unaudited Pro Forma
Financial Statements included herein, the Company's net revenues and EBITDA
would have been $22.6 million and $11.3 million, respectively, for the year
ended December 31, 1997 and $12.3 million and $6.4 million, respectively, for
the six months ended June 30, 1998.

According to recent estimates by the OAAA, total outdoor advertising
expenditures during 1997 were $2.1 billion, an 8.8% increase over such
expenditures in 1996. The Company operates primarily in the rural highway
directional segment of the outdoor advertising industry. Highway directional
billboards are utilized by local advertisers to alert motorists to an
advertiser's place of business and provide directions to that business. Many of
the Company's principal customers, which include motels and hotels, restaurants
and gasoline retailers, depend on strategically located billboards as the only
effective and cost efficient means to reach their target customers. As a result,
these advertisers will usually purchase a billboard display under long-term
contracts and leave the original advertising copy in place for the duration of
the contract. On June 30, 1998, over 85% of the Company's bulletin advertising
contracts had an original term of at least 18 months and 51% had an original
term of at least 36 months. The Company believes that its large number of
long-term contracts has generated more stable and predictable revenues, has
reduced production, installation and maintenance costs over the term of the
contracts and has permitted it to more efficiently leverage its sales personnel.

Since its formation in 1986, the Company has pursued an aggressive
acquisition strategy, completing over 20 acquisitions of outdoor advertising
businesses. During this period, the Company completed both "new market" and
"fill-in" acquisitions. New market acquisitions are acquisitions outside of the
Company's then existing markets, while fill-in acquisitions are generally small
acquisitions in the Company's existing markets that involve the purchase of
advertising displays only, resulting in the elimination of all personnel and
related costs. During the past year, the Company completed the TSS and Unisign
acquisitions, both of which are included in the Unaudited Pro Forma Financial
Statements included herein.

34
<PAGE> 39

Set forth below is a summary of the Company's acquisitions which exceeded
$250,000 per acquisition since January 1, 1994 through June 30, 1998:

<TABLE>
<CAPTION>
NEW
MARKET DISPLAY FACES
OR PURCHASE NET -------------------
COMPANY(1) FILL-IN DATE PRICE STATES REVENUES(2) BULLETINS POSTERS
---------- ---------- -------------- -------- ------------ ----------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Unisign Corporation, Inc.............. New February 1996 $21,800 KY, NV, OH $ 3,675 1,037 384

Tri-State Systems, Inc................ New June 1997 31,400 GA, AL, FL, 6,056 1,838 --
KY, MS, SC,
TN

Vogel Outdoor Advertising, Inc........ New October 1994 7,042 MN, IA 2,900 395 356

Heard Communications, Inc. (d/b/a
Gateway Outdoor Advertising)........ New September 1994 1,037 SC, NC, MO, N/A(3) -- 669
OH

3-H Sign Company, Inc................. Fill-in January 1998 980 MO 305 325 --

Mid-American Advertising Company...... Fill-in October 1997 400 MO 121 47 --

Sunbelt Outdoor Systems, Inc.......... Fill-in September 1997 2,754 GA 543 152 --

Supreme Outdoor, Inc.................. Fill-in July 1997 333 MN 74 18 --

Park Outdoor Advertising of New York,
Inc................................. Fill-in October 1994 3,066 NY, PA 1,386 93 370

Outdoor Visions, Inc. (d/b/a Bruening
Outdoor Advertising)................ Fill-in September 1994 425 PA 135 133 --

Lewis Outdoor Advertising, Inc........ Fill-in September 1994 587 AR, LA, TX 218 216 --
--------
Total......................... $69,824
========
</TABLE>

- ---------------
(1) This table does not reflect display faces located in and around Watertown,
New York that were acquired in November 1995 and disposed of in January
1996. See Notes 4 and 6 to the Company's Financial Statements.

(2) Net revenues have been calculated on the basis of the number of bulletins
and posters acquired, as follows: in the case of bulletins, the revenues
generated in the last month before the acquisition for which financial
information was available multiplied by 12 and, in the case of posters, the
revenues generated in the 12 months before the acquisition, except in the
case of Unisign where net revenues have been calculated on the basis of
Unisign's audited financial statements included elsewhere herein.

(3) The net revenues of Heard Communications Inc. are not available.

35
<PAGE> 40

BUSINESS STRATEGY

The Company's business strategy is to be a leading provider of highway
directional outdoor advertising services to local advertisers in non-urban
markets. The Company entered this segment of the outdoor advertising business
because it believes that rural businesses have been underserved by the major
outdoor advertising companies. In order to implement this business strategy, the
Company focuses on the following key elements:

- Increase the Penetration of its Local Markets with 36-Month Advertising
Contracts. In order to better serve its local customers, the Company
customizes the size and pricing of its billboards to fit the budgets of
the local businesses that require these services. In addition, the
Company can produce a long-lasting sign that is strategically located
relative to the advertiser's place of business. For these reasons, the
Company believes that its local highway directional advertisers have been
willing to enter into long-term contracts and leave a display in place
for an extended period. As of June 30, 1998, 51% of the Company's
bulletin advertising contracts had an original term of at least 36
months. The billboards acquired by the Company in the TSS and Unisign
acquisitions were predominantly subject to contracts with an original
term of 18 months and 24 months, respectively. Excluding these
billboards, as of June 30, 1998 over 77% of the Company's bulletin
advertising contracts had an original term of at least 36 months.
Accordingly, the Company believes that the number of contracts with a 36-
month original term will increase as the Company seeks 36-month contracts
for expiring TSS and Unisign contracts. The Company believes that its
large number of long-term contracts has generated more stable and
predictable revenues, has reduced production, installation and
maintenance costs over the term of the contracts and has permitted it to
more efficiently leverage its sales personnel. As a result of these cost
efficiencies and in order to encourage advertisers to enter into
long-term contracts, the Company prices its longer term contracts with
lower monthly rates than it prices its shorter term contracts.

- Pursue Growth through Acquisitions. The Company intends to continue its
aggressive growth strategy of acquiring and developing highway
directional outdoor advertising businesses, by continuing to seek both
new market and fill-in acquisitions, where the billboards are used, or
can be resold, as highway directional signs under long-term contracts.
The Company believes that the non-urban highway directional market
remains highly fragmented producing numerous acquisition opportunities
that fit its criteria. In addition, the Company is typically a major
provider of outdoor advertising services in the areas in which it
operates, which, it believes, allows it to more easily acquire and
successfully integrate fill-in acquisitions.

- Capitalize on New Build Opportunities. In addition to growth through
acquisitions, the Company seeks opportunities for growth through the
development of newly built outdoor advertising structures. The Company
actively monitors changes in local zoning restrictions and the
availability of new land lease sites in each of its existing markets so
as to develop new build opportunities. The Company erected 78 structures
and 146 display faces in 1997 and anticipates erecting approximately 70
structures with up to 250 display faces in 1998 of which 62 structures
and 186 faces were completed by June 30, 1998. A substantial portion of
these new structures and display faces results from the Unisign
acquisition, in which the Company acquired 94 leases in Kentucky,
predominantly located along primary highways, and on which, subject only
to the receipt of routine government permits, it plans to construct 94
new structures with up to 376 display faces of which 21 structures and 78
display faces were completed by June 30, 1998. In addition, the billboard
structures acquired by the Company in the Unisign acquisition have the
capacity for up to an additional 300 display faces of which 40 faces were
installed by June 30, 1998. The Company believes that the economics of
building new advertising structures compare favorably with the economics
of purchasing structures through fill-in acquisitions.

36
<PAGE> 41

contractors. In addition, because of its large number of rural signs
under long-term contracts, the Company has been able to use Scotchlite, a
highly reflective vinyl manufactured by 3M, which causes the advertising
copy to be brightly illuminated by the headlights of passing vehicles.
Scotchlite is effective only where there is little or no competing light
sources around the sign. While somewhat more expensive to construct, a
Scotchlite billboard does not need any electric lighting on the
advertising structure and thus significantly reduces the Company's
operating expenses. A photograph of a Scotchlite billboard is included on
the inside back cover of this Prospectus. Approximately 25% of the
Company's bulletins in service at March 31, 1998 used Scotchlite on the
advertising copy. The main facility in Baxter Springs, Kansas, produces
substantially all of the Company's Scotchlite and non-reflective
self-adhesive vinyl advertising copy for installation throughout its
markets. Each of the Company's five divisions hires painters to produce
hand painted bulletins and employs other personnel to install and
maintain bulletins and posters. At Baxter Springs, the Company also
employs staff artists to design advertising copy for use in all of its
divisions. The Company's new billboard structures have generally been
constructed by outside contractors, although the Company has recently
increased its capability to build these structures with Company
personnel.

INVENTORY

The Company operates three types of outdoor billboards.

Bulletins consist of panels on which advertising copy is displayed. The
Company's bulletins range in size from 4 feet high by 6 feet wide to 20 feet
high by 80 feet wide, with the majority ranging from 12 feet high by 24 feet
wide to 10 feet high by 32 feet wide. In order to better serve its local
customers, the Company customizes the size and pricing of its bulletins to fit
the budgets of the local businesses. As a result, many of the Company's
bulletins are smaller than the standard-sized bulletins offered by its
competitors, most of which are 10 1/2 feet high by 36 feet wide or 14 feet high
by 48 feet wide. At March 31, 1998, approximately 48% of the Company's bulletin
advertising contracts provided for bulletins made from Scotchlite or
non-reflective self-adhesive vinyl attached to pre-painted plywood panels.
Substantially all of this vinyl advertising copy is produced at the Company's
Baxter Springs, Kansas facility and shipped to the site. These vinyl display
faces generally last between three and five years without replacement. Most of
the Company's remaining billboards are hand painted, in most cases by outside
contractors either at the Company's divisional facilities or on-site. Hand
painted signs generally last between 12 and 18 months. A small number of the
Company's bulletins are made from computer-generated graphics on a single sheet
of vinyl that is wrapped around the billboard structure. These single sheet
vinyl faces are produced by outside contractors and are usually sold under
shorter-term contracts. Because of their greater impact and higher cost,
bulletins are usually located on major highways.

30-Sheet Posters, the most common type of billboard in the outdoor
advertising industry, are 12 feet high by 25 feet wide. Advertising copy for
30-sheet posters usually consists of lithographed or silk-screened paper sheets
that are pasted and applied like wallpaper to the face of the display. All of
the lithographed and silk-screened paper sheets are prepared by outside parties,
but in most cases are installed on billboards by the Company's divisional
personnel. Thirty-sheet posters are primarily located on major traffic arteries.
All display faces originally constructed by the Company as 30-sheet posters are
generally maintained as such. If a bulletin display face is unoccupied, the
Company may sell it as one or two poster displays on a short-term basis, pending
the procurement of a long-term contract.

Junior (8-Sheet) Posters are 6 feet wide by 12 feet wide. Displays are
typically prepared and mounted in the same manner as 30-sheet posters. The
Company generally seeks to resell its 8-sheet posters as bulletins as soon as it
procures a long-term contract for the space.

Display faces generally are mounted on structures owned by the Company and
located on sites that are leased by it. The Company also owns a small number of
its sites. Billboard structures are made of wood, steel and other durable
materials built to withstand variable climates, have long useful lives and do
not require substantial maintenance. Virtually all of the Company's new
billboard structures are made of steel. The Company expects its billboard
structures to last at least 20 years without significant refurbishment.

37
<PAGE> 42

The following table sets forth certain information on the Company's
operations in each of the states in its market areas.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
---------------------------------------------------
8-SHEET
JUNE 1998 JUNE 1998 LAND BULLETINS 30-SHEET JUNIOR TOTAL
STATE NET REVENUES(1) LEASE COSTS(2) (3) POSTERS(3) POSTERS(3) DISPLAY FACES
----- --------------- --------------- --------- ---------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Georgia.................. $ 447 $ 76 1,518 0 0 1,518
Minnesota................ 264 48 464 460 0 924
Kentucky................. 253 18 861 346 0 1,207
Pennsylvania............. 92 8 470 242 3 715
Oklahoma................. 78 8 829 0 0 829
Missouri................. 74 9 780 0 0 780
New York................. 70 5 493 173 0 666
Arkansas................. 67 7 651 0 0 651
Florida.................. 52 4 218 0 0 218
South Carolina........... 35 4 282 0 386 668
Texas.................... 28 2 217 0 0 217
Kansas................... 23 1 232 0 0 232
Alabama.................. 22 0 152 0 0 152
Tennessee................ 22 1 27 0 0 27
Iowa..................... 11 0 57 0 0 57
North Carolina........... 10 0 152 1 132 285
West Virginia............ 7 1 172 0 172
Louisiana................ 2 0 35 0 0 35
Ohio..................... 2 0 15 50 65
Mississippi.............. 0 2 0 0 2
------ ---- ----- ----- --- -----
Total:.............. $1,559 $192 7,627 1,222 571 9,420
====== ==== ===== ===== === =====
</TABLE>

- ---------------
(1) Billings under existing advertising contracts for June 1998.

(2) Land lease costs are typically paid one year in advance. June 1998 costs are
based on the estimated monthly average of all land lease costs for 1998
under existing leases.

(3) Each display face, including an unoccupied display face, is classified
either as a bulletin or poster based on the last sale to an advertiser.

MARKETS

The Company operates through five divisions covering particular regions of
its market area: Midwest division, Northcentral division, Northeast division,
Southeast division and Mid-Atlantic division. Certain of the Company's divisions
operate in the same states but their coverage areas do not overlap.

The following is a summary of the market and plants associated with each
division.

Midwest Division: The Midwest division, based in Baxter Springs, Kansas,
currently provides outdoor advertising services in Arkansas, Kansas, Louisiana,
Missouri, Oklahoma and Texas. The Company's Midwest division consisted of 2,717
bulletins as of June 30, 1998, varying in size from 8 feet by 20 feet to 14 feet
by 48 feet. The average monthly price per bulletin (based on those bulletins
occupied on June 30, 1998) for the month of June 1998 was $146.

Northcentral Division: The Northcentral division, based in Rochester,
Minnesota, currently provides outdoor advertising services in southern Minnesota
(including Rochester) and Iowa. At June 30, 1998, the Company's Northcentral
division operated 550 bulletins, varying in size with the majority being 12 feet
by 50 feet, and 460 posters including 35 8-sheet posters. For the month of June
1998, the average monthly price

38
<PAGE> 43

per bulletin was $446 and the average monthly price per poster (based on the
June 1998 revenues and average occupancy of all posters determined on a daily
basis) was $336.

Northeast Division: The Northeast division, based in Jamestown, New York,
provides outdoor advertising services in western New York, northwestern
Pennsylvania and Youngstown, Ohio. At June 30, 1998, the Company's Northeast
division operated 966 bulletins, with the majority varying in size from 6 feet
wide by 12 feet high to 14 feet high by 48 feet wide, and 468 posters including
50 8-sheet posters in Youngstown, Ohio. For the month of June 1998, the average
monthly price per bulletin was $143 and the average monthly price per poster was
$315.

Southeast Division: The Southeast division, based in Tifton, Georgia, is a
combination of the Company's existing Southeast division, formerly based in
Newberry, South Carolina, and the assets purchased by the Company in the TSS
acquisition. This division provides outdoor advertising services primarily in
Georgia, Florida and Alabama. At June 30, 1998, the Company's Southeast division
operated 2,357 bulletins with the majority varying in size from 10 1/2 feet by
36 feet to 14 feet by 48 feet, except in North Carolina and South Carolina where
the typical size is 6 feet by 12 feet, and 518 8-sheet posters. For the month of
June 1998, the average monthly price per bulletin was $346 and the average
monthly price per poster was $106. In addition, this division also operates a
public service display business consisting of over 1,000 small advertising faces
on public benches. Public service displays contributed less than 1% of the
Company's net revenues in 1997.

Mid-Atlantic Division: The Mid-Atlantic division, based in Ivel, Kentucky,
consists of the business acquired in the Unisign acquisition on March 2, 1998
and provides outdoor advertising in West Virginia, eastern Kentucky and southern
Ohio. At June 30, 1998, the Company's Mid-Atlantic division operated 1,037
bulletins, with the majority varying in size from 12 feet high by 24 feet wide
to 20 feet high by 60 feet wide and 346 30-sheet posters and had an additional
94 undeveloped leased sites. For the month of June 1998, the average monthly
price per bulletin was $414 and the average monthly price per poster was $264.

CUSTOMERS

For the year ended December 31, 1997, over 95% of the Company's net
revenues was generated by local businesses, including local franchisees of
national chains. The Company believes that its customer base of local
advertisers offers several advantages over a more national customer base. In the
case of local advertisers, the Company is more likely to deal directly with the
customer without an advertising agency acting as an intermediary. The Company is
also more likely to develop a long-term working relationship with a local
advertiser, which, the Company believes, gives it greater influence over the
advertiser's purchasing decisions and helps it obtain contract renewals from the
advertiser.

39
<PAGE> 44

The Company's customers are engaged in a wide range of businesses as shown
in the following table which sets forth an estimated breakdown of the businesses
in which the Company's customers were engaged for the year ended December 31,
1997.

<TABLE>
<CAPTION>
PERCENTAGE OF
NET REVENUES
FOR YEAR ENDED
INDUSTRY DECEMBER 31, 1997
-------- -----------------
<S> <C>
Hotels & Motels...................................... 25.2%
Restaurants.......................................... 22.5
Retail............................................... 12.4
Automotive........................................... 10.4
Gasoline Retailers and Other Services................ 8.3
Entertainment/Sports................................. 3.2
Hospital............................................. 2.9
Financial Institutions............................... 2.1
Tobacco.............................................. 0.2(1)
All Other............................................ 12.8
-----
Total........................................... 100.0%
=====
</TABLE>

- ---------------
(1) Tobacco advertisers typically advertise on posters under short-term
contracts. The Company believes that annual net revenues from tobacco
advertisers have not exceeded 3% in the last several years.

No customer of the Company accounted for as much as 2% of the Company's net
revenues during the month of June 1998. The following table sets forth the
Company's top ten advertisers for the month of June 1998.

<TABLE>
<CAPTION>
ANNUALIZED
AMOUNT
(IN
ADVERTISER(1) INDUSTRY THOUSANDS)(2)
------------- --------------- ----------------
<S> <C> <C>
Georgia Lottery Other $ 151
Kahler Lodging Hotels & Motels 141
Rochester Hospitality Hotels & Motels 117
Fariboo Woolens Retail 113
Treasure Island Hotels & Motels 100
Burger King Franchisee Restaurants 96
Tanger Outlet Retail 90
J. Walter Thompson Automotive 90
Ranch Restaurant Restaurants 88
McDonald's Franchisee Restaurants 87
</TABLE>

- ---------------
(1) Based on the party that pays for the advertising, which, in the case of an
advertising agency or franchisee, may not necessarily be the party that
contracts for the outdoor advertising or controls the decision to contract
with the Company.

(2) Total June 1998 billings multiplied by 12. This amount may not necessarily
reflect the actual revenues received from an advertiser over a 12-month
period.

Tobacco revenues have historically accounted for a significantly lower
portion of the Company's outdoor advertising revenues than for the outdoor
advertising industry as a whole. Tobacco advertisers have typically accounted
for less than 3% of the Company's annual net revenues, well below the estimated
7.3% for the outdoor advertising industry as a whole in 1997, as reported by
Competitive Media Reporting and Publishers Information Bureau Inc. Thus, the
reduction by tobacco companies in their expenditures for outdoor advertising has
had a less dramatic effect on the Company's inventories than on the outdoor
advertising

40
<PAGE> 45

industry as a whole. See "-- Government Regulation" and "Risk
Factors -- Potential Elimination or Reduction of Tobacco Advertising".

CONTRACTS

The Company emphasizes the use of advertising contracts with a term of 36
months. The Company believes that such contracts provide the Company with
considerable stability with respect to both occupancy and advertising rates.
Long-term contracts also increase the predictability of net revenues and allow
sales personnel time to devote greater attention to servicing their accounts and
generating new customers. The Company believes that once its customers enter
into 36-month contracts they tend to view their outdoor advertising expenses as
a routine cost of doing business. As a result, the Company believes that such
customers are more likely to renew their contracts.

To encourage customers to sign 36-month contracts, the Company charges
advertisers a lower monthly rate for 36-month contracts than that for
shorter-term contracts. The Company also provides incentives to its sales force
to sell longer-term contracts by paying commissions applicable to revenues for
the entire term of the advertising contract in advance upon contract receipt.

As of January 1, 1998, the future contract revenue associated with occupied
bulletins was $17.1 million, of which $10.4 million is expected to be collected
in 1998 (the foregoing amounts include future contract revenues for Unisign as
of March 1, 1998). Since posters are sold under short-term contracts, net
revenues from poster contracts are not included in future contract revenue
amounts.

LOCAL MARKET OPERATIONS

The Company conducts its operations through its five regional offices
consistent with management's belief that decentralization of operations is most
responsive to local market demands while providing greater incentive to its
regional employees. Each division has a general manager who oversees regional
leasing and creative production, and a sales manager who reports to the Director
of Marketing in the Company's headquarters. In addition, each division has
limited facilities for the production of outdoor advertising. (See
"-- Production"). Management believes that by relying on regional personnel to
study and assess local market conditions and to procure new site leases, it is
better able to respond to increases in advertiser demand.

This decentralized approach is complemented by the Company's centralized
administration and oversight that includes direct management of each division's
sales, accounting and strategic planning. Division general managers report
directly to the President as do the Chief Financial Officer and Director of
Marketing. Division sales managers report directly to the Director of Marketing.

Management encourages its sales force to maintain a hands-on approach to
marketing within their local business communities. This mandates substantial
customer and business contact, evaluation of sites and potential locations, and
an understanding of the prevailing business community. Since most small
communities lack exposure to sophisticated advertising agencies, the Company
satisfies this need with its design and production staff.

PRODUCTION

The Company has internal production facilities and staff to perform a full
range of activities required to construct and install outdoor advertising
structures and display faces, to develop, create and install outdoor advertising
in all of its markets, and to maintain its outdoor advertising properties.

Production work for display faces includes creating the advertising copy
design and layout, painting the design or coordinating its printing, and
installing the designs on display faces. The Company produces substantially all
advertising on its bulletin display faces, especially since local advertisers
generally are not represented by advertising agencies.

The Company's bulletin display faces are panels to which advertising copy
is attached, and will be one of three types depending upon the length of the
advertising contract under which the copy is to be displayed: self-

41
<PAGE> 46

adhesive vinyl, hand painted or vinyl wrap. Self-adhesive vinyl bulletins, which
are generally sold under contracts with a term of at least 36 months,
substantially all of which are produced in-house at the Company's Baxter
Springs, Kansas facility, consist of vinyl letters and other advertising copy
that contain an adhesive backing placed on pre-painted, roller-coated plywood
sheets that are hung on the outdoor advertising structure. Where no illumination
source exists on a structure, the self-adhesive vinyl copy may be coated with
Scotchlite, which causes the advertising copy to be illuminated brightly by the
headlights of passing vehicles. Hand painted bulletins, which are generally sold
under contracts with a term of 12 to 18 months, contain advertising copy painted
on plywood sheets, and are hand painted by an outside contractor either on-site
or in-house at a Company facility. Vinyl wraps, which are sold under short-term
contracts, are produced by outside contractors and consist of vinyl sheets
painted with computer-generated graphics that are wrapped around rectangular
plywood sheets attached to the outdoor advertising structure. The Company's
poster display faces are lithographs or silk-screened paper sheets produced by
outside contractors that are pasted to the face of the display, much like
wallpaper.

The Company has facilities for the construction of new outdoor advertising
structures in Baxter Springs, Kansas and Tifton, Georgia. The Company's new
billboard structures have generally been constructed by outside contractors;
however, the Company has increased its capability to build these structures with
Company personnel by adding construction personnel at its Tifton facility.

The Company believes that it can generally construct outdoor advertising
structures for approximately 80% of the price charged by an outside contractor.
The majority of the Company's new structures constructed by outside contractors
range in price from $10,000 to $30,000, whereas the cost for such structures
when constructed by the Company range from $8,000 to $24,000.

The Company believes it has adequate capacity to meet the needs of its
anticipated in-house structure construction and advertising production.

COMPETITION

In most cases, the Company is a leading provider of outdoor advertising in
the areas in which it operates. Most of the Company's customers are local
businesses purchasing highway directional billboards under long-term contracts.
The Company competes for these customers primarily with other outdoor
advertising companies in the area, highway logo sign operators and companies
that install commercial signs on an advertiser's own property. To a lesser
extent, the Company also competes with a number of other local competitors,
including local newspapers, direct mail and other print media, as well as radio
and television, especially in cases where the local advertiser is seeking to
attract local residents to its business. In competing for local highway
directional advertisers, price, location and availability are important factors,
as are service and customer relationships.

The Company competes for non-highway directional customers principally
through the sale of space on its posters. The Company competes for these
customers against a full range of competitors, including other outdoor
advertisers, print media, radio and television, as well as a variety of other
"out-of-home" media, including advertising in shopping centers and malls,
airports, stadiums, movie theaters and supermarkets and on buses.

Advertisers compare relative costs of available media and cost-per-thousand
impressions, particularly when delivering a message to customers from particular
geographic areas. In competing with other media, outdoor advertising relies on
its low cost-per-thousand-impressions and its ability to target a particular
geographic area.

The outdoor advertising industry is highly fragmented, consisting of
several large outdoor advertising and media companies with operations in
multiple markets as well as smaller and local companies operating a limited
number of structures in single or a few local markets. In several of its
markets, the Company encounters direct competition from other major outdoor
media companies, including Outdoor Systems, Inc., Whiteco, Inc. and Lamar
Advertising Company, each of which has a larger national network and greater
resources than the Company. The Company believes that its emphasis on local
highway directional advertisers

42
<PAGE> 47

and its position as a major provider of advertising services in each of the
areas in which it operates enable it to compete effectively with the other
outdoor media operators, as well as other media. The Company also competes with
other outdoor advertising companies for sites on which to build new structures.
See "Risk Factors -- Competition".

PROPERTIES

The Company conducts its operations at the facilities set forth below:

<TABLE>
<CAPTION>
LOCATION USE SQUARE FOOTAGE LEASED/OWNED
-------- --- -------------- ------------
<S> <C> <C> <C>
Tifton, Georgia.................. Office; billboard structure 45,000 Owned
construction; limited display
face production
Baxter Springs, Kansas........... Office; billboard structure 14,000 Owned
construction; full display face
production
Jamestown, New York.............. Office; limited display face 5,000 Leased
production
Rochester, Minnesota............. Office; limited display face 8,000 Leased
production
Ivel, Kentucky................... Office; limited display face 5,000 Leased
production
</TABLE>

OUTDOOR ADVERTISING SITES

As of June 30, 1998, the Company owned 31 parcels of real property that
serve or may serve as the sites for outdoor displays. The Company's remaining
6,243 advertising display sites are leased. The Company's site leases are for
varying terms ranging from month-to-month or year-to-year to terms of ten years
or longer, and many provide for renewal options. Approximately 32% of these
leases will expire prior to the end of 1998. Historically, the Company has had
no difficulty renewing these leases. There is no significant concentration of
displays under any one lease or subject to negotiation with any one landlord.
The Company believes that an important part of its management activity is to
manage its lease portfolio and negotiate suitable lease renewals and extensions.
Through the use of double-sided structures and multiple displays on individual
structures on individual sites, the Company averages approximately 1.5 display
faces for every occupied site it owns or leases.

GOVERNMENT REGULATION

The outdoor advertising industry is subject to governmental regulation at
the federal, state and local levels. Federal law, principally the Highway
Beautification Act, encourages states, by the threat of withholding federal
appropriations for the construction and improvement of highways within such
states, to implement legislation to restrict billboards located within 660 feet
of, or visible from, interstate and primary highways except in commercial or
industrial areas. The Highway Beautification Act, and the various state statutes
implementing it, require the payment of just compensation whenever government
authorities require legally erected and maintained billboards to be removed from
federally-aided highways.

All the states in which the Company operates require the owner of a
billboard to obtain a state or local permit before erecting the structure. All
the states have implemented regulations at least as restrictive as the Highway
Beautification Act, including limitations on the construction of new billboards
adjacent to federally-aided highways and the removal at the owner's expense and
without any compensation of any illegal signs on such highways. In addition, a
number of states and localities, including all the principal states in which the
Company operates, have passed additional and more restrictive regulations, often
in the form of municipal building, sign or zoning ordinances, on the
construction, repair, upgrading, height, lighting, size and location of, and, in
some instances, content of, advertising copy being displayed on outdoor
advertising structures adjacent to federally-aided highways and other
thoroughfares. For instance, Maine, Vermont, Hawaii and

43
<PAGE> 48

Alaska ban billboards on a state-wide basis. Common restrictions in the states
in which the Company operates generally include requirements that billboards be
at least 500 feet apart.

Most outdoor advertisers, including the Company, operate a significant
number of billboards that do not conform with current state or local regulations
governing the height, size or location of billboards. A non-conforming is one
that was lawfully erected; but, due to either a change in zoning laws or the
enactment of zoning laws where none previously existed, the billboard is no
longer in compliance. However, the owner of a non-conforming billboard is still
legally permitted to own, operate and maintain the billboard for the rest of its
life. Typically, most laws provide that in the event a non-conforming billboard
is damaged, including damage caused by natural events such as tornados or
hurricanes, the Company is not permitted to repair the structure if either the
cost of doing so exceeds 50% of the cost of building a new billboard structure
or the physical damage to the structure exceeds 50% of the structure. In recent
years, the number of non-conforming billboards lost by the Company in this
fashion has been nominal. An outdoor advertising company that holds a permit for
a non-conforming structure has the exclusive right to maintain and operate that
structure, and is free to transfer the permit to another owner.

From time to time governmental authorities order the removal of billboards
by the exercise of eminent domain. Thus far, the Company has been able to obtain
satisfactory compensation for any of its structures removed at the direction of
governmental authorities, although there is no assurance that it will be able to
continue to do so in the future.

In various jurisdictions and more typically in some urban metropolitan
areas, ordinances authorizing the amortization of billboards have been adopted.
Amortization permits the billboard owner to operate its billboard as a
non-conforming use for a specified period of time until it has recouped its
investment, after which it must remove or otherwise conform its billboard to the
applicable regulations at its own cost without any compensation. Amortization
and other regulations requiring the removal of billboards without compensation
have been subject to vigorous litigation in state and federal courts and cases
have reached differing conclusions as to the constitutionality of these
regulations. Currently, none of the Company's existing inventory is subject to
any amortization ordinance.

In recent years, there have been movements to restrict billboard
advertising of certain products, including tobacco and alcohol. It is uncertain
whether additional legislation of this type will be enacted on the national
level or in any of the Company's markets.

In August 1996, the U.S. Food and Drug Administration (the "FDA") issued
final regulations that, among other things, sought to regulate cigarettes and
other tobacco products. These regulations also sought to prohibit tobacco
product billboard advertisements within 1,000 feet of schools and playgrounds
and require that tobacco product advertisements on billboards be printed in
black and white color and contain only text. In 1997 a federal district court in
North Carolina upheld the right of the FDA to regulate cigarettes and tobacco
products, but ruled that the FDA did not have the authority to control tobacco
advertising. In August 1998 a three-judge panel of the 4th U.S. Circuit Court of
Appeals overturned the federal district court decision which would have
permitted the FDA to regulate cigarettes and tobacco products. The appeals panel
ruled that the FDA needed explicit authority from the U.S. Congress to regulate
tobacco products. It is anticipated that this decision will be appealed to the
full appellate court, and thereafter may eventually be reviewed by the U.S.
Supreme Court.

In June 1997, a majority of the major United States tobacco companies and
certain state attorneys general agreed to a proposed settlement of litigation.
The proposed settlement included a ban on all outdoor advertising of tobacco
products commencing nine months after finalization of the settlement. The
settlement was subject to numerous conditions, including the enactment of
legislation by the U.S. Congress. As a result of the failure of the U.S.
Congress to enact legislation, the proposed settlement was not completed.
Currently, a group of eight states is involved in settlement discussions with
four of the major United States tobacco companies. In addition, the states of
Mississippi, Florida, Texas and Minnesota have entered into separate settlements
of litigation with the tobacco industry. None of these completed settlements is
conditioned on federal government approval and each reportedly eliminates all
outdoor advertising of tobacco products.

