FRANKS NURSERY & CRAFTS INC, S-4/A, 1998-06-08

FRANKS NURSERY & CRAFTS INC
S-4/A, 1998-06-08
MISCELLANEOUS RETAIL

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As filed with the Securities and Exchange Commission on June 8, 1998
Registration No. 333-50815
=============================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________

AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
Frank's Nursery & Crafts, Inc.
(Exact name of Registrant as specified in its charter)

Michigan 5200 38-1561374
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
_________________________
1175 West Long Lake Road
Troy, Michigan 48098
(248) 712-7000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
_________________________
Larry T. Lakin
Chief Financial Officer
Frank's Nursery & Crafts, Inc.
1175 West Long Lake Road
Troy, Michigan 48098
(248) 712-7000
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
_________________________

Copy to:
Vincent Pagano, Jr.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
(212) 455-2000
_________________________

Approximate date of commencement of proposed sale of the securities
to the public: As soon as practicable after the effective date of this
Registration Statement.

If any of 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.
_________________________
<PAGE>
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.

<PAGE>

__________________________________________________________________________

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. 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.
___________________________________________________________________________

Subject to completion, dated June 8, 1998
PROSPECTUS
Frank's Nursery & Crafts, Inc.

Offer to Exchange up to $115,000,000 of its
10 1/4% Series B Senior Subordinated Notes due 2008
which have been Registered under the
Securities Act for any of its outstanding
10 1/4% Senior Subordinated Notes due 2008
_________________________

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ________,
1998, UNLESS EXTENDED.
_________________________

Frank's Nursery & Crafts, Inc., a Michigan corporation (the
"Company"), hereby offers (the "Exchange Offer"), upon the terms and subject
to the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange an aggregate of up to
$115,000,000 principal amount of its 10 1/4% Series B Senior Subordinated
Notes due 2008 (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for an identical
principal amount of its outstanding 10 1/4% Senior Subordinated Notes due
2008 (the "Old Notes"; collectively with the Exchange Notes, the "Notes") of
the Company from the holders thereof. As of the date of this Prospectus,
$115,000,000 aggregate principal amount of the Old Notes is outstanding.

The Exchange Notes will be obligations of the Company entitled to the
benefits of the Indenture (as defined herein) relating to the Old Notes. The
form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Old Notes except that the Exchange Notes have
been registered under the Securities Act and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing
for registration rights and liquidated damages relating to the Old Notes
under certain circumstances described in the Registration Rights Agreement
(as defined herein), which provisions will terminate as to all the Notes upon
the consummation of the Exchange Offer. See "The Exchange Offer".
<PAGE>
Interest on the Exchange Notes will be payable semi-annually in
arrears on March 1 and September 1 of each year, commencing on September 1,
1998 (each, an "Interest Payment Date"). The Exchange Notes will be
redeemable at the option of the Company, in whole or in part, at any time on
or after March 1, 2003 at the redemption prices set forth herein, plus
accrued and unpaid interest, if any, thereon to the applicable redemption
date. Prior to March 1, 2001, up to 35% of the aggregate principal amount of
Exchange Notes originally issued will be redeemable at the option of the
Company, in whole or in part, at any time, on one or more occasions, from
the net proceeds of one or more public offerings of Capital Stock (as defined
herein) of (i) the Company or (ii) FNC Holdings, Inc. ("Holdings") to the
extent the net cash proceeds thereof are (a) contributed to the Company as a
capital contribution to the common equity of the Company or (b) used to
purchase Equity Interests (as defined herein) of the Company (in either case,
other than Disqualified Stock (as defined herein)), at a price of 110.25% of
the principal amount of the Exchange Notes, together with accrued and unpaid
interest, if any, to the date of redemption; provided that at least 65% of
the aggregate principal amount of Exchange Notes remains outstanding
immediately after the occurrence of each such redemption. See "Description of
Exchange Notes". Upon the occurrence of a Change of Control (as defined
herein), each holder of Exchange Notes may require the Company to repurchase
all or a portion of such holder's Exchange Notes at a redemption price of
101% of the principal amount of the Exchange Notes, together with accrued and
unpaid interest, if any, to the date of repurchase. There can be no assurance
that upon the occurrence of a Change of Control the Company will have, or
will have access to, sufficient funds to repurchase the Exchange Notes in
manner contemplated herein. See "Description of Exchange Notes--Repurchase at
the Option of Holders--Change of Control" and "--Certain Definitions".

The Exchange Notes will be general, unsecured obligations of the
Company, subordinated in right of payment to all existing and future Senior
Debt (as defined herein) of the Company including all of the Company's
obligations under the Senior Credit Facility (as defined herein), will rank
pari passu with all future senior subordinated debt of the Company and will
rank senior in right of payment to all of the Company's future subordinated
debt. As of January 25, 1998, after giving pro forma effect to the
Transactions (as defined herein) and the Offering (as defined herein) and the
application of the proceeds therefrom, the aggregate amount of Senior Debt to
which the Exchange Notes would have been subordinated would have been $73.2
million. The Indenture will permit the Company to incur additional
Indebtedness, subject to certain limitations. See "Description of Exchange
Notes".

The Old Notes were issued and sold on February 26, 1998 in a
transaction not registered under the Securities Act in reliance upon an
exemption from the registration requirements thereof (the "Offering"). In
general, the Old Notes may not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act. The Exchange Notes are being offered hereby
in order to satisfy certain obligations of the Company contained in the
Registration Rights Agreement.
<PAGE>
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Old Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than (i) a broker-dealer who purchased such Old Notes
directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder is
acquiring the Exchange Notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Old Notes
wishing to accept the Exchange Offer must represent to the Company that such
conditions have been met. In the event that the Company's belief is
inaccurate, holders of Exchange Notes who transfer Exchange Notes in
violation of the prospectus delivery provisions of the Securities Act and
without an exemption from registration thereunder may incur liability under
the Securities Act. The Company does not assume or indemnify holders against
such liability. The Company has not sought, and does not intend to seek, its
own no-action letter, and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer. Notwithstanding the foregoing, each broker-dealer that receives
Exchange Notes in exchange for Old Notes held for its own account, as a
result of market-making or other trading activities, 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, such 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 such broker-dealer in connection with resales of Exchange Notes where
such Exchange Notes were acquired by such broker-dealer as a result of
market-making or other trading activities. The Company has agreed that, for a
period of 120 days after the consummation of the Exchange Offer, it will make
this Prospectus and any amendment or supplement to this Prospectus available
to any such broker-dealer for use in connection with any such resale. See
"Plan of Distribution".

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

Exchange Notes initially will be represented by one or more Exchange
Notes in registered, global form without interest coupons (collectively, the
"Global Exchange Notes"). The Global Exchange Notes will be deposited with
the Trustee (as defined herein) as custodian for The Depository Trust Company
("DTC"), in New York, New York, and registered in the name of DTC or its
nominee, in each case, for credit to an account of a direct or indirect
<PAGE>
participant in DTC. Ownership of beneficial interests in the Global Exchange
Note will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC or its nominee or participants
therein.

The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for exchange. The date of
acceptance and exchange of the Old Notes (the "Exchange Date") will be the
third business day following the Expiration Date (as defined herein). Old
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. The Company will not receive any cash proceeds
from the Exchange Offer. The Company will pay all of the expenses incident to
the Exchange Offer. The Exchange Offer will expire 5:00 p.m., New York City
time, on __________ __, 1998 (the "Expiration Date"). The Company does not
currently intend to extend the Expiration Date.
_________________________

See "Risk Factors" beginning on page 14 for a discussion of certain
factors that should be considered by prospective investors in connection with
the Exchange Offer and an investment in the Exchange Notes.
_________________________

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

_________________________

The date of this Prospectus is , 1998.

<PAGE>
AVAILABLE INFORMATION

The Company has filed with the Commission a registration statement on
Form S-4 (herein referred to, together with all exhibits and schedules and
supplements thereto and any amendments thereto, as the "Exchange Offer
Registration Statement") under the Securities Act with respect to the
Exchange Notes offered hereby. This Prospectus, which forms a part of the
Exchange Offer Registration Statement, does not contain all of the
information set forth in the Exchange Offer Registration Statement, as
certain parts of the Exchange Offer Registration Statement are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Exchange Notes offered
hereby, reference is hereby made to the Exchange Offer Registration
Statement. Statements contained in this Prospectus as to the contents of
certain documents are not necessarily complete and, in each instance,
reference is hereby made to the copy of such document filed as an exhibit to
the Exchange Offer Registration Statement.

The Company is not currently subject to the periodic reporting and
other informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Upon consummation of the Exchange Offer, the
Company will be subject to the information requirements of the Exchange Act
and, in accordance therewith, will file periodic reports and other
information with the Commission. In addition, pursuant to the Indenture, the
Company has agreed that, whether or not it is required to do so by the rules
and regulations of the Commission, for so long as any of the Notes remain
outstanding, the Company will furnish to the holders of the Notes and file
with the Commission, if permitted, (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company was required to file such
Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition
and results of operations of the Company and its consolidated subsidiaries
and, with respect to the annual information only, a report thereon by the
Company's certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Company
was required to file such reports. In addition, for so long as any of the Old
Notes remain outstanding, the Company has agreed to furnish to any
prospective purchaser of the Old Notes or beneficial owner of the Old Notes,
upon their request, the information required by Rule 144A(d)(4) under the
Securities Act.

Any reports or documents filed by the Company with the Commission
(including the Exchange Offer Registration Statement) may be inspected and
copied at the Public Reference Section of the Commission's office at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices in New York at Seven World Trade Center,
13th Floor, New York, New York 10048 and Chicago at Citicorp Center, 14th
Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
reports or other documents may be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, the Commission maintains a Web site that
<PAGE>
contains reports and other information that is filed through the Commission's
Electronic Data Gathering Analysis and Retrieval System. The Web site can be
accessed at http://www.sec.gov.

UNTIL _____________, 1998, (90 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including without limitation, the discussions of the Company's
business strategy and expectations concerning the Company's position in the
industry and market share, future operations, margins, profitability,
liquidity and capital resources, as well as statements concerning increased
market penetration, geographic expansion and achievement of cost savings, may
constitute forward-looking statements. Although the Company believes that its
plans, intentions and expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such plans,
intentions or expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's forward-looking
statements are set forth below and elsewhere in this Prospectus. All
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by the cautionary
statements set forth below. See "Risk Factors".
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless the context otherwise
requires, references in this Prospectus to the "Issuer", "Frank's" or the
"Company" refer to Frank's Nursery & Crafts, Inc., a Michigan corporation,
and references to "Holdings" refer to the sole shareholder of Frank's, FNC
Holdings Inc. (formerly known as General Host Corporation), a New York
corporation. References in this Prospectus to "Cypress" refer to The Cypress
Group L.L.C. and its affiliates. All references in this Prospectus to a
fiscal year refer to the 52 or 53 weeks ended on the last Sunday in January
(e.g., fiscal 1997 refers to the fiscal year ended January 25, 1998).

The Company

The Company operates the largest chain (as measured by sales) in the
United States of specialty retail stores devoted to the sale of lawn and
garden products. In addition, the Company sells dried and artificial flowers
and arrangements, Christmas merchandise, crafts and pet supplies. As of
January 25, 1998, the Company operated 256 retail stores located in 15 states
primarily in the East and Midwest regions of the country under the name
Frank's Nursery & Crafts (Registered Trademark). The Company derives
approximately 80% of its sales from its core business lines, which include
lawn and garden products, related home decor merchandise such as dried and
artificial flowers and Christmas merchandise. For fiscal 1997, the Company
generated sales and Adjusted EBITDA (as defined herein) of $530.0 million and
$36.5 million, respectively, and incurred a net loss of $31.4 million.

The Company was organized in 1957. Holdings acquired the Company in
1983 with the objective of developing the first national chain of lawn and
garden stores. At the time of the acquisition, Frank's had 95 stores
principally located in the Midwest. Since 1983, the Company has built, leased
or acquired a net of 161 stores in existing and new markets to become the
largest retail chain in the national lawn and garden industry. On
December 24, 1997, Holdings was acquired by Cypress and new senior management
with the strategic objective of positioning Frank's as the leading specialty
retailer in the lawn and garden arena. Frank's represents Holdings' sole
operating subsidiary.

The Company's principal executive offices are located at 1175 West
Long Lake Road, Troy, Michigan 48098 and its telephone number is
(248) 712-7000.

The Lawn and Garden Industry

According to Nursery Retailer, a leading national trade journal, the
overall retail market for lawn and garden products, defined to include green
goods, fertilizers, gardening accessories, lawn furniture, Christmas
merchandise and snow removal, power and watering equipment, was approximately
$71.2 billion in 1996 and approximately $76.5 billion in 1997, representing a
7.4% growth over 1996. Furthermore, between 1987 and 1997 the industry
<PAGE>
experienced an 8.6% compound annual growth rate. Such industry-wide growth
has been driven by several key factors, including the increasing popularity
of gardening as a leisure activity and positive demographic trends.
Highlighting such widespread popularity, the 1996-1997 National Gardening
Survey indicates that 64% of the approximately 101 million U.S. households
participated in some form of gardening activity in 1996.

The national lawn and garden market is seasonal, highly fragmented
and generally non-branded, consisting of thousands of local garden centers
and mass merchandisers who sell lawn and garden products as part of their
overall product lines. Due to the highly fragmented nature of the industry,
the top ten competitors accounted for approximately 10% of 1996 industry-wide
sales. The Company believes that the industry's popularity, steady and
consistent overall growth and fragmented nature represent a significant
opportunity for a well-established specialty retailer such as Frank's to
capture significant market share in the future through both increased market
penetration and geographic expansion.

Company Strengths

The Company believes that its main competitive strengths include its
experienced new management team, its well-positioned specialty retailing
concept, its strong competitive position and the increased liquidity provided
by its new capital structure.

New Management Team with Proven Track Record. The Company's new
management team is led by its new Chairman, Chief Executive Officer and
President, Joseph R. Baczko, who was formerly President and Chief Operating
Officer at Blockbuster Entertainment Corp. ("Blockbuster") (1991-1992) and
the initial President of the International Division of Toys "R" Us, Inc.
("Toys "R" Us International") (1983-1991). At Blockbuster, Mr. Baczko oversaw
system-wide revenue growth from approximately $1.1 billion to approximately
$2.0 billion, and during his eight years with Toys "R" Us International,
system-wide sales expanded to approximately $800 million. To assist him in
leading the Company, Mr. Baczko has re-assembled his senior management team
from Toys "R" Us International, including Adam Szopinski as Chief Operating
Officer and Larry T. Lakin as Chief Financial Officer, both of whom served in
their respective functions under Mr. Baczko while at Toys "R" Us
International. This new management team has worked successfully together in
the past and possesses, on average, 29 years of specialty retailing and
general management experience.

Well-Positioned to Capitalize on Favorable Industry Fundamentals.
The Company believes it has a strong existing operating base in a popular and
growing market segment. A recent study by the National Gardening Association
indicates that nearly two-thirds of all U.S. households participate in one or
more types of lawn and garden activities, ranking such leisure activities
among the most popular in the U.S. According to industry studies, adults
between the ages of 45 and 64 are the most frequent participants in the lawn
and garden market, and the U.S. Census Bureau expects the percentage of
Americans in this age bracket to increase from 19.9% in 1995 to 25.3% in
2005. In addition, management believes that Frank's merchandise selection is
<PAGE>
characterized by relatively "high-maintenance" and low cost products with the
capacity to generate a significant level of ancillary purchases and a
relatively low exposure to fashion risk. As the country's largest specialty
retailer dedicated to this category, the Company is well-positioned to
capitalize on these trends and characteristics.

Well-Established Competitive Position. New management believes that
the Company is well-positioned within the lawn and garden industry.
Competition in the lawn and garden retailing industry is comprised of
traditional nationwide "big box" retailing chains, on the one hand, and
local, often family-run, garden centers on the other. Unlike the price-driven
competitive model of the "big box" retailers, the Company's business model
focuses on a broad product offering, high quality merchandise, value-added
customer service and the convenience of shopping in a smaller format
specialty store. The Company believes that such differentiating factors
create a basis for successful competition with "big box" home centers. In
addition, as the nation's largest specialty lawn and garden retailer, the
Company believes it successfully takes advantage of the economies of scale
associated with purchasing, advertising, distribution and brand name to
compete with locally-owned garden centers.