44
<PAGE> 49

According to the OAAA, tobacco product advertising accounted for
approximately 7.3% of all outdoor billboard advertising revenues for the year
ended December 31, 1997. A reduction in billboard advertising by the tobacco
industry due to a proposed settlement or federal legislation could cause an
immediate reduction in industry revenues from such advertisers and would
simultaneously increase the available space on the existing inventory of
billboards in the outdoor advertising industry. This could in turn result in a
lowering of rates throughout the outdoor advertising industry or limit the
ability of industry participants to increase rates for some period of time.
Thus, even though less than 3% of the Company's annual net revenues is typically
derived from tobacco advertising, if outdoor advertising of tobacco products
were reduced or eliminated and the industry were unable to replace the lost
revenues, the change could have a material adverse effect on the Company by
forcing advertising rates down or inhibiting rate increases. See "Management's
Discussion and Analysis" and "Business -- Government Regulation".

If outdoor advertising of tobacco products were reduced or eliminated, the
Company may suffer reduced revenues due to an anticipated surplus of inventory
and price competition. See "-- Customers" and "Risk Factors -- Potential
Elimination or Reduction of Tobacco Advertising".

The outdoor advertising industry is heavily regulated and, at various times
and in various markets, the Company can expect to be subject to varying degrees
of regulatory pressure affecting the operation of advertising displays.
Accordingly, although the Company's experience to date is that the regulatory
environment has not adversely impacted the Company's business, no assurance can
be given that existing or future laws or regulations will not materially
adversely affect the Company at some time in the future.

EMPLOYEES

At June 30, 1998, the Company employed 138 people, of whom 42 were
primarily engaged in sales and marketing, 68 were engaged in painting, bill
posting and construction and maintenance of displays, and the balance were
employed in executive, financial, administrative and similar capacities. The
Company is not a party to any collective bargaining agreement.

LEGAL PROCEEDINGS

From time to time, the Company may be involved in various legal proceedings
that are incidental to the conduct of its business. The Company is not involved
in any pending or, to its knowledge, threatened legal proceedings which the
Company believes could reasonably be expected to have a material adverse effect
on the Company.

45
<PAGE> 50

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages and positions of the
directors and executive officers of the Company as of June 30, 1998:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Sheldon G. Hurst.......................... 50 President, Chief Executive Officer and director
Anthony LaMarca........................... 44 Vice President and director
A. Wayne Lamm............................. 44 Director of Marketing and director
William G. McLendon....................... 43 Chief Financial Officer and director
William P. Sutter, Jr..................... 41 Director
</TABLE>

Sheldon G. Hurst founded and has served as President and Chief Executive
Officer of the Company since 1986. From 1972 to 1986, Mr. Hurst was vice
president of Hurst Sign Company, a billboard construction company in Scranton,
Pennsylvania owned by his father. During this period, he was responsible for
designing and managing the construction of over 1,000 advertising displays for
outdoor advertising companies.

Anthony LaMarca, a co-founder of the Company, has served as the Company's
Vice President since 1986, with primary responsibilities in the sales and
marketing of bulletins.

A. Wayne Lamm has been Director of Marketing of the Company since September
1, 1997. From September 1, 1989 to July 1, 1997, Mr. Lamm was the president and
chief operating officer of Penn Advertising, one of the largest outdoor
advertising companies in the Northeast. From November 1986 to September 1989,
Mr. Lamm was the regional supervisor of the Buffalo, New York plant of Penn
Advertising. From June 1984 to September 1986, he was the general manager and
national director of sales at Naegele Outdoor Advertising.

William G. McLendon joined the Company in October 1994 as Chief Financial
Officer. From December 1993 to October 1994, Mr. McLendon was the chief
financial officer of Naegele Outdoor Advertising. From 1991 to December 1993, he
was a partner at Brush & Associates, an investment banking boutique specializing
in outdoor advertising. From 1986 to 1990, Mr. McLendon was employed at Heller
Financial and, from 1978 to 1986, Mr. McLendon worked at General Electric
Capital Corp.

William P. Sutter, Jr. has been a director of the Company since October
1994. Since 1984, Mr. Sutter has been associated with affiliates of Mesirow
Financial Holdings, Inc., a Chicago-based financial services firm. Mr. Sutter is
an executive vice president of Mesirow Private Equity Investments, Inc. and a
vice president of Mesirow Financial Services, Inc. Mr. Sutter is a director of
New West Eyeworks, Inc., an optical retail chain. Mesirow Financial Services,
Inc. is the general partner of Mesirow, a holder of warrants in Holdings. See
"Principal Stockholders".

Pursuant to the Holdings Stockholders Agreement, the board of directors of
Holdings (and each of its subsidiaries, including the Company) shall be
comprised of seven individuals, four of whom are designated by the executive
employees of Holdings owning a majority of the Common Stock held by such
executives, and three of whom are designated by Mesirow (as of the date of this
Prospectus, Mesirow has only designated one such individual, William P. Sutter,
Jr.). See "Certain Relationships and Related Transactions".

Executive officers are appointed annually and serve at the discretion of
the Board of Directors.

DIRECTOR COMPENSATION

All directors of the Company serve without compensation (other than
reimbursement of expenses) in connection with rendering services as a director.

46
<PAGE> 51

EXECUTIVE COMPENSATION

The compensation of executive officers of the Company is determined by the
Board of Directors of the Company. The following table sets forth certain
information concerning compensation received by the Chief Executive Officer and
each executive officer of the Company whose total annual salary and bonus
exceeded $100,000 in 1997 for services rendered to the Company in all capacities
(including service as an officer or director). No stock options or similar
awards had been granted as of the end of fiscal 1997, to the individuals named
below.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
1997
ANNUAL COMPENSATION
-----------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
- --------------------------- -------- -------
<S> <C> <C>
Sheldon G. Hurst............................................ $142,000 $62,000
President and Chief Executive Officer
William G. McLendon......................................... 119,000 52,000
Chief Financial Officer and Secretary
</TABLE>

47
<PAGE> 52

PRINCIPAL STOCKHOLDERS

All of the Company's common stock is owned by Holdings. The following table
sets forth certain information with respect to the beneficial ownership of
Holdings' common stock, par value $.0001 per share (the "Common Stock"), and
Holdings' preferred stock, par value $.0001 per share (the "Preferred Stock"),
as of June 30, 1998 (i) by each person who is known by the Company to own
beneficially 5% percent or more of the outstanding shares of Common Stock or
Preferred Stock, (ii) by each of the Company's directors, (iii) by each of the
named executives, and (iv) by all current directors and officers of the Company
as a group. Unless indicated otherwise, each of the stockholders has sole voting
and investment power with respect to the shares beneficially owned.

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
----------------------------- -----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES CLASS(1) SHARES CLASS(2)
---------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Sheldon G. Hurst(3)........................ 844.1(4) 82.7%
3416 Highway 41 South
Tifton, Georgia 31793
Hurst Enterprises, L.P.(3)................. 844.1(4) 82.7%
c/o 3416 Highway 41 South
Tifton, Georgia 31793
William G. McLendon........................ 110.0(4) 10.8
3416 Highway 41 South
Tifton, Georgia 31793
A. Wayne Lamm.............................. 51.1(4)(5) 5.0
3416 Highway 41 South
Tifton, Georgia 31793
Anthony LaMarca............................ 20.4(4) 2.0
Mesirow Capital Partners VI(6)............. 716.0 41.2 7,308.0 46.7%
350 North Clark Street
Chicago, Illinois 60610
Mesirow Capital Partners VII(7)............ 383.0 27.3 8,331.0 53.3
350 North Clark Street
Chicago, Illinois 60610
William P. Sutter, Jr.(8).................. -- --
350 North Clark Street
Chicago, Illinois 60610
All directors and executive officers
as a group (5 persons)(8)................ 1,025.6 100.0
</TABLE>

- ---------------
(1) Mesirow VI in 1994 was granted warrants to purchase 640 shares of Common
Stock (the "1994 Warrants"), and in 1997 was granted warrants to purchase 76
shares of Common Stock (the "Mesirow VI 1997 Warrants"). Mesirow VII in 1997
was granted warrants to purchase 383 shares of Common Stock (the "Mesirow
VII 1997 Warrants") (the Mesirow VI 1997 Warrants and the Mesirow VII 1997
Warrant are collectively referred to as the "1997 Warrants"). The 1994
Warrants and the 1997 Warrants are currently exercisable. Total outstanding
Common Stock (on a fully diluted basis) consists of 1,020.4 shares rounded
to the nearest tenth prior to any exercise of the 1994 Warrants, the 1997
Warrants or certain options granted to Mr. Lamm.

(2) Total outstanding Preferred Stock consists of 15,639 shares.

(3) All shares are owned by Hurst Enterprises, L.P., a Georgia limited
partnership in which the general partners are Mr. Hurst and Sharon Hurst and
the sole limited partner is Mr. Hurst. The general partners hold a 4%
interest in Hurst Enterprises, L.P. and the limited partner holds a 96%
interest in Hurst Enterprises, L.P.

48
<PAGE> 53

(4) In the event of the exercise by Mesirow of the 1994 Warrants and/or the 1997
Warrants (the "Mesirow Exercise"), Holdings has agreed to issue certain
Common Stock to A. Wayne Lamm to maintain the 2% of the Common Stock of
Holdings purchased by A. Wayne Lamm from Holdings in 1997. Messrs. Hurst,
McLendon, Lamm and LaMarca have agreed to transfer Common Stock among
themselves in the event of the Mesirow Exercise and/or the exercise of the
Lamm options in order to provide certain percentage ownership anti-dilution
protection for Messrs. McLendon, Lamm and LaMarca.

(5) Includes 5.2 shares subject to outstanding options to purchase Common Stock
which are exercisable within the next 60 days.

(6) Includes 640 shares of Common Stock subject to outstanding warrants to
purchase Common Stock granted pursuant to the 1994 Warrants and 76 shares of
Common Stock subject to outstanding warrants to purchase granted pursuant to
the Mesirow VI 1997 Warrants.

(7) Includes 383 shares of Common Stock subject to outstanding warrants to
purchase granted pursuant to the Mesirow VII 1997 Warrants.

(8) Mr. Sutter, a director of the Company, is a vice president of Mesirow
Financial Services, Inc., which is the general partner of Mesirow VI and
Mesirow VII. Mr. Sutter disclaims beneficial ownership of shares
beneficially owned by Mesirow VI and Mesirow VII.

49
<PAGE> 54

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to the Holdings Stockholders Agreement, the board of directors of
Holdings (and each of its subsidiaries, including the Company) is required to be
comprised of seven individuals, four of whom are designated by the executive
employees of Holdings owning a majority of the Common Stock held by such
executives, and three of whom are designated by Mesirow (as of the date of this
Prospectus, Mesirow has only designated one such individual, William P. Sutter,
Jr.). The Holdings Stockholders Agreement provides that upon the occurrence of
certain events (including the failure of Holdings to purchase from Mesirow the
1994 Warrant and/or 1997 Warrants pursuant to such agreements, or to redeem
Mesirow's Preferred Stock pursuant to the certificate of incorporation of
Holdings), Mesirow can cause the re-constitution of the board of directors of
Holdings (and each of its subsidiaries, including the Company) to be comprised
of five individuals, four of whom are designated by Mesirow and one of whom is
designated by the executive employees of Holdings owning a majority of the
Common Stock held by such executives, in order to pursue the sale of Holdings
and its subsidiaries (or any assets or properties thereof).

Sheldon G. Hurst, President and Chief Executive Officer, and William G.
McLendon, Chief Financial Officer of the Company, jointly own 13 parcels of real
property which are leased to the Company and on which the Company maintains
billboards. The aggregate rent paid by the Company for these sites for 1997 was
$14,450. The aggregate rent to be paid to Messrs. Hurst and McLendon over the
life of these leases is $72,250. The leases are all for a term of five years. In
addition, Mr. Hurst owns 29 parcels of real property which are leased to the
Company principally on a one year basis (four leases are for terms of five
years) and on which the Company maintains billboards. The aggregate rent paid by
the Company for these sites for 1997 was $9,600.

Messrs Hurst, McLendon and Anthony LaMarca, Vice President of the Company,
jointly owned the building in Joplin, Missouri in which the Company maintained
its corporate headquarters until June 1997, at which time the Company's
corporate headquarters was relocated to Tifton, Georgia. The Joplin, Missouri
building was sold by Messrs. Hurst, McLendon and LaMarca to a third party in
September 1997. The lease was for a term of five years at a rate of $34,000 per
year.

The Company believes the terms of these lease arrangements are no less
favorable to the Company than similar arm's-length arrangements with unrelated
parties would be.

Sheldon G. Hurst owns a six-seat, single engine airplane which is leased to
the Company. The Company pays Mr. Hurst monthly lease payments equal to the
total amount paid by Mr. Hurst monthly under the financing he obtained to
acquire the airplane. Mr. Hurst borrowed $145,000 bearing interest at a rate per
annum equal to 1.4% in excess of the prime rate. The borrowing is to be repaid
in monthly installments over a ten-year period ending in 2007. The Company also
pays all insurance (currently $2,100 per year) and maintenance costs for the
airplane.

William G. McLendon, as a shareholder of TSS, received $161,000 for his
ownership in TSS in connection with the acquisition of the assets of TSS by the
Company.

50
<PAGE> 55

DESCRIPTION OF THE NOTES

The Existing Notes were issued, and the Exchange Notes offered hereby will
be issued, under an indenture dated as of May 15, 1998 (the "Indenture") between
the Company and IBJ Schroder Bank & Trust Company, trustee (the "Trustee"). The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), as in effect on the date of the Indenture.

Upon the issuance of the Exchange Notes, if any, or the effectiveness of
the Shelf Registration Statement, as the case may be, the Indenture will be
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The following summary of the material provisions of the
Indenture does not purport to be complete and is subject to, and qualified in
its entirety by, reference to the provisions of the Indenture, including the
definitions of certain terms contained therein and those terms made part of the
Indenture by reference to the Trust Indenture Act. For definitions of certain
capitalized terms used in the following summary, see "Certain Definitions"
below.

GENERAL

The Notes will mature on May 15, 2008, will be initially limited to
$100,000,000 aggregate principal amount and will be unsecured (except as
described under "Security" below) senior obligations of the Company. Each Note
will bear interest at the rate set forth on the cover page hereof from May 20,
1998 or from the most recent interest payment date to which interest has been
paid or duly provided for, payable semiannually on May 15 and November 15 in
each year, commencing November 15, 1998, until the principal thereof is paid or
duly provided for, to the person in whose name the Note (or any predecessor
Note) is registered at the close of business on May 1 or November 1 next
preceding such interest payment date. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months.

The principal of and premium, if any, and interest on the Notes will be
payable, and the Notes will be exchangeable and transferable, at the office or
agency of the Company in The City of New York maintained for such purposes
(which initially will be the office of the Trustee located at One State Street,
New York, New York 10004); provided, however, that, at the option of the
Company, interest may be paid by check mailed to the address of the person
entitled thereto as such address appears in the security register. The Notes
will be issued only in registered form without coupons and only in denominations
of $1,000 and any integral multiple thereof. No service charge will be made for
any registration of transfer or exchange or redemption of Notes, but the Company
may require payment in certain circumstances of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.

Subject to the covenants described below under "Certain Covenants" and
applicable laws, the Company may, from time to time, issue additional Notes (the
"Additional Notes") under the Indenture. The Notes offered hereby and any
Additional Notes subsequently issued would be treated as a single class for all
purposes under the Indenture.

As of the Closing Date, the Company will have no Subsidiaries. However,
under certain circumstances, the Company will be able to designate future
Subsidiaries as Unrestricted Subsidiaries, subject to certain limitations.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.

Any Notes that remain outstanding after the consummation of the Exchange
Offer and Exchange Notes issued in connection with the Exchange Offer will be
treated as a single class of securities under the Indenture.

The Notes will not be entitled to the benefit of any sinking fund.

RANKING

The Notes will be unsecured except as described below under "Security,"
senior obligations of the Company, ranking pari passu with all existing and
future unsubordinated debt of the Company. The Notes will be effectively
subordinated to all of the Company's secured debt to the extent of the assets
securing such loans.

51
<PAGE> 56

As of June 30, 1998, on a pro forma basis after giving effect to the Initial
Offering and the Western acquisition, the application of the estimated net
proceeds therefrom and the consummation of other transactions referred to
herein, the Company would have had $16.8 million of debt outstanding other than
the Notes, excluding outstanding letters of credit.

REDEMPTION

The Notes will be redeemable at the election of the Company, as a whole or
from time to time in part, at any time on or after May 15, 2003, on not less
than 30 nor more than 60 days' prior notice at the redemption prices (expressed
as percentages of principal amount) set forth below, together with accrued
interest, if any, to the redemption date, if redeemed during the 12-month period
beginning on May 15 of the years indicated below (subject to the right of
holders of record on the relevant record date to receive interest due on an
interest payment date):

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2003...................................................... 105.500%
2004...................................................... 103.667
2005...................................................... 101.833
</TABLE>

and thereafter at 100% of the principal amount, together with accrued interest,
if any, to the redemption date.

In addition, at any time or from time to time prior to May 15, 2001, the
Company may at its option redeem Notes with the net proceeds of one or more
Equity Offerings at a redemption price equal to 111% of the principal amount
thereof, together with accrued interest, if any, to the date of redemption
(subject to the rights of holders of record on the relevant record date to
receive interest due on an interest payment date); provided that, immediately
after giving effect to any such redemption, at least 75% of the aggregate
principal amount of the Notes issued under the Indenture remains outstanding.
Any such redemption must be made within 90 days of the related Equity Offering.

If less than all the Notes are to be redeemed, the particular Notes to be
redeemed will be selected not more than 60 days prior to the redemption date by
the Trustee by lot or such other method as the Trustee deems fair and
appropriate.

SECURITY

The Notes are collateralized pursuant to the Escrow Agreement dated as of
May 15, 1998 (the "Escrow Agreement"), among the Company, the Trustee and IBJ
Schroder Bank & Trust Company, Escrow Agent, by a pledge of the Escrow Account
created in the Escrow Agreement, which initially contained a portfolio of U.S.
Government securities in the amount of $10.4 million that, together with the
interest thereon (the "Escrow Collateral"), will be sufficient to pay interest
on the Notes for two scheduled interest payments.

The Company entered into the Escrow Agreement providing for the grant by
the Company to the Trustee, for the benefit of the holders of Notes, of security
interests in the Escrow Collateral. All such security interests collateralize
the payment and performance when due of all obligations of the Company under the
Indenture and the Notes, as provided in the Escrow Agreement. The Liens created
by the Escrow Agreement are first priority security interests in the Escrow
Collateral. The ability of holders of the Notes to realize upon any such funds
or securities may be subject to certain bankruptcy law limitations in the event
of the bankruptcy of the Company.

Pursuant to the Escrow Agreement, funds may be disbursed from the Escrow
Account only to pay interest on the Notes (or, if a portion of the Notes has
been retired by the Company, funds representing the lesser of (i) the excess of
the amount sufficient to pay interest through and including May 15, 1999 on the
Notes not so retired and (ii) the interest payments that have not previously
been made on such retired Notes for each interest payment date through the
interest payment date to occur on May 15, 1999 will be paid to the Company if no
Default then exists under the Indenture).

52
<PAGE> 57

Pending the two scheduled interest payments, all funds contained in the
Escrow Account were invested in U.S. Government securities (the "Pledged
Securities"). Interest earned on the Pledged Securities will be placed in the
Escrow Account. Upon the acceleration of the maturity of the Notes, the Escrow
Agreement will provide for the foreclosure by the Trustee upon the net proceeds
of the Escrow Account. Under the terms of the Indenture, the proceeds of the
Escrow Account will be applied, first, to amounts owing to the Trustee in
respect of fees and expenses of the Trustee and, second, to all obligations
under the Notes and the Indenture. Under the Escrow Agreement, after the Company
makes the first two scheduled interest payments on the Notes in a timely manner,
any remaining funds and Pledged Securities held in the Escrow Account will be
released and returned to the Company and, thereafter, the Notes will be
unsecured.

CERTAIN DEFINITIONS

"Acquired Debt" means Debt of a person (a) existing at the time such person
is merged with or into the Company or becomes a Restricted Subsidiary or (b)
assumed in connection with the acquisition of assets from such person.

"Affiliate" means, with respect to any specified person, 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 specified 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 Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer") by the Company or a
Restricted Subsidiary, directly or indirectly, in one or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary, (b) all or
substantially all of the properties and assets of the Company and its Restricted
Subsidiaries representing a division or line of business or (c) any other
properties or assets of the Company or any Restricted Subsidiary, other than in
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" does not include any transfer of properties or assets (i) that is
governed by the provisions of the Indenture described under "Consolidation,
Merger and Sale of Assets", (ii) between or among the Company and its Restricted
Subsidiaries pursuant to transactions that do not violate any other provision of
the Indenture, (iii) any transfer constituting a Restricted Payment that is
permitted to be made, and is made, under paragraph (a) of the covenant described
under "Limitation on Restricted Payments", (iv) that is permitted to be made,
and is made, pursuant to the definition of "Permitted Investments", (v)
representing obsolete or permanently retired equipment and facilities or (vi)
the gross proceeds of which (exclusive of indemnities) do not exceed $100,000
for any particular item or $500,000 in the aggregate for any fiscal year.

"Capital Stock" of any person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents of, or
interest in, the equity of such person, but excluding any debt securities
convertible into such equity.

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

"Change of Control" means the occurrence of any of the following events:

(a) Any person or "group" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than (i) Sheldon G. Hurst, Hurst
Enterprises, L.P., William G. McLendon, A. Wayne Lamm, Anthony La Marca or
any trust existing solely for the benefit of any of the above individuals
and the estate or any executor, administrator, conservator or other legal
representative of any of the above individuals and (ii) Mesirow or its
affiliated entities, is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will be
deemed to have "beneficial ownership" of all securities that such person
has the right to acquire, whether such right is exercisable

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immediately or only after the passage of time), directly or indirectly, of
more than a majority of the voting power of all classes of Voting Stock of
the Company.

(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors,
or whose nomination for election by the stockholders of the Company, was
approved by a vote of 66 2/3% of the directors 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 then in
office.

(c) The Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than a transaction that complies with the
provisions described under "Consolidation, Merger and Sales of Assets".

"Closing Date" means the date on which the Notes are originally issued
under the Indenture.

"Consolidated Adjusted Net Income" means, for any period, the net income
(or net loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income
(but not the net loss) of any person (other than the Company or a Restricted
Subsidiary), including Unrestricted Subsidiaries, in which the Company or any
Restricted Subsidiary has an equity interest, except to the extent of the amount
of dividends or other distributions actually paid to the Company or any
Restricted Subsidiary in cash during such period by such person, (d) the net
income (or loss) of any person acquired by the Company or any Restricted
Subsidiary in a "pooling of interests" transaction attributable to any period
prior to the date of such acquisition and (e) the net income (but not the net
loss) of any Restricted Subsidiary to the extent that the declaration or payment
of dividends or similar distributions by such Restricted Subsidiary is at the
date of determination restricted, directly or indirectly, except to the extent
that such net income could be paid to the Company or a Restricted Subsidiary
thereof by loans, advances, intercompany transfers, principal repayments or
otherwise; provided that, if any Restricted Subsidiary is not a Wholly Owned
Restricted Subsidiary, Consolidated Adjusted Net Income will be reduced (to the
extent not otherwise reduced in accordance with GAAP) by an amount equal to (A)
the amount of the Consolidated Adjusted Net Income otherwise attributable to
such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of
shares of outstanding common stock of such Restricted Subsidiary not owned on
the last day of such period by the Company or any of its Restricted Subsidiaries
divided by (2) the total number of shares of outstanding common stock of such
Restricted Subsidiary on the last day of such period.

"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Adjusted Net Income for such period, plus (or, in the
case of clause (d) below, plus or minus) the following items to the extent
included in computing Consolidated Adjusted Net Income for such period (a)
Consolidated Fixed Charges for such period, plus (b) the federal, state, local
and foreign income tax expense of the Company and its Restricted Subsidiaries
for such period, plus (c) the aggregate depreciation and amortization expense of
the Company and its Restricted Subsidiaries for such period, plus (d) any other
non-cash charges for such period, and minus non-cash credits for such period,
other than non-cash charges or credits resulting from changes in prepaid assets
or accrued liabilities in the ordinary course of business; provided that income
tax expense, depreciation and amortization expense and non-cash charges and
credits of a Restricted Subsidiary will be included in Consolidated EBITDA only
to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Adjusted Net
Income for such period.

"Consolidated Fixed Charges" means, for any period, without duplication,
the sum of (a) the amount that, in conformity with GAAP, would be set forth
opposite the caption "interest expenses" (or any like caption) on a consolidated
statement of operations of the Company and its Restricted Subsidiaries for such
period, including, without limitation, (i) amortization of debt discount, (ii)
the net cost of interest rate contracts (including amortization of discounts),
(iii) the interest portion of any deferred payment obligation, (iv) amortization
of debt issuance costs and (v) the interest component of Capitalized Lease
Obligations, plus
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(b) cash dividends paid on Preferred Stock and Disqualified Stock by the Company
and any Restricted Subsidiary (to any person other than the Company or a
Restricted Subsidiary), plus (c) all interest on any Debt of any person
guaranteed by the Company or any of its Restricted Subsidiaries; provided,
however, that Consolidated Fixed Charges will not include (i) any gain or loss
from extinguishment of debt, including the write-off of debt issuance costs and
(ii) the fixed charges of a Restricted Subsidiary to the extent (and in the same
proportion) that the net income of such Subsidiary was excluded in calculating
Consolidated Adjusted Net Income pursuant to clause (e) of the definition
thereof for such period.

"Consolidated Leverage Ratio" means, on any date of determination, the
ratio of (i) the aggregate amount of Debt of the Company and its Restricted
Subsidiaries on a consolidated basis as on such date of determination to (ii)
the aggregate amount of Consolidated EBITDA for the immediately preceding four
full fiscal quarters for which internal financial statements are available.

"Consolidated Net Worth" means, at any date of determination, stockholders'
equity of the Company and its Restricted Subsidiaries as set forth on the most
recently available quarterly or annual consolidated balance sheet of the Company
and its Restricted Subsidiaries, less any amounts attributable to Disqualified
Stock or any equity security convertible into or exchangeable for Debt, the cost
of treasury stock and the principal amount of any promissory notes receivable
from the sale of the Capital Stock of the Company or any of its Restricted
Subsidiaries and less, to the extent included in calculating such stockholders'
equity of the Company and its Restricted Subsidiaries, the stockholders' equity
attributable to Unrestricted Subsidiaries, each item to be determined in
conformity with GAAP (excluding the effects of foreign currency adjustments
under Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 52).

"Debt" means (without duplication), with respect to any person, whether
recourse is to all or a portion of the assets of such person and whether or not
contingent, (a) every obligation of such person for money borrowed, (b) every
obligation of such person evidenced by bonds, debentures, notes or other similar
instruments, (c) every reimbursement obligation of such person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such person, (d) every obligation of such person issued or assumed as
the deferred purchase price of property or services, (e) the amount of every
Capitalized Lease Obligation of such person, (f) all Disqualified Stock of such
person valued at its maximum fixed repurchase price, plus accrued and unpaid
dividends, (g) all obligations of such person under or in respect of Hedging
Obligations if and to the extent such Hedging Obligations would appear as a
liability upon a balance sheet of such person in accordance with GAAP and (h)
every obligation of the type referred to in clauses (a) through (g) of another
person and all dividends of another person the payment of which, in either case,
such person has guaranteed. For purposes of this definition, the "maximum fixed
repurchase price" of any Disqualified Stock that does not have a fixed
repurchase price will be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were repurchased on any date on
which Debt is required to be determined pursuant to the Indenture, and if such
price is based upon, or measured by, the fair market value of such Disqualified
Stock, such fair market value will be determined in good faith by the board of
directors of the issuer of such Disqualified Stock. Notwithstanding the
foregoing, trade accounts payable and accrued liabilities arising in the
ordinary course of business and any liability for federal, state or local taxes
or other taxes owed by such person will not be considered Debt for purposes of
this definition.

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

"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions (other than as the holder of Voting Stock of the Company).

"Disqualified Stock" means any class or series of Capital Stock that,
either by its terms, or by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise (a) is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to one year after the final Stated Maturity of the Notes, (b) is redeemable at
the option of the holder thereof at any time prior to one
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year after such final Stated Maturity or (c) at the option of the holder
thereof, is convertible into or exchangeable for debt securities at any time
prior to one year after such final Stated Maturity; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions therein
giving holders thereof the right to cause the issuer thereof to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the Notes will not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in the "Limitation on Certain Asset
Sales" and "Purchase of Notes upon a Change of Control" covenants described
below and such Capital Stock specifically provides that the issuer will not
repurchase or redeem any of such stock pursuant to such provision prior to the
Company's repurchase of such of the Notes as are required to be repurchased
pursuant to the "Limitation on Certain Asset Sales" and "Purchase of Notes upon
a Change of Control" covenants described below.

"Equity Offering" means an offer and sale by the Company of its common
stock (which is Qualified Stock) to one or more persons other than a Subsidiary.

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

"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, as applied from time to
time by the Company in the preparation of its consolidated financial statements.

"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of all or any part of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limitation, the payment of
amounts drawn down under letters of credit.

"Hedging Obligations" means the obligations of any person under (i)
interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements and (ii) other agreements or arrangements designed to protect
such person against fluctuations in interest rates or the value of foreign
currencies.

"Investment" in any person means, (a) directly or indirectly, any advance,
loan or other extension of credit (including, without limitation, by way of
guarantee or similar arrangement) or capital contribution to any person, the
purchase or other acquisition of any stock, bonds, notes, debentures or other
securities issued by such person, the acquisition (by purchase or otherwise) of
all or substantially all of the business or assets of such person, or the making
of any investment in such person, (b) the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary, (c) the transfer of any assets or
properties from the Company or a Restricted Subsidiary to an Unrestricted
Subsidiary, other than the transfer of assets or properties made in the ordinary
course of business and (d) the fair market value of the Capital Stock (or any
other Investment), held by the Company or any of its Restricted Subsidiaries, of
(or in) any person that has ceased to be a Restricted Subsidiary, including,
without limitation, by reason of any transaction permitted by clause (d) of the
"Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries"
covenant described below. Investments exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.

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

"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations as and when received in the form of, or stock or
other assets when disposed of for, cash or cash equivalents (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary), net of (a) brokerage commissions and other fees
and expenses (including fees and expenses of legal counsel, accountants and
investment banks) related to such Asset Sale, (b) provisions for all taxes
payable as a result of such Asset Sale, (c) payments made to retire Debt where
payment of such Debt is secured by a Lien on the
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assets that are the subject of such Asset Sale, (d) amounts required to be paid
to any person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets that are subject to the Asset Sale and (e)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the seller after
such Asset Sale, including pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.

"Pari Passu Debt" means any Debt of the Company or any Subsidiary
Guarantor, whether outstanding on the Closing Date or incurred thereafter, that
ranks pari passu in right of payment with the Notes or any Subsidiary Guarantee,
as the case may be.

"Permitted Investment" means any of the following:

(a) Investments in (i) securities with a maturity of 180 days or less
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of 180 days or less
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus of not less than $500,000,000; and
(iii) commercial paper with a maturity of 180 days or less issued by a
corporation that is not an Affiliate of the Company and is organized under
the laws of any state of the United States or the District of Columbia and
having the highest rating obtainable from Moody's Investors Service, Inc.
or Standard & Poor's Ratings Services.

(b) Investments by the Company in another person, if as a result of
such Investment such other person (i) becomes a Subsidiary Guarantor or
(ii) is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Subsidiary Guarantor.

(d) Investments in existence on the Closing Date.

(e) Promissory notes received as a result of Asset Sales permitted
under the "Limitation on Certain Asset Sales" covenant.

(f) Direct or indirect loans to officers, directors or employees, or
to a trustee for the benefit of such employees, of the Company or any
Restricted Subsidiary in an aggregate amount outstanding at any time not
exceeding $250,000, plus the amount of direct or indirect loans to
employees for relocation assistance.

(g) Investments in assets owned or used in the ordinary course of
business.

(h) Investments in any person in the form of a capital contribution of
the Company's common stock.

"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock, whether now outstanding or issued after
the Closing Date, and including, without limitation, all classes and series of
preferred or preference stock of such person.