Increased Liquidity. New management believes that the Company has
been subject to capital constraints that have significantly hindered its
growth and operating performance. As a result of the Transactions, the
Company's prior $20 million revolving credit facility was replaced with a new
$110 million revolving credit facility which provides significant added
liquidity to support the new management team's strategic objectives.
Additionally, Holdings was acquired with a cash equity investment of $166
million which represents approximately 45% of the sources of funds used in
the Transactions and the Offering.

Company Strategy

The Company plans to build on its core competencies in plants and
gardening and its current market position to become the leading national
specialty retailer of lawn and garden products. Management intends to
systematically accomplish this objective by: (i) rationalizing the Company's
current cost structure, (ii) implementing a store refurbishment program
covering all existing 256 stores, (iii) increasing overall inventory levels,
(iv) further focusing its merchandising strategy on its core lawn and garden
theme and (v) increasing market penetration and expanding geographically
through the selective opening and/or acquisition of new store locations.

Rationalize Cost Structure. Since closing the acquisition of
Holdings by Cypress on December 24, 1997, the Company's new management team
has identified and principally effected annual cost savings of approximately
$13.1 million through: (i) reduction of corporate overhead related to the
closing of Holdings' headquarters in Stamford, Connecticut, (ii) streamlining
and reduction of field supervision and store-level management,
(iii) replacement of the Company's insurance policies with new lower premium
plans providing for substantially similar coverages, (iv) elimination of
expenditures incurred by prior management to build and promote a new store
<PAGE>
concept, (v) termination of the temporary mall-based Christmas stores and
realization of savings from several previous and two additional store
closings and (vi) expense reductions associated with the consolidation of its
distribution facilities implemented in late fiscal 1996 and early fiscal
1997.

Implement Store Refurbishment Program. Management expects to
refurbish all of Frank's existing 256 store locations. This refurbishment is
expected to occur over a three-year period by investing an average of $75,000
per store to improve overall store presentation, layout, signage and
fixturing. Management expects to implement this refurbishment program by
initially focusing on markets where the Company enjoys high market
penetration and brand awareness as well as stores where demographic
characteristics, traffic conditions and the competitive environment are
especially attractive.

Increase Overall Inventory Levels. Largely due to capital
constraints beginning in late fiscal 1995, the Company's purchases of new
inventory dropped by approximately 15.6% in fiscal 1996. Management believes
that this decrease contributed to the Company's significant decline in fiscal
1996 comparable store sales. During fiscal 1997, the Company's purchases of
inventory increased approximately 4.6% over fiscal 1996. New management
intends to raise overall inventory levels through a one-time increase of
approximately $50,000 per store, representing an increase of 14.5% versus
average inventory levels during the latest twelve months.

Pursue Increased Market Penetration and Geographic Expansion. The
Company intends to focus solely on improving the operations of its existing
store base in fiscal 1998. Management currently expects to selectively pursue
a new store opening program beginning in fiscal 1999. The Company believes
that increased penetration and expansion will result in significant sales
growth and allow the Company to further realize economies of scale associated
with advertising, distribution, operations and brand name recognition.
Additionally, management will selectively review acquisition opportunities of
local and regional operators to complement its store expansion strategy.
<PAGE>
The Sponsor

As a result of the transactions described in the section entitled
"The Transactions," Holdings is controlled by Cypress. Cypress manages a
$1.05 billion private equity fund which seeks to invest alongside proven and
successful management teams to achieve long-term capital appreciation. Since
its founding, Cypress has made investments in Cinemark USA, Inc., AMTROL
Inc., Williams Scotsman, Inc. and Genesis ElderCare Corp. Prior to founding
Cypress, the Cypress professionals managed the 1989 merchant banking fund
(the "1989 Fund") of Lehman Brothers Inc. Selected investments of the 1989
Fund included Infinity Broadcasting Corporation, Lear Corporation, Parisian,
Inc. and Illinois Central Corporation.

The Transactions

Cypress acquired the Company through a series of transactions
summarized as follows:

o On November 25, 1997, Cypress formed and invested $165
million in an acquisition corporation.

o On December 24, 1997, the acquisition corporation acquired
over 90% of Holdings' common stock through a tender offer
for Holdings' common stock and a purchase of additional
treasury shares.

o Contemporaneous with the equity tender offer, Holdings
acquired $58.2 million of its senior indebtedness pursuant
to a debt tender offer.

o On December 24, 1997, Holdings and the Company entered into
a senior secured credit facility providing the Company with
up to $195 in immediate borrowings, and the Company used an
initial borrowing of $37.5 million thereunder to pay for a
portion of the consideration and expenses relating to the
acquisition by Cypress.

o On January 9, 1998, the acquisition corporation was merged
with and into Holdings with Holdings designated as the
surviving corporation.

For a more complete description of the transactions summarized above,
see "The Transactions".

<PAGE>
The following table sets forth the sources and uses of funds in
connection with the Transactions and the Offering:

<TABLE>
<CAPTION>
Amount
--------------------------
(in millions)
<S> <C>
Sources:
Senior Credit Facility<F1>. . . . . . . . . . . . . $ 50.2
Assumption of existing indebtedness<F2> . . . . . . 41.3
Offering of the Old Notes . . . . . . . . . . . . . 115.0
Equity contribution by the Investors . . . . . . . 166.0
------
Total Sources . . . . . . . . . . . . . . . . . . $372.5
======

Uses:
Purchase of equity<F3>. . . . . . . . . . . . . . . $136.7
Assumption of existing indebtedness<F2> . . . . . . 41.3
Retirement of existing indebtedness<F4> . . . . . . 162.4
Estimated fees and expenses<F5> . . . . . . . . . . 32.1
------
Total Uses . . . . . . . . . . . . . . . . . . . $372.5
======

____________________
<FN>

<F1> The Senior Credit Facility originally consisted of a $110 million
Revolving Credit Facility (as defined herein) and an $85 million Term
Loan Facility (as defined herein). In connection with the
Transactions, the Company borrowed $37.5 million under the Term Loan
Facility and $10 million under the Revolving Credit Facility.
Approximately $17.2 million of the proceeds of the Offering were used
to pay down indebtedness under the Term Loan Facility. In connection
with the Offering, the Company borrowed $19.9 million under the
Revolving Credit Facility. Additionally, in connection with the
Offering, the Company permanently reduced the commitments under the
Term Loan Facility to $25 million from $85 million. Loans obtained
under the Revolving Credit Facility mature in December 2003 and loans
obtained under the Term Loan Facility mature in December 2004, subject
to amortization and mandatory prepayment. See "Other
Indebtedness--Senior Credit Facility".
<F2> Includes assumption of existing mortgages in the amount of $29.7
million and assumption of existing capital leases in the amount of
$11.6 million. See "Other Indebtedness".
<F3> Includes purchases made pursuant to the Tender Offer and in connection
with the Merger totalling $134.3 million and retirement of stock
options totalling $2.4 million. See "The Transactions".
<PAGE>
<F4> Includes $10.9 million used in the repayment of certain mortgages;
$58.0 million used to purchase a portion of the Senior Notes tendered
pursuant to the Debt Tender; $26.5 million of proceeds of the Offering
were used to redeem the remaining Senior Notes; and $67.0 million of
proceeds of the Offering were used to redeem the Convertible Notes (as
defined herein). All payments include premium and accrued interest.
<F5> Includes amounts paid pursuant to the former Chairman of Holdings'
employment agreement, financial advisory, consulting and other
professional fees and financing costs. See "Certain Relationships and
Related Transactions".

</TABLE>
<PAGE>
THE EXCHANGE OFFER

The Exchange Offer relates to the exchange of up to $115,000,000
aggregate principal amount of Old Notes for an equal aggregate principal
amount of Exchange Notes. The Exchange Notes are obligations of the Company
entitled to the benefits of the Indenture relating to the Old Notes. The form
and terms of the Exchange Notes are the same as the form and terms of the Old
Notes except that the Exchange Notes have been registered under the
Securities Act, and therefore will not bear legends restricting their
transfer and will not contain certain provisions providing for registration
rights and liquidated damages relating to the Old Notes under certain
circumstances described in the Registration Rights Agreement (the
"Registration Rights Agreement"), which provisions will terminate as to all
the Notes upon the consummation of the Exchange Offer.

The Exchange Offer . . . The Company is offering to exchange pursuant
to the Exchange Offer up to $115,000,000
aggregate principal amount of its Exchange
Notes for a like aggregate principal amount of
its Old Notes validly tendered pursuant to the
Exchange Offer. As of the date hereof,
$115,000,000 in aggregate principal amount of
Old Notes is outstanding. The Company will
issue the Exchange Notes to tendering holders
of Old Notes on or promptly after the
Expiration Date. Old Notes may be tendered
only in integral multiples of $1,000.

Interest Payments . . . . Interest on the Exchange Notes shall accrue
from the last Interest Payment Date on which
interest was paid on the Old Notes so
surrendered or, if no interest have been paid
on such Old Notes, from February 26, 1998, the
date of issuance of the Old Notes, payable
semi-annually in arrears on March 1 and
September 1 of each year, commencing on
September 1, 1998 at a rate of 10 1/4% per
annum.

Resale of the Exchange Based on interpretations by the staff of the
Notes . . . . . . . . . Commission 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 Old Notes may
be offered for resale, resold and otherwise
transferred by any holder thereof (other than
(i) a broker-dealer who purchased such Old
Notes directly from the Company for resale
pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a
person that is an "affiliate" of the Company
within the meaning of Rule 405 promulgated
<PAGE>
under the Securities Act) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided
that the holder is acquiring the Exchange
Notes in its ordinary course of business and
is not participating, and has no arrangement
or understanding with any person to
participate, in the distribution of the
Exchange Notes. In the event that the
Company's belief is inaccurate, holders of
Exchange Notes who transfer Exchange Notes in
violation of the prospectus delivery
provisions of the Securities Act and without
an exemption from registration thereunder may
incur liability under the Securities Act. The
Company does not assume or indemnify holders
against such liability. The Company has not
sought, and does not intend to seek, its own
no-action letter, and there can be no
assurance that the staff of the Commission
would make a similar determination with
respect to the Exchange Offer. Notwithstanding
the foregoing, each broker-dealer that
receives Exchange Notes in exchange for Old
Notes held for its own account, 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. The Letter of
Transmittal states that by so acknowledging
and by delivering a prospectus, such
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 such broker-dealer in
connection with resales of Exchange Notes
received in exchange for Old Notes. The
Company has agreed that for a period of 120
days after the consummation of the Exchange
Offer it will make this Prospectus and any
amendment or supplement to this Prospectus
available to any such broker-dealer for use in
connection with any such resales. See "Plan of
Distribution".

This Exchange Offer is not being made to, nor
will the Company accept surrenders for
exchange from, holders of Old Notes in any
jurisdiction in which this Exchange Offer or
the acceptance thereof would not be in
<PAGE>
compliance with the securities or blue sky
laws of such jurisdiction.

Expiration of Exchange The Exchange Offer will expire at 5:00 p.m.,
Offer . . . . . . . . . New York City time, on ________, 1998, unless
the Exchange Offer is extended, in which case
the Expiration Date will be the latest date
and time to which the Exchange Offer is
extended. The Company does not currently
intend to extend the Expiration Date. See
"The Exchange Offer--Expiration Date;
Extensions; Amendments".

Exchange Date . . . . . . The date of acceptance and exchange of the Old
Notes will be the third business day following
the Expiration Date.

Conditions to the
Exchange Offer . . . . The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. The Company may terminate or
amend the Exchange Offer at any time prior to
the Expiration Date upon the failure to
satisfy any such conditions. The Exchange
Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being
tendered for exchange. Holders of Old Notes
will have certain rights against the Company
under the Registration Rights Agreement should
the Company fail to consummate the Exchange
Offer. See "The Exchange Offer--General" and
"--Termination".

Procedures for Tendering
Old Notes . . . . . . . Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with any other
required documentation, to the Exchange Agent
(as defined herein) at the address set forth
herein and therein. See "The Exchange
Offer--Procedures for Tendering".

By executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, (i) the Exchange Notes
acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of
business of the person receiving such Exchange
<PAGE>
Notes, whether or not such person is the
holder, (ii) neither the holder nor any such
other person has an arrangement or
understanding with any person to participate
in the distribution of such Exchange Notes and
(iii) neither the holder nor any such other
person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company
or, if an affiliate, such holder will comply
with the registration and prospectus delivery
requirements of the Securities Act to the
extent applicable.

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

Guaranteed Delivery
Procedures . . . . . . Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes (or who cannot complete the
procedure for book-entry transfer on a timely
basis) 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 must tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures".

Withdrawal Rights . . . . Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders".
<PAGE>
Acceptance of Old Notes
and Delivery of Subject to certain conditions (as described
Exchange Notes . . . . under "The Exchange Offer--Termination"), the
Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer and not validly withdrawn prior
to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be
delivered promptly following the Expiration
Date. See "The Exchange Offer--General".

Effect on Holders of Old
Notes . . . . . . . . . Holders of the Old Notes who do not tender
their Old Notes in the Exchange Offer will
continue to hold such Old Notes and will be
entitled to all the rights and limitations
applicable thereto under the Indenture dated
as of February 26, 1998 between the Company
and Bankers Trust Company relating to the Old
Notes and the Exchange Notes (the
"Indenture"), except for any such rights under
the Registration Rights Agreement that by
their terms terminate or cease to have further
effectiveness as a result of the making of,
and the acceptance for exchange of all validly
tendered Old Notes pursuant to, the Exchange
Offer. All untendered Old Notes will continue
to be subject to the restrictions on transfer
provided for in the Old Notes and in the
Indenture and will have no further
registration rights under the Registration
Rights Agreement. To the extent that Old Notes
are tendered and accepted in the Exchange
Offer, the trading market for untendered Old
Notes could be adversely affected.

Consequences of Failure
to Exchange . . . . . . Holders of Old Notes who do not exchange their
Old Notes for Exchange Notes pursuant to the
Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Notes
as set forth in the legend thereon. In
general, the Old Notes may not be offered or
sold, unless registered under the Securities
Act, except pursuant to an exemption from, or
in a transaction not subject to, the
Securities Act and applicable state securities
laws. The Company does not currently
anticipate that it will register the Old Notes
under the Securities Act.
<PAGE>
Certain Tax The exchange pursuant to the Exchange Offer
Considerations . . . . will not be a taxable event for federal income
tax purposes. See "Certain United States
Federal Income Tax Consequences of the
Exchange".

Exchange Agent . . . . . Bankers Trust Company, the Trustee under the
Indenture, is serving as exchange agent (the
"Exchange Agent") in connection with the
Exchange Offer. The address of the Exchange
Agent is: Bankers Trust Company, Four Albany
Street, Fourth Floor, New York, New York
10006, Attention: Corporate Trust & Agency
Group. For information with respect to the
Exchange Offer, the telephone number for the
Exchange Agent is (800) 735-7777 and the
facsimile number for the Exchange Agent is
(615) 835-3701.

Use of Proceeds . . . . . There will be no cash proceeds payable to the
Company from issuance of the Exchange Notes
pursuant to the Exchange Offer.

THE EXCHANGE NOTES

Issuer . . . . . . . . . Frank's Nursery & Crafts, Inc.

Securities Offered . . . $115,000,000 in aggregate principal amount of
10 1/4% Series B Senior Subordinated Notes due
2008.

Maturity Date . . . . . . March 1, 2008.

Interest Payment Dates . March 1 and September 1 of each year,
commencing on September 1, 1998.

Optional Redemption . . . Except as described below, the Exchange Notes
are not redeemable at the Company's option
prior to March 1, 2003. From and after
March 1, 2003, the Exchange Notes will be
subject to redemption at the option of the
Company, in whole or in part, at the
redemption prices set forth herein, plus
accrued and unpaid interest, if any, thereon
to the applicable redemption date. In
addition, prior to March 1, 2001, up to 35% of
the aggregate principal amount of Exchange
Notes will be redeemable at the option of the
Company, in whole or in part, on one or more
occasions, from the net proceeds of one or
more public offerings of Capital Stock of (i)
the Company or (ii) Holdings to the extent the
<PAGE>
net cash proceeds thereof are (a) contributed
to the Company as a capital contribution to
the common equity of the Company or (b) used
to purchase Equity Interests of the Company
(in either case, other than Disqualified
Stock), at a price of 110.25% of the principal
amount of the Exchange Notes, together with
accrued and unpaid interest, if any, to the
date of the redemption; provided that at least
65% of the aggregate principal amount of
Exchange Notes remains outstanding immediately
after the occurrence of each such redemption.
See "Description of Exchange Notes--Optional
Redemption".

Change of Control . . . . In the event of a Change of Control, holders
of the Exchange Notes will have the right to
require the Company to repurchase their
Exchange Notes, in whole or in part, at a
price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase.
The Indenture will require that prior to such
a repurchase, the Company must either repay
all outstanding indebtedness under the Senior
Credit Facility or obtain any required consent
to such repurchase. See "Description of
Exchange Notes--Repurchase at Option of
Holders--Change of Control" and "--Certain
Definitions".

Ranking . . . . . . . . . The Exchange Notes will be general, unsecured
obligations of the Company and will be
subordinated in right of payment to all
existing and future Senior Debt of the
Company, will rank pari passu with all future
senior subordinated indebtedness of the
Company and will rank senior in right of
payment to all future subordinated
indebtedness of the Company. As of January 25,
1998, after giving pro forma effect to the
Transactions and the Offering and the
application of the proceeds therefrom, the
aggregate amount of Senior Debt to which the
Exchange Notes would have been subordinated
would have been approximately $73.2 million.
See "Description of Exchange--Notes
Subordination".

Restrictive Covenants . . The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries (as
<PAGE>
defined herein) to incur additional
indebtedness and issue preferred stock, pay
dividends or distributions or make investments
or make certain other Restricted Payments (as
defined herein), enter into certain
transactions with affiliates, dispose of
certain assets, incur liens and engage in
mergers and consolidations. See "Description
of Exchange Notes".

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

Absence Of Public Market

There is no public market for the Exchange Notes, and the Exchange
Notes will not be listed on any securities exchange. If an active public
market does not develop, the market price and liquidity of the Exchange Notes
may be adversely affected.

Risk Factors

See "Risk Factors" for a discussion of certain factors that should be
considered by holders of Old Notes prior to tendering Old Notes in the
Exchange Offer.

Additional Information

For additional information regarding the Exchange Notes, see
"Description of Exchange Notes" and "Certain United States Federal Income Tax
Consequences of the Exchange".
<PAGE>

Summary Historical and Unaudited Pro Forma Financial Information

Set forth below is summary historical financial information of the
Company for the forty-eight week period ending December 28, 1997, the four-
week period ending January 25, 1998 and for each of the two fiscal years in
the period ended January 26, 1997 which are derived from the audited
financial statements included elsewhere herein. The fiscal year is normally
comprised of 52 or 53 weeks, ending on the last Sunday in January. The 1997,
1996 and 1995 fiscal years each reflect a 52 week period ended January 25,
1998, January 26, 1997 and January 28, 1996, respectively. Because of the
acquisition of Holdings by Cypress on December 24, 1997, as described under
the section entitled "The Transactions," the summary financial data for
fiscal 1997 represents the results of operations for the forty-eight week
period prior to the acquisitions and the four-week period subsequent to the
acquisition. The post-acquisition period has been presented on the purchase
basis of accounting, and is therefore not comparable to the historical
financial information presented for the forty-eight week pre-acquisition
period. The unaudited pro forma financial information has been derived from
the Unaudited Pro Forma Financial Data and the related notes thereto included
elsewhere herein. The unaudited pro forma financial information does not
purport to represent what the Company's results actually would have been if
the Transactions and the Offering and the application of the proceeds
therefrom had occurred on the dates indicated, nor does such information
purport to project the results of the Company for future periods. The summary
financial information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
"Unaudited Pro Forma Financial Data", "Selected Historical Financial and
Other Data" and the financial statements and notes thereto included elsewhere
herein.
<PAGE>
<TABLE>
<CAPTION>
Pre- Post-
Acquisition Acquisition
Period Period
(Predecessor- (Successor-
basis) basis)
Fiscal Year Ended Forty-Eight Four-Weeks Unaudited
---------------------------- Weeks Ended Ended Pro Forma
January 28, January 26, December 28, January 25, January 25,
1996 1997 1997 1998 1998
------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales . . . . . . . . . . . . . . . $593,270 $530,752 $515,204 $ 14,814 $530,018
Cost of sales, including buying and
occupancy . . . . . . . . . . . . . 429,181 383,099 367,008 17,532 384,540
------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . 164,089 147,653 148,196 (2,718) 145,478
Selling, general and administrative
expenses . . . . . . . . . . . . . . 148,502 138,355 137,872 7,318 143,926
Impairment loss . . . . . . . . . . . . -- -- 1,720 -- 1,720
Provision for store closings and
other cost . . . . . . . . . . . . . -- -- 6,677 -- 6,677
------- -------- -------- -------- --------
Operating income (loss) . . . . . . . . 15,587 9,298 1,927 (10,036) (6,845)
Interest expense . . . . . . . . . . . 23,845 20,863 19,632 1,601 20,490
Other income (expense) . . . . . . . . 507 (226) (2,010) (17) (2,027)
------- -------- -------- -------- --------
Income (loss) before income taxes . . . (7,751) (11,791) (19,715) (11,654) (29,362)
Income tax expense (credit) . . . . . . -- -- -- -- --
------- -------- -------- -------- --------
Net income (loss) . . . . . . . . . . . $ (7,751) $(11,791) $(19,715) $(11,654) $(29,362)
======= ======== ======== ======== ========

Other Data:
Adjusted EBITDA<F2> . . . . . . . . . . -- -- $ 45,704 $ (9,325) $ 36,484
Adjusted EBITDA margin<F3>. . . . . . . -- -- 9.0% -- 7.0%
Merchandise margin . . . . . . . . . . 40.8% 42.2% 42.2% 13.7% 41.4%
Depreciation and amortization<F1> . . . $ 22,888 $ 22,377 $ 21,835 $ 1,500 $ 22,071
Capital expenditures . . . . . . . . . 5,497 4,371 12,472 (34) 12,438
Number of stores at the end of period . 264 262 258 258 256
Ratio of Adjusted EBITDA to interest
expense . . . . . . . . . . . . . . -- -- -- -- 1.8x
Ratio of long term debt to Adjusted
EBITDA<F4> . . . . . . . . . . . . . -- -- -- -- 4.8x

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------
Unaudited
Pro Forma
January 25, January 25,
1998 1998
--------------------- ----------------------
<S> <C> <C>
Balance Sheet Data (at end of period):
Cash and cash equivalents . . . . . . . . . . . . . . . $ 16,100 $ 13,427
Working capital<F5> . . . . . . . . . . . . . . . . . . 7,347 8,360
Property, plant and equipment, net . . . . . . . . . . 217,880 217,880
Total debt, including current maturities . . . . . . . 178,969 186,515
Shareholder's equity . . . . . . . . . . . . . . . . . 153,653 148,597

____________________
<FN>
<F1> Includes amortization of debt issuance cost of, $1,671 for fiscal
1995, $889 for fiscal 1996, $676 for the forty-eight weeks ended
December 28, 1997, $56 for the four weeks ended January 25, 1998 and
$627 for pro forma fiscal 1997 and includes $1,720 for the write-down
to fair value of property, plant and equipment in accordance with FAS-
121 "Impairment of Long-Lived Assets" for the forty-eight weeks ended
December 28, 1997 and pro forma 1997.
<F2> Adjusted EBITDA represents EBITDA (as described below) adjusted for
management's estimate of cost savings shown below:

</TABLE>

<TABLE>
<CAPTION>
Forty-eight Four weeks Unaudited
weeks ended ended Pro Forma
December 28, January 25, January 25,
1997 1998 1998
---------------- -------------- ---------------
(in thousands)
<S> <C> <C> <C>

EBITDA(a) . . . . . . . . . . . . . . . . . . . . . . . $31,891 $(8,592) $23,404
Reduction in corporate overhead(b) . . . . . . . . . . 3,789 (1,278) 2,511
Store and field management payroll savings(c) . . . . . 4,615 385 5,000
Insurance savings(d) . . . . . . . . . . . . . . . . . 1,108 92 1,200
Cost associated with development of a new store concept 2,125 68 2,193
Effect of closed stores(e) . . . . . . . . . . . . . . 1,388 -- 1,388
Distribution center consolidation(f) . . . . . . . . . 788 -- 788
------ ------- -------
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . $45,704 $(9,325) $36,484
====== ======= =======
<PAGE>

____________________
<FN>

(a) EBITDA represents earnings before interest expense (which
includes amortization of debt issuance cost), other income
(expense), income tax expense, depreciation and amortization
(excluding amortization of debt issuance cost), nonrecurring
charges of $6,677 for store closing costs and $1,249 of loan
forgiveness associated with the former Chairman for the forty-
eight weeks ended December 28, 1997 and pro forma fiscal 1997
and $879 of amortization of capitalized cost associated with the
consolidation of the Company's distribution centers, for the
forty-eight weeks ended December 28, 1997 and pro forma fiscal
1997. Management of the Company finds EBITDA to be a useful
measurement and includes it in this Prospectus because it is a
widely accepted financial indicator of a company's ability to
service or incur debt, serves as a basis upon which the Company
assesses its financial performance and is tied to certain
covenants in the Company's Senior Credit Facility. EBITDA and
Adjusted EBITDA are not measurements of operating performance
calculated in accordance with U.S. generally accepted accounting
principles and should not be considered as substitutes for
operating income, net income, cash flows from operating
activities or other statement of operations or cash flow data
prepared in accordance with U.S. generally accepted accounting
principles, or as measures of profitability or liquidity. EBITDA
and Adjusted EBITDA may not be indicative of the historical
operating results of the Company; nor are they meant to be
predictive of potential future results.
Although the Company believes it will be able to realize
substantial cost savings in the areas described above without
any loss of revenues (except in connection with store closings),
there can be no assurance that all such cost savings will be
realized or as to the time table over which such savings will
begin to affect operating results. The Company also expects to
take certain non-recurring charges in connection with the
streamlining of its operations. See "Management's Discussion and
Analysis of Financial Condition and Results of
Operations--Anticipated Cost Savings".
(b) Reflects reduction in corporate overhead included in the
historical results of the Company as a result of the planned
closure of the Stamford, Connecticut corporate office including
staff reductions and the elimination of certain expenses.
(c) Reflects reduction in store and field management as a result of
elimination of certain store and field administration positions.
Reserves for severance have been included in the pro forma
adjustments to accrued liabilities in the Unaudited Pro Forma
Balance Sheet.
(d) Insurance savings reflect the changes in insurance coverage from
(1) a self-insured, large deductible plan and (2) an incurred
<PAGE>
deductible plan to a first dollar guaranteed premium program at
substantial cost savings for similar or better coverage.
(e) Reflects the historical results of stores which have been
closed.
(f) Reflects the savings attributable to the closing of two
distribution centers, located in Detroit and Chicago, in fiscal
1996 and 1997 and the opening of one new distribution center in
Howe, Indiana.

<F3> Adjusted EBITDA margin is calculated by reducing sales for the effect
of closed stores by $9,701 for the forty-eight weeks ended December
28, 1997 and pro forma fiscal 1997.
<F4> Total long term debt (including current portion) excludes the
outstanding balance under the Revolving Credit Facility. The Revolving
Credit Facility must have no borrowings outstanding for a consecutive
30-day period during each fiscal year.
<F5> Reflects total current assets (excluding cash) less total current
liabilities (excluding current maturities of long-term debt, notes
payable to banks and the Revolving Credit Facility).

</TABLE>

<PAGE>
RISK FACTORS

Prospective investors should consider carefully the following
factors, as well as the other information and data included in this
Prospectus, before tendering Old Notes in exchange for the Exchange Notes
offered hereby. The risk factors set forth below are generally applicable to
the Old Notes as well as the Exchange Notes.

Consequences of Failure to Exchange

Holders of Old Notes who do not exchange their Old Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the offer or sale of the Old Notes pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Old Notes
under the Securities Act or any state securities laws. Based on
interpretations by the staff of the Commission, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than any such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) 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 with any person
to participate in the distribution of such Exchange Notes. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Old Notes,
where such Exchange 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. The interpretations by the staff of the Commission on which the
Company has relied were based on no-action letters issued by the staff of the
Commission to third parties. The Company has not sought, and does not intend
to seek, its own no-action letter and there can be no assurance that the
staff of the Commission would make a similar determination with respect to
the Exchange Offer. See "Plan of Distribution".

Substantial Leverage

As a result of the Transactions and the Offering and the application
of the proceeds therefrom, the Company is highly leveraged. As of January 25,
1998, after giving pro forma effect to the Transactions and the Offering and
the application of the proceeds therefrom, the Company would have had
outstanding indebtedness of $186.5 million and its shareholder's equity would
have been $148.6 million. In addition, the Company would have had available
borrowings of up to $98.3 million under the Revolving Credit Facility. In
addition, subject to restrictions in the Senior Credit Facility and the
Indenture, the Company may incur additional indebtedness. For fiscal 1997,
<PAGE>
after giving pro forma effect to the Transactions and the Offering and the
application of the proceeds therefrom, the Company's ratio of earnings to
fixed charges would have been (0.1) to 1.0. Pro forma earnings would have
been insufficient to cover pro forma fixed charges by $29.3 million for
fiscal year ended January 25, 1998.

The Company's ability to make scheduled payments of principal of, or
to pay the interest, if any, on, or to refinance, its indebtedness (including
the Notes), or to fund planned capital expenditures will depend on its future
performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond its control. Based upon the current level of operations and
anticipated revenue growth and operating improvements, management believes
that cash flow from operations and available cash, together with available
borrowings under the Senior Credit Facility, will be adequate to meet the
Company's future liquidity needs for at least the next several years. The
Company, however, may need to refinance all or a portion of the principal of
the Notes on or prior to maturity. There can be no assurance that the Company
will be able to effect any such refinancing on commercially reasonable terms
or at all. In addition, there can be no assurance that the Company's business
will generate sufficient cash flow from operations, that anticipated revenue
growth and operating improvements will be realized or that future borrowings
will be available under the Senior Credit Facility in an amount sufficient to
enable the Company to service its indebtedness, including the Notes, or to
fund its other liquidity needs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources".

The Company's high degree of leverage could have important
consequences to holders of the Notes, including, but not limited to:
(i) making it more difficult for the Company to satisfy its obligations with
respect to the Notes; (ii) increasing the Company's vulnerability to general
adverse economic and industry conditions; (iii) limiting the Company's
ability to obtain additional financing to fund future working capital,
capital expenditures and other general corporate requirements; (iv) requiring
the dedication of a substantial portion of the Company's cash flow from
operations to the payment of principal of, and interest on, its indebtedness,
thereby reducing the availability of such cash flow to fund working capital,
capital expenditures or other general corporate purposes; (v) limiting the
Company's flexibility in planning for, or reacting to, changes in its
business and the industry; and (vi) placing the Company at a competitive
disadvantage relative to less leveraged competitors. In addition, the
Indenture and the Senior Credit Facility contain financial and other
restrictive covenants that limit the ability of the Company to, among other
things, borrow additional funds. Failure by the Company to comply with such
covenants could result in an event of default which, if not cured or waived,
could have a material adverse effect on the Company's financial condition or
results of operations. In addition, the degree to which the Company is
leveraged could prevent it from repurchasing all of the Notes tendered to it
upon the occurrence of a Change of Control. See "Description of Exchange
Notes--Repurchase at Option of Holders--Change of Control" and "Other
Indebtedness".
<PAGE>
Subordination of Notes

The Notes are contractually subordinated to all Senior Debt including
all obligations under the Senior Credit Facility. Upon any distribution to
creditors of the Company in a liquidation or dissolution of the Company or in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, the holders of Senior Debt will be
entitled to be paid in full in cash before any payment may be made with
respect to the Notes. In addition, the subordination provisions of the
Indenture provide that payments with respect to the Notes will be blocked in
the event of a payment default on Senior Debt. In the event of a bankruptcy,
liquidation or reorganization of the Company, holders of the Notes will
participate ratably in the remaining assets of the Company with all holders
of subordinated indebtedness of the Company that is deemed to be of the same
class as the Notes, and potentially with all other general creditors of the
Company, based upon the respective amounts owed to each holder or creditor.
In any of the foregoing events, there can be no assurance that there would be
sufficient assets to pay amounts due on the Notes. As a result, holders of
Notes may receive less, ratably, than the holders of Senior Debt. At January
25, 1998, after giving pro forma effect to the Transactions and the Offering
and the application of the proceeds therefrom, the aggregate amount of Senior
Debt to which the Notes would have been subordinated would have been
approximately $73.2 million, consisting of secured borrowings under the
Senior Credit Facility, the Company's mortgages and the capital leases. In
addition, the Company would have had available additional borrowings of up to
$98.3 million under the Revolving Credit Facility, all of which would
constitute Senior Debt. Subject to certain limitations, the Indenture permits
the Company to incur additional indebtedness, including Senior Debt. See "The
Transactions" and "Description of Exchange Notes". Substantially all of the
assets of the Company have been pledged to secure other indebtedness of the
Company. See "Other Indebtedness".