"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).

"Qualified Stock" of any person means any and all Capital Stock of such
person, other than Disqualified Stock.

"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.

"Significant Subsidiary" means any Restricted Subsidiary of the Company
that together with its Subsidiaries, (a) for the most recent fiscal year of the
Company, accounted for more than 10% of the

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consolidated net sales of the Company and its Restricted Subsidiaries or (b) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, in the case
of either (a) or (b), as set forth on the most recently available consolidated
financial statements of the Company for such fiscal year or (c) was organized or
acquired after the beginning of such fiscal year and would have been a
Significant Subsidiary if it had been owned during the entire fiscal year.

"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Debt, means the date
specified in the instrument governing such Debt as the fixed date on which the
principal of such Debt or any installment of interest thereon is due and
payable.

"Subordinated Debt" means Debt of the Company that is subordinated in right
of payment to the Notes.

"Subsidiary" means any person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more other Subsidiaries of the Company.

"Subsidiary Guarantee" means any guarantee by any Subsidiary Guarantor of
the Company's obligations under the Notes and the Indenture as required by the
terms of the Indenture.

"Subsidiary Guarantor" means any Restricted Subsidiary of the Company that
guarantees the Company's obligations under the Notes and the Indenture pursuant
to its Subsidiary Guarantee.

"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of May 20,
1998 between the Company and Holdings, as in effect on the Closing Date.

"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary in accordance with the
"Unrestricted Subsidiaries" covenant and (b) any Subsidiary of an Unrestricted
Subsidiary.

"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).

"Weighted Average Life" means, as of the date of determination with respect
to any Debt or Disqualified Stock, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from the date of determination to the
date or dates of each successive scheduled principal or liquidation value
payment of such Debt or Disqualified Stock, respectively, multiplied by (ii) the
amount of each such principal or liquidation value payment by (b) the sum of all
such principal or liquidation value payments.

"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding voting securities (other than directors' qualifying shares or
shares of foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which are owned, directly or
indirectly, by the Company.

CERTAIN COVENANTS

The Indenture will contain, among others, the following covenants:

Limitation on Debt. The Company will not, and will not permit any
Restricted Subsidiary to, create, issue, assume, guarantee or in any manner
become directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Debt (including Acquired Debt and the issuance of
Disqualified Stock), except that the Company or a Restricted Subsidiary may
incur Debt or issue Disqualified Stock if, at the time of such event, the
Consolidated Leverage Ratio would have been (i) less than 6.50 to 1 through May
15, 2001, (ii) less than 6.25 to 1 from May 15, 2001 through May 15, 2003 and
(iii) less than 6.0 to 1 thereafter.

In making the foregoing calculation, pro forma effect will be given to: (i)
the incurrence of such Debt and (if applicable) the application of the net
proceeds therefrom, including to refinance other Debt, as if such

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Debt was incurred and the application of such proceeds occurred at the beginning
of the four-quarter period ending on the last day of the immediately preceding
fiscal quarter of the Company for which internal financial statements are
available, (ii) the incurrence, repayment or retirement of any other Debt by the
Company or its Restricted Subsidiaries since the first day of such four-quarter
period as if such Debt was incurred, repaid or retired at the beginning of such
four-quarter period, (iii) the acquisition (whether by purchase, merger or
otherwise) or disposition (whether by sale, merger or otherwise) of any company,
entity or business acquired or disposed of by the Company or its Restricted
Subsidiaries, as the case may be, since the first day of such four-quarter
period, as if such acquisition or disposition occurred at the beginning of such
four-quarter period. In making a computation under the foregoing clause (i) or
(ii), (A) interest on Debt bearing a floating interest rate will be computed as
if the rate in effect on the date of computation had been the applicable rate
for the entire period, (B) if such Debt bears, at the option of the Company, a
fixed or floating rate of interest, interest thereon will be computed by
applying, at the option of the Company, either the fixed or floating rate and
(C) the amount of Debt under a revolving credit facility will be computed based
upon the average daily balance of such Debt during such four-quarter period and
(iv) if such four-quarter period ends before September 30, 1998, the TSS
acquisition and, if such four-quarter period ends before March 31, 1999, the
Unisign acquisition, in each case as if such acquisitions occurred at the
beginning of such four-quarter period.

Notwithstanding the foregoing, the Company may, and may, to the extent
expressly permitted below, permit its Restricted Subsidiaries to, incur any of
the following Debt ("Permitted Debt"):

(i) Debt of the Company or any Restricted Subsidiary under one or more
credit facilities in an aggregate principal amount at any one time
outstanding not to exceed $20,000,000 less any amounts applied to the
permanent reduction of such credit facilities pursuant to the "Limitation
on Certain Asset Dispositions" covenant (and any guarantees of such Debt by
a Restricted Subsidiary).

(ii) Debt of the Company or any Restricted Subsidiary outstanding on
the Closing Date, other than Debt described under clause (i)above, and
obligations under Hedging Obligations in effect on the Closing Date.

(iii) Debt owed by the Company to any Restricted Subsidiary or owed by
any Restricted Subsidiary to the Company or any other Restricted Subsidiary
(provided that such Debt is held by the Company or such Restricted
Subsidiary).

(iv) Debt represented by the Notes (other than any Additional Notes)
and any Subsidiary Guarantee.

(v) (A) Capitalized Lease Obligations of the Company or any Restricted
Subsidiary, and (B) Debt of the Company or any Restricted Subsidiary under
purchase money mortgages or secured by purchase money security interests so
long as (x) such Debt is not secured by any property or assets of the
Company or any Restricted Subsidiary other than the property and assets so
acquired and (y) such Debt is created prior to, at the time of or within
six months after the later of the acquisition, the completion of
construction or the commencement of full operation of the related property;
provided that the aggregate amount of Debt under the foregoing clauses (A)
and (B) above does not exceed $5.0 million at any one time outstanding.

(vi) Debt of the Company or any Restricted Subsidiary consisting of
guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock.

(vii) Guarantees by any Restricted Subsidiary made in accordance with
the provisions of the "Guarantees of Debt by Restricted Subsidiaries"
covenant.

(viii) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Debt, other than Debt incurred pursuant to clause (i), (iii),
(v) (vi) or (vii) of this definition, including any successive refinancings
thereof, so long as (A) any such new Debt is in a principal amount that
does not exceed the principal amount so refinanced, plus the amount of any
premium required to be paid in connection with such refinancing pursuant to
the terms of

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the Debt refinanced or the amount of any premium reasonably determined by
the Company as necessary to accomplish such refinancing, plus the amount of
the expenses of the Company reasonably estimated to be incurred in
connection with such refinancing, (B) in the case of any refinancing of
Subordinated Debt, such new Debt is made subordinate to the Notes at least
to the same extent as the Debt being refinanced and (C) such refinancing
Debt does not have a Weighted Average Life less than the Weighted Average
Life of the Debt being refinanced and does not have a final scheduled
maturity earlier than the final scheduled maturity, or permit redemption at
the option of the holder earlier than the earliest date of redemption at
the option of the holder, of the Debt being refinanced.

Limitation on Restricted Payments. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, take any of the
following actions:

(a) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any
Restricted Subsidiary, other than (i) dividends or distributions payable
solely in Qualified Equity Interests, (ii) dividends or distributions by a
Restricted Subsidiary payable to the Company or another Restricted
Subsidiary or (iii) pro rata dividends or distributions on common stock of
a Restricted Subsidiary held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro
rata share of such Restricted Subsidiary's net income from the first day of
the Company's fiscal quarter during which the Closing Date occurs;

(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock (or any options,
warrants or other rights to acquire shares of Capital Stock) of (i) the
Company, Holdings or any Unrestricted Subsidiary or (ii) any Restricted
Subsidiary held by any Affiliate of the Company (other than, in either
case, any such Capital Stock owned by the Company or any of its Restricted
Subsidiaries);

(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Debt; or

(d) make any Investment (other than a Permitted Investment) in any
person

(such payments or other actions described in (but not excluded from) clauses (a)
through (d) being referred to as "Restricted Payments"), unless at the time of,
and immediately after giving effect to, the proposed Restricted Payment:

(i) no Default or Event of Default has occurred and is continuing,

(ii) the Company could incur at least $1.00 of additional Debt (other
than Permitted Debt) pursuant to the first paragraph of the "Limitation on
Debt" covenant and

(iii) the aggregate amount of all Restricted Payments declared or made
after the Closing Date does not exceed the sum of:

(A) the remainder of (x) 100% of the aggregate cumulative
Consolidated EBITDA for the period beginning on the first day of the
Company's fiscal quarter during which the Closing Date occurs and ending
on the last day of the Company's most recent fiscal quarter for which
internal financial statements are available ending prior to the date of
such proposed Restricted Payment (the "Computation Period") minus (y)
the product of 1.4 times the aggregate cumulative Consolidated Fixed
Charges for the Computation Period, plus

(B) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination will be conclusive), after the Closing Date
from the issuance or sale (other than to a Subsidiary) of debt
securities or Disqualified Stock that have been converted into or
exchanged for Qualified Stock of the Company, together with the
aggregate net cash proceeds received by the Company at the time of such
conversion or exchange, plus received by the Company after the Closing
Date from the issuance or sale (other than to a Subsidiary) of Qualified
Equity Interests of the Company (excluding from this

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computation proceeds of an Equity Offering received by the Company that
are used by it to redeem Notes as discussed above), plus

(C) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination will be conclusive), after the Closing Date
from the issuance or sale (other than to a Subsidiary) of debt
securities or Disqualified Stock that have been converted into or
exchanged for Qualified Stock of the Company, together with the
aggregate net cash proceeds received by the Company at the time of such
conversion or exchange, plus received by the Company after the Closing
Date from the issuance or sale (other than to a Subsidiary) of debt
securities or Disqualified Stock that have been converted into or
exchanged for Qualified Stock of the Company, together with the
aggregate net proceeds received by the Company at the time of such
conversion or exchange, plus

(D) $5.0 million.

Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take any of the following actions, so long as (with respect to clauses (e)
and (f) below) no Default or Event of Default has occurred and is continuing or
would occur:

(a) The payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have
been prohibited by the foregoing provision.

(b) The repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company.

(c) The purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Debt in exchange for, or out of
the net cash proceeds of a substantially concurrent issuance and sale
(other than to a Subsidiary) of Qualified Equity Interests of the Company.

(d) The purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Debt in exchange for, or out of the
net cash proceeds of a substantially concurrent issuance or sale (other
than to a Subsidiary) of, Subordinated Debt, so long as the Company or a
Restricted Subsidiary would be permitted to refinance such original
Subordinated Debt with such new Subordinated Debt pursuant to clause (viii)
of the definition of Permitted Debt.

(e) The repurchase of any Subordinated Debt at a purchase price not
greater than 101% of the principal amount of such Subordinated Debt in the
event of a "change of control" in accordance with provisions similar to the
"Purchase of Notes upon a Change of Control" covenant; provided that, prior
to or simultaneously with such repurchase, the Company has made the Change
of Control Offer as provided in such covenant with respect to the Notes and
has repurchased all Notes validly tendered for payment in connection with
such Change of Control Offer.

(f) The purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company or Holdings,
options on any such shares or related stock appreciation rights or similar
securities held by officers or employees or former officers or employees
(or their estates or beneficiaries under their estates) or by any employee
benefit plan, upon death, disability, retirement or termination of
employment or pursuant to the terms of any employee benefit plan or any
other agreement under which such shares of stock or related rights were
issued; provided that the aggregate cash consideration paid for such
purchase, redemption, acquisition, cancellation or other retirement of such
shares of Capital Stock after the Closing Date does not exceed in any
fiscal year the sum of (i) $1.0 million and (ii) any proceeds received by
the Company under a related key man or other life insurance policy.

(g) Make payments to Holdings pursuant to the Tax Sharing Agreement as
in effect on the Closing Date; and reimburse Holdings for out-of-pocket
administrative expenses incurred by Holdings, provided such reimbursement
may not exceed $50,000 in any fiscal year.

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The payments described in clauses (b), (c), (e) and (f) of this paragraph will
be Restricted Payments that will be permitted to be taken in accordance with
this paragraph but will reduce the amount that would otherwise be available for
Restricted Payments under the foregoing clause (iii) of the first paragraph of
this covenant and the payments described in clauses (a), (d) and (g) of this
paragraph will be Restricted Payments that will be permitted to be taken in
accordance with this paragraph and will not reduce the amount that would
otherwise be available for Restricted Payments under the foregoing clause (iii)
of the first paragraph of this covenant.

For the purpose of making any calculations under the Indenture (i) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will
be deemed to have made an Investment in amount equal to the fair market value of
the net assets of such Restricted Subsidiary at the time of such designation as
determined by the Board of Directors of the Company, whose good faith
determination will be conclusive, (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company, whose good
faith determination will be conclusive and (iii) subject to the foregoing, the
amount of any Restricted Payment, if other than cash, will be determined by the
Board of Directors of the Company, whose good faith determination will be
conclusive.

If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the lesser of (x) the net asset value of such Subsidiary at the
time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.

If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in the
Company's Consolidated Adjusted Net Income; provided that the total amount by
which the aggregate amount of all Restricted Payments may be reduced may not
exceed the lesser of (x) the cash proceeds received by the Company and its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.

In computing Consolidated Adjusted Net Income of the Company for purposes
of the foregoing clause (iii)(A), (i) the Company may use audited financial
statements for the portions of the relevant period for which audited financial
statements are available on the date of determination and unaudited financial
statements and other current financial data based on the books and records of
the Company for the remaining portion of such period and (ii) the Company will
be permitted to rely in good faith on the financial statements and other
financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment that, at the time of the making of such Restricted Payment, would in the
good faith determination of the Company be permitted under the requirements of
the Indenture, such Restricted Payment will be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Adjusted
Net Income of the Company for any period.

Purchase of Notes upon a Change of Control. If a Change of Control occurs
at any time, then each holder of Notes will have the right to require that the
Company purchase such holder's Notes, in whole or in part in integral multiples
of $1,000, at a purchase price in cash equal to 101% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of purchase,
pursuant to the offer described below (the "Change of Control Offer") and the
other procedures set forth in the Indenture.

Due to the highly leveraged capital structure of the Company, there can be
no assurance that the Company will have sufficient funds to purchase the Notes
upon a Change of Control. Prior to the purchase of the Notes, the Company's
Credit Facility must be repaid. As of September 30, 1998, $16.0 million of debt
was outstanding in the Credit Facility.

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The Company may omit or waive the provisions under the Indenture relative
to the Company's obligation to make an offer to repurchase the Notes as a result
of a Change of Control, if before or after the time for such compliance the
holders of at least a majority in principal amount of the Notes then outstanding
waive such compliance.

Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Notes by first-class mail, postage prepaid, at its address appearing in the
security register, stating, among other things, (i) the purchase price and the
purchase date, which will be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed or such later date as is
necessary to comply with requirements under the Exchange Act; (ii) that any Note
not tendered will continue to accrue interest; (iii) that, unless the Company
defaults in the payment of the purchase price, any Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest after the
Change of Control purchase date; and (iv) certain other procedures that a holder
of Notes must follow to accept a Change of Control Offer or to withdraw such
acceptance.

If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be tendered by holders of the Notes seeking to accept
the Change of Control Offer. The failure of the Company to make or consummate
the Change of Control Offer or pay the applicable Change of Control purchase
price when due would result in an Event of Default and would give the Trustee
and the holders of the Notes the rights described under "Events of Default".

One of the events that constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Notes elect to require the Company to purchase the
Notes and the Company elects to contest such election, there can be no assurance
as to how a court interpreting New York law would interpret the phrase in many
circumstances.

The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction that constitutes a Change of Control.

The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to repurchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "Certain Definitions" above for the definition of
"Change of Control". A transaction involving the Company's management or its
affiliates, or a transaction involving a recapitalization of the Company, would
result in a Change of Control if it is the type of transaction specified in such
definition.

The Company will comply with the applicable tender offer rules including
Rule 14e-l under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer.

The Company will not, and will not permit any Restricted Subsidiary to,
create any restriction (other than restrictions existing under Debt as in effect
on the Closing Date or in refinancings of such Debt) that would materially
impair the ability of the Company to make a Change of Control Offer to purchase
the Notes or, if such Change of Control Offer is made, to pay for the Notes
tendered for purchase.

Limitation on Certain Asset Sales. (a) The Company will not, and will not
permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) the
consideration received by the Company or such Restricted Subsidiary for such
Asset Sale is not less than the fair market value of the assets sold (as
determined by the Board of Directors of the Company, whose good faith
determination will be conclusive) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 85% (A) cash or cash equivalents or (B) the assumption by
the transferee of Debt of
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the Company or a Restricted Subsidiary ranked pari passu with the Notes and
release of the Company or such Restricted Subsidiary from all liability on such
Debt, or a combination of the foregoing.

(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may, at its option, within 270 days after such Asset Sale, (i) apply
all or a portion of the Net Cash Proceeds to the permanent reduction of amounts
outstanding under one or more credit facilities referred to in clause (i) of the
definition of Permitted Debt or to the repayment of other senior Debt of the
Company or a Restricted Subsidiary or (ii) invest (or enter into a legally
binding agreement to invest) all or a portion of such Net Cash Proceeds in
properties and assets to replace the properties and assets that were the subject
of the Asset Sale or in properties and assets that will be used in businesses of
the Company or its Restricted Subsidiaries, as the case may be, existing on the
Closing Date. If any such legally binding agreement to invest such Net Cash
Proceeds is terminated, the Company may, within 90 days of such termination or
within 270 days of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clause (b)(i) or (b)(ii) (without regard to the
parenthetical contained in such clause (b)(ii)) above. The amount of such Net
Cash Proceeds not so used as set forth above in this paragraph (b) constitutes
"Excess Proceeds".

(c) When the aggregate amount of Excess Proceeds exceeds $5,000,000, the
Company will, within 30 days thereafter, make an offer to purchase from all
holders of Notes and from the holders of any Pari Passu Debt, to the extent
required by the terms thereof, on a pro rata basis, in accordance with the
procedures set forth in the Indenture or the agreements governing any such Pari
Passu Debt, the maximum principal amount (expressed as a multiple of $1,000) of
the Notes and any such Pari Passu Debt that may be purchased with the Excess
Proceeds. The offer price as to each Note and any such Pari Passu Debt will be
payable in cash in an amount equal to (solely in the case of the Notes) 100% of
the principal amount of such Note and (solely in the case of Pari Passu Debt) no
greater than 100% of the principal amount (or accreted value, as applicable) of
such Pari Passu Debt, plus in each case accrued interest, if any, to the date of
repurchase. To the extent that the aggregate principal amount of Notes and any
such Pari Passu Debt tendered pursuant to an excess proceeds offer is less than
the Excess Proceeds, the Company may use the portion of the Excess Proceeds not
required to be used to repurchase the Notes and such Pari Passu Debt for general
corporate purposes. If the aggregate principal amount of Notes and any such Pari
Passu Debt validly tendered and not withdrawn by holders thereof exceeds the
Excess Proceeds, the Notes and any such Pari Passu Debt to be purchased will be
selected on a pro rata basis (based upon the principal amount of Notes and the
principal amount or accreted value of such Pari Passu Debt tendered by each
holder). Upon completion of such offer to purchase, the amount of Excess
Proceeds will be reset to zero.

Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction with, or for the benefit of, any Affiliate of
the Company unless (a) such transaction is on terms that are no less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
that could have been obtained in an arm's length transaction with third parties
who are not Affiliates and (b) either (i) with respect to any transaction or
series of related transactions involving aggregate payments in excess of
$250,000 but less than $2,500,000, the Company delivers an officers' certificate
to the Trustee certifying that such transaction or transactions comply with
clause (a) above or (ii) with respect to a transaction or series of related
transactions involving aggregate payments equal or greater than $2,500,000, such
transaction or transactions have been approved by the Board of Directors
(including a majority of the Disinterested Directors) of the Company or the
Company has obtained a written opinion from a nationally recognized investment
banking firm to the effect that such transaction or transactions are fair to the
Company or such Restricted Subsidiary from a financial point of view.

The foregoing covenant will not restrict any of the following:

(A) Transactions among the Company and/or its Restricted Subsidiaries.

(B) The Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary.

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Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock, (b) pay any Debt owed to the Company or any other Restricted Subsidiary,
(c) make loans or advances to the Company or any other Restricted Subsidiary or
(d) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary, except for such encumbrances or restrictions existing
under or by reason of any of the following:

(i) Any agreement or instrument in effect on the Closing Date.

(ii) Customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary.

(iii) Any agreement or instrument of a person acquired by the Company
or any Restricted Subsidiary in existence at the time of such acquisition
(but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired.

(iv) The refinancing or successive refinancings of Debt incurred under
agreements or instruments referred to in the foregoing clause (i) or (iii),
so long as the encumbrances or restrictions contained therein are no less
favorable to the Company or any Restricted Subsidiary than those contained
in such original agreement or instrument.

(v) Any agreement providing for the incurrence of Debt by a Restricted
Subsidiary in compliance with the "Limitation on Debt" covenant, provided
that such Restricted Subsidiary is or becomes a Subsidiary Guarantor.

(vi) Contained in any agreement pursuant to which Debt was issued if
(A) the encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in such
Debt, (B) the encumbrance or restriction is not materially more
disadvantageous to the holders of the Notes than is customary in comparable
financings (as determined by the Company) and (C) the Company determines
that any such encumbrance or restriction will not materially affect the
Company's ability to make principal or interest payments on the Notes.

Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries. The Company will not sell, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (a) to the Company or a Wholly
Owned Restricted Subsidiary, (b) issuances or sales to foreign nationals of
shares of Capital Stock of foreign Restricted Subsidiaries, to the extent
required by applicable law, or issuances or sales to directors of directors'
qualifying shares, (c) if, immediately after giving effect to such issuance or
sale, neither the Company nor any of its Subsidiaries owns any shares of Capital
Stock of such Restricted Subsidiary (including options, warrants or other rights
to purchase shares of such Capital Stock) or (d) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any remaining Investment in such person
would have been permitted to be made under the "Limitation on Restricted
Payments" covenant if made on the date of such issuance or sale.

Guarantees of Debt by Restricted Subsidiaries. All of the Company's future
Restricted Subsidiaries will be Subsidiary Guarantors.

In addition, the Company will not permit any Restricted Subsidiary,
directly or indirectly, to guarantee, assume or in any other manner become
liable for the payment of any Debt of the Company or any Debt of any other
Restricted Subsidiary, unless (a) such Restricted Subsidiary has executed and
delivered, or simultaneously executes and delivers, a Subsidiary Guarantee and
(b) with respect to any guarantee of Subordinated

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Debt by a Restricted Subsidiary, any such guarantee is subordinated to such
Restricted Subsidiary's guarantee with respect to the Notes at least to the same
extent as such Subordinated Debt is subordinated to the Notes.

Any Subsidiary Guarantee may provide by its terms that it will be
automatically and unconditionally released and discharged upon (i) any sale,
exchange or transfer to any person not an Affiliate of the Company of all of the
Company's and the Restricted Subsidiaries' Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Indenture) or (iii) the
designation of such Restricted Subsidiary as an Unrestricted Subsidiary in
accordance with the terms of the Indenture.

Unrestricted Subsidiaries. (a) The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company
nor any Restricted Subsidiary is directly or indirectly liable for any Debt of
such Subsidiary, (ii) no default with respect to any Debt of such Subsidiary
would permit (upon notice, lapse of time or otherwise) any holder of any other
Debt of the Company or any Restricted Subsidiary to declare a default on such
other Debt or cause the payment thereof to be accelerated or payable prior to
its stated maturity, (iii) any Investment in such Subsidiary made as a result of
designating such Subsidiary an Unrestricted Subsidiary will not violate the
provisions of the "Limitation on Restricted Payments" covenant, (iv) neither the
Company nor any Restricted Subsidiary has a contract, agreement, arrangement,
understanding or obligation of any kind, whether written or oral, with such
Subsidiary other than those that might be obtained at the time from persons who
are not Affiliates of the Company and (v) neither the Company nor any Restricted
Subsidiary has any obligation to subscribe for additional shares of Capital
Stock or other equity interest in such Subsidiary, or to maintain or preserve
such Subsidiary's financial condition or to cause such Subsidiary to achieve
certain levels of operating results.

(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event of
Default has occurred and is continuing following such designation and (ii) the
Company could incur at least $1.00 of additional Debt (other than Permitted
Debt) pursuant to the first paragraph of the covenant described under the
caption "Limitation on Debt" (treating any Debt of such Unrestricted Subsidiary
as the incurrence of Debt by a Restricted Subsidiary).

Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind on or with respect to any of its property
or assets, including any shares of stock or debt of any Restricted Subsidiary,
whether owned at the Closing Date or thereafter acquired, or any income, profits
or proceeds therefrom, or assign or otherwise convey any right to receive income
thereon, unless (a) in the case of any Lien securing Subordinated Debt, the
Notes are secured by a Lien on such property, assets or proceeds that is senior
in priority to such Lien and (b) in the case of any other Lien, the Notes are
equally and ratably secured with the obligation or liability secured by such
Lien.

Notwithstanding the foregoing, the Company may, and may permit any
Restricted Subsidiary to, incur any of the following Liens ("Permitted Liens"):

(i) Liens existing as of the Closing Date.

(ii) Liens on property or assets of the Company or any Restricted
Subsidiary securing Debt under one or more credit facilities in a principal
amount not to exceed the principal amount of the outstanding Debt permitted
by clause (i) of the definition of "Permitted Debt".

(iii) Liens on any property or assets of a Restricted Subsidiary
granted in favor of the Company or any Restricted Subsidiary.

(iv) Liens securing the Notes or any Subsidiary Guarantee.

(v) Liens representing the interest or title of lessors under
Capitalized Lease Obligations or Liens securing purchase money mortgages or
purchase money security interests, so long as the aggregate amount secured
by such Liens does not exceed the respective amounts permitted by clause
(v) of the definition of "Permitted Debt".
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(vi) Liens securing Acquired Debt created prior to (and not in
connection with or in contemplation of) the incurrence of such Debt by the
Company or any Restricted Subsidiary; provided that such Lien does not
extend to any property or assets of the Company or any Restricted
Subsidiary other than the property and assets acquired in connection with
the incurrence of such Acquired Debt.

(vii) Liens securing Hedging Obligations incurred in the ordinary
course of business.

(viii) Statutory Liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings.

(ix) Liens for taxes, assessments, government charges or claims that
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted.

(x) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts
for the payment of money).

(xi) Easements, rights-of-way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the business
of the Company or any Restricted Subsidiary incurred in the ordinary course
of business.

(xii) Liens arising by reason of any judgment, decree or order of any
court, so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired.

(xiii) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to
such letters of credit and the products and proceeds thereof.

(xiv) Liens upon specific items of inventory or other goods and
proceeds of the Company or any Restricted Subsidiary securing its
obligations in respect of bankers' acceptances issued or created for the
account of any person to facilitate the purchase, shipment or storage of
such inventory or other goods.

(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods.

(xvi) Any extension, renewal or replacement, in whole or in part, of
any Lien described in the foregoing clauses (i) through (xv); provided that
any such extension, renewal or replacement is no more restrictive in any
material respect than the Lien so extended, renewed or replaced and does
not extend to any additional property or assets.

Reports. At all times from and after the earlier of (i) the date of the
commencement of an Exchange Offer or the effectiveness of the Shelf Registration
Statement (the "Registration") and (ii) the date six months after the Closing
Date, in either case, whether or not the Company is then required to file
reports with the Commission, the Company will file with the Commission all such
annual reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Sections 13(a) or 15(d) under of the
Exchange Act. The Company will also be required (a) to supply to the Trustee and
each holder of Notes, or supply to the Trustee for forwarding to each such
holder, without cost to such holder, copies of such reports and other documents
within 15 days after the date on which the Company files such reports and
documents with the Commission or the date on which the Company would be required
to file such reports and documents if the Company were so required and (b) if
filing such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, to supply at the Company's
cost copies of such reports and documents to any prospective holder of Notes
promptly upon written request. In addition, at all times prior to the earlier of
the date of the Registration and the date six months after the Closing Date, the
Company will, at its cost, deliver to each holder of the Notes quarterly and
annual reports substantially equivalent to those that would be required by the
Exchange Act. Furthermore, at

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all times prior to the Registration, the Company will supply at the Company's
cost copies of such reports and documents to any prospective holder of the Notes
promptly upon written request.

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Company may not consolidate with or merge with or into any other person
or, directly or indirectly, convey, sell, assign, transfer, lease or otherwise
dispose of its properties and assets substantially as an entirety to any other
person (in one transaction or a series of related transactions), unless each of
the following conditions is satisfied:

(a) Either (i) the Company is the surviving corporation or (ii) the
person (if other than the Company) formed by such consolidation or into
which the Company is merged or the person that acquires by conveyance,
sale, assignment, transfer, lease or other disposition the properties and
assets of the Company substantially as an entirety (the "Surviving Entity")
(A) is a corporation, partnership or trust organized and validly existing
under the laws of the United States, any state thereof or the District of
Columbia and (B) expressly assumes, by a supplemental indenture in form
satisfactory to the Trustee, all of the Company's obligations under the
Indenture and the Notes.

(b) Immediately after giving effect to such transaction, no Default or
Event of Default has occurred and is continuing.

(c) Immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the Company (or of the Surviving
Entity if the Company is not the continuing obligor under the Indenture) is
equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction.

(d) Immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred at the beginning of
the most recently ended four full fiscal quarter period for which internal
financial statements are available), the Company (or the Surviving Entity
if the Company is not the continuing obligor under the Indenture) could
incur at least $1.00 of additional Debt (other than Permitted Debt)
pursuant to the first paragraph of the "Limitation on Debt" covenant.

(e) If the Company is not the continuing obligor under the Indenture,
each Subsidiary Guarantor, unless it is the other party to the transaction
described above, has by supplemental indenture confirmed that its
Subsidiary Guarantee applies to the Surviving Entity's obligations under
the Indenture and the Notes.

(f) If any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of the "Limitation on Liens" covenant are complied with.

(g) The Company delivers, or causes to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the requirements of the Indenture.

In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in the
case of a lease, be discharged from all its obligations and covenants under the
Indenture and Notes.

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EVENTS OF DEFAULT

Each of the following will be "Events of Default" under the Indenture:

(a) Default in the payment of any interest on any Note when it becomes
due and payable, and continuance of such default for a period of 30 days.

(b) Default in the payment of the principal of (or premium, if any,
on) any Note when due.

(c) Failure to perform or comply with the Indenture provisions
described under "Consolidation, Merger and Sale of Assets".

(d) Default in the performance, or breach, of any covenant or
agreement of the Company contained in the Indenture (other than a default
in the performance, or breach, of a covenant or agreement that is
specifically dealt with elsewhere herein), and continuance of such default
or breach for a period of 60 days after written notice has been given to
the Company by the Trustee or to the Company and the Trustee by the holders
of at least 25% in aggregate principal amount of the Notes then
outstanding.

(e) (i) An event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of Debt of
the Company or any Restricted Subsidiary, which issue has an aggregate
outstanding principal amount of not less than $1,000,000, and such default
has resulted in such Debt becoming, whether by declaration or otherwise,
due and payable prior to the date on which it would otherwise become due
and payable or (ii) a default in any payment when due at final maturity of
any such Debt.

(f) Failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments the uninsured portion of which exceeds in
the aggregate $1,000,000, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days.

(g) Any Subsidiary Guarantee issued by a Significant Subsidiary ceases
to be in full force and effect or is declared null and void or any
Subsidiary Guarantor denies that it has any further liability under any
Subsidiary Guarantee, or gives notice to such effect (other than by reason
of the termination of the Indenture or the release of any such Subsidiary
Guarantee in accordance with the Indenture), and such condition has
continued for a period of 30 days after written notice of such failure
requiring the Subsidiary Guarantor and the Company to remedy the same has
been given (x) to the Company by the Trustee or (y) to the Company and the
Trustee by the holders of 25% in aggregate principal amount of the Notes
then outstanding.

(h) The occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.

If an Event of Default (other than as specified in clause (h) above) occurs
and is continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such holders will, declare the principal of all of the outstanding
Notes immediately due and payable and, upon any such declaration, such principal
will become due and payable immediately. If an Event of Default specified in
clause (h) above occurs and is continuing, then the principal of all of the
outstanding Notes will ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holder of
Notes.