Restrictions Imposed by the Senior Credit Facility and the Indenture

Among other obligations, the Senior Credit Facility requires the
Company to satisfy certain tests and maintain specified financial ratios,
including a minimum interest coverage ratio and a maximum leverage ratio. In
addition, the Senior Credit Facility restricts, among other things, the
Company's ability to incur additional indebtedness and to make acquisitions,
investments and capital expenditures beyond a certain level. A failure to
comply with the restrictions contained in the Senior Credit Facility could
lead to an event of default thereunder which could result in an acceleration
of such indebtedness. Such an acceleration would constitute an event of
default under the Indenture relating to the Notes. In addition, the Indenture
restricts, among other things, the Company's ability to incur additional
indebtedness, make investments, sell assets, make certain payments and
dividends or merge or consolidate. A failure to comply with the restrictions
in the Indenture could result in an event of default under the Indenture. If,
as a result thereof, a default occurs with respect to Senior Debt, the
subordination provisions of the Indenture would likely restrict payments to
holders of the Notes. See "Other Indebtedness" and "Description of Exchange
Notes--Subordination".
<PAGE>
Encumbrances on Assets to Secure Credit Facilities and Mortgages

In addition to being subordinated to all existing and future Senior
Debt of the Company, the Notes are not secured by any of the Company's
assets. The Company's obligations under the Senior Credit Facility are
secured by a first priority pledge of and security interest in the common
stock of the Company and the Company's subsidiaries and in substantially all
of the Company's personal property (including inventory) and real property
(other than real property encumbered by certain existing mortgages). If the
Company becomes insolvent or is liquidated, or if payment under the Senior
Credit Facility is accelerated, the lenders under the Senior Credit Facility
will be entitled to exercise the remedies available to a secured lender under
applicable law. In addition, the Company's obligations under its mortgage
loans are secured by the respective store properties subject to such mortgage
loans. See "Other Indebtedness--Senior Credit Facility" and "Description of
Exchange Notes".

Competition; Business Factors; History of Net Losses

The national lawn and garden market is highly fragmented and
competitive, consisting of thousands of local garden centers and mass
merchandisers who sell lawn and garden products as part of their overall
product lines. The Company encounters competition from many retailers and
mass merchandisers with respect to certain of the Company's lines of
business. Certain of the Company's principal competitors are less
highly-leveraged than the Company and may be better able to withstand market
conditions. Additionally, there can be no assurance that the Company will not
encounter increased future competition, which could have a material adverse
effect on the Company's financial condition or results of operations. See
"Business--Industry Overview--Competition".

The success of the Company's operations depends upon a number of
factors relating to consumer spending, including future economic conditions
affecting disposable consumer income such as employment, business conditions,
interest rates and taxation. If existing economic conditions deteriorate,
consumer spending may decline. There can be no assurance that any prolonged
economic downturn would not have a material adverse affect on the Company.

More specifically, growth in the lawn and garden industry is driven
by several key factors including the increasing popularity of gardening as a
leisure activity and positive demographic trends. No assurance can be made
that the absence of any of these key factors would not have a material
adverse effect on the Company.

The financial results of the Company in recent years have been
significantly affected by management turnover, capital constraints and
general economic conditions. For fiscal years 1995, 1996 and 1997, the
Company had net losses of $7.8 million, $11.8 million and $31.4 million,
respectively. There can be no assurance that the Company will not incur
additional losses in the future.
<PAGE>
Seasonal Earnings; Effect of Weather Conditions

The Company's business is highly seasonal and subject to the impact
of weather conditions, which may affect consumer purchasing patterns.
Historically, the spring season, which runs from late March to mid-June, is
the Company's most profitable and has accounted for approximately 40% of the
Company's sales and the Christmas season, which runs from November to late
December, is the Company's second most profitable and has accounted for
approximately 25% of the Company's sales. Losses are usually experienced
during the other periods of the year.

A significant portion of the Company's products consists of live
nursery goods which have limited shelf lives in some cases. Adverse weather
conditions may cause delays in the purchase of live nursery goods by
customers and may result in such goods remaining unsold past their shelf life
and require markdowns or disposal. See "Management's Discussions and Analysis
of Financial Condition and Results of Operations".

Year 2000 Issue; Computer System Upgrade

The Company has begun installing a new Management Information System
("MIS") to address the widely-known dating flaw inherent in most operating
systems (the "Year 2000 Issue"). While the new MIS being installed is
expected to be operational by the end of fiscal 1998, there can be no
assurance that the new MIS will be installed in time to remedy the Year 2000
Issue or that the Company's computer operating systems will not be disrupted
in the year 2000. Any such disruption, whether caused by the Company's
systems or those of any of its vendors, could have a material adverse effect
on the Company's financial condition or results of operations. In addition,
there can be no assurance that the Company will not experience significant
cost overruns or delays in connection with the upgrade of its existing
computer system. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Business--Management Information System".

Dependence on Key Personnel

The Company is dependent on the continued services of its new senior
management team. Although the Company intends to enter into employment
agreements with its new Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer, it currently has no employment agreement with any
members of its new senior management team. There can be no assurance that
these and other key personnel will continue to be employed by the Company or
that the Company will be able to attract and retain qualified personnel in
the future. Although the Company believes that it could replace key employees
in an orderly fashion should the need arise, the loss of such key personnel
could have a material adverse effect on the Company's financial condition or
results of operations. The Company does not currently maintain key-man life
insurance policies on any of its executive officers or any other key
personnel. See "Management--Executive Officers and Directors".

<PAGE>
Anticipated Cost Savings

Since closing the acquisition on December 24, 1997, the Company's new
management team has identified and principally effected annual cost savings
of approximately $13.1 million through: (i) reduction of corporate overhead
related to the closing of Holdings' headquarters in Stamford, Connecticut,
(ii) streamlining and reduction of field supervision and store-level
management, (iii) replacement of the Company's insurance policies with new
lower premium plans providing for substantially similar coverages,
(iv) elimination of expenditures incurred by prior management to build and
promote a new store concept, (v) termination of the temporary mall-based
Christmas stores and realization of savings from several previous and two
additional store closings and (vi) expense reductions associated with the
consolidation of its distribution facilities implemented in late fiscal 1996
and early fiscal 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General", "Business--Overview" and
"Business--Company Strategy".

These cost savings estimates were prepared solely by members of the
management of the Company. All of these statements are based on estimates and
assumptions made by management of the Company, which although believed to be
reasonable, are inherently uncertain and difficult to predict. There can be
no assurance that the savings anticipated in these statements will be
achieved. In addition, there can be no assurance that unforeseen costs and
expenses or other factors will not offset the estimated cost savings or other
components of the Company's operating plan in whole or in part.

Ability to Implement the Company's Operating Strategy

The growth and success of the Company is dependent, in large part,
upon the Company's ability to successfully execute its focused operating
strategy aimed at substantially improving the Company's cost structure,
refurbishing existing stores, improving inventory levels, re-merchandising
its stores and enhancing its geographic footprint through the pursuit of new
store growth. The success of the Company's new store opening plan will depend
on, among other things, the identification of suitable markets and sites for
new stores, the ability to penetrate such markets and the negotiation of
leases on acceptable terms. In addition, the Company must be able to hire,
train and retain competent managers and personnel and manage the operational
components of its growth. The failure of the Company to open new stores on a
timely basis, obtain acceptance in markets in which it currently has limited
or no presence, attract qualified management and personnel and appropriately
adjust operational systems and procedures could adversely affect the
Company's future operating results. There can be no assurance that the
Company will be able to locate suitable store sites or enter into suitable
lease agreements. In addition, no assurances can be given that the Company or
its management team will be able to implement successfully the other aspects
of the operating strategy described herein. The ability of the Company to
implement its operating strategy may require significant additional debt
and/or equity capital, and no assurance can be given as to whether, and on
what terms, such additional debt and/or equity capital will be available. See
"Business--Company Strategy".
<PAGE>
Controlling Shareholders

The Cypress Funds beneficially own approximately 99% of the
outstanding common stock of Holdings, the sole shareholder of the Company,
and can effectively control the affairs and policies of the Company.
Circumstances may occur in which the interests of these shareholders conflict
with the interests of the holders of the Notes. In addition, these
shareholders may have an interest in pursuing acquisitions, divestitures or
other transactions that, in their judgment, enhance their equity investment,
even though such transactions might involve risks to the holders of the
Notes. See "Security Ownership of Certain Beneficial Owners and Management".

Limitations on Change of Control

In the event of a Change of Control, the Company will be required to
make an offer for cash to repurchase the Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
repurchase date. A Change of Control will result in an event of default under
the Senior Credit Facility and may result in a default under other
indebtedness of the Company that may be incurred in the future. The Senior
Credit Facility prohibits the purchase of outstanding Notes prior to
repayment of the borrowings under the Senior Credit Facility and any exercise
by the holders of the Notes of their right to require the Company to
repurchase the Notes will cause an event of default under the Senior Credit
Facility. Finally, there can be no assurance that the Company will have the
financial resources necessary to repurchase the Notes upon a Change of
Control. See "Description of Exchange Notes--Repurchase at the Option of
Holders--Change of Control".

Risk of Fraudulent Transfer

A significant portion of the net proceeds of the Offering were paid
as a dividend to Holdings and used to redeem the outstanding Holdings Notes
(as defined herein). Under applicable provisions of the U.S. Bankruptcy Code
or comparable provisions of state fraudulent transfer or conveyance laws, if
the Company, at the time it issued the Notes (i) incurred such indebtedness
with the intent to hinder, delay or defraud creditors, or (ii) (a) received
less than reasonably equivalent value or fair consideration for incurring
such indebtedness and (b) (1) was insolvent at the time of incurrence,
(2) was rendered insolvent by reason of such incurrence (and the application
of the proceeds thereof), (3) was engaged or was about to engage in a
business or transaction for which the assets remaining with the Company
constituted unreasonably small capital to carry on its businesses, or
(4) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature, then, in each case, a court of
competent jurisdiction could void, in whole or in part, the Notes, or, in the
alternative, subordinate the Notes to existing and future indebtedness of the
Company. The measure of insolvency for purposes of the foregoing will vary
depending upon the law applied in such case. Generally, however, the Company
would be considered insolvent if the sum of its debts, including contingent
liabilities, was greater than all of its assets at fair valuation or if the
present fair saleable value of its assets was less than the amount that would
<PAGE>
be required to pay the probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature. Management
believes that, for purposes of all such insolvency, bankruptcy and fraudulent
transfer or conveyance laws, the Notes were issued without the intent to
hinder, delay or defraud creditors and for proper purposes and in good faith
and that the Company, after the issuance of the Notes and the application of
the proceeds thereof, was solvent, had sufficient capital for carrying on its
business and was able to pay its debts as they mature. There can be no
assurance, however, that a court passing on such questions would agree with
management's view.

Environmental Matters

National, state and/or local laws and regulations relating to
pollution and environmental protection impose limitations and prohibitions on
the discharge and emission of, and establish standards for the use, disposal,
and management of, certain materials and waste, and impose liability for the
costs of investigating and cleaning up, and certain damages resulting from,
present and past spills, disposals, or other releases of hazardous substances
or materials (collectively, "Environmental Laws"). As an owner/lessor or
former owner/lessor of numerous properties, as well as a seller of certain
environmentally sensitive products such as herbicides and pesticides, the
Company has an inherent risk of liability under Environmental Laws,
including, for example, contamination that may have occurred in the past on
its current or formerly owned/leased properties or as a result of its
operations. There can be no assurance that the costs of complying with
Environmental Laws, any claims concerning noncompliance, or liability with
respect to contamination will not have a material adverse effect on the
Company's operations in the future.

The Company may also be affected by Holdings' liabilities and
potential liabilities with respect to Environmental Laws. Holdings'
subsidiaries in the past have included corporations involved in
manufacturing, such as food processing, salt-mining and refining, tanning and
retail operations such as convenience stores that sell gasoline, as well as
retail operations such as those of the Company. Such manufacturing and other
retail operations have in some instances resulted in contamination at
facilities currently or formerly owned or leased by Holdings or its
subsidiaries and/or at sites where wastes have allegedly been disposed of by
a subsidiary. Holdings has incurred substantial liabilities under the
Environmental Laws for such contamination, and has also from time to time
contracted to indemnify purchasers of subsidiaries or properties for
environmental liabilities. There can be no assurance that Holdings will not
be called upon to discharge additional liabilities with respect to the
Environmental Laws that may arise from its operations/properties or those of
its present or former subsidiaries, or that such liabilities will not be
significant. Holdings' ability to satisfy any obligations under the
Environmental Laws (and any other obligations) it may have will depend upon
dividends from the Company, which will be limited by certain covenants in the
Indenture and the Senior Credit Facility. Additionally, there can be no
assurance that parties will not attempt to impose upon the Company
liabilities arising or allegedly arising out of the operations or properties
<PAGE>
of Holdings and/or its present or former subsidiaries, or that such attempts
if undertaken would not adversely affect the Company in a manner that could
be material. See "Business--Environmental Matters".

Government Regulation

The Company's stores and products are subject to regulation by
numerous governmental authorities, including, without limitation, federal,
state and local laws and regulations governing health, sanitation, safety and
hiring and employment practices, including laws, such as the Fair Labor
Standards Act, governing such matters as minimum wages, overtime and other
working conditions. The failure to obtain or retain the required licenses or
to be in compliance with applicable governmental regulations, or any increase
in the minimum wage, rate, employee benefit costs or other costs associated
with employees, could adversely affect the business, financial condition or
results of operations of the Company. Even if such regulatory approval is
obtained, the stores are subject to periodic inspection and discovery of
problems or regulatory noncompliance may have a material adverse effect on
the Company's operations.

Lack of Public Market for the Exchange Notes

The Exchange Notes are being offered to holders of the Old Notes. The
Old Notes were offered and sold in February 1998 to a small number of
institutional investors and are eligible for trading in the PORTAL market.
The Exchange Notes are a new issue of securities for which there is currently
no trading market. If the Exchange Notes are traded after their initial
issuance, they may trade at a discount from their initial offering price
depending upon prevailing interest rates, the market for similar securities
and other factors, including general economic conditions and the financial
condition and performance of, and prospects for, the Company. The Company
does not intend to apply for a listing of the Exchange Notes on any
securities exchange. See "Description of Exchange Notes".
<PAGE>
THE TRANSACTIONS

On November 25, 1997, pursuant to an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of November 22, 1997, between Holdings and
Cyrus Acquisition Corp., a New York corporation ("Acquisition Corp.") formed
by Cypress, Acquisition Corp. commenced a tender offer (the "Tender Offer")
to purchase all of the then-outstanding shares (the "Former Shares") of
common stock of Holdings, $1.00 par value per share ("Holdings Common
Stock"). Also pursuant to the Merger Agreement, contemporaneously with the
Tender Offer, Holdings began a debt tender offer and consent solicitation
(the "Debt Tender") for at least a majority in principal amount of Holdings'
Senior Notes.

On December 23, 1997, Cypress Merchant Banking Partners L.P. ("CMBP")
and Cypress Offshore Partners L.P. ("Cypress Offshore" and, together with
CMBP, the "Cypress Funds"), invested $165 million in Acquisition Corp. and
Joseph R. Baczko, the new Chairman, President and Chief Executive Officer of
Holdings and the Company (together with the Cypress Funds, the "Investors"),
invested $1 million in Acquisition Corp. The total investment made in
Acquisition Corp. by the Investors is referred to herein as the "Investment".

On December 24, 1997, following the acquisition of 22.0 million
Former Shares tendered in the Tender Offer and the purchase of approximately
4.8 million treasury shares of Holdings Common Stock pursuant to the Merger
Agreement, in each case at a price of $5.50 in cash per share, Acquisition
Corp. owned approximately 91.6% of the outstanding Former Shares. In
addition, Holdings acquired $52.8 million of the $78 million then-outstanding
aggregate principal amount of the Senior Notes pursuant to the Debt Tender.