At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if (i) the Company has paid or deposited
with the Trustee a sum sufficient to pay (A) all overdue interest on all Notes,
(B) all unpaid principal of (and premium, if any, on) any outstanding Notes that
has become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, (C) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal at the
rate borne by the Notes and, (D) all sums paid or advanced by the Trustee under
the Indenture and the reasonable compensation, expenses, disbursements and
advances of

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the Trustee, its agents and counsel; and (ii) all Events of Default, other than
the non-payment of amounts of principal of (or premium, if any, on) or interest
on the Notes that have become due solely by such declaration of acceleration,
have been cured or waived. No such rescission will affect any subsequent default
or impair any right consequent thereon.

The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the holders of all of the Notes, waive
any past defaults under the Indenture, except a default in the payment of the
principal of (and premium, if any) or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.

If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within 90 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of (and
premium, if any, on) or interest on any Notes, the Trustee may withhold the
notice to the holders of the Notes if a committee of its trust officers in good
faith determines that withholding such notice is in the interests of the holders
of the Notes.

The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Subsidiary Guarantors of their respective
obligations under the Indenture and as to any default in such performance. The
Company is also required to notify the Trustee within five days of any Default.

DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE

The Company may, at its option and at any time, terminate the obligations
of the Company and any Subsidiary Guarantors with respect to the outstanding
Notes ("defeasance"). Such defeasance means that the Company will be deemed to
have paid and discharged the entire Debt represented by the outstanding Notes,
except for (i) the rights of holders of outstanding Notes to receive payments in
respect of the principal of (and premium, if any, on) and interest on such Notes
when such payments are due, (ii) the Company's obligations to issue temporary
Notes, register the transfer or exchange of any Notes, replace mutilated,
destroyed, lost or stolen Notes, maintain an office or agency for payments in
respect of the Notes and segregate and hold such payments in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee and (iv) the
defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to terminate the obligations of the Company and
any Subsidiary Guarantor with respect to certain covenants set forth in the
Indenture and described under "Certain Covenants" above, and any omission to
comply with such obligations would not constitute a Default or an Event of
Default with respect to the Notes ("covenant defeasance").

In order to exercise either defeasance or covenant defeasance, (a) the
Company must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Notes, money in an amount, or U.S.
Government Obligations (as defined in the Indenture) that through the scheduled
payment of principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the outstanding Notes at maturity (or upon
redemption, if applicable) of such principal or installment of interest; (b) no
Default or Event of Default has occurred and is continuing on the date of such
deposit or, insofar as an event of bankruptcy under clause (h) of "Events of
Default" above is concerned, at any time during the period ending on the 91st
day after the date of such deposit; (c) such defeasance or covenant defeasance
may not result in a breach or violation of, or constitute a default under, the
Indenture or any material agreement or instrument to which the Company or any
Subsidiary Guarantor is a party or by which it is bound; (d) in the case of
defeasance, the Company must deliver to the Trustee an opinion of counsel
stating that the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or since the date hereof there has been a
change in applicable federal income tax law, to the effect, and based thereon
such opinion must confirm that, the holders of the outstanding Notes will

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not recognize income, gain or loss for federal income tax purposes as a result
of such defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred; (e) in the case of covenant defeasance, the
Company must have delivered to the Trustee an opinion of counsel to the effect
that the Holders of the Notes outstanding will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant defeasance
had not occurred; and (f) the Company must have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with.

SATISFACTION AND DISCHARGE

Upon the request of the Company, the Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in the Indenture) and the Trustee, at the
expense of the Company, will execute proper instruments acknowledging
satisfaction and discharge of the Indenture when (a) either (i) all the Notes
theretofore authenticated and delivered (other than destroyed, lost or stolen
Notes that have been replaced or paid and Notes that have been subject to
defeasance under "Defeasance or Covenant Defeasance of Indenture") have been
delivered to the Trustee for cancellation or (ii) all Notes not theretofore
delivered to the Trustee for cancellation (A) have become due and payable, (B)
will become due and payable at maturity within one year or (C) are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company, and the Company has irrevocably deposited or caused to
be deposited with the Trustee funds in trust for the purpose in an amount
sufficient to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any, on) and interest on the Notes to the date of such deposit (in
the case of Notes that have become due and payable) or to the Stated Maturity or
redemption date, as the case may be; (b) the Company has paid or caused to be
paid all sums payable under the Indenture by the Company; and (c) the Company
has delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided in the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.

AMENDMENTS AND WAIVERS

Modifications and amendments of the Indenture and any Subsidiary Guarantee
may be made by the Company, any affected Subsidiary Guarantor and the Trustee
with the consent of the holders of a majority in aggregate outstanding principal
amount of the Notes; provided, however, that no such modification or amendment
may, without the consent of the holder of each outstanding Note affected
thereby,

(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which any Note or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment after
the Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date);

(b) reduce the percentage in principal amount of outstanding Notes,
the consent of whose holders is required for any such amendment or for any
waiver of compliance with certain provisions of, or certain defaults and
their consequences provided for under, the Indenture; or

(c) waive a default in the payment of principal of, or premium, if
any, or interest on the Notes or reduce the percentage or aggregate
principal amount of outstanding Notes the consent of whose holders is
necessary for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults.

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Without the consent of the holders of at least 75% in principal amount of
the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for such Notes), no waiver or amendment to the
Indenture may make any change in the provisions described above under the
caption "Change of Control" after the mailing of an offer with respect to a
Change of Control Offer that adversely affects the rights of any holder of
Notes.

The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.

Without the consent of any holders, the Company and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
to the Indenture for any of the following purposes: (1) to evidence the
succession of another person to the Company and the assumption by any such
successor of the covenants of the Company in the Indenture and in the Notes; or
(2) to add to the covenants of the Company for the benefit of the holders, or to
surrender any right or power herein conferred upon the Company; or (3) to add
additional Events of Defaults; or (4) to provide for uncertificated Notes in
addition to or in place of the certificated Notes; or (5) to evidence and
provide for the acceptance of appointment under the Indenture by a successor
Trustee; or (6) to secure the Notes; or (7) to cure any ambiguity, to correct or
supplement any provision in the Indenture that may be defective or inconsistent
with any other provision in the Indenture, or to make any other provisions with
respect to matters or questions arising under the Indenture, provided that such
actions pursuant to this clause (7) do not adversely affect the interests of the
holders in any material respect; or (8) to comply with any requirements of the
Commission in order to effect and maintain the qualification of the Indenture
under the Trust Indenture Act.

THE TRUSTEE

IBJ Schroder Bank & Trust Company, the Trustee under the Indenture, will be
the initial paying agent and registrar for the Notes.

The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. Under the Indenture, the holders of a majority in outstanding
principal amount of the Notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.

The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that, if it acquires any conflicting
interest (as defined), it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.

GOVERNING LAW

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

BOOK-ENTRY, DELIVERY AND FORM

Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the Closing Date with the
Trustee as custodian for The Depository Trust Company (the "Depositary") and
registered in the name of Cede & Co., as nominee of the Depositary (such nominee
being referred to herein as the "Global Note Holder").

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Notes originally purchased by persons outside the United States pursuant to
sales in accordance with Regulation S under the Securities Act will be
represented upon issuance by a temporary global Note certificate (the "Temporary
Certificate"), which will not be exchangeable for Certificated Notes until the
expiration of the "40-day restricted period" within the meaning of Rule
903(c)(3) of Regulation S under the Securities Act. The Temporary Certificate
will be registered in the name of, and held by, a temporary certificate holder
until the expiration of such 40-day period, at which time the Temporary
Certificate will be delivered to the Trustee in exchange for Certificated Notes
registered in the names requested by such temporary certificate holder. In
addition, until the expiration of such 40-day period, transfers of interests in
the Temporary Certificate can only be effected through such temporary
certificate holder in accordance with the requirements set forth in "Notice to
Investors".

The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.

The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Note and (ii) ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to own, transfer or pledge Notes evidenced
by the Global Note will be limited to such extent. For certain other
restrictions on the transferability of the Notes, see "Notice to Investors".

So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.

Payments in respect of the principal of and premium, if any, and interest
on any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.

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Certificated Notes

If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to change the issuance of Notes
in the form of Certificated Securities under the Indenture then, upon surrender
by the Global Note Holder of its Global Note, Certificated Notes will be issued
to each person that the Global Note Holder and the Depositary identify as being
the beneficial owner of the related Notes.

Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.

Same-Day Settlement and Payment

The Indenture will require that payments in respect of the Notes
represented by the Global Note (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Notes, the Company will make all payments of principal, premium, if any, and
interest by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such Holder's registered address. Secondary trading in long-term
notes and debentures of corporate issuers is generally settled in clearinghouse
or next-day funds. In contrast, the Notes represented by the Global Note are
expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Notes will also be settled in
immediately available funds.

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THE EXCHANGE OFFER

PURPOSE OF THE EXCHANGE OFFER

The Existing Notes were originally issued and sold on May 20, 1998 (the
"Issue Date"). Such sales were not registered under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act and
Rule 144A under the Securities Act. The Company and the Initial Purchasers
entered into the Registration Rights Agreement on the Issue Date, pursuant to
which the Company agreed to (i) file with the Commission on or prior to 60 days
after the Issue Date a registration statement on Form S-3, or Form S-4, if the
use of such form is then available (the "Exchange Offer Registration Statement")
relating to a registered exchange offer for the Existing Notes under the
Securities Act and (ii) use their reasonable best efforts to cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
within 210 days after the Issue Date. Upon the effectiveness of the Exchange
Offer Registration Statement, the Company will offer to the holders of Existing
Notes who are not prohibited by any law or policy of the Commission from
participating in the Exchange Offer the opportunity to exchange their Existing
Notes for Exchange Notes. The Company will keep the Exchange Offer open for not
less than 30 days (or longer, if required by applicable law) after the date
notice of the Exchange Offer is mailed to the holders of the Existing Notes. For
each Existing Note surrendered to the Company for exchange pursuant to the
Exchange Offer, the holder of such Existing Note will receive an Exchange Note
having a principal amount at maturity equal to that of the surrendered Existing
Note. Interest on each Exchange Note will accrue from the last interest payment
date on which interest was paid on the Existing Note surrendered in exchange
therefor or, if no interest has been paid on such Existing Note, from the date
of original issuance.

The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company under the Registration Rights Agreement.

TERMS OF THE EXCHANGE OFFER

The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal, $1,000 principal
amount of Exchange Notes for each $1,000 principal amount of Existing Notes. The
terms of the Exchange Notes are identical in all respects to the terms of the
Existing Notes for which they may be exchanged pursuant to this Exchange Offer,
except that (i) the Exchange Notes will generally be freely transferable by
holders thereof and (ii) the holders of the Exchange Notes will not be entitled
to registration rights under the Registration Rights Agreement except under
certain limited circumstances. See "Existing Notes Registration Rights." The
Exchange Notes will evidence the same debt as the Existing Notes and will be
entitled to the benefits of the Indenture. See "Description of Notes."

The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Existing Notes being tendered or accepted for exchange.

Based on interpretations set forth in no-action letters issued by the Staff
of the Commission to third parties, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for the Existing Notes may be
offered for resale, resold or otherwise transferred by holders thereof (other
than any holder which is (i) an Affiliate, (ii) a broker-dealer who acquired
Existing Notes directly from the Company or (iii) a broker-dealer who acquired
Existing Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such holders' business, such holders have no arrangement or
understanding with any person to participate in a distribution of such Exchange
Notes, and that such holders are not engaged in and do not intend to engage in a
distribution of the Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Existing Notes, where such Existing
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." Any holder that cannot rely upon such interpretations must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction.

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Tendering holders of Existing Notes 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 the Existing Notes
pursuant to the Exchange Offer.

EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS

The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1998 unless the
Company in its sole discretion extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Company, expires.
The Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to IBJ
Schroder Bank & Trust Company (the "Exchange Agent") and by timely public
announcement communicated by no later than 5:00 p.m. on the next business day
following the Expiration Date, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Existing Notes previously tendered pursuant
to the Exchange Offer will remain subject to the Exchange Offer.

The Exchange Date will be the first business day following the Expiration
Date. The Company expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Existing Notes for any reason, including
if any of the events set forth below under "Conditions to the Exchange Offer"
shall have occurred and shall not have been waived by the Company and (ii) amend
the terms of the Exchange Offer in any manner, whether before or after any
tender of the Existing Notes. If any such termination or amendment occurs, the
Company will notify the Exchange Agent in writing and will either issue a press
release or give written notice to the holders of the Existing Notes as promptly
as practicable. Unless the Company terminates the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date, the Company will exchange the
Exchange Notes for the Existing Notes on the Exchange Date.

If the Company waives any material condition to the Exchange Offer, or
amends the Exchange Offer in any other material respect, and if at the time that
notice of such waiver or amendment is first published, sent or given to holders
of Existing Notes in the manner specified above, the Exchange Offer is scheduled
to expire at any time earlier than the expiration of a period ending on the
fifth business day from, and including, the date that such notice is first so
published, sent or given, then the Exchange Offer will be extended until the
expiration of such period of five business days.

This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Existing Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Existing Notes.

INTEREST ON THE EXCHANGE NOTES

Interest on each Exchange Note issued pursuant to the Exchange Offer will
accrue from the last interest payment date to which interest was paid on the
Existing Notes surrendered in exchange therefor or, if no interest has been paid
on the Existing Notes, from the date of original issue of the Existing Notes.

HOW TO TENDER

The tender to the Company of Existing Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.

GENERAL PROCEDURES. A holder of an Existing Note may tender the same by
(i) properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall be
deemed to include a facsimile thereof) and delivering the same, together with
the certificate or certificates representing the Existing Notes being tendered
and any required signature guarantees (or a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") pursuant to the procedure

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described below), to the Exchange Agent at its address set forth below on or
prior to the Expiration Date or (ii) complying with the guaranteed delivery
procedures described below. Each broker-dealer that receives Exchange Notes for
its own account in exchange for Existing Notes, where such Existing Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.

If tendered Existing Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Existing Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Existing Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Company and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an "Eligible Institution") that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Notes and/or Existing Notes not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the note register for the Existing Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.

Any beneficial owner whose Existing Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Existing Notes should contact such holder promptly and instruct such
holder to tender Existing Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Existing Notes himself or herself, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering such Existing Notes, either make appropriate
arrangements to register ownership of the Existing Notes in such beneficial
owner's name or follow the procedures described in the immediately preceding
paragraph. The transfer of record ownership may take considerable time.

BOOK ENTRY TRANSFER. The Exchange Agent will make a request to establish
an account with respect to the Existing Notes at The Depository Trust Company
(the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within
two business days after receipt 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 Existing Notes by causing the Book-Entry
Transfer Facility to transfer such Existing Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Existing Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal, 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 specified below on or prior
to the Expiration Date or the guaranteed delivery procedures described below
must be complied with.

The Exchange Agent and the Book-Entry Transfer Facility have confirmed that
any financial institution that is a participant in the Book-Entry Transfer
facility may utilize the Book-Entry Transfer Facility Automated Tender Offer
Program ("ATOP") procedures to tender Existing Notes.

Any participant in the Book-Entry Transfer Facility may make book-entry
delivery of Existing Notes by causing the Book Entry Transfer Facility to
transfer such Existing Notes into the Exchange Agent's account in accordance
with the Book Entry Transfer Facility's ATOP procedures for transfer. However,
the exchange for the Existing Notes so tendered will only be made after a
Book-Entry Confirmation of such book-entry transfer of Existing Notes into the
Exchange Agent's account, and timely receipt by the Exchange Agent of an Agent's
Message (as such term is defined in the next sentence) and any other documents
required by the Letter of Transmittal. The term "Agent's Message" means a
message, transmitted by the Book Entry Transfer Facility and received by the
Exchange Agent and forming part of a Book-Entry Confirmation, which states that
the Book Entry Transfer Facility has received an express acknowledgment from a
participant tendering Existing Notes that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.

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THE METHOD OF DELIVERY OF EXISTING NOTES AND ALL OTHER DOCUMENTS, INCLUDING
DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY AND ANY ACCEPTANCE OF AN
AGENT'S MESSAGE THROUGH ATOP, IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT
BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE
USED, PROPER INSURANCE BE OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN
ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR
BEFORE THE EXPIRATION DATE.

GUARANTEED DELIVERY PROCEDURES. If a holder desires to accept the Exchange
Offer, and time will not permit a Letter of Transmittal or Existing Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected if
the Exchange Agent has received at its office listed on the back cover hereof on
or prior to the Expiration Date a letter, telegram or facsimile transmission
from an Eligible Institution setting forth the name and address of the tendering
holder, the principal amount of the Existing Notes being tendered, the names in
which the Existing Notes are registered and, if possible, the certificate
numbers of the Existing Notes to be tendered, and stating that the tender is
being made thereby and guaranteeing that within three New York Stock Exchange
trading days after the date of execution of such letter, telegram or facsimile
transmission by the Eligible Institution, the Existing Notes, in proper form for
transfer, will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Existing Notes being tendered by the above-described
method (or a timely Book-Entry Confirmation) are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of a Notice of Guaranteed
Delivery which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.

A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal or
Agent's Message accompanied by the Existing Notes (or a timely Book-Entry
Confirmation) is received by the Exchange Agent. Issuances of Exchange Notes in
exchange for Existing Notes tendered pursuant to a Notice of Guaranteed Delivery
or letter, telegram or facsimile transmission to similar effect (as provided
above) by an Eligible Institution will be made only against deposit of the
Letter of Transmittal (and any other required documents) and the tendered
Existing Notes (or a timely Book-Entry Confirmation).

All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Existing Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any and all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. Neither the Company, the
Exchange Agent nor any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.

TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL

The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.

The party tendering Existing Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Existing Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Existing Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Existing
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered

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Existing Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Existing Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Existing Notes by the Company, and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of its
obligations under the Registration Rights Agreement and that the Company shall
have no further obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the death
or incapacity of the Transferor, and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.

By tendering Existing Notes and executing the Letter of Transmittal, or
transmitting an Agent's Message, as the case may be, the Transferor certifies
that (a) it is not an Affiliate, that it is not a broker-dealer that owns
Existing Notes acquired directly from the Company or an Affiliate of the
Company, that it is acquiring the Exchange Notes offered hereby in the ordinary
course of such Transferor's business and that such Transferor has no arrangement
or understanding with any person to participate in the distribution of such
Exchange Notes, and that such Transferor is not engaged in and does not intend
to engage in a distribution of the Exchange Notes, or (b) that it is an
Affiliate of the Company or of any of the Initial Purchasers and that it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable to it.

WITHDRAWAL RIGHTS

Existing Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.

For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus prior to the Expiration
Date. Any such notice of withdrawal must specify the person named in the Letter
of Transmittal as having tendered Existing Notes to be withdrawn, the
certificate numbers of Existing Notes to be withdrawn, the principal amount of
Existing Notes to be withdrawn, a statement that such holder is withdrawing his
or her election to have such Existing Notes exchanged, and the name of the
registered holder of such Existing Notes, and must be signed by the holder in
the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the beneficial ownership of the Existing Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Existing Notes promptly following
receipt of notice of withdrawal. All questions as to the validity of notices of
withdrawal, including time of receipt, will be determined by the Company, and
such determination will be final and binding on all parties.

ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES

Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Existing Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted for
exchange validly tendered Existing Notes when the Company has given written
notice thereof to the Exchange Agent.

The Exchange Agent will act as agent for the tendering holders of Existing
Notes for the purposes of receiving Exchange Notes from the Company and causing
the Existing Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of the Exchange Notes
to be issued in exchange for accepted Existing Notes will be made by the
Exchange Agent promptly after acceptance of the tendered Existing Notes.
Existing Notes not accepted for exchange by the Company will be returned without
expense to the tendering holders (or in the case of Existing Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the procedures described above, such non-exchanged Existing
Notes will be credited to an account maintained

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with such Book-Entry Transfer Facility) promptly following the Expiration Date,
or, if the Company terminates the Exchange Offer prior to the Expiration Date,
promptly after the Exchange Offer is so terminated.

CONDITIONS TO THE EXCHANGE OFFER

The obligation of the Company to consummate the Exchange Offer is not
subject to any condition other than that the Exchange Offer, or the making of
any exchange by a holder, does not violate applicable law or any applicable
interpretation of the Staff of the Commission.

In addition, the Company will not accept for exchange any Existing Notes
tendered, and no Exchange Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").

EXCHANGE AGENT

IBJ Schroder Bank & Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:

<TABLE>
<S> <C> <C>
By Mail: Telephone: By Hand:
One State Street (212) 858-2103 One State Street
New York, New York 10004 New York, New York 10004
Attn: Reorganization Operations Facsimile: Attn: Reorganization Operations
Department Department
(212) 858-2611
</TABLE>

Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.

SOLICITATION OF TENDERS; EXPENSES

The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers.

No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Existing Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Existing
Notes in such jurisdiction. In any jurisdiction the securities laws or blue sky
laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.

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APPRAISAL RIGHTS

HOLDERS OF EXISTING NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.

FEDERAL INCOME TAX CONSEQUENCES

The following discussion is a summary of certain material federal income
tax consequences of an exchange of Existing Notes for Exchange Notes and of the
purchase, ownership and disposition of the Exchange Notes. This summary does not
purport to deal with all aspects of federal income taxation that may be relevant
to a particular investor, nor any tax consequences arising under the laws of any
state, locality, or foreign jurisdiction, and it is not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, foreign
persons, persons that hold Exchange Notes as part of a straddle or conversion
transaction or holders subject to the alternative minimum tax, may be subject to
special rules. In addition, this summary is limited to persons that will hold
the Exchange Notes as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended. All investors are advised to consult their own tax advisors regarding
the federal, state, local and foreign tax consequences of an exchange of
Existing Notes for Exchange Notes and the ownership and disposition of Exchange
Notes.

THE EXCHANGE. The exchange of the Existing Notes for the Exchange Notes in
the Exchange Offer should not be a taxable event for federal income tax
purposes, either because the exchange does not constitute an exchange for
federal income tax purposes or because the exchange constitutes a tax-free
recapitalization. Accordingly, (i) holders should not recognize any taxable gain
or loss as a result of the exchange; (ii) the adjusted tax basis of an Exchange
Note immediately after the exchange should be the same as the adjusted tax basis
of the Existing Note exchanged therefore immediately before the exchange; (iii)
the holding period of the Exchange Note should include the holding period of the
Existing Note; and (iv) the Exchange Note should have the same issue price as
the Existing Note.

MARKET DISCOUNT. If a holder acquired an Existing Note other than at
original issue for an amount that is less than its principal amount, the amount
of the difference will be treated as "market discount" (unless such difference
is less than a statutorily defined de minimis amount), and the Existing Note
will be subject to the market discount rules. If a holder exchanges an Existing
Note that is subject to the market discount rules for an Exchange Note, the
Exchange Note will also be subject to the market discount rules. In addition,
Exchange Notes purchased by a subsequent purchaser will be subject to the market
discount rules if the Exchange Notes are purchased with more than the statutory
de minimis amount of market discount.

The holder of an Exchange Note that is subject to the market discount rules
will be required to treat any full or partial principal payment or any gain
recognized on the maturity, sale or other disposition of the Note as ordinary
income, to the extent that such gain does not exceed the accrued market discount
on the Note. The amount of market discount treated as having accrued will be
determined either (i) on a straight-line basis by multiplying the market
discount times a fraction, the numerator of which is the number of days the
Exchange Note was held by the holder and the denominator of which is the total
number of days after the date such holder acquired the Exchange Note up to and
including the date of its maturity, or (ii) if the holder so elects, on a
constant interest rate method.

The holder of an Exchange Note subject to the market discount rules may
elect to include market discount in income currently, through the use of either
the straight-line inclusion method or the elective constant interest method, in
lieu of recharacterizing gain upon disposition as ordinary income to the extent
of accrued market discount at the time of disposition. Once made, this election
will apply to all debt instruments with market discount acquired by the electing
holder during the taxable year for which the election is made, and all
subsequent taxable years, unless the Internal Revenue Service (the "IRS")
consents to a revocation of the election. If an election is made to include
market discount on a debt instrument in income currently, the basis of the debt
instrument in the hands of the holder will be increased by the market discount
thereon as it is included in income.

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A holder who does not elect to include the market discount on an Exchange
Note in income currently may be required to defer interest expense deductions
for a portion of the interest paid on indebtedness allocable to such Note, until
the maturity of the Note or its earlier disposition in a taxable transaction.

AMORTIZABLE BOND PREMIUM. A holder that purchased an Existing Note for an
amount in excess of its principal amount 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 Existing Note will
be reduced by the amount of amortizable bond premium allocable (based on the
yield to maturity of the Existing Note) to such year. If a holder made an
election to amortize bond premium with respect to an Existing Note and exchanges
the Existing Note for an Exchange Note pursuant to the Exchange Offer, the
election will apply to the Exchange Note. A holder who exchanges an Existing
Note for which an election has not been made for an Exchange Note, and a
subsequent purchaser of an Exchange Note, may also elect to amortize bond
premium, if any, on the Note. Any election to amortize bond premium will apply
to all debt instruments (other than debt instruments 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 thereafter acquired by the holder,
and the election is irrevocable without the consent of the IRS.

DISPOSITION OF THE EXCHANGE NOTES. Subject to the market discount rules
discussed above, a holder of an Exchange Note will generally recognize gain or
loss upon the sale, redemption, retirement or other disposition of the Note
equal to the difference between (i) the amount of cash and the fair market value
of any property received (except to the extent attributable to the payment of
accrued interest) and (ii) the holder's adjusted tax basis in the Note. Gain or
loss recognized will be capital gain or loss if the Notes are held as capital
assets by the holder and will be long-term capital gain or loss if the holder's
holding period is more than eighteen months and midterm capital gain or loss if
the holder's holding period is more than one year but not more than eighteen
months. Holders who are individuals will generally be taxed on long-term capital
gains at a maximum marginal rate of 20% and on midterm capital gains at a
maximum marginal rate of 28%, and corporate holders will be taxed on long-term
and midterm capital gains at a maximum marginal rate of 35%.

BACKUP WITHHOLDING AND INFORMATION REPORTING. The holder of an Exchange
Note may be subject to backup withholding at a rate of 31% with respect to
interest, principal and premium, if any, paid on the Note, unless such holder
(a) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (b) provides a correct taxpayer
identification number, certifies that the holder is not subject to backup
withholding and otherwise complies with the requirements of the backup
withholding rules.

The Company will report to the holders of the Exchange Notes and the IRS
the amount of any "reportable payment" for each calendar year and the amount of
tax withheld, if any, with respect to payments on the Exchange Notes. The amount
of any backup withholding from a payment to a holder will be allowed as a credit
against the holder's federal income tax liability and may entitle the holder to
a refund, provided that the required information is furnished to the IRS.

OTHER

Participation in the Exchange Offer is voluntary, and holders should
carefully consider whether to accept the Exchange Offer and tender their
Existing Notes. Holders of the Existing Notes are urged to consult their
financial and tax advisors in making their own decisions on what action to take.

As a result of the making of, and upon acceptance for exchange of all
validly tendered Existing Notes pursuant to the terms of, this Exchange Offer,
the Company will have fulfilled covenants contained in the terms of the Existing
Notes and the Registration Rights Agreement. Holders of the Existing Notes who
do not tender their certificates in the Exchange Offer will continue to hold
such certificates and will be entitled to all the rights, and subject to all the
limitations applicable thereto, under the Indenture, except for any such rights
under the Registration Rights Agreement which by their terms terminate or cease
to have further effect as a result of the making of this Exchange Offer. See
"Description of Notes." All untendered Existing Notes will continue to be
subject to the restrictions on transfer set forth in the legend thereon as a
consequence of the issuance of the Existing Notes pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. To the extent that Existing
Notes are
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tendered and accepted in the Exchange Offer, the trading market, if any, for the
Existing Notes could be adversely affected. See "Risk Factors -- Absence of
Public Market for the Exchange Notes; Restrictions on Transfer."

The Company may in the future seek to acquire untendered Existing Notes in
the open market or privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company has no present plan to acquire any
Existing Notes that are not tendered in the Exchange Offer.

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U.S. FEDERAL INCOME TAX CONSEQUENCES

Set forth below are material U.S. federal income tax consequences
associated with the acquisition, ownership, and disposition of the Notes by
initial investors who acquire the Notes at original issue for cash in an amount
equal to the original issue price. The following does not discuss all of the
aspects of federal income taxation that may be relevant to a prospective holder
of the Notes in light of his or her particular circumstances, or to certain
types of holders (including dealers in securities, insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, S
corporations, and except as discussed below, foreign corporations, persons who
are not citizens or residents of the United States and persons who hold the
Notes as part of a hedge, straddle, "synthetic security" or other integrated
investment) which are subject to special treatment under the federal income tax
laws. This discussion also does not address the tax consequences to nonresident
aliens or foreign corporations that are subject to United States federal income
tax on a net basis on income with respect to a Note because such income is
effectively connected with the conduct of a U.S. trade or business. Such holders
generally are taxed in a similar manner to U.S. Holders (as defined below);
however, certain special rules apply. In addition, this discussion is limited to
holders who hold the Notes as capital assets within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code"). This also does
not describe any tax consequences under state, local, or foreign tax laws.

The following is based upon the Code, Treasury Regulations, IRS rulings and
pronouncements and judicial decisions all in effect as of the date hereof, all
of which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder of the Notes. The Company has not sought
and will not seek any rulings or opinions from the IRS or counsel with respect
to the matters discussed below. There can be no assurance that the IRS will not
take positions concerning the tax consequences of the purchase, ownership or
disposition of the Notes that are different from those discussed herein.

PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE INCOME TAX CONSEQUENCES THAT MAY APPLY TO THEM, AS WELL AS THE
APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.

A U.S. Holder is any holder who or which is (i) a citizen or resident of
the United States; (ii) a domestic corporation or domestic partnership; (iii) an
estate other than a "foreign estate" as defined in Section 7701(a)(31) of the
Code; or (iv) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust.

Taxation of Stated Interest. In general, U.S. Holders of the Notes will be
required to include interest received thereon in taxable income as ordinary
income at the time it accrues or is received, in accordance with the holder's
regular method of accounting for federal income tax purposes.

Effect of Optional Redemption and Repurchase. Under certain circumstances
the Company may be entitled to redeem a portion of the Notes. In addition, under
certain circumstances, each holder of Notes will have the right to require the
Company to repurchase all or any part of such holder's Notes. Treasury
Regulations contain special rules for determining the yield to maturity and
maturity on a debt instrument in the event the debt instrument provides for a
contingency that could result in the acceleration or deferral of one or more
payments. The Company does not believe that these rules are likely to apply to
either the Company's right to redeem the Notes or to the holders' rights to
require the Company to repurchase the Notes. Therefore, the Company does not
intend to treat such redemption and repurchase provisions of the Notes as
affecting the computation of the yield to maturity or maturity date of the
Notes.

Sale or other Taxable Disposition of the Notes. The sale, exchange,
redemption, retirement or other taxable disposition of a Note will result in the
recognition of gain or loss to a U.S. Holder in an amount equal to the
difference between (a) the amount of cash and fair market value of property
received in exchange therefor (except to the extent attributable to the payment
of accrued but unpaid stated interest) and (b) the holder's adjusted tax basis
in such Note.

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<PAGE> 89

A holder's initial tax basis in a Note purchased by such holder will be
equal to the price paid for the Note.

Any gain or loss on the sale or other taxable disposition of a Note will be
capital gain or loss. Payments on such disposition for accrued interest not
previously included in income will be treated as ordinary interest income.

The exchange of a Note by a U.S. Holder for an Exchange Note will not
constitute a taxable exchange. A U.S. Holder should have the same basis and
holding period in the Exchange Note as such U.S. Holder had in the Note.

Backup Withholding. The backup withholding rules require a payor to deduct
and withhold a tax if (i) the payee fails to furnish a taxpayer identification
number ("TIN") in the prescribed manner, (ii) the IRS notifies the payor that
the TIN furnished by the payee is incorrect, (iii) the payee has failed to
report properly the receipt of "reportable payments" and the IRS has notified
the payor that withholding is required, or (iv) the payee fails to certify under
the penalty of perjury that such payee is not subject to backup withholding. If
any one of the events discussed above occurs with respect to a holder of Notes,
the Company, its paying agent or other withholding agent will be required to
withhold a tax equal to 31% of any "reportable payment" made in connection with
the Notes of such holder. A "reportable payment" includes, among other things,
amounts paid in respect of interest on a Note. Any amounts withheld from a
payment to a holder under the backup withholding rules will be allowed as a
refund or credit against such holder's federal income tax, provided that the
required information is furnished to the IRS. Certain holders (including, among
others, corporations and certain tax-exempt organizations) are not subject to
backup withholding.