Also on December 24, 1997, Holdings and the Company entered into a
senior secured credit facility with affiliates of the Initial Purchasers (the
"Senior Credit Facility") for the Company providing for (i) a term loan
facility of up to $85 million (the "Term Loan Facility") and (ii) a revolving
credit facility of up to $110 million (the "Revolving Credit Facility"). The
Company's initial borrowing under the Senior Credit Facility consisted of
$37.5 million in term loans and $10 million of revolving credit loans.

On January 7, 1998, pursuant to the Merger Agreement, Acquisition
Corp. was merged (the "Merger") with and into Holdings with Holdings as the
surviving corporation of the Merger. In the Merger, each Former Share not
purchased in the Tender Offer (other than Former Shares held by Acquisition
Corp., Holdings or its subsidiaries or dissenting shareholders) was converted
into the right to receive $5.50 in cash (the "Merger Consideration"), and
each share of Acquisition Corp. common stock was converted into one share of
Holdings Common Stock; accordingly, Holdings became wholly owned by the
Investors.

The proceeds of the initial $47.5 million borrowing under the Senior
Credit Facility, together with the proceeds of the Investment were used,
among other things, to fund the Debt Tender and the Tender Offer, to pay
<PAGE>
Merger Consideration, to refinance certain indebtedness of Frank's and to pay
fees and expenses relating to the transactions discussed above.

In connection with the Transactions, Holdings contributed its
available cash on-hand to Frank's and converted all intercompany borrowings
with Frank's to equity of Frank's.

The Tender Offer, the Debt Tender, the Investment, the Merger, the
consummation of the Senior Credit Facility and the other transactions
described or referred to above are collectively referred to herein as the
"Transactions".

The following table sets forth the sources and uses of funds in
connection with the Transactions and the Offering:

<TABLE>
<CAPTION>
Amount
---------------------------
(in millions)
<S> <C>
Sources:
Senior Credit Facility<F1>:
Revolving Credit Facility . . . . . . . . . . $ 29.9
Term Loan Facility . . . . . . . . . . . . . . 20.3
Assumption of existing mortgages . . . . . . . . 29.7
Assumption of existing capital leases . . . . . . 11.6
Offering . . . . . . . . . . . . . . . . . . . . 115.0
Equity contribution by the Investors . . . . . . 166.0
------
Total Sources . . . . . . . . . . . . . . . . $372.5
======

Uses:
Purchase of equity<F2>. . . . . . . . . . . . . . $136.7
Assumption of existing mortgages . . . . . . . . 29.7
Assumption of existing capital leases . . . . . . 11.6
Repayment of certain mortgages . . . . . . . . . 10.9
11 1/2% Senior Notes due 2002:
Purchased pursuant to Debt Tender<F3>. . . . . 58.0
To be redeemed(F4) . . . . . . . . . . . . . . 26.5
Redemption of 8% Convertible Subordinated Notes
due 2002<F4> . . . . . . . . . . . . . . . . . 67.0
Estimated fees and expenses<F5> . . . . . . . . . 32.1
------
Total Uses . . . . . . . . . . . . . . . . . . $372.5
======

____________________
<FN>
<F1> The Senior Credit Facility originally consisted of a $110 million
Revolving Credit Facility and an $85 million Term Loan Facility. In
<PAGE>
connection with the Transactions, the Company borrowed $37.5 million
under the Term Loan Facility and $10 million under the Revolving
Credit Facility. Approximately $17.2 million of the proceeds of the
Offering were used to pay down indebtedness under the Term Loan
Facility. In connection with the Offering, the Company borrowed $19.9
million under the Revolving Credit Facility. Additionally, in
connection with the Offering, the Company permanently reduced the
commitments under the Term Loan Facility to $25 million from $85
million. Loans obtained under the Revolving Credit Facility mature in
December 2003 and loans obtained under the Term Loan Facility mature
in December 2004, subject to amortization and mandatory prepayment.
See "Other Indebtedness--Senior Credit Facility".
<F2> Includes purchases made pursuant to the Tender Offer and in connection
with the Merger totalling $134.3 million and retirement of stock
options totalling $2.4 million. See "The Transactions".
<F3> Includes tender premium and accrued interest.
<F4> Includes call premium and accrued interest.
<F5> Includes amounts paid pursuant to the former Chairman of Holdings'
employment agreement, financial advisory, consulting and other
professional fees and financing costs. See "Certain Relationships and
Related Transactions".

</TABLE>
<PAGE>
USE OF PROCEEDS

There will be no cash proceeds to the Company from the Exchange
Offer.

The net proceeds of the Offering were used to (i) pay a dividend to
Holdings to enable Holdings to redeem (A) approximately $67.0 million of its
outstanding 8% Convertible Subordinated Notes due 2002 (including the
redemption premium and accrued interest) (the "Convertible Notes") and
(B) approximately $26.5 million of its outstanding 11 1/2% Senior Notes due
2002 (including the redemption premium and accrued interest) (the "Senior
Notes" and, together with the Convertible Notes, the "Holdings Notes") and
(ii) prepay approximately $17.2 million of the Company's indebtedness under
the Term Loan Facility.

The Convertible Notes were originally issued pursuant to an indenture
dated February 28, 1992 among Holdings, the subsidiary guarantors and Bankers
Trust Company. The Convertible Notes had a maturity date of February 15, 2002
and an interest rate of 8%. The Senior Notes were originally issued pursuant
to an indenture dated February 28, 1992 between Holdings and United States
Trust Company of New York. The Senior Notes had a maturity date of
February 15, 2002 and an interest rate of 11 1/2%. For a description of the
Term Loan Facility, see "Other Indebtedness--Senior Credit Facility".
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company
(i) as of January 25, 1998 and (ii) as adjusted for the Transactions and the
Offering and the application of the net proceeds therefrom. See "Use of
Proceeds" and the financial statements and related notes appearing elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
As of January 25, 1998
----------------------------------------------------
Actual As Adjusted
---------------------- ---------------------------
(in thousands)
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,100 $ 13,427

Debt:
Senior Credit Facility<F1>:
Revolving Credit Facility<F2> . . . . . . . . . . . . . . . . . . . . . 10,000 10,000
Term Loan Facility . . . . . . . . . . . . . . . . . . . . . . . . . . 37,500 20,281
Capitalized lease obligations<F3> . . . . . . . . . . . . . . . . . . . . . 11,554 11,554
Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,680 29,680
Old Notes offered in the Offering . . . . . . . . . . . . . . . . . . . . . -- 115,000
11 1/2% Senior Notes due 2002<F4> . . . . . . . . . . . . . . . . . . . . . 25,235 --
8% Convertible Subordinated Notes due 2002<F4> . . . . . . . . . . . . . . 65,000 --
------- -------
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,969 186,515
------- -------

Total shareholder's equity<F5> . . . . . . . . . . . . . . . . . . . . . . 153,653 148,597
------- -------

Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . $332,622 $335,112
======== ========

____________________
<FN>
<F1> The Senior Credit Facility originally consisted of a $110 million
Revolving Credit Facility and an $85 million Term Loan Facility. In
connection with the Transactions, the Company borrowed $37.5 million
under the Term Loan Facility and $10 million under the Revolving
Credit Facility. Approximately $17.2 million of the proceeds of the
Offering were used to pay down indebtedness under the Term Loan
Facility. In connection with the Offering, the Company reduced
commitments available under the Term Loan Facility to $25 million from
$85 million. Loans obtained under the Revolving Credit Facility mature
in December 2003 and loans obtained under the Term Loan Facility
mature in December 2004, subject to amortization and mandatory
prepayment. See "Other Indebtedness--Senior Credit Facility".
<PAGE>
<F2> The Revolving Credit Facility must have no borrowings outstanding for
a consecutive 30-day period during each fiscal year.
<F3> Capitalized lease obligations are primarily related to the Company's
financing of its retail stores. The implicit interest rates under the
leases range from approximately 9.3% to 18.2%. See "Other
Indebtedness--Capital Leases".
<F4> The Company redeemed the outstanding Holdings Notes with a portion of
the proceeds of the Offering.
<F5> Reflects loss related to write-offs of:
Debt issue cost related to the reduction of
the Term Loan facility $(1,479)
Debt issue cost associated with the 11 1/2%
Senior Notes and the 8% Convertible Notes
redeemed with the proceeds from the Offering (1,369)
Premium cost associated with the repayment
of the 11 1/2% Senior Notes and the 8%
Convertible Notes (2,208)
-------
Net Change $(5,056)
=======

</TABLE>

<PAGE>

UNAUDITED PRO FORMA FINANCIAL DATA

The following unaudited pro forma financial data (the "Unaudited Pro
Forma Financial Data") for the fiscal year ended January 25, 1998 have been
derived by the application of pro forma adjustments to the financial
statements of the Company included elsewhere in this Prospectus. The
unaudited pro forma results of operations data for the fiscal year ended
January 25, 1998 give effect to: (i) the Tender Offer, (ii) the Debt Tender,
(iii) borrowings under the Senior Credit Facility, (iv) the Merger and (v)
the consummation of the Offering and application of the proceeds therefrom,
as if each had occurred on January 27, 1997. The related unaudited pro forma
balance sheet data give effect to the consummation of the Offering and
application of the proceeds therefrom as if it had occurred on January 25,
1998. The adjustments are described in the accompanying notes. The Unaudited
Pro Forma Financial Data (a) do not purport to represent what the Company's
results of operations actually would have been if those transactions had been
consummated on the date or for the periods indicated, or what such results
will be for any future date or for any future period or (b) give effect to
certain non-recurring charges expected to result from the Transactions. The
final allocation of the purchase price in connection with the Transactions,
in accordance with the purchase method of accounting, may differ from the
preliminary estimates due to the final allocation being based on completion
of fixed asset appraisals and valuations of certain other acquired assets and
assumed liabilities and management's evaluation of such items. The Unaudited
Pro Forma Financial Data should be read in conjunction with "Selected
Historical Financial and Other Data", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the financial
statements included elsewhere in this Prospectus.

<PAGE>

UNAUDITED PRO FORMA BALANCE SHEET
January 25, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Company Unaudited
Historical<F1> Adjustments Pro Forma
---------------- --------------- ---------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . $ 16,100 $(2,673)<F2> $ 13,427
Accounts and notes receivable . . . . . . . . . . 4,607 -- 4,607
Merchandise inventory . . . . . . . . . . . . . . 81,051 -- 81,051
Other current assets . . . . . . . . . . . . . . . 6,218 -- 6,218
-------- -------- --------
Total current assets . . . . . . . . . . . . . 107,976 (2,673) 105,303

Net property, plant and equipment . . . . . . . . . . 217,880 -- 217,880
Net intangibles . . . . . . . . . . . . . . . . . . . 95,825 -- 95,825
Other assets and deferred charges . . . . . . . . . . 13,248 1,477<F3> 14,725
-------- -------- --------
$434,929 $(1,196) $433,733
======== ======== ========
Liabilities and Shareholder's Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . $ 30,852 $ -- $ 30,852
Accrued liabilities . . . . . . . . . . . . . . . 53,677 (3,686)<F4> 49,991
Notes payable to bank . . . . . . . . . . . . . . 10,000 -- 10,000
Current portion of long-term debt . . . . . . . . 1,780 -- 1,780
-------- -------- --------
Total current liabilities . . . . . . . . . . . 96,309 (3,686) 92,623

Long-term debt:
Senior debt . . . . . . . . . . . . . . . . . . . 102,189 (42,454)<F5> 59,735
Subordinated debt . . . . . . . . . . . . . . . . 65,000 50,000<F6> 115,000
-------- -------- --------
Total long-term debt . . . . . . . . . . . . . . . . 167,189 7,546 174,735
Other liabilities and deferred credits . . . . . . . 17,778 -- 17,778

Shareholder's equity:
Common stock . . . . . . . . . . . . . . . . . . . 246 -- 246
Capital in excess of par . . . . . . . . . . . . . 165,754 -- 165,754
Intercompany payable . . . . . . . . . . . . . . . (693) -- (693)
Retained earnings . . . . . . . . . . . . . . . . (11,654) (5,056)<F7> (16,710)
-------- -------- --------
Total shareholder's equity . . . . . . . . . . . . . 153,653 (5,056) 148,597
-------- -------- --------
$434,929 $(1,196) $433,733
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet

<PAGE>

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
January 25, 1998
(dollars in thousands)

[FN]
<F1>The Company historical amounts include management's preliminary
allocation of purchase in accordance with the purchase method of
accounting as follows:

Purchase Price:
Purchase price consideration . . . . . . . . . . . $166,000
Estimated fees and expenses . . . . . . . . . . . 11,960

Total . . . . . . . . . . . . . . . . . . . . . . $177,960
========

Allocated as follows:
Historical book value of Frank's . . . . . . . . . $ 81,542
Repayment of Debt in connection
with the Transactions . . . . . . . . . . . . . 25,006
Estimated decrease in inventory to fair value(a) . (4,173)
Estimated adjustment to current assets(b) . . . . (4,822)
Estimated increase in property plant and
equipment to fair value(c) . . . . . . . . . . 17,800
Estimated increase in goodwill as a result of
the allocation of purchase price . . . . . . . 81,654
Estimated transaction related liabilities,
including accrual for directors' retirement
plan and other severance costs . . . . . . . . (13,573)
Estimated changes in reserves for store
closings(d) . . . . . . . . . . . . . . . . . . (5,474)
------
Total . . . . . . . . . . . . . . . . . . . . . . $177,960
========

(a) Reflects the estimated decrease to fair value of inventory as a result
of differences in new management's plans to discontinue certain
product lines.

(b) Reflects write-offs of other current assets as a result of conforming
accounting policies. This change in accounting policies primarily
relates to the capitalization of pallets, whereby prior managements's
policy was to capitalize and amortize costs. New management's policy
is to expense these costs as incurred.

Land (based on appraisals) . . . . . . . . . . . . $ 27,468
Buildings (based on appraisals) . . . . . . . . . (1,527)
Net fixed assets of additional stores to be
closed (estimated fair value) . . . . . . . . . (1,598)
Other fixed assets (estimated fair value) . . . . (6,543)
--------
<PAGE>
$ 17,800
========

(d) Reflects additional store closings reserves. As a result of the
acquisition, management has identified two additional unprofitable
Frank's stores and has accelerated its plan for the disposal of
previously identified stores, thereby reducing the anticipated
residual value.