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS

This section discusses specific rules applicable to a Non-U.S. Holder (as
defined below) of Notes. This summary does not address the tax consequences to
stockholders, partners or beneficiaries in a Non-U.S. Holder. For purposes
hereof, a "Non-U.S. Holder" is any person who is not a U.S. Holder and is not
subject to U.S. federal income tax on a net basis on income with respect to a
Note because such income is effectively connected with the conduct of a U.S.
trade or business.

Interest. Payments of interest to a Non-U.S. Holder that do not qualify
for the portfolio interest exception discussed below will be subject to
withholding of U.S. federal income tax at a rate of 30% unless a U.S. income tax
treaty applies to reduce, or eliminate, the rate of withholding. To claim a
treaty reduced rate, the Non-U.S. Holder must provide a properly executed Form
1001 or applicable successor form.

Interest that is paid to a Non-U.S. Holder on a Note will not be subject to
U.S. income or withholding tax if the interest qualifies as "portfolio
interest." Generally, interest on the Notes that is paid by the Company will
qualify as portfolio interest if (i) the Non-U.S. Holder does not own, actually
or constructively, 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote; (ii) the Non-U.S. Holder is not a
controlled foreign corporation that is related to the Company actually or
constructively through stock ownership for U.S. federal income tax purposes;
(iii) the Non-U.S. Holder is not a bank receiving interest on a loan entered
into in the ordinary course of business; and (iv) either (x) the beneficial
owner of the Note provides the Company or its paying agent with a properly
executed certification on IRS Form W-8 (or a suitable substitute form), signed
under penalties of perjury, that the beneficial owner is not a "U.S. person" for
U.S. federal income tax purposes and that provides the beneficial owner's name
and address, or (y) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
business holds the Note and certifies to the Company or its agent under
penalties of perjury that the IRS Form W-8 (or a suitable substitute) has been
received by it from the beneficial owner of the Note or a qualifying
intermediary and furnishes the payor a copy thereof.

Treasury regulations that will be effective with respect to payments made
after December 31, 1998 (the "Withholding Regulations") provide alternative
methods for satisfying the certification requirements described in clause (iv)
above. The Withholding Regulations also will require, in the case of Notes held
by a foreign partnership, that (x) the certification described in clause (iv)
above be provided by each partner and

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<PAGE> 90

(y) the partnership provide certain information, including its taxpayer
identification number. A look-through rule will apply in the case of tiered
partnerships.

Sale, Exchange or Retirement of Notes. Any gain realized by a Non-U.S.
Holder on the sale, exchange or retirement of the Notes, will generally not be
subject to U.S. federal income tax or withholding unless (i) the Non-U.S. Holder
is an individual who was present in the U.S. for 183 days or more in the taxable
year of the disposition and meets certain other requirements; or (ii) the
Non-U.S. Holder is subject to tax pursuant to certain provisions of the Code
applicable to certain individuals who renounce their U.S. citizenship or
terminate long-term U.S. residency. If a Non-U.S. Holder falls under (ii) above,
the holder will be taxed on the net gain derived from the sale under the
graduated U.S. federal income tax rates that are applicable to U.S. citizens and
resident aliens, and may be subject to withholding under certain circumstances.
If a Non-U.S. Holder falls under (i) above, the holder generally will be subject
to U.S. federal income tax at a rate of 30% on the gain derived from the sale
(or reduced treaty rate) and may be subject to withholding in certain
circumstances.

U.S. Information Reporting and Backup Withholding Tax. Back-up withholding
generally will not apply to a Note issued in registered form that is
beneficially owned by a Non-U.S. Holder if the certification of Non-U.S. Holder
status is provided to the Company or its agent as described above in "Certain
Federal Income Tax Consequences to Non-U.S. Holders Interest," provided that the
payor does not have actual knowledge that the holder is a U.S. person. The
Company may be required to report annually to the IRS and to each Non-U.S.
Holder the amount of interest paid to, and the tax withheld, if any, with
respect to each Non-U.S. Holder.

If payments of principal and interest are made to the beneficial owner of a
Note by or through the foreign office of a custodian, nominee or other agent of
such beneficial owner, or if the proceeds of the sale of Notes are paid to the
beneficial owner of a Note through a foreign office of a "broker" (as defined in
the pertinent Regulations), the proceeds will not be subject to backup
withholding (absent actual knowledge that the payee is a U.S. person).
Information reporting (but not backup withholding) will apply, however, to a
payment by a foreign office of a custodian, nominee, agent or broker that is (i)
a U.S. person, (ii) a controlled foreign corporation for U.S. federal income tax
purposes, or (iii) a foreign person that derives 50% or more of its gross income
from the conduct of a U.S. trade or business for a specified three-year period
or, effective after December 31, 1998, by a foreign office of certain other
persons, unless the broker has in its records documentary evidence that the
holder is a Non-U.S. Holder and certain conditions are met (including that the
broker has no actual knowledge that the holder is a U.S. Holder) or the holder
otherwise establishes an exemption. Payment through the U.S. office of a
custodian, nominee, agent or broker is subject to both backup withholding at a
rate of 31% and information reporting, unless the holder certifies that it is a
Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption.

Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against, or refund of, such holder's
U.S. federal income tax liability, provided that certain information is provided
by the holder to the IRS.

EXISTING NOTES REGISTRATION RIGHTS

The Company and the Initial Purchasers entered into the Registration Rights
Agreement on the Issue Date, pursuant to which the Company agreed, for the
benefit of the holders of the Existing Notes, at the expense of the Company, to
(i) file on or prior to the 60th calendar day following the Closing Date a
registration statement on Form S-4 if the use of such form is then available
(the "Exchange Offer Registration Statement") with the Commission with respect
to a registered offer to exchange the Existing Notes for a new issue of debt
securities of the Company (the "Exchange Notes") to be issued under the
Indenture in the same aggregate principal amount as and with terms that will be
identical in all respects to the Existing Notes (except that the Exchange Notes
will not contain the interest rate step-up provision described below or the
transfer restrictions described herein), (ii) use its best efforts to cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act on or prior to the 180th calendar day following the Closing Date
and (iii) use its best efforts to consummate the Exchange Offer on or prior to
the 210th calendar
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<PAGE> 91

day following the Closing Date. Promptly after the Exchange Offer Registration
Statement is declared effective, the Company will offer the Exchange Notes in
exchange for surrender of the Existing Notes (the "Exchange Offer"). The Company
will keep the Exchange Offer open for not less than 30 days (or longer if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the holders of the Existing Notes. For each Existing Note tendered to
the Company pursuant to the Exchange Offer and not validly withdrawn by the
holder thereof, the holder of such Existing Note will receive an Exchange Note
having a principal amount equal to the principal amount of such surrendered
Existing Note.

Under existing Commission interpretations, the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided, that in the case of
broker-dealers, a prospectus meeting the requirements of the Securities Act be
delivered as required. The Company has agreed for a period of 180 days after
consummation of the Exchange Offer to make available a prospectus meeting the
requirements of the Securities Act to any broker-dealer for use in connection
with any resale of any such Exchange Notes acquired as described below. A
broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Rights Agreement (including certain indemnification rights and obligations).

Each holder of the Existing Notes who wishes to exchange such Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business; (ii) it
has no arrangement with any person to participate in the distribution (within
the meaning of the Securities Act) of the Exchange Notes and (iii) it is not an
"affiliate", as defined in Rule 405 of the Securities Act, of the Company, or if
it is an affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.

In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, or if for any reason the
Exchange Offer is not consummated within 210 days of the Closing Date or upon
written request to the Company within 90 days of the consummation of the
Exchange Offer if any holder of the Existing Notes (other than the Initial
Purchasers) is not eligible to participate in the Exchange Offer, or upon
request of either Initial Purchaser under certain circumstances, the Company
will, at its expense, (i) as promptly as practicable, and in any event on or
prior to 60 days after such filing obligation arises, file with the Commission a
shelf registration statement (the "Shelf Registration Statement") covering
resales of the Existing Notes, (ii) use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act on or
prior to 45 days after such filing occurs and (iii) keep effective the Shelf
Registration Statement until two years after the Closing Date (or such shorter
period that will terminate when all the Notes covered thereby have been sold
pursuant thereto or in certain other circumstances). The Company will, in the
event of the filing of a Shelf Registration Statement, provide to each holder of
the Existing Notes covered by the Shelf Registration Statement 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
Existing Notes. A holder of Existing Notes that sells such Notes pursuant to the
Shelf Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to the
purchaser, 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 that are applicable to such
holder (including certain indemnification obligations). In addition, each holder
of the Existing Notes will be required to deliver certain information to be used
in connection with the Shelf Registration Statement in order to have its Notes
included in the Shelf Registration Statement.

Although the Company intends to file one of the registration statements
described above, there can be no assurance that either registration statement
will be filed or, if filed, that it will become effective. If the Company fails
to comply with the above provisions or if such registration statement fails to
become effective,

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<PAGE> 92

then, as liquidated damages, additional interest will become payable in respect
of the Existing Notes as follows:

If (i) an Exchange Offer Registration Statement is not filed with the
Commission on or prior to the 60th calendar day following the Closing Date;
or

(ii) the Exchange Offer Registration Statement is not declared
effective on or prior to the 180th calendar day following the Closing Date;
or

(iii) the Exchange Offer is not consummated or a Shelf Registration
Statement is not declared effective on or prior to the 210th calendar day
after the Closing Date; or

(iv) either (A) the Exchange Offer Registration Statement ceases to be
effective at any time prior to the time that the Exchange Offer is
consummated or (B) if applicable, subject to certain exceptions, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of its effective date,

(each such event referred to in clause (i) through (iv) above, a "Registration
Default"), then the per annum interest rate on the Notes will increase by 25
basis points following the 60-day period referred to in clause (i) above,
following the 180-day period referred to in clause (ii) above, following the
210-day period referred to in clause (iii) above or in the case of clause (iv)
above, immediately following such Registration Default; and the per annum
interest rate will increase by an additional 25 basis points at the beginning of
each subsequent 30-day period in the case of clause (i), (ii) or (iii) above, or
90-day period in the case of clause (iv) above; provided, however, that in no
event will the per annum interest rate borne by the Notes be increased by more
than 150 basis points. Upon the filing of the Exchange Offer Registration
Statement, the consummation of the Exchange Offer or the effectiveness of the
Shelf Registration Statement, as the case may be, the interest borne by the
Notes from the date of such filing, consummation or effectiveness, as the case
may be, will be reduced to the original interest rate set forth on the cover of
this Exchange Offer Prospectus; provided, however, that, if after any such
reduction in interest rate, a different Registration Default occurs, the
interest rate may again be increased pursuant to the foregoing provisions.

The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement, a copy of which is available as
set forth under "Additional Information".

BOOK-ENTRY; DELIVERY AND FORM

Except as set forth in below, the Exchange Notes will be initially issued
in the form of one or more registered Notes in global form without coupons (each
a "Global Note"). Each Global Note will be deposited with, or on behalf of, the
Trustee as custodian for The Depository Trust Company (the "Depositary") and
registered in the name of Cede & Co., as nominee of the Depositary (such nominee
being referred to herein as the "Global Note Holder").

Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's Participants and
the Depositary's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to own,
transfer or pledge Exchange Notes evidenced by the Global Note will be limited
to such extent.

So long as the Global Note Holder is the registered owner of any Exchange
Notes, the Global Note Holder will be considered the sole holder under the
Indenture of any Exchange Notes evidenced by the Global Note. Beneficial owners
of Exchange Notes evidenced by the Global Note will not be considered the owners
or holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Exchange
Notes.

Certificated Notes

If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary or the Depositary ceases to be
registered as a clearing agency under the Exchange Act and the Company is unable
to locate a qualified successor within 90 days or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to change the issuance of
Notes in the form of Certificated Securities under the Indenture then, upon
surrender by the Global Note Holder of its Global Note, Certificated Notes will
be issued to each person that the Global Note Holder and the Depositary identify
as being the beneficial owner of the related Notes. Upon any such issuance, the
Depositary is required to register such Certificated Securities in the name of
such person or persons (or the nominees of any thereof), and cause the same to
be delivered thereto.

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<PAGE> 94

PLAN OF DISTRIBUTION

Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for Existing Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any holder which
is (i) an "Affiliate," (ii) a broker-dealer who acquired Existing Notes directly
from the Company or (iii) broker-dealers who acquired Existing Notes as a result
of market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, such holders have no arrangement or understanding with any person to
participate in a distribution of such Exchange Notes and that such holders are
not engaged in and do not intend to engage a distribution of the Exchange Notes;
provided that broker-dealers receiving Exchange Notes in the Exchange Offer will
be subject to a prospectus delivery requirement with respect to resales of such
Exchange Notes.

Each broker-dealer that receives Exchange 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 Exchange Notes. 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 Exchange Notes received in
exchange for Existing Notes where Existing Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 120 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, all dealers affecting
transactions in the Exchange Notes may be required to deliver a prospectus.

The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange 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 Exchange 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 at 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
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of Exchange
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, 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 120 days after the Expiration Date, the Company will
promptly send 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 Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify such holders (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.

PSI, FCCM and their affiliates also provide or have provided banking,
advisory and other financial services to the Company in the ordinary course of
their businesses. On March 2, 1998, Prudential Securities Credit Corp. ("PSCC"),
an affiliate of PSI, and First Chicago Capital Corporation ("FCCC"), an
affiliate of FCCM, purchased $8.5 million and $1.5 million, respectively, of
Bridge Notes from Holdings, the proceeds of which were loaned to the Company and
used to help finance the Unisign acquisition. In addition, First Chicago, also
an affiliate of FCCM, acted as the agent and a bank under the Company's 1994
credit facility, as well as the Original Credit Facility and the Senior Credit
Facility, the proceeds of which were used to help finance acquisitions,
including the TSS and Unisign acquisitions. The Company used a portion of the
proceeds of the Initial Offering to repay in full the Senior Credit Facility and
the intercompany loan, at which time Holdings repaid the Bridge Notes. PSI,
PSCC, FCCC, First Chicago and FCCM have received customary compensation in
connection with these transactions.

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LEGAL MATTERS

Certain legal matters with respect to the legality of the Exchange Notes
offered hereby will be passed upon for the Company by St. John & Wayne, L.L.C.,
Newark, New Jersey. In rendering its opinion on the validity of the Notes,
counsel for the Company will express no opinion as to federal or state laws
relating to fraudulent transfers.

EXPERTS

The financial statements of the Company as of and for the year ended
December 31, 1997 included in this Prospectus and Registration Statement have
been audited by McGladrey & Pullen, LLP, independent auditors, as stated in
their report appearing herein and are included in reliance upon such report and
upon the authority of such firm as experts in accounting and auditing.

The financial statements of the Company as of and for the years ended
December 31, 1995 and 1996 included in this Prospectus and Registration
Statement have been audited by McGrail Merkel Quinn & Associates, independent
auditors, as stated in their report appearing herein and are included in
reliance upon such report and upon the authority of such firm as experts in
accounting and auditing.

The financial statements of Unisign Corporation, Inc. -- Outdoor
Advertising Division as of and for the years ended December 31, 1996 and 1997
included in this Prospectus and Registration Statement have been audited by
McGrail Merkel Quinn & Associates, independent auditors, as stated in their
report appearing herein and are included in reliance upon such report and upon
the authority of such firm as experts in accounting and auditing.

The financial statements of Tri-State Systems, Inc. as of and for the
period October 1, 1996 through June 11, 1997 and as of and for the years ended
September 30, 1995 and 1996 included in this Prospectus and Registration
Statement have been audited by Smith & Radigan, independent auditors, as stated
in their report appearing herein and are included in reliance upon such report
and upon the authority of such firm as experts in accounting and auditing.

The financial statements of Western Outdoor Advertising Co. -- Outdoor
Advertising Division as of and for the years ended October 31, 1996 and 1997
included in this Prospectus and Registration Statement have been audited by
Frankel, Zacharia, Arnold, Nissen, Stamp & Reinsch, LLC, independent auditors,
as stated in their report appearing herein and are included in reliance upon
such report and upon the authority of such firm as experts in accounting and
auditing.

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CHANGE IN ACCOUNTANTS

On March 12, 1998, the Company engaged McGladrey & Pullen, LLP and
dismissed McGrail Merkel Quinn & Associates as the independent auditors for the
Company. Prior to the engagement of McGladrey & Pullen, LLP, McGrail Merkel
Quinn & Associates served as the principal independent auditors for the Company.
The Company engaged McGladrey & Pullen, LLP and dismissed McGrail Merkel Quinn &
Associates in anticipation of the Initial Offering because of the Company's
desire to have a national firm. The change to McGladrey & Pullen, LLP was
approved by the Board of Directors of the Company. The reports on the Company's
financial statements prepared by McGrail Merkel Quinn & Associates for the years
ended December 31, 1995 and December 31, 1996 contained no adverse opinion or
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with the audits for the
years ended December 31, 1995 and December 31, 1996, and for the period from
January 1, 1997 through March 12, 1998, there were no disagreements with McGrail
Merkel Quinn & Associates on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of McGrail Merkel Quinn &
Associates, would have caused McGrail Merkel Quinn & Associates to make
reference to the subject matter of the disagreements in its reports.

AVAILABLE INFORMATION

The Company intends to file reports and other information with the
Commission pursuant to the informational requirements of the Exchange Act.

The Company has filed with the Commission a Registration Statement (which
term shall include all amendments thereto) on Form S-4 under the Securities Act
with respect to the Exchange Notes offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and reference is made to the
Registration Statement and the exhibits thereto for further information with
respect to the Company. Such reports, the Registration Statement and the
exhibits thereto may be inspected, without charge, at the offices of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its regional
offices at Seven World Trade Center, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the public reference section of the Commission at its
Washington address upon payment of the prescribed fee. Such reports and other
information can also be reviewed through the Commission's Web site
(http://www.sec.gov).

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INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
FINANCIAL STATEMENTS, TRI-STATE OUTDOOR MEDIA GROUP, INC.
Unaudited balance sheet................................... F-2
Unaudited statements of operations........................ F-3
Unaudited statements of cash flows........................ F-4
Notes to unaudited financial statements................... F-5
Independent Auditors' Reports............................. F-8
Balance sheets............................................ F-10
Statements of operations.................................. F-11
Statements of accumulated deficit......................... F-12
Statements of cash flows.................................. F-13
Notes to financial statements............................. F-14

FINANCIAL STATEMENTS, UNISIGN CORPORATION, INC.
Independent Auditor's Report.............................. F-25
Balance sheets............................................ F-26
Statements of income...................................... F-27
Statements of changes in divisional equity................ F-28
Statements of cash flows.................................. F-29
Notes to financial statements............................. F-30

FINANCIAL STATEMENTS, TRI-STATE SYSTEMS, INC.
Independent Auditors' Reports............................. F-35
Balance sheet............................................. F-36
Statement of operations................................... F-37
Statement of retained earnings (deficit).................. F-38
Statement of cash flows................................... F-39
Notes to financial statements............................. F-40

Independent Auditors' Reports............................. F-45
Balance sheets............................................ F-46
Statements of operations.................................. F-47
Statements of retained earnings (deficit)................. F-48
Statements of cash flows.................................. F-49
Notes to financial statements............................. F-50

FINANCIAL STATEMENTS, WESTERN OUTDOOR ADVERTISING CO.
Independent Auditors' Report.............................. F-55
Statements of assets and liabilities...................... F-56
Statements of revenues and expenses and changes in
corporate investment................................... F-57
Statements of cash flows.................................. F-58
Notes to financial statements............................. F-59
</TABLE>

F-1
<PAGE> 98

TRI-STATE OUTDOOR MEDIA GROUP, INC.

BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE OR PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<S> <C>
ASSETS
Current Assets
Cash...................................................... $ 9,338
Restricted cash........................................... 10,484
Investments............................................... 7,965
Accounts receivable, net of allowance for doubtful
accounts of $316....................................... 2,146
Supplies.................................................. 492
Prepaid production costs.................................. 579
Prepaid site leases....................................... 1,303
Prepaid commissions, current portion...................... 276
Other current assets...................................... 282
--------
Total current assets.............................. 32,865
--------
Property and Equipment, net................................. 44,140
--------
Other Assets
Intangible assets, net.................................... 27,643
Prepaid commissions, long-term portion.................... 312
Deferred taxes............................................ 5,273
Other..................................................... 107
--------
33,335
--------
$110,340
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable.......................................... $ 342
Accrued interest.......................................... 1,236
Accrued expenses.......................................... 435
Deferred revenue.......................................... 236
Due to SGH Holdings, Inc. ................................ 125
--------
Total current liabilities......................... 2,374
Long-Term Debt
Long-term debt............................................ 100,817
--------
Total liabilities................................. 103,191
--------
Commitments and Contingencies
Stockholder's Equity
Common stock, par value, $10 per share; authorized 10,000
shares; issued and outstanding, 200 shares............. 2
Paid-in capital........................................... 16,165
Accumulated deficit....................................... (9,018)
--------
7,149
--------
$110,340
========
</TABLE>

See Note to Financial Statements.
F-2
<PAGE> 99

TRI-STATE OUTDOOR MEDIA GROUP, INC.

STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997, AND 1998
(IN THOUSANDS, EXCEPT SHARE OR PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Net revenues................................................ $ 4,415 $ 9,413
------- --------
Operating expenses:
Direct operating expenses................................. 1,319 3,179
General and administrative................................ 996 1,466
Depreciation and amortization............................. 1,224 4,027
------- --------
3,539 8,672
------- --------
Operating income.................................. 876 741
------- --------
Other income (expense):
Interest expense.......................................... (1,132) (4,198)
Other income (expense).................................... (51) 92
------- --------
Total other income (expense)...................... (1,183) (4,106)
------- --------
Loss before income tax benefit and extraordinary
loss on early extinguishment of debt............. (307) (3,365)
Income tax benefit.......................................... 129 1,347
------- --------
Loss before extraordinary loss on early
extinguishment of debt........................... (178) (2,018)
Extraordinary loss on early extinguishment of debt
(net of income taxes of $1,393)................. -- (2,089)
------- --------
Net Loss........................................ $ (178) $ (4,107)
======= ========

Basic (loss) per common share:
Loss before extraordinary loss on early
extinguishment of debt........................... $ (890) $(10,090)
Extraordinary loss on early extinguishment of
debt............................................. -- (10,445)
------- --------
Net Loss........................................ $ (890) $(20,535)
======= ========
Weighted common shares outstanding.......................... 200 200
======= ========
</TABLE>

See Note to Financial Statements.
F-3
<PAGE> 100

TRI-STATE OUTDOOR MEDIA GROUP, INC.

STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $ (178) $ (4,107)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 1,224 4,027
Deferred income tax benefit............................ (129) (2,740)
Loss on early extinguishment of debt................... -- 2,089
Accrued interest added to principal.................... 498 834
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable............................... (390) (901)
Supplies and prepaid production costs............. (106) 257
Prepaid site leases............................... (581) (327)
Prepaid commissions............................... (152) (153)
Other assets...................................... (396) (713)
Increase (decrease) in:
Accounts payable..................................... 94 297
Accrued interest..................................... 293 1,149
Accrued expenses.....................................
Deferred revenue..................................... 15 137
--------- ---------
Net cash provided by (used in) operating
activities...................................... 192 (151)
--------- ---------
INVESTING ACTIVITIES
Purchase of property and equipment........................ (1,123) (2,303)
Acquisitions.............................................. (31,348) (23,093)
Purchase of securities held for investment................ -- (7,965)
Purchase of pledged securities............................ -- (10,484)
--------- ---------
Net cash (used in) investing activities........... (32,471) (43,845)
--------- ---------
FINANCING ACTIVITIES
Proceeds for issuance of senior subordinated notes........ -- 100,000
Deferred financial costs.................................. (1,637) (5,650)
Borrowings under long-term debt agreement................. 35,050 22,889
Proceeds from revolver borrowings......................... 2,811 --
Payments on revolver borrowings........................... (4,546) (4,950)
Principal payments on long-term debt...................... -- (59,087)
Increase in due to SGH Holdings, Inc. .................... 500 --
--------- ---------
Net cash provided by financing activities.............. 32,178 53,202
--------- ---------
Net increase (decrease) in cash and cash equivalents... (101) 9,206
CASH AND CASH EQUIVALENTS
Beginning................................................. 133 132
--------- ---------
Ending.................................................... $ 32 $ 9,338
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest................................ $ 1,025 $ 3,467
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Conversion of subordinated debentures to preferred
stock.................................................. $ -- $ 16,140
========= =========
</TABLE>

See notes to financial statements.
F-4
<PAGE> 101

TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

The interim financial statements should be read in conjunction with the
financial statements and notes thereto of Tri-State Outdoor Media Group, Inc.
(the "Company") for the year ended December 31, 1997 as included in the
Prospectus. The interim information reflects all adjustments, consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the results for the interim period. Results for the
interim period are not necessarily indicative of results to be expected for the
full year.

NOTE 2. ACQUISITIONS

Effective March 2, 1998, the Company acquired substantially all the outdoor
advertising assets of Unisign Corporation, Inc. ("Unisign") for a total
acquisition cost of approximately $22.0 million, including the assumption of
certain capital leases aggregating approximately $727,000. Cash consideration
paid was $21.1 million. As a result of this acquisition, the Company acquired
display faces in Kentucky, West Virginia and Ohio. This acquisition was a new
market acquisition.

The Company entered into a purchase commitment with Unisign on March 2,
1998 for the construction of outdoor advertising structures for $1,250,000. At
that time, the Company also provided a standby letter of credit agreement in the
amount of $1,250,000 with Unisign expiring April 6, 2000. The Company does not
believe it is practical to estimate the fair value of the letter of credit and
does not believe exposure to loss is likely.

The Company purchased on July 14, 1998 certain assets of an outdoor
advertising company with approximately 244 advertising displays located in
Georgia. The purchase price was $3.0 million.

On July 23, 1998, the Company purchased certain assets of an outdoor
advertising company with approximately 50 advertising displays located in
Georgia. The purchase price was $1.2 million.

On September 18, 1998, the Company purchased certain assets of an outdoor
advertising company for a total acquisition cost of approximately $26.8 million.
As a result of this acquisition, the Company acquired display faces in 19
states. The Company entered into a new credit facility and borrowed $16 million
to finance this acquisition.

The Company has entered into various other purchase agreements since year
end aggregating $1.1 million.

The assets acquired and liabilities assumed subsequent to year end and
related acquisition costs incurred in conjunction with this acquisition were as
follows (in thousands):

<TABLE>
<CAPTION>
UNISIGN WESTERN OTHERS TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
Current assets...................................... $ 220 $ 360 $ 38 $ 618
Property and equipment and other long term assets... 9,105 11,657 2,639 23,401
Goodwill............................................ 10,185 12,194 2,210 24,589
Other intangible assets............................. 2,490 2,539 399 5,428
Assumed liabilities................................. (727) (163) (9) (899)
Acquisition costs................................... (200) (189) (177) (566)
------- ------- ------- -------
$21,073 $26,398 $ 5,100 $52,571
======= ======= ======= =======
</TABLE>

F-5
<PAGE> 102

NOTE 3. FINANCINGS

On May 20, 1998, the Company issued $100 million aggregate principal amount
of 11% Senior Notes (the "Senior Notes") pursuant to an indenture (the
"Indenture") between the Company and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee"). The Senior Notes mature on March 15, 2008 and are
senior unsecured obligations of the Company ranking pari passu with all present
and future indebtedness of the Company that by its terms is not subordinated to
the obligations represented by the Senior Notes. The Company incurred
approximately $4.7 million of costs associated with the issuance of the Senior
Notes.

The Senior Notes bear interest at 11% per annum. Interest is payable
semi-annually on each May 15 and November 15 to holders of records on the close
of business on the immediately preceding May 1 and November 1. The Company was
required to purchase approximately $10.4 million of U.S. government securities
and pledge them as security for the first two interest payments on the Senior
Notes.

Obligations under the Senior Notes are not secured.

The Senior Notes may be redeemed at the option of the Company, in whole or
in part, at any time and from time to time on or after May 15, 2003 at the
redemption prices declining ratably from 105.5% of the principal amount on May
15, 2003 to 100.0% on and after May 15, 2006, plus in each case accrued and
unpaid interest to the applicable redemption date.

The Indenture restricts the Company and its subsidiaries from, among other
things (i) incurring indebtedness; (ii) incurring liens or guaranteeing
obligations; (iii) entering into mergers or consolidations or liquidating or
dissolving; (iv) selling or otherwise disposing of property, business or assets;
(v) with certain exceptions, making loans or investments; (vi) making optional
payments or prepayments of indebtedness; (vii) limiting the ability of the
Company to create liens upon its property, assets or revenues.

Upon a change of control of the Company, each holder of Senior Notes may
require the Company to repurchase all or a portion of such holder's Senior Notes
at a purchase price equal to 10% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase.

The Company has used a portion of the net proceeds from the Senior Notes to
repay all outstanding borrowings under the Senior Credit Facility, which was
thereupon terminated.

As a result of the early extinguishment of the Senior Credit Facility, the
Company was required to record an extraordinary loss of $3.5 million ($2.1
million net of income tax effect) including the estimated fair value of the
interest rate swap agreements because they no longer met the criteria to be
accounted for as a hedge. The Company recorded a liability of $400,000 in May
1998 related to this. In September 1998, the Company settled the interest rate
swap agreements for $600,000.

In May 1998, Holdings converted the subordinated debt to paid-in capital of
the Company.

In conjunction with the Unisign acquisition, the Company borrowed $10
million from Holdings. This borrowing was subordinate to the Company's senior
debt and bore interest at LIBOR plus 4.75%, 10.4% at March 2, 1998. The
borrowings were due on demand and were repaid with the proceeds from the Senior
Notes.

The Company entered in a credit agreement with The First National Bank of
Chicago on the close of business on September 18, 1998 which was used to finance
the acquisition of Western Outdoor. The Credit Facility consists of a Facility A
Promissory Note for $14,000,000, Facility B standby Letter of Credit for
$1,250,000 in connection with the Unisign acquisition, and a Facility C
Revolving Loan for $4,000,000 for working capital and general corporate
purposes. The Promissory Note matures and the Letter of Credit and Revolver
terminates on September 30, 2000.

The Credit Facility enables the Company to borrow funds at a rate equal to
the alternate base rate, as defined by the Credit Facility, calculated on the
number of days elapsed on the basis of a 360-day year. The Company also has the
option of paying interest on loan advances at the Eurodollar Rate, as defined.
On September 18, 1998, the effective interest rate was 11% for the A Facility
and C Facility.

F-6
<PAGE> 103

The Credit Facility contains certain affirmative covenants that must be
complied with on a continuing basis. In addition, the Credit Facility contains
certain restrictive covenants which, among other things, restrict the Company
from incurring additional debt and liens on assets, limits the amount of capital
expenditures during any fiscal year, and prohibits the consolidation, merger or
sale of assets, or issuance of common stock except as permitted by the Credit
Facility. The Credit Facility also requires the Company to maintain certain
financial ratios.

The Company was required to pay a commitment fee of $385,000 and an
additional $288,750 is required if Facility A has not been repaid in full and
Facility B has not been fully cash collateralized or repaid in full by March 31,
1999. In addition, Holdings will be required to issue warrants in March 1999 to
purchase 5% of its common stock which will be exercisable if any loans under
Facility A, B and C are not repaid in full by September 30, 1999 and the letter
of credit evidenced by Facility B is not fully cash collateralized or terminated
by September 30, 1999.

The borrowings under the Credit Facility are collateralized by
substantially all of the Company's assets, including all leases, permits and
other intangible assets, and other collateral, as well as by a pledge from
Holdings of its stock in the Company. In addition, the Company must maintain
keyman life insurance on the president of the Company in the aggregate amount of
$2,500,000. The insurance policies are assigned to The First National Bank of
Chicago.

The Company has the right to prepay the borrowings in whole or in part,
without premium or penalty, as stipulated in the Credit Facility.