<F2>Cash:
Gross Proceeds from the Offering . . . . . . . . . $115,000
Less:
Repayment of 11 1/2% Senior Notes and 8%
Convertible Notes, including accrued interest
and premium . . . . . . . . . . . . . . . . . . . 96,129
Expenses related to the Offering . . . . . . . . . 4,325
Repayment of term loan . . . . . . . . . . . . . . 17,219
--------
Net Change . . . . . . . . . . . . . . . . . . . . . $(2,673)
========

<F3>Changes in Other Assets and Deferred Charges as a
result of:
Write-off of debt issue cost associated with the
11 1/2% Senior Notes and the 8% Convertible
Notes redeemed with the proceeds from the
Offering . . . . . . . . . . . . . . . . . . . . $(1,369)
Write-off of debt issue cost associated with Senior
Credit Facility . . . . . . . . . . . . . . . . . . (1,479)
Expenses related to the Offering . . . . . . . . . 4,325
======
Net Change . . . . . . . . . . . . . . . . . . . . . $ 1,477
========

F<4>Accrued interest on balance of 11 1/2% Senior Notes
redeemed . . . . . . . . . . . . . . . . . . . . . . $(1,375)
Accrued interest on 8% Convertible Notes redeemed . (2,311)
-------
Net Change . . . . . . . . . . . . . . . . . . . . . $(3,686)
========

<F5>Repayment of:
11 1/2% Senior Notes . . . . . . . . . . . . . . . $(25,235)
Term loan . . . . . . . . . . . . . . . . . . . . . (17,219)
-------
Net Change . . . . . . . . . . . . . . . . . . . . $(42,454)
=======

<F6>Issuance/(repayment) of:
Old Notes . . . . . . . . . . . . . . . . . . . . . $115,000
8% Convertible Notes . . . . . . . . . . . . . . . (65,000)
-------
<PAGE>
Net Change . . . . . . . . . . . . . . . . . . . . $ 50,000
========

<F7>Reflects loss related to write-offs of:
Debt issue cost related to the reduction of the
Term Loan facility . . . . . . . . . . . . . . . . $(1,479)
Debt issue cost associated with the 11 1/2% Senior
Notes and the 8% Convertible Notes redeemed with
the proceeds from the Offering . . . . . . . . . . (1,369)
Premium cost associated with the repayment of the
11 1/2% Senior Notes and the 8% Convertible
Notes . . . . . . . . . . . . . . . . . . . . . . (2,208)
--------
Net Change . . . . . . . . . . . . . . . . . . . . $(5,056)
========

<PAGE>

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
Fiscal Year Ended January 25, 1998
(dollars in thousands)

<TABLE>
<CAPTION>
Company Historical
------------------------------
Post- Pre-
acquisition acquisition
Period Period
(Successor- (Predecessor-
basis) basis)
Four-Weeks Forty-Eight
Ended Weeks Ended Adjusted
January 25, December 28, Transactions Unaudited Offering Unaudited
1998 1997 Adjustments Pro Forma Adjustments Pro Forma
-------------- --------------- -------------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>

Sales . . . . . . . . . . . . . . $ 14,814 $515,204 $530,018 $530,018
Cost of sales, including buying
and occupancy expense . . . . 17,532 367,008 384,540 384,540
-------- -------- -------- -------- -------- --------
Gross profit . . . . . . . . . (2,718) 148,196 145,478 145,478
Selling, general and
administrative expense . . . . 7,318 137,872 (1,264)<F1> 143,926 143,926
Impairment loss . . . . . . . . . 1,720 1,720 1,720
Provision for store closings and
other cost . . . . . . . . . . 6,677 6,677 6,677
-------- -------- -------- -------- -------- --------
Operating income . . . . . . . . (10,036) 1,927 1,264 (6,845) 0 (6,845)
Interest and debt expense . . . . 1,601 19,632 (4,509)<F2> 16,724 3,766<F3> 20,490
Other income (expense) . . . . . (17) (2,010) (2,027) (2,027)
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes $(11,654) $(19,715) $ 5,773 $(25,596) $ (3,766) $(29,362)
======== ======== ======== ======== ======== ========

Ratio of earnings to fixed charges <F4> . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --

See Notes to Unaudited Pro Forma Statements of Operations

<PAGE>

NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
Fiscal Year Ended January 25, 1998
(dollars in thousands)

<F1> Pro forma adjustments to reflect the
effects of the Transactions on
property, plant and equipment and
intangibles:
Increase in amortization of
goodwill(a) . . . . . . . . . . . . . $ 2,041
Reduction in depreciation for
valuation of property, plant and
equipment(b) . . . . . . . . . . . . (3,305)
--------
$ (1,264)
========

(a) The increase in amortization of goodwill is a result of the
increase in goodwill of $81,654 (due to purchase accounting),
amortized over 40 years.

(b) The reduction in depreciation expense is due to the write-down of
buildings, fixtures and other fixed assets as a result of the
allocation of purchase price based on appraisals amortized over
the estimated useful lives of the related assets.

<F2> Reflects interest and debt expense
adjustments as a result of the
Transaction as follows:
Interest expense for the Senior Notes
at 11.5% . . . . . . . . . . . . . . $ (5,518)
Interest expense for certain
mortgages repaid at 8.75% (average
interest) . . . . . . . . . . . . . . (810)
Interest expense for the Previous
Bank Facility at 8% (average
interest) . . . . . . . . . . . . . . (1,290)
Change in commitment fees, net . . . . . 381
Amortization of Holdings' Senior
Notes issuance cost redeemed over
10 years . . . . . . . . . . . . . . (185)
Amortization of issuance cost on
Senior Credit Facility over 7 years . 476
Interest expense on borrowings under
the Senior Credit Facility (a) . . . 2,437
--------
$ (4,509)
--------
(a) Reflects the following:
Revolving Credit Facility at 7.875% $ 788
<PAGE>
Term Loan Facility at 8.125% . . . . 1,649
--------
$ 2,437
========

A 1/8 increase in the interest rate under the Senior Credit
Facility would increase interest expense and reduce income (loss)
before income taxes by $37 for the fiscal year ended January 25,
1998.

<F3> Reflects interest and debt expense
adjustments as a result of the Offering
as follows:
Interest expense for the Senior Notes
at 11.5% . . . . . . . . . . . . . . $ (2,902)
Interest expense for the Convertible
Subordinated Notes at 8% . . . . . . (5,200)
Amortization of Holdings Notes
issuance cost over 10 years . . . . . (353)
Interest expense for the Notes
offered hereby at a rate of 10.25% . 11,788
Amortization of issuance cost on
Notes offered hereby over 10 years . 433
--------
$ 3,766
========

<F4> For purposes of determining the ratio of earnings of fixed charges,
earnings are defined as income before income taxes, plus fixed
charges. Fixed charges consist of interest expense on all
indebtedness (including amortization of deferred debt issuance costs)
and a portion of operating lease rental expense that is
representative of the interest factor. The Company's earnings would
have been insufficient to cover pro forma fixed charges by $29.3
million.

</TABLE>

<PAGE>

SELECTED HISTORICAL FINANCIAL AND OTHER DATA

Set forth below are selected historical financial data of the Company
for the forty-eight week period ending December 28, 1997, the four-week
period ending January 25, 1998 and for each of the two fiscal years in the
period ended January 26, 1997, which are derived from the audited financial
statements included elsewhere herein. The fiscal year is normally comprised
of 52 or 53 weeks, ending on the last Sunday in January. The 1997, 1996 and
1995 fiscal years each reflect a 52 week period ended January 25, 1998,
January 26, 1997 and January 28, 1996, respectively. Because of the
acquisition of Holdings by Cypress on December 24, 1997, as described under
the section entitled "The Transactions," the summary financial data for
fiscal 1997 represents the operations data for the forty-eight week period
prior to the acquisition and the four-week period subsequent to the
acquisition. The post-acquisition period has been presented on the purchase
basis of accounting, and is therefore not comparable to the historical
financial information presented for the forty-eight week pre-acquisition
period. The selected historical financial data set forth below for the
Company as of January 30, 1994 and January 29, 1995 and for each of the two
fiscal years in the period ended January 29, 1995 are derived from the
unaudited financial statements for those periods and, in the opinion of
management, include all adjustments necessary for a fair presentation of said
information. The selected historical financial data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto
included elsewhere herein.

<TABLE>
<CAPTION>
Pre-
acquisition Post-
Period acquisition
(Predecessor Period
basis) (Successor-
Fiscal Year Ended Forty-Eight basis)
------------------------------------------------- Weeks Ended Four-Weeks
January December Ended
January 30, 29, January 28, January 26, 28, January 25,
1994 1995 1996 1997 1997 1998
------------ ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales . . . . . . . . . . . . . . $568,602 $567,987 $593,270 $530,752 $515,204 $ 14,814
Cost of sales, including buying
and occupancy . . . . . . . . . . 425,724 402,839 429,181 383,099 367,008 17,532
-------- -------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . 142,878 165,148 164,089 147,653 148,196 (2,718)
Selling, general and
administrative expense . . . . . . 151,995 140,171 148,502 138,355 137,872 7,318
Impairment loss . . . . . . . . . . . -- -- -- -- 1,720 --
Provision for store closings
and other costs . . . . . . . . . 22,876 -- -- -- 6,677 --
<PAGE>
Pre-
acquisition Post-
Period acquisition
(Predecessor Period
basis) (Successor-
Fiscal Year Ended Forty-Eight basis)
------------------------------------------------- Weeks Ended Four-Weeks
January December Ended
January 30, 29, January 28, January 26, 28, January 25,
1994 1995 1996 1997 1997 1998
------------ ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>

-------- -------- -------- -------- -------- --------
Operating income (loss) . . . . . . . (31,993) 24,977 15,587 9,298 1,927 (10,036)
Interest expense . . . . . . . . . . 23,251 22,911 23,845 20,863 19,632 1,601
Other income (expense) . . . . . . . (216) 47 507 (226) (2,010) (17)
-------- -------- -------- -------- -------- --------
Income tax expense (credit) . . . . . -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) . . . . . . . . . . $(55,460) $ 2,113 $ (7,751) $(11,791) $(19,715) $(11,654)
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed
charges<F1>. . . . . . . . . . . . -- 1.08x -- -- -- --

Other Data:
Merchandise gross margin . . . . . . 39.6% 42.3% 40.8% 42.2% 42.2% 13.7%
Depreciation and amortization<F2> . . $24,610 $ 23,836 $ 22,888 $ 22,377 $ 21,835 $ 1,500
Capital expenditures . . . . . . . . 29,946 5,391 5,497 4,371 12,472 (34)
Increase (decrease) in
comparable store sales . . . . . . (1.0)% 5.2% 4.5% (9.4)% 0.8% (5.2)%
Number of stores at end of period . . 265 265 264 262 258 258

Balance Sheet Data (at end of
period):
Cash and cash equivalents<F3> . . . . $ 5,204 $ 5,619 $ 4,871 $ 3,526 $ 39,411 $ 16,100
Working capital<F4> . . . . . . . . . 27,127 9,631 36,926 27,005 (4,708) 7,347
Property, plant and equipment, net . 280,210 253,331 237,803 220,626 219,171 217,880
Total debt, including current
maturities . . . . . . . . . . . 256,875 234,005 191,872 195,015 169,067 178,969
Shareholder's equity . . . . . . . . 71,587 54,117 106,258 75,681 166,441 153,653

____________________
<FN>
<F1> The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges (excluding capitalized
interest) by fixed charges. Fixed charges consist of interest expense,
capitalized interest and the portion of operating rental expense which
management believes is representative of the interest component of
rent expense. For fiscal 1993, fiscal 1995, fiscal 1996, for the
forty-eight weeks ended December 28, 1997 and for the four weeks ended
January 25, 1998, the Company's earnings were insufficient to cover
<PAGE>
its fixed charges by $55,820, $7,610, $11,803, $19,643 and $11,650,
respectively.
<F2> Includes amortization of debt issuance cost of $1,485 for fiscal 1993,
$1,218 for fiscal 1994, $1,671 for fiscal 1995, $899 for fiscal 1996
and $676 for the forty-eight weeks ended December 28, 1997 and $56 for
the four weeks ended January 25, 1998 and includes $1,720 for the
write-down to fair value of property, plant and equipment in
accordance with FAS-121 "Impairment of Long-Lived Assets" for the
forty-eight weeks ended December 28, 1997.
<F3> Excludes Holdings cash of $32,653 for fiscal 1993, $62,745 for fiscal
1994, $5,033 for fiscal 1995 and $23,796 for fiscal 1996.
<F4> Reflects total current assets (excluding cash) less total current
liabilities (excluding current maturities of long-term debt and notes
payable to banks).

</TABLE>

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of the
financial condition and results of operations ("MD&A") of the Company for the
fiscal years ended January 25, 1998, January 26, 1997 and January 28, 1996.
This discussion and analysis should be read in conjunction with, and is
qualified in its entirety by, the sections entitled (i) "Summary Historical
and Unaudited Pro Forma Financial Information", (ii) "Selected Historical
Financial and Other Data" and (iii) the financial statements of the Company
and the notes thereto included elsewhere in this Prospectus.

General

Overview. The Company operates the largest national chain of
specialty retail stores devoted to the sale of lawn and garden products. In
addition, the Company sells dried and artificial flowers and arrangements,
Christmas merchandise, crafts and pet supplies. The Company's parent,
Holdings, was acquired by Cypress and new management on December 24, 1997 in
a series of related transactions. See "The Transactions". Following the
Transactions, the Company announced the appointment of Joseph R. Baczko as
Chairman, President and Chief Executive Officer, Adam Szopinski as Executive
Vice President and Chief Operating Officer and Larry T. Lakin as Executive
Vice President and Chief Financial Officer. The new management team possesses
considerable expertise in specialty retailing and has developed an operating
strategy which is designed to position the Company as the nation's leading
lawn and garden specialty retailer.

Factors Affecting Historical Operating Performance. New management
believes that the Company's financial performance during the past several
years has been affected by senior management turnover and significant capital
constraints.

During the past several years, the operations of Frank's have been
under the leadership of three different senior executives: Ernest Townsend
(Frank's President and Chief Operating Officer from February 1997 to December
1997), Scott Hessler (Frank's President and Chief Operating Officer from May
1994 to January 1997) and Harris J. Ashton, former Chairman of Holdings
(acting president of Frank's from March 1991 to May 1994). New management
believes that lack of continuity and frequent change of strategic direction
adversely affected the Company's operations and financial performance.

Furthermore, in recent years, the Company's ability to effect a
long-term strategic plan has been adversely affected by capital constraints.
Since fiscal 1994, the Company's revolving line of credit has had a maturity
of no longer than a single year, prohibiting the Company from implementing a
strategy and merchandising plan beyond a one-year time horizon. In fiscal
1995 and early fiscal 1996, Frank's refinanced $76 million of mortgages with
approximately $39 million of new mortgages and available Holdings and Frank's
cash on hand. As a consequence, in fiscal 1996, the Company's overall
liquidity significantly deteriorated. The Company reduced its purchases of
inventory during fiscal 1996 by 15.6% versus the prior year, which
<PAGE>
contributed to a significant decline in fiscal 1996 comparable store sales.
In addition, during 1997, the Company's revolving line of credit was extended
only through December 31, 1997, further eroding long-term liquidity. New
management believes that the new $110 million Revolving Credit Facility,
which will solely finance working capital and must have no borrowings
outstanding for a consecutive 30-day period during each fiscal year, will
substantially increase the Company's liquidity and will allow for the
successful implementation of the new operating plan.

Anticipated Cost Savings

Since closing the acquisition on December 24, 1997, the Company's new
management team has identified and principally effected annual cost savings
of approximately $13.1 million through: (i) reduction of corporate overhead
related to the closing of Holdings' headquarters in Stamford, Connecticut,
(ii) streamlining and reduction of field supervision and store-level
management, (iii) replacement of the Company's insurance policies with new
lower premium plans providing for substantially similar coverages,
(iv) elimination of expenditures incurred by prior management to build and
promote a new store concept, (v) termination of the temporary mall-based
Christmas stores and realization of savings from several previous and two
additional store closings and (vi) expense reductions associated with the
consolidation of its distribution facilities implemented in late fiscal 1996
and early fiscal 1997. This approximately $13.1 million in annual cost
savings is net of revenues new management expects the Company will forego as
a result of the identified closure of unprofitable stores. See "Risk
Factors--Anticipated Cost Savings", "Business--Overview" and "Business--Company
Strategy".

Results of Operations

Because the acquisition occurred on December 24, 1997, only four
weeks prior to the Company's fiscal year end on January 25, 1998, management
considers the impact of reduced depreciation expense and changes in interest
expense to have an immaterial impact on the results of operations for the
four-week period subsequent to the acquisition (see Unaudited Pro Forma
Statements of Operations in "Unaudited Pro Forma Financial Data"); therefore,
for purposes of the analysis of the results of operations, the four-week
period and forty-eight week period ending January 25, 1998 and December 28,
1997, respectively, have been aggregated for comparative purposes. The
following table sets forth the Company's results of operations for the
periods indicated expressed as a percentage of net sales:

<PAGE>
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------------------
1995 1996 1997
-------------- --------------- --------------
<S> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%
Cost of sales, including buying and occupancy . . . . . . . . . . . . . . . . . 72.3 72.2 72.6
------ ------ ------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.7 27.8 27.4
Selling, general and administrative expense . . . . . . . . . . . . . . . . . . 25.1 26.1 28.9
------ ------ ------
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 1.7 (1.5)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 3.9 4.0
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.0 (0.4)
------ ------ ------
Income (loss) before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (1.3) (2.2) (5.9)
Income tax expense (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
------ ------ ------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.3)% (2.2)% (5.9)%
====== ====== ======
</TABLE>

Fiscal 1997 Compared to Fiscal 1996

The discussion and analysis below combines the results for the forty-
eight weeks ended December 28, 1997 and the four weeks ended January 25, 1998
and compares this combined fiscal 1997 with fiscal 1996. Management believes
that the combined fiscal 1997 periods represent a fair and comparable
presentation versus fiscal 1996.