F-7
<PAGE> 104

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Tri-State Outdoor Media Group, Inc.
Tifton, Georgia

We have audited the accompanying balance sheet of Tri-State Outdoor Media
Group, Inc. as of December 31, 1997, and the related statements of operations,
accumulated deficit, and cash flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tri-State Outdoor Media
Group, Inc. as of December 31, 1997, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.

MCGLADREY & PULLEN, LLP

West Palm Beach, FL
March 27, 1998, except for
Notes 4, 5 and 11 as to
which the date is September 20, 1998

F-8
<PAGE> 105

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of
Tri-State Outdoor Media Group, Inc.
Joplin, Missouri

We have audited the accompanying balance sheet of Tri-State Outdoor Media
Group, Inc. as of December 31, 1996 and the related statements of operations,
accumulated deficit and cash flows for each of the years in the two year period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tri-State Outdoor Media
Group, Inc. as of December 31, 1996, and the results of its operations and cash
flows for each of the years in the two year period ended December 31, 1996, in
conformity with generally accepted accounting principles.

MCGRAIL, MERKEL, QUINN & ASSOCIATES

Scranton, PA
March 13, 1997

F-9
<PAGE> 106

TRI-STATE OUTDOOR MEDIA GROUP, INC.

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
(IN THOUSANDS,
EXCEPT SHARE OR PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
ASSETS
Current Assets (Note 5)
Cash...................................................... $ 133 $ 132
Accounts receivable, net of allowance for doubtful
accounts 1996 $71; 1997 $186........................... 815 1,429
Supplies.................................................. 258 316
Prepaid production costs.................................. -- 432
Prepaid site leases....................................... 444 1,012
Prepaid commissions, current portion...................... 146 193
Other current assets...................................... 80 211
------- -------
Total current assets.............................. 1,876 3,725
------- -------
Property and Equipment, net (Note 2)........................ 11,326 33,083
------- -------
Other Assets
Intangible assets, net (Note 3)........................... 2,553 14,421
Prepaid commissions, long-term portion.................... 197 242
Deferred taxes (Note 8)................................... 1,109 2,533
Other..................................................... 67 102
------- -------
3,926 17,298
------- -------
$17,128 $54,106
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
Current Liabilities
Current portion of long-term debt (Note 5)................ $ 1,554 $ --
Accounts payable.......................................... 320 246
Accrued interest.......................................... 119 504
Accrued expenses.......................................... 27 18
Deferred revenue.......................................... 51 99
Due to SGH Holdings, Inc.................................. -- 125
------- -------
Total current liabilities......................... 2,071 992
Long-Term Debt (Note 5)
Long-term debt, net of current portion.................... 17,920 57,998
------- -------
Total liabilities................................. 19,991 58,990
------- -------
Commitments and Contingencies (Note 9)
Stockholder's Equity (Deficiency)
Common stock, par value, $10 per share; authorized 10,000
shares; issued and outstanding 1997 and 1996; 200
shares................................................. 2 2
Paid-in capital........................................... 25 25
Accumulated deficit....................................... (2,890) (4,911)
------- -------
(2,863) (4,884)
------- -------
$17,128 $54,106
======= =======
</TABLE>

See Notes to Financial Statements.
F-10
<PAGE> 107

TRI-STATE OUTDOOR MEDIA GROUP, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE OR PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Net revenues................................................ $ 7,892 $ 8,021 $ 11,831
------- ------- --------
Operating expenses:
Direct operating expenses................................. 2,315 2,427 3,817
General and administrative................................ 1,934 2,345 2,417
Depreciation and amortization............................. 2,713 2,648 4,699
------- ------- --------
6,962 7,420 10,933
------- ------- --------
Operating income.................................. 930 601 898
------- ------- --------
Other income (expense):
Gain (loss) on sale of assets............................. 1,334 443 (143)
Interest expense.......................................... (2,094) (1,941) (4,200)
Other income (expense).................................... (153) 2 --
------- ------- --------
Total other income (expense)...................... (913) (1,496) (4,343)
------- ------- --------
Income (loss) before income tax benefit........... 17 (895) (3,445)
Income tax benefit (Note 8)................................. 8 324 1,424
------- ------- --------
Net income (loss)................................. $ 25 $ (571) $ (2,021)
======= ======= ========
Basic earnings (loss) per common share...................... $ 125 $(2,855) $(10,105)
======= ======= ========
Weighted common shares outstanding.......................... 200 200 200
======= ======= ========
</TABLE>

See Notes to Financial Statements.
F-11
<PAGE> 108

TRI-STATE OUTDOOR MEDIA GROUP, INC.

STATEMENTS OF ACCUMULATED DEFICIT
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)

<TABLE>
<S> <C>
Deficit, January 1, 1995.................................... $(2,344)
Net income................................................ 25
-------
Deficit, December 31, 1995.................................. (2,319)
Net loss.................................................. (571)
-------
Deficit, December 31, 1996.................................. (2,890)
Net loss.................................................. (2,021)
-------
Deficit, December 31, 1997.................................. $(4,911)
=======
</TABLE>

See Notes to Financial Statements.
F-12
<PAGE> 109

TRI-STATE OUTDOOR MEDIA GROUP, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................... $ 25 $ (571) $(2,021)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 2,713 2,648 4,699
Deferred income tax benefit............................ (8) (324) (1,424)
(Gain) loss on sale of assets.......................... (1,334) (443) 143
Accrued interest added to principal.................... 588 549 1,265
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................................. (215) 67 (461)
Supplies and prepaid production costs................ (149) 25 29
Prepaid site leases.................................. (112) (16) (568)
Prepaid commissions.................................. (73) (97) (20)
Other assets......................................... 37 (1) 219
Increase (decrease) in:
Accounts payable..................................... (68) (84) (154)
Accrued expenses..................................... (133) (293) 366
Deferred revenue..................................... (28) 18 (263)
Deposit.............................................. 2 (2) --
------- ------- -------
Net cash provided by operating activities......... 1,245 1,476 1,810
------- ------- -------
INVESTING ACTIVITIES
Purchase of property and equipment........................ (1,083) (1,655) (2,334)
Acquisitions (Note 4)..................................... (3,003) (286) (34,835)
Proceeds from sale of assets.............................. 2,000 3,100 --
Other acquisition costs................................... (202) (75) (101)
Other..................................................... (55) 81 (35)
------- ------- -------
Net cash provided by (used in) investing
activities...................................... (2,343) 1,165 (37,305)
------- ------- -------
FINANCING ACTIVITIES
Loan proceeds............................................. 2,500 200 35,925
Proceeds from revolver borrowings......................... 2,622 3,766 8,395
Payments on revolver borrowings........................... (908) (2,493) (6,433)
Principal payments on debt................................ (3,014) (4,055) (881)
Increase in due to SGH Holdings, Inc...................... 17 -- 125
Debt issuance costs....................................... (85) -- (1,637)
------- ------- -------
Net cash provided by (used in) financing
activities...................................... 1,132 (2,582) 35,494
------- ------- -------
Net increase (decrease) in cash................... 34 59 (1)
CASH:
Beginning................................................. 40 74 133
------- ------- -------
Ending.................................................... $ 74 $ 133 $ 132
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest................................ $ 1,464 $ 1,663 $ 3,815
======= ======= =======
</TABLE>

See Notes to Financial Statements.
F-13
<PAGE> 110

TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of business: The Company is an outdoor advertising company,
operating advertising displays in the eastern and central regions of the United
States. Most of the Company's advertising displays are located along interstate
highways and primary and secondary roads outside of urban areas. The Company
offers a full line of outdoor advertising services to its customers, including
creative design, production, installation and maintenance of the displays. The
Company primarily provides services to advertisers who wish to alert motorists
to the advertiser's place of business and to provide directions to that
business.

The Company is a 100%-owned subsidiary of SGH Holdings, Inc. ("Holdings").

Significant accounting policies:

Accounting 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.

Cash and concentration of credit risk: The Company maintains cash with
various financial institutions in accounts which, at times, may be in excess of
the FDIC insurance limits. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit risk
on cash.

Supplies and prepaid production costs: Supplies and prepaid production
costs consist primarily of material used in the production of signs, artwork and
other production costs. The cost of producing display faces for contracts for 18
months or less are recorded as prepaid production costs and are charged to
production expense over the term of the related contracts on a straight line
basis.

Prepaid expenses: The Company prepays certain costs for land leases and
sales commissions at the inception of the advertising contracts. These costs are
deferred and amortized on a straight-line basis over the period that coincides
with the recognition of income. The portion of these costs associated with
advertising revenue to be earned beyond one year of the balance sheet date has
been classified as long-term assets.

Property and equipment: Property and equipment is recorded at cost and
depreciated on a straight-line basis over the estimated useful lives of the
respective assets. The estimated useful lives of assets are as follows:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Building and improvements............................ 15-30
Advertising structures............................... 20
Advertising display faces............................ 3
Vehicles and equipment............................... 5
</TABLE>

Depreciation expense for the years ended December 31, 1995, 1996 and 1997,
amounted to $1,410,000 $1,574,000 and $2,343,000, respectively.

Intangible assets and deferred costs: Intangible assets result from
several acquisitions and include noncompete agreements, goodwill and future
contract revenues. Intangible assets are being amortized on a straight-line
basis over the following lives:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Goodwill.............................................. 15
Value of purchased contracts.......................... 1-3
Noncompete agreements................................. 5
</TABLE>

F-14
<PAGE> 111
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Costs incurred by the Company in securing financing agreements have been
deferred and are being amortized over the term of the agreements using the
effective interest method.

Amortization expense for the years ended December 31, 1995, 1996 and 1997,
amounted to $1,304,000, $1,074,000 and $2,356,000 respectively.

Financial instruments: The Company utilizes derivative financial
instruments to change the fixed/ variable interest rate mix of the debt
portfolio to reduce the Company's aggregate risk to movements in interest rates.
The derivative instruments consist of interest rate swap agreements with banks.
Gains and losses relating to qualified hedges are deferred and included in the
measurement of the related transaction, when the hedged transaction occurs. The
Company's policy is not to hold or issue derivative financial instruments for
trading purposes.

Net revenues: Revenues from outdoor advertising contracts are recognized
on a straight-line basis over the term of the contract and are net of agency
commissions. Bulletin contracts are primarily 36-month terms whereas poster
contracts are primarily 12 months or less.

Impairment of long-lived assets: The Company continually evaluates whether
events and circumstances have occurred that indicate the remaining estimated
useful life of long-lived assets may warrant revision or the remaining balance
of long-lived assets may not be recoverable. In accordance with FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, the Company records impairment losses on long-lived
assets used in operations when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amounts of those assets.

Loss per common share: Loss per common share amounts are computed using
the weighted average number of common shares outstanding.

Income taxes: Deferred income taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

The Company files a consolidated income tax return with Holdings. The
consolidated group uses the separate return method for allocating the
consolidated amount of current and deferred tax expense (benefit) to members of
the group.

NOTE 2. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1996 and
1997 (in thousands):

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Land........................................................ $ 98 $ 173
Buildings and improvements.................................. 317 648
Structures and faces........................................ 16,420 39,887
Vehicles and equipment...................................... 891 1,109
------- -------
17,726 41,817
Less accumulated depreciation............................... 6,400 8,734
------- -------
$11,326 $33,083
======= =======
</TABLE>

F-15
<PAGE> 112
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3. INTANGIBLE ASSETS

Intangible assets consist of the following at December 31, 1996 and 1997
(in thousands):

<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Goodwill.................................................... $1,729 $11,732
Debt issuance costs......................................... 698 2,335
Value of purchased contracts................................ 2,276 4,838
Noncompete agreements....................................... 364 414
------ -------
5,067 19,319
Less accumulated amortization............................... 2,514 4,898
------ -------
$2,553 $14,421
====== =======
</TABLE>

NOTE 4. ACQUISITIONS

1997:

The Tri-State Systems Acquisition: In June 1997, the Company acquired
substantially all the assets of Tri-State Systems, Inc. ("TSS") for a total
acquisition cost of $32.0 million. As a result of the acquisition of TSS, the
Company acquired display faces in Georgia, Alabama, Florida, Kentucky,
Mississippi, South Carolina and Tennessee. Through this acquisition, the Company
also acquired the bench advertising business of TSS, which involves the sale of
advertising copy on benches located at bus stops and other locations. The bench
advertising business of the Company is operated primarily in Georgia and
Alabama, as well as Florida, Kentucky, Mississippi, South Carolina and
Tennessee. Subsequent to the acquisition of TSS by the Company, the Company's
Chief Financial Officer received $161,000 for his ownership interest in TSS.

Sunbelt Outdoor Systems, Inc.: In September 1997, the Company acquired
substantially all of the assets of Sunbelt Outdoor Systems, Inc. for a total
acquisition cost of approximately $2.8 million.

Others: The Company acquired assets from Supreme Outdoor, Inc. and
Mid-American Advertising Company for a total acquisition cost of $333,000 and
$400,000, respectively, during 1997.

The assets acquired and liabilities assumed during 1997 in conjunction with
the above acquisitions were as follows (in thousands):

<TABLE>
<CAPTION>
TSS SUNBELT OTHERS TOTAL
------- ------- ------ -------
<S> <C> <C> <C> <C>
Current assets................................. $ 1,060 $ 21 $ 13 $ 1,094
Property and equipment......................... 19,562 1,734 613 21,909
Goodwill....................................... 8,997 922 84 10,003
Other intangible assets........................ 2,345 104 33 2,482
Assumed liabilities............................ (616) (27) (10) (653)
------- ------ ---- -------
$31,348 $2,754 $733 $34,835
======= ====== ==== =======
</TABLE>

The acquisitions were financed by borrowings under the Company's bank
credit facilities.

Prior years:

During 1996, the Company acquired certain assets of three small outdoor
companies for the aggregate purchase price of $286,000.

On November 30, 1995, the Company acquired substantially all of the assets
of a division of an outdoor advertising company located in and around Watertown,
New York for $2,664,000. Such operations were not material to the financial
statements during 1995.

F-16
<PAGE> 113
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

During 1995, the Company also acquired two small outdoor companies for the
aggregate purchase price of $340,000. Such operations were not material to the
financial statements during 1995.

All of the foregoing acquisitions were accounted for as purchases, and the
operations are included in the accompanying financial statements subsequent to
the acquisitions.

Unaudited pro forma results of operations for the years ended December 31,
1996 and 1997 as though these businesses had been acquired as of January 1,
1996, follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Revenue.................................................. $14,783 $15,072
Net loss................................................. (3,242) (3,211)
Loss per common share.................................... (16,210) (16,055)
</TABLE>

Subsequent to December 31, 1997:

The Unisign Acquisition: Effective March 2, 1998, the Company acquired
substantially all the outdoor advertising assets of Unisign Corporation, Inc.
("Unisign") for a total acquisition cost of approximately $22.0 million,
including the assumption of certain capital leases aggregating approximately
$727,000. Cash consideration paid was $21.1 million. As a result of this
acquisition, the Company acquired display faces in Kentucky, West Virginia and
Ohio. This acquisition was a new market acquisition.

The Company purchased on July 14, 1998 certain assets of an outdoor
advertising company with approximately 244 advertising displays located in
Georgia. The purchase price was $3.0 million.

On July 23, 1998, the Company purchased certain assets of an outdoor
advertising company with approximately 50 advertising displays located in
Georgia. The purchase price was $1.2 million.

On September 18, 1998, the Company purchased certain assets of an outdoor
advertising company for a total acquisition cost of approximately $26.8 million.
As a result of this acquisition, the Company acquired display faces in 19
states. The Company entered into a Credit Facility and borrowed $16 million to
finance this acquisition.

The Company has entered into various other purchase agreements since year
end aggregating $1.1 million.

The assets acquired and liabilities assumed subsequent to year end and
related acquisition costs incurred in conjunction with this acquisition were as
follows (in thousands):

F-17
<PAGE> 114
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5. LONG-TERM DEBT

Long-term debt at December 31, 1996 and 1997 consists of the following (in
thousands):

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Senior Debt:
The First National Bank of Chicago
Senior term loan (Facility A) payable in 25 unequal
quarterly principal installments maturing June 30, 2004;
interest payable quarterly as defined by the agreement
(A)....................................................... $11,450 $30,000
Senior term loan (Facility B) payable in 26 unequal
quarterly principal installments maturing December 31,
2004; interest payable quarterly as defined by the
agreement (A)............................................. -- 7,500
Revolving note (Facility C) provides for borrowing up to
$7,500,000 until the facility termination date of June 30,
2004. Interest is payable quarterly on the outstanding
balance. Aggregate revolving note will be reduced in
unequal quarterly principal installments commencing June
30, 2000 (A).............................................. 2,987 4,950
Subordinated Debt:
Promissory note payable to Holdings dated June 12, 1997.
Interest accrues at a rate of 15% per annum through June
12, 2000 and 14% per annum thereafter compounded quarterly
(including capitalized accrued interest of $765,000 at
December 31, 1997). Principal and accrued interest is due
and payable on January 31, 2005........................... -- 9,765
Promissory note payable to Holdings dated October 3, 1994.
Interest accrues at a rate of 12% per annum (including
capitalized accrued interest of $1,137,000 and $1,637,000
at December 31, 1996 and 1997, respectively). The
principal and accrued interest is due and payable on
October 4, 2003 (1)....................................... 5,037 5,537
Other long-term debt (secured).............................. -- 246
------- -------
19,474 57,998
Less current portion of long-term debt...................... 1,554 --
------- -------
Long-term debt, less current portion........................ $17,920 $57,998
======= =======
</TABLE>

- ---------------
(A) Senior Debt Facilities were amended as of February 27, 1998; see below for
amended terms and maturities.

Senior Debt:

To finance certain business acquisitions, the Company entered into a second
amendment to the original credit agreement (the "Senior Credit Facility") with
The First National Bank of Chicago originally dated October 3, 1994 and a
syndicate consisting of various other financial institutions (collectively
called the "Bank") on the close of business on February 27, 1998. The Senior
Credit Facility consists of a Term Loan A Facility for $37,500,000, Term Loan B
Facility for $12,500,000 (the "Term Loans"), and a Revolving Loan Commitment
(the "Revolver") of $12,500,000 (collectively the "Borrowings"). The Term Loans
mature on September 30, 2005 and March 31, 2006, respectively, and the
Revolver's termination date is September 30, 2005.

The borrowings under the Senior Credit Facility are collateralized by
substantially all of the Company's assets, including all leases, permits and
other intangible assets, and other collateral, as well as by a pledge from
Holdings of its stock in the Company. In addition, the Company must maintain
keyman life insurance on the

F-18
<PAGE> 115
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

president of the Company in the aggregate amount of $2,500,000. The insurance
policies are assigned to The First National Bank of Chicago.

The Senior Credit Facility enables the Company to borrow funds at a rate
equal to the alternate base rate, as defined by the Senior Credit Facility,
calculated on the number of days elapsed on the basis of a 360-day year. The
Company also has the option of paying interest on loan advances at the
Eurodollar Rate, as defined. The Senior Credit Facility also enables the Company
to realize a lower interest rate if its leverage ratio meets certain levels as
stipulated in the Senior Credit Facility. At December 31, 1997, the effective
interest rate was 8.813% and 10.500% for the A Facility and B Facility,
respectively. At December 31, 1996, the effective interest rate was 9.125% for
the aggregate facility loan. Accrued interest is payable in quarterly
installments on March 31, June 30, September 30 and December 31. The Senior
Credit Facility also requires payment of a commitment fee of either (a) if the
Total Leverage Ratio as of the last day of the most recently ended fiscal
quarter is equal to or greater than 3.5 to 1, .50% per annum, or (b) if the
Total Leverage Ratio as of the last day of such fiscal quarter is less than 3.0
to 1, .375% per annum. In either case, the fee is computed on the average daily
unborrowed portion of the Aggregate Total Commitment from the Effective Date to
and including the Facility C Termination Date, payable in arrears on each
payment date hereafter and on the Facility C termination date. Related to this,
the Company incurred $1,000 and $14,000 in 1996 and 1997, respectively, in
commitment fee expense.

Available borrowings under the Revolver are permanently reduced on the last
day of each fiscal quarter beginning December 31, 2001 by $625,000, thereby
reducing the availability to zero on September 30, 2005.

The Senior Credit Facility contains certain affirmative covenants that must
be complied with on a continuing basis. In addition, the Senior Credit Facility
contains certain restrictive covenants which, among other things, restrict the
Company from incurring additional debt and liens on assets, limits the amount of
capital expenditures during any fiscal year, and prohibits the consolidation,
merger or sale of assets, or issuance of common stock except as permitted by the
Senior Credit Facility. The Senior Credit Facility also requires the Company to
maintain certain financial ratios. In addition, the agreement requires the
Company to enter into a rate hedging obligation (see Interest Rate Swaps,
below).

The Company has the right to prepay the borrowings in whole or in part,
without premium or penalty, as stipulated in the Senior Credit Facility.

Subordinated Debt:

(1) Interest accrues at a rate of 12% per annum and is payable quarterly
commencing December 31, 1994. However, all quarterly interest due on or prior to
September 30, 1996 was deferred. For all quarterly payment dates subsequent to
September 30, 1996, the Company is permitted to defer the payment of interest.
If deferred, interest accrues at a rate of 15% per annum.

Interest deferred pursuant to the subordinated debt agreement amounted to
$549,000 during 1996 and $1,265,000 during 1997.

In May 1998, Holdings converted the subordinated debt to paid in capital of
the Company.

F-19
<PAGE> 116
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Maturities of long-term debt based on the Senior Credit Facility dated
February 27, 1998, as of December 31, 1997 are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- -------
<S> <C>
1998............................................... $ --
1999............................................... 1,896
2000............................................... 4,300
2001............................................... 7,800
2002............................................... 8,300
Thereafter......................................... 35,702
-------
$57,998
=======
</TABLE>

Subsequent to year end, in conjunction with the Unisign acquisition, the
Company borrowed $10 million from Holdings. This borrowing is subordinate to the
Company's senior debt and bears interest at LIBOR plus 4.75%, 10.4% at March 2,
1998. The note is due on demand. (See Note 11).

The Company has the right to prepay the borrowings in whole or in part,
without premium or penalty, as stipulated in the Credit Facility.

F-20
<PAGE> 117
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Interest Swaps Agreements:

The Company uses interest rate swap agreements to change the fixed/variable
interest rate mix of the debt portfolio to reduce the Company's aggregate risk
to movements in interest rates. Amounts paid or received under interest rate
swap agreements are accrued as interest rates change and are recognized over the
life of the swap agreements as an adjustment to interest expense. The related
amounts payable to, or receivable from, the counterparties are included in
accrued interest expense. The fair value of the swap agreements noted below were
not recognized in the financial statements since they are accounted for as a
hedge. The criteria required to be met for hedge accounting is that, first, the
item to be hedged exposes the Company to interest rate risk and, second, the
interest rate swap reduces that exposure and is designated as a hedge as
follows:

The first interest rate swap has a notional amount of $15,000,000, matures
May 17, 1999 (with an additional one year option at the Bank's discretion) and
has a fixed rate of 9.13%. During 1997, the Company incurred $56,000 related to
this agreement and increased interest expense accordingly.

The second interest rate swap has a notional amount of $15,000,000, matures
May 16, 2000 and has a fixed rate of 9.13%. During 1997, the Company incurred of
$56,000 related to this agreement and increased interest expense accordingly.

Prior to June 1997, the Company had an interest rate swap with a notional
amount of $12,000,000, a term of two years commencing November 20, 1995 and a
fixed rate of 8.995%. Also, the swaps had an interest rate collar with a
notional amount of $10,000,000, a term of one year commencing November 20, 1997
and would have provided a cap of 10.625% and a floor of 8.975%.

NOTE 6. SALE OF ASSETS

On January 25, 1996, the Company sold substantially all of its operating
assets in and around Watertown, New York for $3,100,000. Assets sold, in
addition to the outdoor advertising structures, included the site leases, sales
and advertising contracts and permits.

On June 30, 1995, the Company sold billboards located in and around Erie,
Pennsylvania for $2,000,000. Assets sold, in addition to the billboards,
included the site leases, sales contracts and permits.

NOTE 7. RELATED PARTY TRANSACTIONS

The Company leased its corporate headquarters in Joplin, Missouri from the
President, Chief Financial Officer and a Vice President of the Company, who
jointly owned the building. The Company moved its headquarters to Tifton,
Georgia in 1997 and no longer leases the building in Missouri. The Company also
leases other assets from the President and Chief Financial Officer. The rent
expense paid to related parties for the years ended December 31, 1995, 1996 and
1997 in the aggregate totaled approximately $80,000, $80,000 and $60,000
respectively. See also Note 5 for a description of subordinated promissory notes
payable to Holdings.

F-21
<PAGE> 118
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8. INCOME TAXES

The income tax benefit consists of the following for the years ended
December 31, 1995, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Currently payable:
Federal................................................... $-- $ -- $ --
State..................................................... -- -- --
Deferred benefit:
Federal................................................... 6 269 1,218
State..................................................... 2 55 206
-- ---- ------
$8 $324 $1,424
== ==== ======
</TABLE>

A reconciliation of income tax benefit at statutory rates to the income tax
benefit reported in the statements of operations is as follows (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Tax benefit at statutory rate............................... $ 6 $304 $1,171
State tax benefit, net of federal taxes..................... 2 55 206
Nondeductible expenses...................................... 2 (21) 11
Other....................................................... (2) (14) 36
--- ---- ------
Income tax benefit.......................................... $ 8 $324 $1,424
=== ==== ======
</TABLE>

At December 31, 1997, the Company has net operating loss carryforwards of
approximately $6,010,000 for federal and state income tax purposes, which expire
in varying amounts during the year ending 2009 through 2017.

Although realization is not assured, the Company believes, based on its
expectations for the future, that the taxable income of the Company will more
likely than not be sufficient to utilize all of the $6,010,000 net operating
loss carryforwards prior to their ultimate expiration in the year 2017. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.

Temporary differences between the financial statement carrying amounts and
tax bases of assets that give rise to significant portions of the deferred tax
assets relate to the following as of December 31, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 374 $2,344
Amortization.............................................. 9 15
Allowance for uncollectible accounts...................... 28 73
Property and equipment.................................... 698 101
------ ------
$1,109 $2,533
====== ======
</TABLE>

NOTE 9. COMMITMENTS

Operating leases: Noncancelable operating leases for display sites expire
in various years through 2009. These leases generally contain renewal options
for a period of years equal to the initial term of the leases. Thereafter, the
leases generally are renewable on a year to year basis unless terminated by
either party at least 30 days prior to the anniversary date.

Rental expenses for all site leases were $859,000, $1,008,000 and
$1,632,000 for the years ended December 31, 1995, 1996 and 1997, respectively.

F-22
<PAGE> 119
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum rentals for site leases at December 31, 1997 are as follows
(in thousands):

<TABLE>
<CAPTION>
YEAR AMOUNTS
- ---- -------
<S> <C>
1998................................................ $ 933
1999................................................ 788
2000................................................ 669
2001................................................ 538
2002................................................ 357
Thereafter.......................................... 1,952
------
Total minimum lease payments required............... $5,237
======
</TABLE>

In addition, the Company acquired approximately $3,900,000 in future lease
commitments in the acquisitions subsequent to year end (Note 4).

Zoning regulations: In some of the localities in which the Company
operates, outdoor advertising is subject to restrictive zoning regulations.
Although the Company believes the existence of those regulations continue to be
a factor in the operation of the Company's business, such regulations have not
had a significant effect on the results of operations.

NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

The carrying amounts approximate fair values as of December 31, 1996 and
1997 for cash, accounts receivable and accounts payable because of the
short-term maturities of those instruments.

The fair value of the interest rate instruments are the estimated amounts
that the Company would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
creditworthiness of the counterparties. At December 31, 1997, the Company
estimates it would have paid $400,000.

The Company does not believe it is practical to estimate the fair value of
the letter of credit (Note 4) and does not believe exposure to loss is likely.

The carrying amount of variable rate long-term debt instruments is
estimated to approximate fair values as the underlying agreements have been
recently negotiated and rates are tied to short-term indices. Other fixed rate
long-term debt instruments are estimated to approximate fair values as actual
rates are consistent with rates estimated to be currently available for debt of
similar terms and remaining maturities.

The fair value of the swap agreements were not recognized in the financial
statements since they are accounted for as a hedge.

NOTE 11. SENIOR NOTES

F-23
<PAGE> 120
TRI-STATE OUTDOOR MEDIA GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Obligations under the Senior Notes are not secured.

The Company has used a portion of the net proceeds from the Senior Notes to
repay all outstanding borrowings under the Senior Credit Facility, which was
thereupon terminated.

As a result of the early extinguishment of the Senior Credit Facility, the
Company was required to record an extraordinary loss of $3.5 million ($2.1
million net of income tax effect) including the estimated fair value of the
interest rate swap agreements described in Note 5 in its financial statements
because they no longer met the criteria to be accounted for as a hedge. The
Company recorded a liability of $400,000 in May 1998 related to this. In
September 1998, the Company settled the interest rate swap agreements for
$600,000.

F-24
<PAGE> 121

INDEPENDENT AUDITOR'S REPORT

Unisign Corporation, Inc.
Outdoor Advertising Division
P.O. Box 76
Ivel, Kentucky 41642-0076

We have audited the accompanying balance sheets of the Outdoor Advertising
Division of Unisign Corporation, Inc. as of December 31, 1996 and 1997, and the
related statements of income, divisional equity and cash flows for the years
then ended. 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.

The accompanying financial statements present solely the Outdoor
Advertising Division of Unisign Corporation, Inc. They are not meant to present
the financial position of Unisign Corporation, Inc. as of December 31, 1996 and
1997, or its results of operations, changes in stockholders' equity and cash
flows for the years then ended.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Outdoor Advertising
Division of Unisign Corporation, Inc. as of December 31, 1996 and 1997, and the
results of its operations, changes in divisional equity and cash flows for the
years then ended in conformity with generally accepted accounting principles.

MCGRAIL MERKEL QUINN & ASSOCIATES

Scranton, PA

March 2, 1998

F-25
<PAGE> 122

UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Due from other division................................... $ 769,602 $ 813,582
Accounts receivable, net of allowance for doubtful
accounts of $56,500 in 1996 and $50,000 in 1997........ 237,447 348,353
Prepaid land rents........................................ 45,553 48,387
Other current assets...................................... 16,104 45,100
---------- ----------
Total current assets.............................. 1,068,706 1,255,422
---------- ----------
Property and equipment
Advertising structures.................................... 4,105,609 5,172,631
Vehicles and equipment.................................... 398,331 455,277
---------- ----------
4,503,940 5,627,908
Less: Accumulated depreciation............................ 1,117,965 1,442,108
---------- ----------
Net property and equipment................................ 3,385,975 4,185,800
---------- ----------
Other assets
Deposits.................................................. 32,215 32,215
Goodwill, net............................................. 483,998 580,674
---------- ----------
Total other assets................................ 516,213 612,889
---------- ----------
Total assets...................................... $4,970,894 $6,054,111
========== ==========

LIABILITIES AND DIVISIONAL EQUITY
Current liabilities
Current portion of long-term debt......................... $ 55,289 $ 65,461
Obligations under capital leases.......................... 305,495 337,424
Accounts payable.......................................... 249,844 303,665
Accrued expenses.......................................... 37,768 45,631
---------- ----------
Total current liabilities......................... 648,396 752,181
---------- ----------
Long-term debt
Long-term debt, net of current portion.................... 144,633 105,318
Obligations under capital leases.......................... 1,290,294 952,866
---------- ----------
Total long-term debt.............................. 1,434,927 1,058,184
---------- ----------
Total liabilities................................. 2,083,323 1,810,365
---------- ----------
Divisional equity........................................... 2,887,571 4,243,746
---------- ----------
Total liabilities and divisional equity........... $4,970,894 $6,054,111
========== ==========
</TABLE>

The accompanying Notes are an integral part of these Financial Statements.
F-26
<PAGE> 123

UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION

STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Revenues, net
Paints.................................................... $2,702,546 $3,138,340
Posters................................................... 439,949 520,690
Other..................................................... -- 15,522
---------- ----------
Total revenues, net............................... 3,142,495 3,674,552
---------- ----------
Costs and expenses
Production................................................ 636,978 609,632
Lease expense............................................. 229,359 312,051
Sales and marketing....................................... 143,852 212,942
General and administrative................................ 575,990 659,646
Depreciation and amortization............................. 278,381 390,676
---------- ----------
1,864,560 2,184,947
---------- ----------
Income from operations............................ 1,277,935 1,489,605
---------- ----------
Other income (expense)
Interest income........................................... 3,098 900
Interest expense.......................................... (114,849) (94,451)
Other expense............................................. (10,438) (26,565)
Loss on disposal of assets................................ -- (13,314)
---------- ----------
Total other income (expense)...................... (122,189) (133,430)
---------- ----------
Net income........................................ $1,155,746 $1,356,175
========== ==========
</TABLE>

The accompanying Notes are an integral part of these Financial Statements.
F-27
<PAGE> 124

UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION

STATEMENTS OF CHANGES IN DIVISIONAL EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<S> <C>
Balance, at December 31, 1995............................... $1,731,825
Net income, 1996............................................ 1,155,746
----------
Balance, at December 31, 1996............................... 2,887,571
Net income, 1997............................................ 1,356,175
----------
Balance, at December 31, 1997............................... $4,243,746
==========
</TABLE>

The accompanying Notes are an integral part of these Financial Statements.
F-28
<PAGE> 125

UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Operating activities
Net income................................................ $ 1,155,746 $ 1,356,175
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 278,381 390,676
Loss on disposal of assets............................. -- 13,314
Bad debt expense....................................... 26,603 29,649
(Increase) decrease in:
Accounts receivable.................................. (106,476) (140,555)
Prepaid land rents................................... (5,553) (2,834)
Other current assets................................. (11,104) (28,996)
Deposits............................................. (26,782) --
Increase (decrease) in:
Accounts payable..................................... (99,722) 53,821
Accrued expenses..................................... (11,373) 7,863
----------- -----------
Net cash provided by operating activities......... 1,199,720 1,679,113
----------- -----------
Investing activities
Purchase of property and equipment........................ (1,354,811) (1,165,951)
Purchase of intangibles................................... (500,688) (134,540)
----------- -----------
Net cash used by investing activities............. (1,855,499) (1,300,491)
----------- -----------
Financing activities
Increase in due from other division....................... (769,602) (43,980)
Loan proceeds............................................. 103,547 30,786
Lease proceeds............................................ 1,521,269 --
Payments of principal..................................... (27,569) (59,929)
Payments on capital leases................................ (171,866) (305,499)
----------- -----------
Net cash (used) provided by financing
activities..................................... 655,779 (378,622)
----------- -----------
Net (decrease) increase in cash................... -- --
Cash balance, beginning of year............................. -- --
----------- -----------
Cash balance, end of year................................... $ -- $ --
=========== ===========
</TABLE>

The accompanying Notes are an integral part of these Financial Statements.
F-29
<PAGE> 126

UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION

NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Unisign Corporation, Inc. ("Unisign") is primarily engaged in the outdoor
advertising business. Its principal corporate offices are located in Ivel,
Kentucky. Advertising structures are located in Kentucky, southern West Virginia
and southern Ohio on leased sites.

The accompanying financial statements present solely the financial position
and results of operations, changes in divisional equity and cash flows of the
Outdoor Advertising Division (the "Division") of Unisign.

Another division of Unisign owns residential and commercial real estate
located in West Virginia and Kentucky and operates an on-premises illuminated
sign company.

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.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is the amount that, in management's
judgment, is sufficient to absorb any anticipated losses related to the accounts
receivable.

Prepaid Land Rents

Most of the Division's outdoor advertising structures are located on leased
land. Land rents are typically paid in advance for periods ranging from one to
twelve months. Prepaid land rents are expensed ratably over the related rental
term.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
assets. Expenditures for maintenance and repairs are charged to operations as
incurred; major improvements are capitalized. The estimated useful lives of the
various classes of assets are as follows:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Advertising structures...................................... 15
Vehicles and equipment...................................... 2-7
</TABLE>

Depreciation expense for the years ended December 31, 1996 and 1997,
amounted to $261,691 and $352,812, respectively.

Goodwill

Goodwill represents the excess of the cost of assets purchased during 1996
and 1997 from Holmes Outdoor Advertising over the fair value of the net
identifiable assets acquired. Goodwill is being amortized over 15 years on a
straight-line basis.

F-30
<PAGE> 127
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Revenue Recognition

The Division's revenues are generated from contracts with advertisers
generally covering periods of one to 36 months. The Division recognizes revenues
ratably over the contract term.

Barter Transactions

The Division enters into agreements to provide outdoor advertising services
in exchange for various goods and services of their customers. Revenue
recognized from these transactions approximated $103,935 and $166,660 in 1996
and 1997, respectively.

Income Taxes

Effective January 1, 1994, Unisign elected "S" Corporation status for both
Federal and State income tax purposes. Accordingly, no accrual has been made for
federal and state taxes at the corporate level, but instead the items of income,
deductions, loss and credit pass through to the stockholders.

Earnings Per Share

An earnings per share calculation has not been presented because the
Division is a component of Unisign which is a closely held company and
accordingly, earnings per share is not required or meaningful.

Cash Flow Disclosures

The Division paid interest amounting to $114,849 during the year ended
December 31, 1996 and $94,451 during the year ended December 31, 1997.

Long-Lived Assets

In accordance with Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting For the Impairment of Long-Lived Assets and For Long-Lived
Assets to be Disposed Of," the Division records impairment losses on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. Based on current
estimates, management does not believe impairment of long-lived assets is
present.

NOTE 2 -- GOODWILL

Goodwill acquired as a result of the Holmes acquisition consisted of the
following at December 31:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Goodwill............................................. $500,688 $635,228
Less: Accumulated amortization....................... 16,690 54,554
-------- --------
$483,998 $580,674
======== ========
</TABLE>

For the years ended December 31, 1996 and 1997, amortization expense
amounted to $16,690 and $37,864, respectively.

NOTE 3 -- LINES OF CREDIT

Unisign has an available company-wide line of credit with Trans Financial
Bank, N.A., in the amount of $1,003,640, with interest at prime plus 0.5% (9.0%
at December 31, 1997), and expiring March 16, 1998. The Division accessed the
line of credit on an as needed basis during the years ended December 31, 1996
and 1997.
F-31
<PAGE> 128
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The line is secured by equipment, accounts receivable, contract rights and all
other assets of Unisign excluding real estate. At December 31, 1997, $1,003,485
had been drawn down.

At December 31, 1996, Unisign had drawn down $317,300 from various lines of
credit with Trans Financial Bank, N.A. These lines of credit were repaid during
1997.

NOTE 4. NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt of the Division consisted of the following
as of December 31,:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
COMMUNITY TRUST BANK
Term note dated December 1995 and maturing December 1999;
interest is at WSJP + .25% (8.75% at December 31, 1997);
monthly principal and interest payments of $3,078; secured
by equipment. ............................................ $ 99,088 $ 67,155
Term note dated November 1996 and maturing November 2000;
interest is at WSJP + .25% (8.75% at December 31, 1997);
monthly principal and interest payments of $2,224; secured
by equipment. ............................................ 90,000 68,783
Term note to finance equipment to mature in 1999 at market
interest rate; monthly principal and interest payment of
$428...................................................... 10,834 6,455
FORD MOTOR CREDIT COMPANY
Term notes to finance vehicles, beginning to mature in 1999
at market interest rates; monthly principal and interest
payments of $780.......................................... -- 28,386
-------- --------
199,922 170,779
Less: current portion....................................... 55,289 65,461
-------- --------
Long-term debt, net of current portion...................... $144,633 $105,318
======== ========
</TABLE>

Based on the current amortization schedules, the long-term debt matures as
follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, AMOUNT
------------ --------
<S> <C>
1998...................................................... $ 65,461
1999...................................................... 67,561
2000...................................................... 32,112
2001...................................................... 5,645
--------
Total........................................... $170,779
========
</TABLE>

NOTE 5. OBLIGATIONS UNDER CAPITAL LEASES

The Division acquired certain advertising structures under the provisions
of long-term leases. For financial reporting purposes, minimum lease payments
have been capitalized. The leases expire in 2001. The aggregate purchase option
price for the leases is $306,970. The leased property under capital lease as of
December 31, 1997 had a cost of $1,771,270, accumulated amortization of $193,794
and a net book value of $1,577,476. Amortization of the leased property is
included in depreciation expense.

F-32
<PAGE> 129
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The minimum future lease payments and the present value of the net minimum
lease payments are:

<TABLE>
<CAPTION>
DUE IN YEAR
ENDED DECEMBER 31, AMOUNT
------------------ ----------
<S> <C>
1998........................................................ $ 451,778
1999........................................................ 451,778
2000........................................................ 446,345
2001........................................................ 176,438
----------
Total minimum lease payment................................. 1,526,339
Less: Imputed interest...................................... 236,049
----------
Present value of net minimum lease payments................. 1,290,290
Less: Current portion of net minimum lease payments......... 337,424
----------
Obligations under capital leases, long-term................. $ 952,866
==========
</TABLE>

NOTE 6. LEASE COMMITMENTS

Land rent expense totalled $229,359 and $312,051 in 1996 and 1997,
respectively. Minimum annual rentals under the terms of non-cancelable land
lease operating leases in effect at December 31, 1997, are payable as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
---- ----------
<S> <C>
1998..................................................... $ 233,559
1999..................................................... 181,000
2000..................................................... 167,440
2001..................................................... 159,040
2002..................................................... 148,840
Thereafter............................................... 460,211
----------
$1,350,090
==========
</TABLE>

NOTE 7. CONTINGENCIES

The Division is subject to various legal claims, suits and complaints in
the normal course of business. Such litigation includes claims by municipalities
that certain outdoor advertising structures must be removed. While the ultimate
outcome of current and future litigation cannot be predicted with certainty,
management believes, based on the advice of the Company's counsel, the final
outcome of such litigation will not have a material adverse effect on the
Company's financial position.

NOTE 8. ALLOCATION OF SHARED EXPENSES

As discussed in Note 1, the Division operated as a business unit of
Unisign. As a result, Unisign incurred and paid certain expenses on the
Division's behalf. All costs applicable to the Division have been included in
the accompanying statements of income. Certain common expenses, and expenses
incremental and proportional to the Division's operations, such as rent,
insurance, advertising, clerical and other administrative support as well as
certain managerial costs, have been allocated to the Division and included in
the accompanying statements of income. The allocations to the Division are based
on various factors, including percentage of revenue and expenses and number of
employees, which, in the judgment of management who control both Unisign and the
Division, are reasonable.

F-33
<PAGE> 130
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Common costs allocated to the Division for the years ended December 31,
1996 and 1997 are as follows (in thousands):

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Production.................................................. $ 51,654 $ 54,730
Sales and marketing......................................... 33,992 32,678
General and administrative.................................. 501,066 505,378
-------- --------
$586,712 $592,786
======== ========
</TABLE>

Management believes the costs that would have been incurred had the
Division existed on a stand alone basis would not have been materially different
than the costs reflected in the accompanying statements of income.

NOTE 9. EVENT SUBSEQUENT TO BALANCE SHEET DATE

On March 2, 1998, Unisign sold substantially all of the assets of Division
for the total consideration of approximately $21.8 million. Unisign continues to
operate its commercial sign and real estate division.

F-34
<PAGE> 131

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Tri-State Systems, Inc.

We have audited the accompanying balance sheet of Tri-State Systems, Inc.
as of June 11, 1997, and the related statements of operations, retained earnings
(deficit) and cash flows for the period October 1, 1996 through June 11, 1997
(date of ownership transfer). 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 audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tri-State Systems, Inc. as
of June 11, 1997 and the results of its operations and its cash flows for the
period October 1, 1996 through June 11, 1997 (date of ownership transfer), in
conformity with generally accepted accounting principles.

SMITH & RADIGAN

Atlanta, Georgia
February 28, 1998

F-35
<PAGE> 132

TRI-STATE SYSTEMS, INC.

BALANCE SHEET
JUNE 11, 1997

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... $ 14,599
Trade accounts receivable, less allowance for doubtful
accounts of $87,703..................................... 504,934
Other accounts receivable................................. 15,491
Inventories............................................... 107,217
Prepaid expenses:
Land rent............................................... 407,967
Other................................................... 472,044
-----------
TOTAL CURRENT ASSETS................................ 1,522,252
-----------
PROPERTY AND EQUIPMENT, at cost
Land...................................................... 75,000
Building.................................................. 613,952
Machinery and equipment................................... 137,462
Furniture and fixtures.................................... 76,863
Vehicles.................................................. 101,163
Construction in progress -- advertising structures........ 129,682
Advertising structures.................................... 18,049,450
-----------
19,183,572
Less accumulated depreciation............................. (8,393,013)
-----------
10,790,559
-----------
OTHER ASSETS
Loan and legal costs, net of amortization................. 262,199
-----------
$12,575,010
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable.......................................... $ 41,034
Accrued expenses.......................................... 64,227
Unearned income........................................... 319,590
Accrued interest.......................................... 43,756
Current portion of long-term debt......................... 1,080,083
-----------
TOTAL CURRENT LIABILITIES........................... 1,548,690
-----------
LONG-TERM DEBT
Notes payable............................................. 14,436,731
Less current maturities................................. 1,080,083
-----------
13,356,648
-----------
TOTAL LIABILITIES................................... 14,905,338
-----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock
Series A -- 15% cumulative, par value $1 per share:
Authorized, issued and outstanding -- 3,000,000
shares............................................... 3,000,000
Series B, par value $1 per share:
Authorized, issued and outstanding -- 1,500,000
shares............................................... 478,202
-----------
3,478,202
-----------
Common stock, no par value, non-voting:
Authorized -- 1,174,888 shares
Issued and outstanding -- 1,116,143 shares.............. 1,756,096
Common stock, no par value:
Authorized -- 632,632 shares
Issued and outstanding -- 631,050 shares................ 223,798
-----------
1,979,894
-----------
Retained earnings (deficit)............................... (7,757,879)
-----------
(2,299,783)
Less cost of treasury stock:
Preferred stock, Series B -- 31,198 shares and Common
stock -- 12,500 shares................................. (30,545)
-----------
Total stockholders' equity (deficiency)................... (2,330,328)
-----------
$12,575,010
===========
</TABLE>

The Notes to Financial Statements are an integral part of these Statements.

F-36
<PAGE> 133

TRI-STATE SYSTEMS, INC.

STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 1, 1996 THROUGH JUNE 11, 1997

<TABLE>
<S> <C>
Net revenues
Lease income, billboards.................................. $3,974,087
Lease income, benches..................................... 92,855
Commercial sales and production charges................... 128,740
----------
4,195,682
Cost of sales (excluding depreciation shown below).......... 1,335,705
----------
Gross profit................................................ 2,859,977
----------
Operating expenses
General and administrative................................ 552,138
Selling................................................... 385,041
Depreciation.............................................. 863,265
Amortization.............................................. 67,427
----------
1,867,871
----------
Income from operations...................................... 992,106
----------
Other expense (income)
Interest expense.......................................... 1,046,797
Gain on disposal of property and equipment................ (11,912)
Other income.............................................. (24,903)
----------
1,009,982
----------
Net loss.................................................... $ (17,876)
==========
</TABLE>

The Notes to Financial Statements are an integral part of these Statements.
F-37
<PAGE> 134

TRI-STATE SYSTEMS, INC.

STATEMENT OF RETAINED EARNINGS (DEFICIT)
FOR THE PERIOD ENDED OCTOBER 1, 1996 THROUGH JUNE 11, 1997

<TABLE>
<S> <C>
Retained earnings (deficit) at October 1, 1996.............. $(7,740,003)
Net loss for the period ended June 11, 1997................. (17,876)
-----------
Retained earnings (deficit) at June 11, 1997................ $(7,757,879)
===========
</TABLE>

The Notes to Financial Statements are an integral part of these Statements.
F-38
<PAGE> 135

TRI-STATE SYSTEMS, INC.

STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED OCTOBER 1, 1996 THROUGH JUNE 11, 1997

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (17,876)
----------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 930,692
Gain on disposal of property and equipment............. (11,912)
Decrease (increase) in:
Accounts receivable.................................... (175,060)
Inventories............................................ 25,305
Prepaid expenses....................................... (38,764)
Deposits............................................... 27,476
Increase (decrease) in:
Accounts payable and accrued expenses.................. (150,182)
Unearned income........................................ 292,995
Accrued interest....................................... (74,956)
----------
Total adjustments................................. 825,594
----------
Net cash provided by operating activities......... 807,718
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets.............................. 67,772
Purchase and refurbishing of advertising
structures -- net...................................... (700,268)
Decrease in construction-in-progress -- advertising
structures............................................. 58,669
----------
Net cash used by investing activities............. (573,827)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt............................... (323,905)
Proceeds from line of credit.............................. 221,494
Repayment of capital lease obligation..................... (31,429)
Payments for loan and closing costs....................... (92,587)
----------
Net cash used by financing activities............. (226,427)
----------
NET INCREASE IN CASH........................................ 7,464
CASH BALANCE AT BEGINNING OF PERIOD......................... 7,135
----------
CASH BALANCE AT END OF PERIOD............................... $ 14,599
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................. $1,121,753
==========
</TABLE>

The Notes to Financial Statements are an integral part of these Statements.
F-39
<PAGE> 136

TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS
JUNE 11, 1997

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Tri-State Systems, Inc. (the "Company") was incorporated in 1989 in the
state of Georgia. The Company was formed to purchase and operate an outdoor
advertising business located in Tifton, Georgia. The Company sells commercial
signs and leases billboard and bench advertising space to customers located
primarily in the Southeast. Billboard and bench leases generally have terms of
eighteen and twenty-four months, respectively.

Inventories

Inventory is valued at the lower of cost or market using the first-in,
first-out method. Inventory consists of materials and supplies used to construct
billboards and benches.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to expense as incurred, while expenditures
for renewals or betterments are capitalized. Depreciation is computed using the
straight-line method over the useful lives of the assets which range from nine
to thirty years for advertising structures, and are twenty-five years for
buildings, ten years for machinery, equipment and furniture and five years for
vehicles.

Fair Value of Financial Instruments

The Company estimates that the aggregate fair value of all financial
instruments at June 11, 1997 does not differ materially from the aggregate
carrying values of its financial instruments recorded in the balance sheet. The
estimated fair value amounts of cash and cash equivalents, receivables,
short-term investments, accounts payable and accrued liabilities approximate
fair value due to their short-term nature. The estimated fair values of
long-term debt are based on discounted cash flows using interest rates currently
available to the Company for financial instruments with similar characteristics
and maturities. Considerable judgment is necessarily required in interpreting
market data to develop the estimates of fair value, and accordingly, the
estimates are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.

Use of Estimates

F-40
<PAGE> 137
TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Amortization

The Company is amortizing deferred loan and legal costs using the
straight-line method as follows:

<TABLE>
<S> <C>
ASSET
Cost at October 1, 1996................................... $1,742,250
Additions................................................. 92,587
----------
Cost at June 11, 1997..................................... $1,834,837
----------
AMORTIZATION
Amortization period....................................... 5 years
Accumulated amortization at October 1, 1996............... $1,505,211
Amortization for 1997..................................... 67,427
----------
Accumulated amortization at June 11, 1997................. $1,572,638
----------
Net book value at June 11, 1997........................... $ 262,199
==========
</TABLE>

Prepaid Expenses

The Company records as prepaid expense certain costs for land leases, sales
commissions, repainting of structures, and corporate art department charges at
the inception of the advertising contracts.

The Company defers these costs and expenses them on a straight-line basis
over the period that coincides with the recognition of income. This period is
generally twelve months for land leases and eighteen months for sales
commissions, repainting and corporate art charges.

Income Taxes

Deferred income tax assets and liabilities are recorded for temporary
differences between the financial reporting and income tax bases of assets and
liabilities that will result in future taxable or deductible amounts. A
valuation allowance is established when necessary to reduce deferred tax assets
to the amount expected to be realized.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid
investments with an original maturity of three months or less.

F-41
<PAGE> 138
TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE B -- LONG-TERM DEBT

The Company amended and restated its loan agreement with Heller Financial,
Inc. ("Heller") effective June 30, 1993 and September 13, 1996. A summary of
notes payable is as follows:

<TABLE>
<S> <C>
Notes payable to Heller Financial, Inc. Revolving note
payable. Interest is payable monthly at the prime rate
(8.5% at June 11, 1997) plus 1.5%. The maximum borrowing
under this agreement is $1,000,000. ...................... $ 819,496
</TABLE>

Senior term loan payable. Interest is payable monthly at the prime rate plus
1.5%.
Principal is payable quarterly as follows:

September 1999.......................................... 8,884,933 11,408,277
Capital expenditure note payable. Interest is payable
monthly at the prime rate plus 1.5%. ................. 500,000
Senior subordinated note payable. Interest accrues at
the prime rate plus 2.5% and is payable monthly. ..... 1,447,714
Capital lease obligation payable to leasing company in
monthly increments of $4,122, including principal and
interest imputed at 14.8% through July 1999 and a
balloon payment of $60,000 in August 1999. ........... 127,304
Capital lease obligation payable to leasing company in
monthly increments of $3,189, including principal and
interest imputed at 16.43% through May 2001 and a
balloon payment of $45,995 in June 2001. ............. 133,940
-----------
Total long -- term debt....................... $14,436,731
===========
</TABLE>

Future maturities of long-term debt, assuming held to maturity, are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 11 AMOUNT
------------------- -----------
<S> <C>
1998........................................................ $ 1,080,083
1999........................................................ 13,211,848
2000........................................................ 77,186
2001........................................................ 67,614
-----------
$14,436,731
===========
</TABLE>

The notes payable to Heller are secured by a first security interest in the
Company's assets and substantially all of the Company's capital stock. The 1993
amended and restated loan agreement with Heller provides that any interest
payment resulting from a prime rate in excess of 6% will be applied to principal
subject to a maximum amount of 50% of the respective quarterly principal
amortization. Additionally, the agreement provides that adjusted cash flow, as
defined, will be paid to Heller annually as a reduction of principal. The
unamortized principal was due October 31, 1997; however, the Company could
extend the due date of the unamortized principal until September 30, 1998
provided certain cash flow criteria are maintained and principal installments
are continued. The Company could extend the due date of the unamortized

F-42
<PAGE> 139
TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

principal until September 30, 1999 provided certain cash flow criteria are
maintained, principal installments are current and a plan of refinancing is
diligently pursued.

NOTE C -- PREFERRED STOCK AND COMMON STOCK

Concurrent with the 1993 debt restructuring (Note B), the Company amended
and restated the articles of incorporation to authorize the following classes of
stock:

<TABLE>
<S> <C>
Series A preferred stock, par value $1 per share:
Authorized -- 3,000,000 shares
Series B preferred stock, par value $1 per share:
Authorized -- 1,500,000 shares
Common stock, no par value: non-voting,
Authorized -- 1,174,888 shares
Common stock, no par value: voting,
Authorized -- 632,632 shares
</TABLE>

The separate classes of capital stock establish a priority of payment among
the various stockholders. The $3,000,000 of Series A preferred stock and the
$1,756,096 of non-voting common stock were issued to junior subordinated
noteholders in exchange for the cancellation of junior subordinated notes
payable totaling $2,250,000 plus the related accrued interest ($2,256,096 at
June 30, 1993) and the shares of the Company's common stock ($250,000 at June
30, 1993) owned at that time by such noteholders. The Series B preferred stock
was issued by the Company as a dividend to remaining common stockholders of the
Company. The result of this transaction was to convert long-term debt to
stockholders' equity.

The Series A preferred stock accrues dividends on an accumulated, but not
compounded, basis at a rate of fifteen percent (15%) per annum on the original
issue price of $1 per share. The Series A preferred stock dividends accrue on a
daily basis from the date of original issuance of such shares until paid. The
ultimate payment of dividends is subordinated to the repayment of senior
indebtedness to Heller.

On September 13, 1996, two existing stockholders of the Company purchased
the Series A preferred stock and the non-voting common stock from those
stockholders.

NOTE D -- INCOME TAXES

The Company has temporary differences and carryforwards which give rise to
deferred tax assets at June 11, 1997. The net deferred tax asset in the amount
of approximately $3,600,000 results primarily from a net operating loss
carryforward. The net deferred tax asset has been completely offset by a
valuation allowance.

The Company has net operating loss carryforwards for federal income tax
purposes in the amount of approximately $10,600,000 at June 11, 1997. These net
operating losses can be carried forward and applied against future taxable
income, if any, and expire at various dates through 2010.

A reconciliation of income tax expense (benefit) at statutory rates to the
income tax expense (benefit) reported in the statements of operations is as
follows:

<TABLE>
<S> <C>
Tax (benefit) at statutory rate............................. $(6,078)
Increase in valuation allowance............................. 6,078
-------
Income tax expense (benefit)................................ $ --
=======
</TABLE>

F-43
<PAGE> 140
TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE E -- PROFIT SHARING

The Company's profit sharing (401(k)) plan covers all full-time employees
over age 21 who have completed twelve months continuous service and have worked
1,000 hours. The Company may make an annual matching contribution. No
contributions to the plan have been made by the Company.

NOTE F -- SUBSEQUENT EVENT

Subsequent to June 11, 1997, the stock of the Company was sold to a
corporation, and for income tax purposes, the operations are consolidated with
the acquiring corporation. Accordingly, a tax return was filed by the Company
for the period ended June 11, 1997.

Also, in connection with the sale, all debt to Heller was repaid. Fees were
paid to employees, brokers and professionals. No costs associated with the sale
of the stock were recorded as of June 11, 1997.

F-44
<PAGE> 141

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Tri-State Systems, Inc.

We have audited the accompanying balance sheets of Tri-State Systems, Inc.
as of September 30, 1995 and 1996, and the related statements of operations,
retained earnings (deficit) and cash flows for the years then ended. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tri-State Systems, Inc. as
of September 30, 1996 and 1995 and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.

SMITH & RADIGAN

Atlanta, Georgia
January 15, 1997

F-45
<PAGE> 142

TRI-STATE SYSTEMS, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... $ 5,167 $ 7,135
Trade accounts receivable, less allowance for doubtful
accounts of $80,000 in 1995 and $90,000 in 1996......... 318,232 305,500
Other accounts receivable................................. 4,729 39,865
Inventories............................................... 144,518 132,522
Prepaid expenses:
Land rent............................................... 298,704 351,450
Other................................................... 554,110 489,797
Deposits.................................................. 27,253 27,476
----------- -----------
TOTAL CURRENT ASSETS................................ 1,352,713 1,353,745
----------- -----------
PROPERTY AND EQUIPMENT, AT COST
Land...................................................... 75,000 75,000
Building.................................................. 581,313 598,106
Machinery and equipment................................... 124,600 138,175
Furniture and fixtures.................................... 69,509 74,144
Vehicles.................................................. 109,761 131,263
Construction in progress -- advertising structures........ -0- 188,351
Advertising structures.................................... 17,068,671 17,435,821
----------- -----------
18,028,854 18,640,860
Less accumulated depreciation............................. 6,520,162 7,572,775
----------- -----------
11,508,692 11,068,085
----------- -----------
OTHER ASSETS
Loan and legal costs, net of amortization................. 385,362 237,039
----------- -----------
$13,246,767 $12,658,869
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable.......................................... $ 241,512 $ 238,078
Accrued expenses.......................................... 52,626 17,365
Unearned income........................................... 1,413 26,595
Accrued interest.......................................... 130,217 118,712
Current portion of long-term debt......................... 1,172,323 1,021,865
----------- -----------
TOTAL CURRENT LIABILITIES........................... 1,598,091 1,422,615
LONG-TERM DEBT
Notes payable............................................. 15,154,474 14,570,571
Less current maturities................................. (1,172,323) (1,021,865)
----------- -----------
13,982,151 13,548,706
----------- -----------
Total Liabilities................................... 15,580,242 14,971,321
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock
Series A -- 15% cumulative, par value $1 per share:
Authorized, issued and outstanding -- 3,000,000
shares............................................... 3,000,000 3,000,000
Series B, par value $1 per share:
Authorized, issued and outstanding -- 1,500,000
shares............................................... 478,202 478,202
----------- -----------
3,478,202 3,478,202
----------- -----------
Common stock, no par value, non-voting:
Authorized -- 1,174,888 shares
Issued and outstanding -- 1,116,143 shares.............. 1,756,096 1,756,096
Common stock, no par value:
Authorized -- 632,632 shares
Issued and outstanding -- 631,050 shares................ 223,798 223,798
----------- -----------
1,979,894 1,979,894
----------- -----------
Retained earnings (deficit)............................... (7,791,571) (7,740,003)
----------- -----------
(2,333,475) (2,281,907)
Less cost of treasury stock:
Preferred stock, Series B -- 31,198 shares and Common
stock -- 12,500 shares................................. -0- (30,545)
----------- -----------
Total stockholders' equity (deficiency)............. (2,333,475) (2,312,452)
----------- -----------
$13,246,767 $12,658,869
=========== ===========
</TABLE>

The Notes to Financial Statements are an integral part of these Statements.
F-46
<PAGE> 143

TRI-STATE SYSTEMS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Net revenues
Lease income, billboards.................................. $5,345,218 $5,601,912
Lease income, benches..................................... 172,936 154,759
Commercial sales and production charges................... 236,759 217,329
---------- ----------
5,754,913 5,974,000
Cost of sales (excluding depreciation shown below).......... 1,747,059 1,805,774
---------- ----------
Gross profit................................................ 4,007,854 4,168,226
---------- ----------
Operating expenses
General and administrative................................ 704,433 657,546
Selling................................................... 479,041 512,834
Depreciation.............................................. 1,133,668 1,185,574
Amortization.............................................. 170,398 152,271
---------- ----------
2,487,540 2,508,225
---------- ----------
Income from operations...................................... 1,520,314 1,660,001
Non-recurring expenses
Georgia tree trimming charges............................. 41,862 --
---------- ----------
Income before other expense (income)...................... 1,478,452 1,660,001
---------- ----------
Other expense (income)
Interest expense.......................................... 1,643,635 1,541,257
Loss on disposal of property and equipment................ 64,161 99,415
Other income.............................................. (19,157) (32,239)
---------- ----------
1,688,639 1,608,433
---------- ----------
Net income (loss)........................................... $ (210,187) $ 51,568
========== ==========
</TABLE>

The Notes to Financial Statements are an integral part of these Statements.
F-47
<PAGE> 144

TRI-STATE SYSTEMS, INC.

STATEMENTS OF RETAINED EARNINGS (DEFICIT)

<TABLE>
<S> <C>
Balance at October 1, 1994, as originally reported.......... $(7,566,479)
Prior period adjustment -- Note G........................... (14,905)
-----------
Balance at October 1, 1994, as restated..................... (7,581,384)
Net loss for the year ended September 30, 1995, as
restated.................................................. (210,187)
-----------
Balance at September 30, 1995, as restated.................. (7,791,571)
Net income for the year ended September 30, 1996............ 51,568
-----------
Balance at September 30, 1996............................... $(7,740,003)
===========
</TABLE>

The Notes to Financial Statements are an integral part of these Statements.
F-48
<PAGE> 145

TRI-STATE SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ (210,187) $ 51,568
---------- ----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 1,304,066 1,337,855
Loss on disposal of property and equipment............. 64,161 99,415
Decrease (increase) in:
Accounts receivable.................................... (29,550) (22,404)
Inventories............................................ 32,082 11,996
Prepaid expenses....................................... (91,435) 11,568
Deposits............................................... (230) (223)
Increase (decrease) in:
Accounts payable, accrued expenses and unearned
income................................................ 49,364 (13,513)
Accrued interest....................................... 7,535 (11,505)
---------- ----------
Total adjustments................................. 1,335,993 1,413,189
---------- ----------
Net cash provided by operating activities......... 1,125,806 1,464,757
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets.............................. 122,482 92,988
Purchase and refurbishing of advertising
structures -- net...................................... (612,996) (749,029)
Increase in construction in progress -- advertising
structures............................................. -0- (188,351)
---------- ----------
Net cash used by investing activities............. (490,514) (844,392)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt............................... (591,543) (699,452)
Proceeds from capital lease transaction................... -0- 149,975
Repayment of capital lease obligation..................... (21,210) (34,427)
Payments for loan and closing costs....................... (21,250) (3,948)
Payments to acquire treasury stock........................ -0- (30,545)
---------- ----------
Net cash used by financing activities............. (634,003) (618,397)
---------- ----------
NET INCREASE IN CASH........................................ 1,289 1,968
CASH BALANCE AT BEGINNING OF YEAR........................... 3,878 5,167
---------- ----------
CASH BALANCE AT END OF YEAR................................. $ 5,167 $ 7,135
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................. $1,636,100 $1,552,762
========== ==========
</TABLE>

The Notes to Financial Statements are an integral part of these Statements.
F-49
<PAGE> 146

TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Tri-State Systems, Inc. (the Company) was incorporated in 1989 in the state
of Georgia. The Company was formed to purchase and operate an outdoor
advertising business located in Tifton, Georgia. The Company sells commercial
signs and leases billboard and bench advertising space to customers located
primarily in the Southeast. Billboard and bench leases generally have terms of
eighteen and twenty-four months, respectively.