Net Sales. Net sales for fiscal 1997 were $530.0 million compared to
$530.8 million for fiscal 1996, a decrease of 0.2%. Comparable store sales
(stores open for a full year in both years) for fiscal 1997 increased 0.6%
compared to fiscal 1996.

Cost of Sales, Including Buying and Occupancy. Cost of sales,
including buying and occupancy, was $384.5 million for fiscal 1997 compared
to $383.1 million for fiscal 1996, an increase of 0.4%. Cost of sales as a
percentage of net sales increased 0.4% to 72.6%. Merchandise gross margins,
as a percentage of net sales, declined 0.8% to 41.4% due primarily to the
1997 third quarter strategy under prior management that increased promotions
in the fall lawn and garden business and increased markdowns to clear some
seasonal and aged merchandise. Additionally, in the 1997 fourth quarter the
Company experienced a lower merchandise gross margin rate on Christmas
products, as a result of markdowns taken to minimize its inventory carryover.
Buying and occupancy costs for fiscal 1997 decreased by $2.1 million, and as
a percentage of net sales decreased 0.3% compared to fiscal 1996. As a
result, gross profit for fiscal 1997 was $145.5 million compared to $147.7
million for fiscal 1996, a decrease of 1.5%. As a percentage of net sales,
gross profit declined 0.4% to 27.4%.
<PAGE>
Selling, General and Administrative Expense. Selling, general and
administrative expense for fiscal 1997 was $145.2 million compared to $138.4
million for fiscal 1996, an increase of 4.9% resulting from higher store
labor and advertising costs. In addition, fiscal 1997 included expenses of
$1.2 million in additional compensation granted by the former Board of
Directors to the former Chairman prior to the acquisition of Holdings in the
form of the forgiveness of indebtedness owed the Company by the Chairman and
$2.5 million associated with the development of a new store concept
implemented by prior management. As a percentage of net sales, selling,
general and administrative expense increased 1.3% to 27.4%.

Operating Income (Loss). The operating loss for fiscal 1997 was $8.1
million compared with operating income of $9.3 million for fiscal 1996. The
decrease in operating income was caused by the gross profit and selling,
general and administrative factors as explained above and the recording of an
asset impairment loss of $1.7 million and a provision for store closings of
$6.7 million during fiscal 1997.

Interest Expense. Interest expense for fiscal 1997 was $21.2 million
compared to $20.9 million for fiscal 1996.

Other Expense. Other expense was $2.0 million in fiscal 1997
compared to $0.2 million in fiscal 1996 due primarily to a gain of $2.8
million associated with the termination of a leased store, higher levels of
interest income and $4.6 million for legal and advisory fees in connection
with the acquisition. The increase was offset in part by a loss of $0.9
million associated with the sale of the Company's prior headquarters and $0.5
million associated with the closing of stores.

Net Income (Loss). The net loss for fiscal 1997 was $31.4 million
compared with a net loss of $11.8 million for fiscal 1996. The increase in
net loss of $19.6 million is due to the increased operating loss of $17.4
million and increased interest and other expense as explained above.

Fiscal 1996 Compared to Fiscal 1995

Net Sales. Net sales for fiscal 1996 were $530.8 million compared to
$593.3 million for fiscal 1995, a decrease of 10.5%. Comparable store sales
for fiscal 1996 decreased 9.4% due primarily to a significant reduction in
inventory purchases from $332.5 million for fiscal 1995 to $280.7 million for
fiscal 1996, representing a decrease of 15.6%.

Cost of Sales, Including Buying and Occupancy. Consistent with the
reduction of sales discussed above, cost of sales, including buying and
occupancy was $383.1 million for fiscal 1996 compared to $429.2 million for
fiscal 1995, a decrease of 10.7%. Cost of sales as a percentage of net sales
decreased 0.1% to 72.2%. Merchandise gross margins, as a percentage of net
sales, improved 1.4% due to fewer promotions and tighter inventory management
during fiscal 1996. Buying and occupancy costs for fiscal 1996 decreased $1.8
million, but as a percentage of net sales, increased 1.2% compared to fiscal
1995. As a result, gross profit for fiscal 1996 was $147.7 million compared
<PAGE>
to $164.1 million for fiscal 1995, a decrease of 10.0%. As a percentage of
net sales, gross profit improved 0.1% to 27.8%.

Selling, General and Administrative Expense. Selling, general and
administrative expense for fiscal 1996 was $138.4 million compared to $148.5
million for fiscal 1995, a decrease of 6.8%. This decrease resulted from
expense reductions initiated during 1996 particularly in the areas of
advertising, store payroll and administrative expenses. As a percentage of
net sales, selling, general and administrative expense increased 1.0% to
26.1%.

Operating Income. Operating income for fiscal 1996 was $9.3 million
compared to $15.6 million for fiscal 1995. The decline of $6.3 million was
the result of a decrease in gross profit of $16.4 million, primarily due to
reduced sales as explained above offset by reduced selling, general and
administrative expenses of $10.1 million.

Interest Expense. Interest expense for fiscal 1996 was $20.9 million
compared to $23.8 million for fiscal 1995, a decrease of 12.2%. The decrease
was primarily due to the Company's repayment in full of certain mortgages at
the end of fiscal 1995. The Company replaced this financing, in part, with
new mortgage financings that totalled $39.0 million as of January 26, 1997.

Other Income. Other income for fiscal 1995 was $0.5 million compared
to other expense of $0.2 million in fiscal 1996. During fiscal 1995 the
Company had a gain on the sale of land, while in fiscal 1996 the Company
incurred a loss on the sale of a store.

Net Income. The net loss for fiscal 1996 was $11.8 million compared
to $7.7 million in fiscal 1995. The increased net loss of $4.1 million was a
result of the $6.3 million operating profit decrease, and a $0.7 million
decrease in other income, offset by a $2.9 million lower interest expense as
a result of the reduced financing explained above.

Liquidity and Capital Resources

Historical

The Company has historically financed its operations with funds
generated from operating activities, available cash (both at Frank's and
Holdings) and borrowing under its revolving credit facility with Comerica
Bank (the "Previous Bank Facility").

Operating Activities. Net cash provided by (used for) operating
activities for fiscal 1997 was $(27.0) million compared to $18.2 million for
fiscal 1996. The decrease is primarily attributable to lower earnings and a
decrease in accrued expenses due to timing of payments. At January 25, 1998
the remaining store closing reserve was $11.6 million. As a result of the
acquisition, new management identified two additional unprofitable Company
stores and accelerated its plan for disposal of these stores which resulted
in an additional liability of $5.4 million when allocating the purchase
price. The reserve primarily represents lease termination costs for the
<PAGE>
remaining four store locations, net lease costs on subleased locations,
estimated legal fees and estimated losses associated with the sale and/or
sublease of real estate. During 1997 the Company utilized net cash of $2.6
million in connection with the store closing reserve. During 1997 the
Company also incurred a liability of $13.4 million in connection with the
purchase of untendered shares of Holdings Common Stock by Cypress.

Net cash provided by (used for) operating activities for fiscal years
1996 and 1995 was $18.2 million and $(11.7) million, respectively. The
improvement in cash flow from operations in fiscal 1996 compared to fiscal
1995 was attributable to significantly reduced inventory purchases in fiscal
1996 and an increase in accrued expenses in fiscal 1996 compared to a
decrease in fiscal 1995. Furthermore, in fiscal 1995 the early receipt of
Christmas merchandise and reduced spring purchases in the 1995 fourth quarter
resulted in a decrease in accounts payable for fiscal 1995 of $13.9 million
compared to an increase of $0.1 million in fiscal 1996.

Investing Activities. Net cash provided by (used for) investing
activities for fiscal 1997 was $0.2 million compared to $(3.4) million for
fiscal 1996. The expenditures in fiscal 1997 included $12.4 million for the
addition of property, plant and equipment which was offset by $12.6 million
of proceeds from the sale of property, plant and equipment, which includes
$6.0 million from the sale/leaseback of three owned stores, the sale of the
Company's headquarters facility and the termination of a leased location.

Net cash used for investing activities for the fiscal years 1996 and
1995 was $3.4 million and $5.2 million, respectively. The majority of such
expenditures was generally for refurbishment of existing stores.

Financing Activities. Net cash provided by (used for) financing
activities for fiscal 1997 was $39.4 million compared to $(16.1) million for
fiscal 1996. The increase was primarily attributable to the Transactions,
which provided $146.3 million. Available cash in excess of the Company's
working capital requirements was used to pay down intercompany borrowings
with Holdings of $114.7 million.

Net cash provided by (used for) financing activities for the fiscal
years 1996 and 1995 was $(16.1) million and $16.1 million, respectively. The
greater net cash used in fiscal 1996 compared to fiscal 1995 was primarily
due to decreased intercompany borrowings with Holdings. Net cash provided in
fiscal 1995 included the payment of long-term debt and capital lease
obligations of $77.1 million (principally the repayment of $76 million of
mortgages), offset by $35.0 million of new mortgage financing and $59.9
million in increased intercompany borrowings with Holdings.

After the Transactions and the Exchange Offer

Following the Exchange Offer, the Company's primary sources of
liquidity will be cash flow from operations and borrowings under its
Revolving Credit Facility. The primary uses of cash will be working capital,
capital expenditures and debt service requirements.
<PAGE>
As a result of the Transactions and the Offering, the Company's
capital structure has changed substantially. As of January 25, 1998, after
giving pro forma effect to the Transactions and the Offering and the
application of the proceeds therefrom, the Company would have had total
outstanding indebtedness of $186.5 million, including $20.3 million under the
Company's Term Loan Facility and $10.0 million under the Revolving Credit
Facility. The Company would have had $98.3 million of remaining availability
under its $110 million Revolving Credit Facility. In connection with the
Offering, the Company reduced commitments available under the Term Loan
Facility to $25 million from $85 million. The unused portion of the Term Loan
Facility of $4.7 million is reserved for potential refinancing of certain
mortgages. See "Other Indebtedness--Mortgage Loans". The Term Loan and
Revolving Credit Facilities will mature on the seventh and sixth anniversary,
respectively, of the Credit Facility Closing Date (as defined herein). The
principal balance under the Term Loan Facility will begin amortizing at the
end of the first quarter of fiscal 1999. In addition, beginning with fiscal
1998, for a consecutive 30-day period during each fiscal year there must be
no outstanding borrowings under the Revolving Credit Facility. See "Other
Indebtedness--Senior Credit Facility".

The Company experiences seasonal fluctuations in its net sales and
profitability, with generally lower net sales and gross profit during the
winter and late summer months. The Company believes that the seasonality of
net sales and profitability is a factor that affects the lawn and garden
industry generally and is primarily due to fluctuating gardening activity
during any given year. As a result, the Company's working capital
requirements also fluctuate throughout the year, ranging from a deficit of
$7.3 million in May to a high of $62.1 million in November during the twelve
months ended January 25, 1998.

Subject to restrictions in the Senior Credit Facility and the
Indenture, the Company may incur additional indebtedness from time to time to
finance working capital, capital expenditures or acquisitions. For fiscal
1997, after giving pro forma effect to the Transactions and the Offering and
the proceeds therefrom, the Company's ratio of earnings to fixed charges
would have been insufficient to cover pro forma fixed charges by $29.3
million for the fiscal year ended January 25, 1998. See "Risk
Factors--Substantial Leverage".

Based upon the current level of operations and anticipated revenue
growth and operating improvements, management believes that cash flow from
operations and available cash, together with available borrowings under the
Senior Credit Facility, will be adequate to meet the Company's future
liquidity needs for at least the next several years, although no assurance
can be given in this regard. In addition, there can be no assurance that the
Company's business will generate sufficient cash flow from operations, that
anticipated revenue growth and operating improvements will be realized or
that future borrowings will be available under the Senior Credit Facility in
an amount sufficient to enable the Company to service its indebtedness,
including the Notes, or to fund its other liquidity needs. The Company's
future operating performance and ability to service or refinance the Notes
and to extend or refinance the Senior Credit Facility will be subject to
<PAGE>
future economic conditions and to financial, business and other factors, many
of which are beyond the Company's control. See "Risk Factors".

Usage of Net Operating Losses

In preparing its financial statements included elsewhere herein,
Frank's has determined its available net operating losses ("NOLs") on a
stand-alone basis from Holdings. As of the close of the Transactions, the
Company had NOLs of approximately $68 million which expire from fiscal 2008
through fiscal 2013. The Company's income tax liability is calculated as part
of the consolidated U.S. federal income tax returns of Holdings. As of
January 25, 1998, Holdings had additional NOLs of approximately $24 million
which expire from fiscal 2008 through fiscal 2013 and will also be available
to offset income generated by the Company provided that the Company files its
tax returns as part of the consolidated U.S. federal income tax returns of
Holdings.

As a result of the Transactions, the tax status of such NOLs is
subject to limitations imposed by Section 382 of the Internal Revenue Code of
1986, as amended (the "Code"), and as such their usage by Holdings is
currently estimated to be limited to $7.2 million per year. New management
expects to utilize such NOLs as the Company regains its profitability.

The Company projects future tax deductions, not subject to Section
382 of the Code, which are expected to result from the Transactions and the
use of the proceeds of the Offering of $16 million.

Capital Expenditures

The Company's capital expenditures were $4.4 million, $5.5 million
and $5.4 million in the fiscal years 1996, 1995 and 1994, respectively. The
majority of such capital expenditures in each of such fiscal years has been
for the refurbishment of the stores. The Company incurred approximately $12.4
million of expenditures in fiscal 1997 for various capital projects,
including investments in the new MIS, refurbishment of existing stores and
implementation of the new store concept by prior management.

Management anticipates that total capital expenditures for fiscal
1998 will be approximately $22 million. Such capital expenditures will be
made in connection with the implementation of the new MIS, refurbishment of
the existing stores and the new store opening program which is expected to
begin early in fiscal 1999. The Company expects to spend $6.5 million in
connection with the implementation of the new MIS which the Company believes
will, among other things, solve all known Year 2000 issues.

Inflation

Inflation has been modest in recent years and has not had a
significant effect on the Company. If merchandise costs were to increase
because of inflation, management believes such increases could be recovered
through higher selling prices, as virtually all retailers would be similarly
affected.
<PAGE>
BUSINESS

Overview

The Company operates the largest chain (as measured by sales) in the
United States of specialty retail stores devoted to the sale of lawn and
garden products. In addition, the Company sells dried and artificial flowers
and arrangements, Christmas merchandise, crafts and pet supplies. As of
January 25, 1998, the Company operated 256 retail stores located in 15 states
primarily in the East and Midwest regions of the country under the name
Frank's Nursery & Crafts (Registered Trademark). The Company derives
approximately 80% of its sales from its core business lines, which include
lawn and garden products, related home decor merchandise such as dried and
artificial flowers and Christmas merchandise. For fiscal 1997, the Company
generated sales and Adjusted EBITDA of $530.0 million and $36.5 million,
respectively, and incurred a net loss of $31.4 million.

The Company's principal executive offices are located at 1175 West
Long Lake Road, Troy, Michigan 48098 and its telephone number is (248) 712-
7000.

Company Strengths

New Management Team with Proven Track Record. The Company's new
management team is led by its new Chairman, Chief Executive Officer and
President, Joseph R. Baczko, who was formerly President and Chief Operating
Officer at Blockbuster Entertainment Corp. ("Blockbuster") (1991-1992) and
the initial President of the International Division of Toys "R" Us, Inc.
("Toys "R" Us International") (1983-1991). At Blockbuster, Mr. Baczko oversaw
system-wide revenue growth from approximately $1.1 billion to approximately
$2.0 billion, and during his eight years with Toys "R" Us International,
system-wide sales expanded to approximately $800 million. To assist him in
leading the Company, Mr. Baczko has re-assembled his senior management team
from Toys "R" Us International, including Adam Szopinski as Chief Operating
Officer and Larry T. Lakin as Chief Financial Officer, both of whom served in
their respective functions under Mr. Baczko while at Toys "R" Us
<PAGE>
International. This new management team has worked successfully together in
the past and possesses, on average, 29 years of specialty retailing and
general management experience.