Inventories

Inventory is valued at the lower of cost or market using the first-in,
first-out method. Inventory consists of materials and supplies used to construct
billboards and benches.

Property, Plant and Equipment

Fair Value of Financial Instruments

The Company estimates that the aggregate fair value of all financial
instruments at September 30, 1996 does not differ materially from the aggregate
carrying values of its financial instruments recorded in the balance sheet. The
estimated fair value amounts of cash and cash equivalents, receivables,
short-term investments, accounts payable and accrued liabilities approximate
fair value due to their short-term nature. The estimated fair values of
long-term debt are based on discounted cash flows using interest rates currently
available to the Company for financial instruments with similar characteristics
and maturities. Considerable judgment is necessarily required in interpreting
market data to develop the estimates of fair value, and accordingly, the
estimates are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.

Use of Estimates

F-50
<PAGE> 147
TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Amortization

The Company is amortizing deferred loan and legal costs using the
straight-line method:

<TABLE>
<S> <C>
ASSET
Cost at September 30, 1995................................ $1,738,302
Additions................................................. 3,948
----------
Cost at September 30, 1996................................ $1,742,250
----------
AMORTIZATION
Amortization period....................................... 5 years
Accumulated amortization at September 30, 1995............ $1,352,940
Amortization for 1996..................................... 152,271
----------
Accumulated amortization at September 30, 1996............ $1,505,211
----------
Net book value at September 30, 1996...................... $ 237,039
==========
</TABLE>

Prepaid Expenses

The Company records as prepaid expense certain costs for land leases, sales
commissions, repainting of structures, and corporate art department charges at
the inception of the advertising contracts.

Income Taxes

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and all highly liquid
investments with an original maturity of three months or less.

F-51
<PAGE> 148
TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE B -- LONG-TERM DEBT

The Company amended and restated its loan agreement with Heller Financial,
Inc. (Heller) effective June 30, 1993 and September 13, 1996. A summary of notes
payable is as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
Notes payable to Heller
Revolving note payable. Interest is payable monthly at the
prime rate (8.25% at September 30, 1996) plus 1.5%. The
maximum borrowing under this agreement is $1,000,000... $ 510,912 $ 598,003
Senior term loan payable. Interest is payable monthly at the
prime rate plus 1.5%. Principal is payable quarterly as
follows:
</TABLE>

<TABLE>
<CAPTION>
AMOUNT OF
PRINCIPAL PAYABLE
PAYABLE THE LAST DAY OF THE QUARTER ENDING EACH QUARTER
------------------------------------------ -----------------
<S> <C> <C> <C>
December 1996 & March, June & September 1997.. $ 244,250
December 1997 & March, June & September 1998.. $ 244,250
December 1998 & March & June 1999............. $ 297,750
September 1999................................ $8,884,933 12,518,725 11,732,183
</TABLE>

<TABLE>
<S> <C> <C>
Capital expenditure note payable. Interest is payable
monthly at the prime rate plus 1.5%. ..................... 500,000 500,000
Senior subordinated note payable. Interest accrues at the
prime rate plus 2.5% and is payable monthly............... 1,447,714 1,447,714
Capital lease obligation payable to leasing company in
monthly increments of $4,122, including principal and
interest imputed at 14.8% through July 1999 and a balloon
payment of $60,000 in August 1999......................... 177,123 152,499
Capital lease obligation payable to leasing company in
monthly increments of $3,189, including principal and
interest imputed at 16.43% through May 2001 and a balloon
payment of $45,995 in June 2001........................... -0- 140,172
----------- -----------
Total long-term debt.............................. $15,154,474 $14,570,571
=========== ===========
</TABLE>

Future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30, AMOUNT
------------- -----------
<S> <C>
1997.................................................... $ 1,021,865
1998.................................................... 1,029,119
1999.................................................... 12,437,026
2000.................................................... 26,379
2001.................................................... 56,182
-----------
$14,570,571
===========
</TABLE>

F-52
<PAGE> 149
TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Additionally, the agreement provides that adjusted cash flow, as defined, will
be paid to Heller Financial, Inc. annually as a reduction of principal. The
unamortized principal is due October 31, 1997; however, the Company may extend
the due date of the unamortized principal until September 30, 1998 provided
certain cash flow criteria are maintained and principal installments are
continued. The Company may extend the due date of the unamortized principal
until September 30, 1999 provided certain cash flow criteria are maintained,
principal installments are current and a plan of refinancing is diligently
pursued.

The loan agreement limits the Company's outside borrowings, investments,
capital expenditures and divestitures, lease commitments and dividends. In
addition, the lender requires the Company to maintain a certain level of cash
flow, as defined in the agreement. For the year ended September 30, 1996, the
Company was in default on its loan covenants dealing with capital expenditures
and outside borrowings. The lender has acknowledged that a waiver of these
covenants will be issued upon the receipt of certain documentation and payment
of a fee.

NOTE C -- PREFERRED STOCK AND COMMON STOCK

Concurrent with the debt restructuring (Note B), the Company amended and
restated the articles of incorporation to authorize the following classes of
stock:

Series A preferred stock, par value $1 per
share: Authorized -- 3,000,000 shares
Series B preferred stock, par value $1 per
share: Authorized -- 1,500,000 shares

Common stock, no par value: non-voting, Authorized -- 1,174,888 shares
Common stock, no par value: voting, Authorized -- 632,632 shares

On September 13, 1996, two existing stockholders of the Company purchased
the Series A preferred stock and the non-voting common stock from those
stockholders.

NOTE D -- INCOME TAXES

The Company has temporary differences and carryforwards which give rise to
deferred tax assets at September 30, 1996. The net deferred tax asset in the
amount of approximately $3,570,000 results primarily from a net operating loss
carryforward. The net deferred tax asset has been completely offset by a
valuation allowance.

The Company has net operating loss carryforwards for federal income tax
purposes in the amount of approximately $10,500,000 at September 30, 1996. These
net operating losses can be carried forward and applied against future taxable
income, if any, and expire at various dates through 2010.

F-53
<PAGE> 150
TRI-STATE SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of income tax expense (benefit) at statutory rates to the
income tax expense (benefit) reported in the statements of operations is as
follows:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Tax (benefit) at statutory rate............................. $(71,464) $ 17,533
Increase in valuation allowance (decrease).................. 71,464 (17,533)
-------- --------
Income tax expense (benefit)................................ $ -- $ --
======== ========
</TABLE>

NOTE E -- PROFIT SHARING AND STOCK BONUS PLAN

Effective July 1, 1993, the Company established an employee stock bonus
plan for senior management. Under this plan, the Company issued 30,050 shares of
the voting common stock of the Company to two senior managers of the Company.
The agreement provides that the stock will be forfeited if employment is
terminated within three years of issue or certain cash flow projections are not
met.

NOTE F -- FUTURE COMMITMENT

As of September 30, 1996, the Company has committed to incur approximately
$26,000 for renovation of the Company's home office. All renovation work is
expected to be completed during November 1996.

NOTE G -- PRIOR PERIOD ADJUSTMENTS

Subsequent to September 30, 1994, the Company became aware that an accrual
for compensated absences was not recorded. Accordingly, accrued expenses was
increased by $14,905 and retained earnings were decreased by $14,905 at October
1, 1994. The loss for the year ended September 30, 1995 has also been restated
to reflect an increase in accrued expenses of $3,675 and a decrease in net
income of $3,675.

F-54
<PAGE> 151

INDEPENDENT AUDITOR'S REPORT

The Stockholders
Western Outdoor Advertising Co.
Omaha, Nebraska

We have audited the accompanying statements of assets and liabilities of
the OUTDOOR ADVERTISING division of Western Outdoor Advertising Co. as of
October 31, 1997 and 1996, and the related statements of revenues and expenses
and changes in corporate investment, and cash flows for the years then ended.
These financial statements are the responsibility of division 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Outdoor Advertising
division of Western Outdoor Advertising Co., as of October 31, 1997 and 1996,
and the results of its operations, changes in corporate investment, and cash
flows for the years then ended in conformity with generally accepted accounting
principles.

Frankel, Zacharia, Arnold, Nissen, Stamp & Reinsch, LLC

Omaha, NE
September 30, 1998

F-55
<PAGE> 152

THE OUTDOOR ADVERTISING DIVISION OF
WESTERN OUTDOOR ADVERTISING CO.

STATEMENTS OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
AUDITED
OCTOBER 31 UNAUDITED
------------------------ JULY 31
1997 1996 1998
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............................. $ 271,298 $ 286,577 $ 361,289
Net accounts receivable (note 2)....................... 116,015 99,978 122,644
Inventories............................................ 206,389 227,338 279,630
Deferred sign lease sales commissions.................. 234,920 227,750 253,340
Deferred site rent..................................... 204,219 210,586 220,502
Other.................................................. 3,583 4,240 12,132
---------- ---------- ----------
Total current assets......................... 1,036,424 1,056,469 1,249,537

PROPERTY AND EQUIPMENT NET OF DEPRECIATION (NOTE 3)
Outdoor advertising structures and faces............... 1,472,152 1,423,044 1,432,263
Vehicles and other..................................... 181,816 186,108 165,371
---------- ---------- ----------
Total property and equipment, net of
depreciation............................... 1,653,968 1,609,152 1,597,634
Other
Deferred sign lease sales commissions.................. 225,706 210,240 243,406
---------- ---------- ----------
Total Assets................................. $2,916,098 $2,875,861 $3,090,577
========== ========== ==========

LIABILITIES AND CORPORATE INVESTMENT
CURRENT LIABILITIES
Accounts payable and accrued expenses.................. $ 61,664 $ 67,461 $ 55,568
Prepaid revenues....................................... 164,870 135,798 168,407
---------- ---------- ----------
Total current liabilities.................... 226,534 203,259 223,975
Corporate investment................................... 2,689,564 2,672,602 2,866,602
---------- ---------- ----------
Total Liabilities and Corporate Investment... $2,916,098 $2,875,861 $3,090,577
========== ========== ==========
</TABLE>

See accompanying notes to financial statements.
F-56
<PAGE> 153

THE OUTDOOR ADVERTISING DIVISION OF
WESTERN OUTDOOR ADVERTISING CO.

STATEMENTS OF REVENUES AND EXPENSES

AND CHANGES IN CORPORATE INVESTMENT

<TABLE>
<CAPTION>
AUDITED UNAUDITED
YEARS ENDED NINE MONTHS ENDED
OCTOBER 31 JULY 31
------------------------ ------------------------
1997 1996 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue from outdoor advertising
display leases.......................... $4,382,740 $4,298,150 $3,363,710 $3,310,759
---------- ---------- ---------- ----------
Costs and expenses
Production.............................. 568,993 608,089 462,541 415,863
Site rent............................... 517,429 492,753 364,387 367,692
Sales................................... 276,443 333,054 237,516 215,610
General and administrative.............. 356,954 342,366 295,341 264,116
Depreciation............................ 938,709 870,126 713,307 708,646
---------- ---------- ---------- ----------
Total costs and expenses........ 2,658,528 2,646,388 2,073,092 1,971,927
---------- ---------- ---------- ----------
NET INCOME................................ 1,724,212 1,651,762 1,290,618 1,338,832
Corporate investment at beginning of
period.................................. 2,672,602 2,432,390 2,689,564 2,672,602
---------- ---------- ---------- ----------
4,396,814 4,084,152 3,980,182 4,011,434
Payments on behalf of corporate........... 1,707,250 1,411,550 1,113,580 1,307,250
---------- ---------- ---------- ----------
Corporate investment at end of period..... $2,689,564 $2,672,602 $2,866,602 $2,704,184
========== ========== ========== ==========
</TABLE>

See accompanying notes to financial statements.
F-57
<PAGE> 154

THE OUTDOOR ADVERTISING DIVISION OF
WESTERN OUTDOOR ADVERTISING CO.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
AUDITED UNAUDITED
YEARS ENDED NINE MONTHS ENDED
OCTOBER 31 JULY 31
-------------------------- --------------------------
1997 1996 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers.......... $ 4,380,602 $ 4,245,880 $ 3,347,508 $ 3,290,653
Cash paid to suppliers and
employees........................... (1,720,279) (1,852,999) (1,500,074) (1,302,013)
Interest income....................... 16,741 15,498 13,110 12,713
----------- ----------- ----------- -----------
Net cash provided by operating
activities..................... 2,677,064 2,408,379 1,860,544 2,001,353
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to outdoor advertising
structures and displays............. (919,092) (872,234) (623,707) (726,875)
Purchases of vehicles and other
equipment........................... (66,001) (98,462) (33,266) (23,979)
----------- ----------- ----------- -----------
Net cash (used) by investing
activities..................... (985,093) (970,696) (656,973) (750,854)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on behalf of corporate....... (1,707,250) (1,411,550) (1,113,580) (1,307,250)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
CASH........................... (15,279) 26,133 89,991 (56,751)
Cash and cash equivalents at beginning
of period........................... 286,577 260,444 271,298 286,577
----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period.............................. $ 271,298 $ 286,577 $ 361,289 $ 229,826
=========== =========== =========== ===========
RECONCILIATION OF NET INCOME TO CASH
FLOWS FROM OPERATING ACTIVITIES
Net income............................ $ 1,724,212 $ 1,651,762 $ 1,290,618 $ 1,338,832
RECONCILING ADJUSTMENTS
Depreciation.......................... 938,709 870,126 713,307 708,646
Other................................. 1,568 (360) -- --
(INCREASE) DECREASE IN OPERATING
ASSETS
Accounts receivable................... (16,037) (10,786) (6,629) (8,530)
Inventories........................... 20,949 (37,805) (73,241) 5,571
Other................................. (15,612) (28,867) (60,952) (12,424)
INCREASE (DECREASE) IN OPERATING
LIABILITIES
Accounts payable and accrued
expenses............................ (5,797) (10,065) (6,096) (31,879)
Prepaid revenues...................... 29,072 (25,626) 3,537 1,137
----------- ----------- ----------- -----------
Net cash provided by operating
activities.......................... $ 2,677,064 $ 2,408,379 $ 1,860,544 $ 2,001,353
=========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.
F-58
<PAGE> 155

THE OUTDOOR ADVERTISING DIVISION OF
WESTERN OUTDOOR ADVERTISING CO.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 1997 AND 1996 AND JULY 31, 1998 AND 1997

Western Outdoor Advertising Co. consists of two autonomous business
operations. The Outdoor Advertising division provides design, production,
installation and maintenance of outdoor advertising displays located along
highways and roads throughout the midwest and south central areas of the United
States.

These financial statements only include the assets, liabilities and
operations of the Outdoor Advertising division.

1. Summary of significant accounting and reporting policies:

A. Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets, liabilities, revenues and expenses and related
disclosures. Actual results could vary from the estimates used.

B. Advertising display lease agreements with customers provide for
various terms, the most common of which are three and five years.
Revenue is recognized ratably by the straight-line method over the
contract term. As of October 31, 1997, the contracts provide for
minimum payments of $6,766,000 over the remaining term of the
leases, of which $3,455,000 is due to be earned and collected during
the year to end October 31, 1998.

Advertising structure cost includes materials, labor and other costs
necessary to erect the structures. Advertising display face cost
includes costs to produce and install faces in the condition
provided by contracts with customers. Sites upon which structures
are erected and maintained are rented from the landowner and such
cost is deferred and ratably charged to operations over the term of
the arrangement by the straight-line method. Face lease sales
commissions are generally paid at commencement of the lease,
however, that cost is ratably charged to operations over the term of
the lease by the straight-line method. Production costs include
utilities, sign removal, repair and maintenance, local taxes and
permits.

C. Property and equipment is stated at cost. Depreciation is computed
primarily by the straight-line method over the following useful
lives:

<TABLE>
<CAPTION>
LIFE
-----
<S> <C>
Advertising structures...................................... 10-20
Advertising display faces................................... 3-5
Automobiles and trucks...................................... 3
Tools and equipment......................................... 5
Furniture and fixtures...................................... 5
</TABLE>

Once structures are fully depreciated, such are removed from the
accounts.

D. The division maintains cash balances in financial institutions
insured by the FDIC. Cash equivalents include excess cash on deposit
which is invested in commercial paper repurchase agreements with one
day maturities.

E. Inventories are valued at the lower of cost (first-in; first-out) or
market.

F. Western Outdoor Advertising Co. is a "Small Business Corporation"
under Subchapter S of the Internal Revenue Code, which provides that
the stockholders include Company income and deductions in their
income tax returns. Therefore, no liability for income taxes is
presented in these financial statements.

F-59
<PAGE> 156
THE OUTDOOR ADVERTISING DIVISION OF
WESTERN OUTDOOR ADVERTISING CO.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

G. The carrying amounts of cash, accounts receivable and accounts
payable approximate fair values because of the short-term maturities
of those instruments.

H. The Division operates autonomously from the other division of
Western Outdoor Advertising Co. All personnel, management,
operations and administration for the Division is separate and
distinct. Accordingly, the accompanying financial statements reflect
all costs associated with operating as a separate entity.

I. The interim information reflects all adjustments, consisting only
of normal recurring accruals, which are, in the opinion of
management, necessary for a fair presentation of the results for
the interim period. Results for the interim period are not
necessarily indicative of results to be expected for the full year.

2. Net accounts receivable include the following:

<TABLE>
<CAPTION>
AUDITED
OCTOBER 31 UNAUDITED
-------------------- JULY 31
1997 1996 1998
-------- -------- ---------
<S> <C> <C> <C>
Receivable from sign lease customers..... $129,015 $111,978 $154,644
Less allowance for doubtful accounts..... 13,000 12,000 32,000
-------- -------- --------
Net accounts receivable.................. $116,015 $ 99,978 $122,644
======== ======== ========
</TABLE>

3. Outdoor advertising structures and faces, and vehicles and other
equipment is recorded at cost and consist of the following:

<TABLE>
<CAPTION>
AUDITED
OCTOBER 31 UNAUDITED
------------------------ JULY 31
1997 1996 1998
---------- ---------- ----------
<S> <C> <C> <C>
Advertising structures and faces
Advertising structures............... $ 345,267 $ 336,027 $ 375,670
Advertising display faces............ 2,470,864 2,366,477 2,417,784
---------- ---------- ----------
2,816,131 2,702,504 2,793,454
Less accumulated depreciation.......... 1,343,979 1,279,460 1,361,191
---------- ---------- ----------
Net advertising structures and faces... $1,472,152 $1,423,044 $1,432,263
========== ========== ==========
Vehicles and other equipment
Land................................. $ 3,495 $ 3,495 $ 3,495
Automobiles and trucks............... 285,330 288,975 285,330
Tools and equipment.................. 179,736 179,736 170,860
Furniture and fixtures............... 161,314 161,314 110,060
---------- ---------- ----------
629,875 633,520 569,745
Less accumulated depreciation.......... 448,059 447,412 404,374
---------- ---------- ----------
Net vehicles and other equipment....... $ 181,816 $ 186,108 $ 165,371
========== ========== ==========
</TABLE>

F-60
<PAGE> 157
THE OUTDOOR ADVERTISING DIVISION OF
WESTERN OUTDOOR ADVERTISING CO.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. Sites upon which structures are erected are rented from landowners
under a variety of arrangements providing for renewal at the option of the
Division. Future minimum rentals are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING
OCTOBER 31,
- ------------------
<S> <C>
1998............................................. $ 499,200
1999............................................. 274,900
2000............................................. 133,100
2001............................................. 87,000
2002............................................. 59,800
Thereafter....................................... 76,700
----------
Total minimum future rent
commitments.......................... $1,130,700
==========
</TABLE>

5. Payments on behalf of corporate consist of the following:

<TABLE>
<CAPTION>
AUDITED UNAUDITED
YEAR ENDED OCTOBER 31, NINE MONTHS ENDED JULY 31,
------------------------ --------------------------
1997 1996 1998 1997
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Distributions to
stockholders............ $1,700,000 $1,400,000 $1,100,000 $1,300,000
Payments of Enhanced
Estimated Tax Deposit... 7,250 11,550 13,580 7,250
---------- ---------- ---------- ----------
$1,707,250.. $1,411,550 $1,113,580 $1,307,250
========== ========== ========== ==========
</TABLE>

6. Outdoor advertising is subject to restrictive zoning and regulatory
restrictions. Adverse changes in such restrictions could have a similar effect
on the advertising operations.

7. Western Outdoor Advertising Co. received an offer from Tri-State
Outdoor Media Group, Inc. to purchase the operations and assets of the Outdoor
Advertising division. The transaction closed on September 18, 1998.

F-61
<PAGE> 158

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

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 1
Risk Factors.............................. 12
Use of Proceeds........................... 16
Capitalization............................ 17
Unaudited Pro Forma Financial Statements.. 18
Selected Historical Financial and Other
Data.................................... 25
Management's Discussion and Analysis...... 27
Business.................................. 34
Management................................ 46
Executive Compensation.................... 47
Principal Stockholders.................... 48
Certain Relationships and Related
Transactions............................ 50
Description of the Notes.................. 51
The Exchange Offer........................ 75
U.S. Federal Income Tax Consequences...... 84
Existing Notes Registration Rights........ 86
Book Entry; Delivery and Form............. 88
Plan of Distribution...................... 90
Legal Matters............................. 91
Experts................................... 91
Change in Accountants..................... 92
Available Information..................... 92
Index to Financial Statements............. F-1
</TABLE>

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

$100,000,000

[Tri-State Logo]

TRI-STATE OUTDOOR
MEDIA GROUP, INC.
11% Senior Notes
due 2008

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

PROSPECTUS
----------------
, 1998

- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 159

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 17-6305 of the General Corporation Code of Kansas grants the
Company the power to indemnify each person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with any such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company, and with to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful, provided, however,
no indemnification shall be made in connection with any proceeding brought by or
in the right of the Company where the person involved is adjudged to be liable
to the Company except to the extent approved by a court.

The Company's By-laws provide that any person who is made a party to any
action or proceeding because such person is or was a director or officer of the
Company will be indemnified and held harmless against all claims, liabilities
and expenses, including those expenses incurred in defending a claim and amounts
paid or agreed to be paid in connection with reasonable settlements made before
final adjudication with the approval of the Board of Directors, if such person
has acted, or in the judgment of the shareholders or directors of the Company
has acted, in good faith. The indemnification provided for in the Company's
By-laws is expressly not exclusive of any other rights to which those seeking
indemnification may be entitled as a matter of law.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

See Exhibit Index immediately following signature pages.

(b) Financial Statement Schedules.

Not applicable.

ITEM 22. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(b) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.

II-1
<PAGE> 160

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Tifton, State of Georgia, on October
29, 1998.

TRI-STATE OUTDOOR MEDIA GROUP, INC.

/s/ SHELDON G. HURST
--------------------------------------
Sheldon G. Hurst
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ SHELDON G. HURST Director and Principal October 29, 1998
- --------------------------------------------------- Executive Officer
Sheldon G. Hurst

/s/ WILLIAM G. MCLENDON Director, Principal October 29, 1998
- --------------------------------------------------- Financial and Accounting
William G. McLendon Officer and Secretary

/s/ A. WAYNE LAMM Director October 29, 1998
- ---------------------------------------------------
A. Wayne Lamm

/s/ ANTHONY LAMARCA Director October 29, 1998
- ---------------------------------------------------
Anthony LaMarca

/s/ WILLIAM P. SUTTER, JR. Director October 29, 1998
- ---------------------------------------------------
William P. Sutter, Jr.

/s/ SEAN E. CALLAHAN Director October 29, 1998
- ---------------------------------------------------
Sean E. Callahan
</TABLE>

II-2
<PAGE> 161

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S> <C>
*3.1 Restated Certificate of Incorporation of the Company
certified by the Secretary State of State of Kansas.........
*3.2 By-laws of the Company......................................
*4.1 Indenture dated as of May 15, 1998 relating to the Company's
11% Senior Notes due 2008 and the 11% Senior Series B Notes
due 2008. ..................................................
*4.2 Form of Global Note.........................................
*5.1 Opinion of St. John & Wayne, L.L.C., General Counsel of the
Company. ...................................................
*10.1 Asset Purchase Agreement, dated as of May 6, 1997, between
the Company and Tri-State Systems, Inc. ....................
*10.2 Asset Purchase Agreement, dated as of February 13, 1998,
between the Company and Unisign Corporation, Inc. ..........
*10.3 Registration Rights Agreement dated as of May 13, 1998
relating to the Company's 11% Senior Notes due 2008. .......
*10.4 Pledge Agreement dated as of May 15, 1998 relating to the
Company's 11% Senior Notes due 2008. .......................
*10.5 Tax Sharing Agreement dated as of May 20, 1998 relating to
SGH Holdings, Inc. and the Company. ........................
*10.6 Second Amended and Restated Stockholders Agreement, dated as
of February 27, 1998. ......................................
*10.7 Anti-Dilution Agreement, dated as of February 29, 1998. ....
*10.8 Credit Agreement dated as of May 20, 1998 between the
Company and The First National Bank of Chicago. ............
*10.9 Asset Purchase Agreement, dated as of September 4, 1998, by
and between Tri-State Outdoor Media Group, Inc. and Western
Outdoor Advertising Co. ....................................
*10.10 Credit Agreement among Tri-State Outdoor Media Group, Inc.,
the Lending Institutions Party Thereto, as Lenders and The
First National Bank of Chicago, as Agent, dated as of
September 18, 1998. ........................................
12.0 Tri-State Outdoor Media Group, Inc. Computation of Ratio of
Earnings to Fixed Charges. Filed herewith. .................
*16.0 Letter from McGrail Merkel Quinn & Associates. .............
23.1 Consent of McGladrey & Pullen, LLP, independent accountants
of the Company. Filed herewith. ............................
23.2 Consent of McGrail Merkel Quinn & Associates, independent
accountants of the Company. Filed herewith. ................
23.3 Consent of McGrail Merkel Quinn & Associates, independent
accountants of Unisign Corporation, Inc. Filed herewith. ...
23.4 Consent of Smith & Radigan, L.L.C., independent accountants
of Tri-State Systems, Inc. Filed herewith. .................
23.5 Consent of Frankel, Zacharia, Arnold, Nissen, Stamp &
Reinsch, L.L.C., independent accountants of Western Outdoor
Advertising Co. Filed herewith. ............................
*23.6 Consent of St. John & Wayne, L.L.C. (included in Exhibit
5.1). ......................................................
*24.1 Powers of Attorney (included on the Signature Page
hereto). ...................................................
*25.1 Statement of Eligibility of Trustee on Form T-1 of IBJ
Schroder Bank & Trust Company. .............................
*25.2 Form of Letter of Transmittal. .............................
*25.3 Form of Notice of Guaranteed Delivery. .....................
*25.4 Form of Exchange Agency Agreement between the Company and
IBJ Schroder Bank & Trust Company, as exchange agent. ......
</TABLE>

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

* Previously filed.

<PAGE> 1

Exhibit 12.0

Tri-State Outdoor Media Group, Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)

<TABLE>
<CAPTION>
Pro forma
------------
Year Ended December 31 Year Ended
---------------------------------------------------------- December 31,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Income (Loss) before income taxes $(11) $ (628) $ 17 $ (895) $(3,445) $(13,966)
Add
Portion of rents representative of
the interest factor 82 170 334 385 571 1,011
Interest on indebtedness 475 880 2,094 1,941 4,200 13,235
---- ----- ------ ------ ------- --------
Income (loss) as adjusted $546 $ 422 $2,445 $1,431 $ 1,326 $ 280
==== ====== ====== ====== ======= ========
Fixed charges
Interest on indebtedness (1) 475 880 2,094 1,941 4,200 13,235
---- ------ ------ ------ ------- --------
Rents 247 511 1,003 1,156 1,713 3,033
---- ------ ------ ------ ------- --------
Portion or rents representative of
interest factor (2) 82 170 334 385 571 1,011
---- ------ ------ ------ ------- --------

Fixed charges (1)+(2) $557 $1,050 $2,428 $2,326 $ 4,771 $ 14,246
==== ====== ====== ====== ======= ========
Ratio of earnings to fixed charges -- -- 1.0 -- -- --
==== ====== ====== ====== ======= ========
</TABLE>

Pro forma
Six Months Six Months
Ended Ended
June 30, 1998 June 30, 1998
------------- -------------
<S> <C> <C>
Loss before income taxes $(3,365) $(6,054)
Add
Portion of rents representative of
the interest factor 450 542
Interest on indebtedness 4,198 6,618
------- -------
Income (loss) as adjusted $ 1,283 $ 1,016
======= =======
Fixed charges
Interest on indebtedness (1) 4,198 6,618
------- -------
Rents 1,351 1,625
------- -------
Portion or rents representative of
interest factor (2) 450 542
------- -------

Fixed charges (1)+(2) $ 4,648 $ 7,160
======= =======
Ratio of earnings to fixed charges -- --
======= =======
</TABLE>

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in this Registration Statement on Form S-4 of
our report, dated March 27, 1998, except for notes 4, 5 and 11 as to which the
date is September 20, 1998, relating to the financial statements of Tri-State
Outdoor Media Group, Inc., which appears in the Registration Statement. We also
consent to the reference to us under the headings "Experts," "Change in
Accountants" and "Selected Historical Financial and Other Data" in such
Registration Statement. However, it should be noted that McGladrey & Pullen, LLP
has not prepared or certified such "Selected Historical Financial and Other
Data."

/s/ MCGLADREY & PULLEN, LLP

--------------------------------------
McGladrey & Pullen

West Palm Beach, Florida

October 29, 1998

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in this Registration Statement on Form S-4 of
our report, dated March 13, 1997 relating to the financial statements of
Tri-State Outdoor Media Group, Inc., which appears in the Registration
Statement. We also consent to the reference to us under the headings "Experts",
"Change in Accountants" and "Selected Historical Financial and Other Data" in
such Registration Statement. However, it should be noted that McGrail, Merkel,
Quinn & Associates has not prepared or certified such "Selected Historical
Financial and Other Data".

/s/ MCGRAIL MERKEL QUINN &
ASSOCIATES

----------------------------------------
McGrail Merkel Quinn & Associates

Scranton, Pennsylvania

October 29, 1998

<PAGE> 1

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in this Registration Statement on Form S-4 of
our report, dated March 2, 1998 relating to the financial statements of the
Outdoor Advertising Division of Unisign Corporation, Inc., which appears in the
Registration Statement. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.

/s/ MCGRAIL MERKEL QUINN &
ASSOCIATES

----------------------------------------
McGrail Merkel Quinn & Associates

Scranton, Pennsylvania

October 29, 1998

<PAGE> 1

EXHIBIT 23.4

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in this Registration Statement on Form S-4 of
our reports, dated January 15, 1997 and February 28, 1998, relating to the
financial statements of Tri-State Systems, Inc., which appear in the
Registration Statement. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.

/s/ SMITH & RADIGAN

--------------------------------------
Smith & Radigan, L.L.C.

Atlanta, Georgia

October 29, 1998

<PAGE> 1

EXHIBIT 23.5

[FRANKEL, ZACHARIA, ARNOLD, NISSEN, STAMP & REINSCH, LLC LETTERHEAD]

CONSENT OF INDEPENDENT AUDITOR

We hereby consent to the use in the Registration Statement dated October
29, 1998 of our report dated September 30, 1998, relating to the financial
statements of The OUTDOOR ADVERTISING Division of WESTERN OUTDOOR ADVERTISING
CO., which appear in the Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.

FRANKEL, ZACHARIA, ARNOLD, NISSEN, STAMP & REINSCH, LLC

/s/ FRANKEL, ZACHARIA, ARNOLD, NISSEN, STAMP &
REINSCH, LLC

----------------------------------------------------
Frankel, Zacharia, Arnold, Nissen, Stamp & Reinsch

Omaha, Nebraska

October 29, 1998