Well-Positioned to Capitalize on Favorable Industry Fundamentals.
The Company believes it has a strong existing operating base in a popular and
growing market segment. A recent study by the National Gardening Association
indicates that nearly two-thirds of all U.S. households participate in one or
more types of lawn and garden activities, ranking such leisure activities
among the most popular in the U.S. According to industry studies, adults
between the ages of 45 and 64 are the most frequent participants in the lawn
and garden market, and the U.S. Census Bureau expects the percentage of
Americans in this age bracket to increase from 19.9% in 1995 to 25.3% in
2005. In addition, management believes that Frank's merchandise selection is
characterized by relatively "high-maintenance" and low cost products with the
capacity to generate a significant level of ancillary purchases and a
relatively low exposure to fashion risk. As the country's largest specialty
retailer dedicated to this category, the Company is well-positioned to
capitalize on these trends and characteristics.

Company Strategy

The Company plans to build on its core competencies in plants and
gardening and its current market position to become the leading national
specialty retailer of lawn and garden products. Management intends to
systematically accomplish this objective by: (i) rationalizing the Company's
current cost structure, (ii) implementing a store refurbishment program
<PAGE>
covering all existing 256 stores, (iii) increasing overall inventory levels,
(iv) further focusing its merchandising strategy on its core lawn and garden
theme and (v) increasing market penetration and expanding geographically
through the selective opening and/or acquisition of new store locations.

Rationalize Cost Structure. Since closing the acquisition on
December 24, 1997, the Company's new management team has identified and
principally affected annual cost savings of approximately $13.1 million
through: (i) reduction of corporate overhead related to the closing of
Holdings' headquarters in Stamford, Connecticut, (ii) streamlining and
reduction of field supervision and store-level management, (iii) replacement
of the Company's insurance policies with new lower premium plans providing
for substantially similar coverages, (iv) elimination of expenditures
incurred by prior management to build and promote a new store concept,
(v) termination of the temporary mall-based Christmas stores and realization
of savings from several previous and two additional store closings and
(vi) expense reductions associated with the consolidation of its distribution
facilities implemented in late fiscal 1996 and early fiscal 1997.

Focus Merchandising Strategy on Lawn and Garden Theme. The Company's
new merchandising strategy will build upon Frank's core lawn and garden
competencies. Management expects to (i) enhance and enlarge both indoor and
outdoor live plant categories and introduce more specialized assortments,
(ii) increase the variety of gardening tools, aids and accessories,
(iii) expand Frank's own private label program, (iv) provide ancillary
services such as in-store consultation and educational programs geared
towards the gardening enthusiast and (v) broaden and enhance the presentation
of the Company's dried and artificial flowers and arrangements and Christmas
trim-a-tree businesses. In addition, new management expects to re-merchandise
portions of the crafts and pet supplies product categories to make them more
complementary to the Company's core lawn and garden theme.
<PAGE>
Pursue Increased Market Penetration and Geographic Expansion. The
Company intends to focus solely on improving the operations of its existing
store base in fiscal 1998. Management currently expects to selectively pursue
a new store opening program beginning in fiscal 1999. The Company believes
that increased penetration and expansion will result in significant sales
growth and allow the Company to further realize economies of scale associated
with advertising, distribution, operations and brand name recognition.
Additionally, management will selectively review acquisition opportunities of
local and regional operators to complement its store expansion strategy.

Industry Overview

Summary. The national lawn and garden market is seasonal, highly
fragmented and generally non-branded, consisting of thousands of local garden
centers and mass merchandisers who sell lawn and garden products as part of
their overall product lines. According to Nursery Retailer, the overall
retail market for lawn and garden products, defined to include green goods,
fertilizers, gardening accessories, lawn furniture, Christmas merchandise and
snow removal, power and watering equipment, was approximately $71.2 billion
in 1996 and approximately $76.5 billion in 1997, representing a 7.4% growth
over 1996. Furthermore, between 1987 and 1997 the industry experienced an
8.6% compound annual growth rate.

Competition. The United States lawn and garden retail market is highly
fragmented, with the top ten competitors accounting for approximately 10% of
1996 industry-wide sales. During the past several years, hardware warehouses
and home centers have entered the lawn and garden market due to the
attractive margins and growth rates. Nursery Retailer estimates that hardware
warehouses and home centers are taking market share primarily at the expense
of mass merchandisers, local hardware stores and supermarkets. Additionally,
because consumers are increasingly demanding greater service, selection,
variety and material sizes, Nursery Retailer also estimates that competitors
best positioned to offer such amenities should gain market share.

Marketing Channels / Distribution. Approximately 36% of all 1996 lawn
and garden market sales were generated in the warehouse club / chain store /
mass market channel, 32% in the hardware store / home center / hardware
warehouse channel and 32% in the lawn and garden center / nursery / farm
store channel. Approximately 60% of all lawn and garden products sold in 1996
were distributed through a direct (one-step) method of distribution to the
retailer from the manufacturer or grower, and approximately 40% arrived at
retail through distributors (two-step distribution).

Widespread Popularity and Favorable Demographics. Gardening enjoys a
highly favorable demographic profile in that it is one of the most popular
leisure activities in the United States. According to the 1996-1997 National
Gardening Survey, 64% of the approximately 101 million U.S. households
participated in some form of gardening activity in 1996. According to
industry studies, adults between the ages of 45 and 64 are the most frequent
participants in the lawn and garden market, and the U.S. Census Bureau
expects the percentage of Americans in this age bracket to increase from
19.9% in 1995 to 25.3% in 2005.
<PAGE>
Product Categories and Strategic Enhancements

The following chart illustrates the Company's fiscal 1997 sales by
product category:

Sales by Product Category
(dollars in millions)

Product Category Sales % of Sales Description

Lawn and Garden . $294.0 55.5% Roses, potted plants, annual
and perennial flowering plants,
trees, shrubs, fertilizers,
seeds and bulbs, mulches, plant
accessories, hoses and
gardening tools and equipment

Floral . . . . . 59.8 11.3 Dried, silk and acrylic flowers
and arrangements

Christmas . . . . 70.1 13.1 Artificial Christmas trees,
decorations and trimmings

Crafts . . . . . 85.6 16.2 Yarns, macrame, art supplies,
needlework, candles and wood
crafts

Pet Supplies . . 20.5 3.9 Bird houses, feeders, seeds and
accessories

Total $530.0 100.0%

Management intends to execute specific strategic enhancements to the
Company's current product categories designed to build upon its existing
strengths.

Lawn and Garden. As the nation's largest specialty retailer of lawn and
garden products, the Company enjoys a strong franchise in the lawn and garden
business. The Company offers customers one of the widest selections of live
plants in the industry. In addition, the Company markets its own line of
private label lawn and garden products under the Frank's name.

The Company intends to build on the live plant category and introduce
deeper and more specialized and differentiated assortments on a year-round
basis. Similarly, the assortment of gardening tools, aids and accessories
will be increased. The Company also intends to grow Frank's private label
products in gardening tools, potting soil, fertilizers and related
merchandise. Finally, management intends to upgrade its service level to
cater more to the gardening enthusiast, with the added intention of tying
sales of ancillary lawn and garden products to the purchase of live plants by
offering in-store demonstrations and take-home instructions.
<PAGE>
Floral. The Company's floral products include dried and artificial
flowers and arrangements. Such floral products exhibit high inventory
turnover, excellent sales productivity, strong operating margins and low
seasonality. Importantly, the floral category ties in closely with the
Company's emphasis on the lawn and garden market and related home decor
merchandise.

The Company plans to improve its current in-store floral
presentation. Additionally, the Company will enhance its current service
level to assist customers more closely in developing their own unique floral
arrangements. Management expects the floral category to be a growth area for
the Company.

Christmas. During the Christmas holiday season, the Company's second
most important selling season after spring, the Company transforms
substantial portions of its stores into Christmas layouts and offers a broad
selection of seasonal merchandise for the holiday season and Christmas
decoration. The Company believes that it is the largest retailer of live
Christmas trees in the United States, selling in excess of 200,000 trees in
1997. In addition, the Company provides a large selection of artificial
trees, wreathes, and holiday plants as well as a wide array of trim-a-tree
items.

The Company plans to discontinue the operation of its temporary
mall-based Christmas boutiques under the name "Christmas by Frank's" in order
to concentrate on in-store Christmas presentations. Management will also
upgrade and expand the trim-a-tree business by offering a more diverse and
richer assortment of products to be displayed using an enhanced presentation
layout.

Crafts. The Company's crafts business provides a steady stream of
revenues throughout the year. The Company intends to re-merchandise the
crafts product category by narrowing the assortment range and re-focusing the
merchandise to better complement its lawn and garden theme.

Pet Supplies. Management believes the sale of pet supplies is a natural
complement to the Company's lawn and garden product offerings. The Company
intends to eliminate basic (dog and cat) pet foods and re-focus its pet
product line to focus on wild-bird related products, such as feeders, seeds
and bird houses which are more complementary to its lawn and garden theme.

Store Operations and Management

The Company's 256 stores average approximately 15,000 square feet of
indoor selling space and on average an equal amount of outdoor selling space
which is primarily closed during the winter months. The stores are primarily
free-standing and/or located adjacent to or near strip shopping centers. The
Company's stores are open 80 hours per week, with the average store opening
at 9 a.m. and closing at 9 p.m.

The average store has approximately 20-25 part- and full-time
employees, including a store manager, an assistant manager and up to six
<PAGE>
department managers responsible for the various product lines. The in-store
staff is generally supplemented at seasonal peaks by temporary employees.

Advertising and Marketing

For fiscal 1997, the Company spent $25.5 million, or 4.8% of sales,
on advertising and marketing. New management expects to increase its
advertising budget modestly for fiscal 1998.

Distribution

During fiscal years 1996 and 1997, the Company consolidated its
distribution centers by closing its facilities in Detroit and Chicago and
opening a new facility in Howe, Indiana. The Company also operates a
distribution center in Harrisburg, Pennsylvania.

In fiscal 1997, the Company's distribution facilities delivered
approximately 50% of all merchandise, principally bulk, crafts and Christmas
items, to the stores primarily using contract carriers. The balance of the
Company's products, primarily live goods, are delivered directly to the
stores by regional and local outside vendors.

Properties

In March 1998, the Company moved its headquarters to Troy, Michigan.
The Company's headquarters measure approximately 27,000 square feet and are
subject to a lease which expires in September 2007.

The Company currently leases a 292,300 square foot distribution
facility in Harrisburg, Pennsylvania as well as a 346,515 square foot
facility in Howe, Indiana. The lease on the Harrisburg facility expires in
March 2002, with one five-year renewal option. The Howe property carries a
lease expiring in June 2002 with two five-year renewal options.

As of January 25, 1998, the Company operated 256 Frank's stores, 117
of which were leased and 139 were owned (40 of which are subject to ground
leases). The following is a summary of store properties by state:

Number of Frank's Stores Per State

Michigan . . . . . . . . . . . . . . . . . . . . . . . . 42
Illinois . . . . . . . . . . . . . . . . . . . . . . . . 33
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . 24
New York . . . . . . . . . . . . . . . . . . . . . . . . 21
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . 18
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . 18
Maryland . . . . . . . . . . . . . . . . . . . . . . . . 17
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . 16
New Jersey . . . . . . . . . . . . . . . . . . . . . . . 15
Florida . . . . . . . . . . . . . . . . . . . . . . . . . 13
Connecticut . . . . . . . . . . . . . . . . . . . . . . . 12
Missouri . . . . . . . . . . . . . . . . . . . . . . . . 9
Massachusetts . . . . . . . . . . . . . . . . . . . . . . 7
Virginia . . . . . . . . . . . . . . . . . . . . . . . . 6
Kentucky . . . . . . . . . . . . . . . . . . . . . . . . 5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 256
<PAGE>
The Company owns three and leases eleven additional store locations
which were previously operated as Frank's stores. The Company is actively
engaged in the leasing, sub-leasing and releasing of these properties.

Vendors

The Company purchases its merchandise from approximately 1,200
outside vendors. Of the Company's total vendor purchases in fiscal 1997,
approximately $126 million, or 43.8%, came from its top 50 vendors, with no
single vendor representing more than 2.1% of overall purchases. Alternative
sources of supply are generally available for all products sold by the
Company. The Company intends to increase its product purchases, particularly
in the floral, Christmas and crafts product categories, from overseas
vendors.

Seasonality

The Company benefits from two distinct selling seasons--Spring and the
Christmas holiday season. The lawn and garden market is fundamentally
seasonal, with the low point arriving during the winter months and the high
point being the spring planting season of April through June, during which
nearly 40% of the Company's annual sales occur.

Employees

In fiscal 1997, the Company's employee base (excluding employees at
the Company's temporary mall-based Christmas stores which are being
discontinued) ranged from a low of 6,500 employees in February to a high of
8,100 employees in May. The Company's entire employee base is non-unionized
and management considers its employee relations to be good.

Management Information System

To address the Year 2000 Issue, the Company is currently in the
process of implementing a new MIS at its headquarters. The Company has hired
outside consultants specializing in retailing MIS to implement the new
system. The implementation process entails transferring the headquarters from
a mainframe-based system to an IBM AS/400 computer system. The project is
already in process and is expected to be completed by the end of fiscal 1998.
The Company's in-store MIS capabilities are adequate and are not directly
impacted by the implementation of the new home office system. These
capabilities include POS data capture, laser scanning and price look-up. The
Company believes it has adequately addressed the Year 2000 Issue as it
relates to its in-store systems. See "Risk Factors--Year 2000 Issue; Computer
System Upgrade".
<PAGE>
Environmental Matters

The Company and its operations are subject to Environmental Laws. As
an owner/lessor or former owner/lessor of numerous properties, as well as a
seller of certain environmentally sensitive products such as herbicides and
pesticides, the Company has an inherent risk of liability under Environmental
Laws, including, for example, contamination that may have occurred in the
past on its current or former properties or as a result of its operations.
For example, prior to the Company's ownership/occupancy, some of the
Company's store locations were the site of uses such as car dealerships,
gasoline stations, or lumber yards. In addition, several of the Company's
stores are known to use (and others to have formerly used) underground tanks
for heating oil storage, and a facility in Detroit formerly used by the
Company as its headquarters has been, in connection with its sale by the
Company, the subject of investigation and remediation relating to underground
storage tanks formerly present and other environmental conditions. The
Company believes it complies in all material respects with applicable
Environmental Laws and does not anticipate any obligations with respect to
Environmental Laws that would have a material adverse effect on its
operations.

The Company may also be affected by Holdings' or Holdings' present or
former subsidiaries' liabilities and potential liabilities with respect to
Environmental Laws, which have been and may continue to be significant to
Holdings. Such liabilities could adversely affect the Company insofar as the
Company declares dividends to Holdings (subject to certain covenants in the
Indenture and the Senior Credit Facility) to discharge any such liability.
The Company believes, however, that it is unlikely to be held liable in any
claim that may be asserted against it for the liabilities or potential
liabilities of Holdings or Holdings' present or former subsidiaries under any
Environmental Law. See "Risk Factors--Environmental Matters".

Litigation

In the normal course of business the Company is subject to various
claims. In the opinion of the Company, any ultimate liability arising from or
related to these claims should not have a material adverse effect on future
results of operations or the consolidated financial position of the Company.
<PAGE>
MANAGEMENT

Executive Officers and Directors

Set forth below are the names, ages and positions of the persons
serving as the executive officers and directors of the Company. Each director
will hold office until the next annual meeting of shareholders and until the
director's successor is elected and qualified or until the earlier of the
director's death, resignation or removal.

Name Age Position

Joseph R. Baczko . . . . 52 Chairman of the Board of
Directors,
Chief Executive Officer and
President

Adam Szopinski . . . . . 52 Executive Vice President,
Chief Operating Officer and
Director
Larry T. Lakin . . . . . 54 Executive Vice President,
Chief Financial Officer and
Director

William C. Boyd . . . . . 67 Executive Vice President
J. Theodore Everingham . 58 Vice President, General Counsel
and Secretary

David P. Spalding . . . . 43 Director

James A. Stern . . . . . 47 Director
Bahram Shirazi . . . . . 33 Director

Joseph R. Baczko became Chairman of the Board, Chief Executive
Officer and President of the Company following consummation of the Tender
Offer after having been a private investor and consultant since 1993. From
1991 to 1992, Mr. Baczko served as President, Chief Operating Officer and
director of Blockbuster. Prior to joining Blockbuster, he was the initial
President of Toys "R" Us International from 1983 to 1991. At Blockbuster,
Mr. Baczko oversaw system-wide revenue growth from approximately $1.1 billion
to approximately $2.0 billion, and during his eight years with Toys "R" Us
International system-wide sales expanded to approximately $800 million.

Adam Szopinski became Executive Vice President, Chief Operating
Officer and director of the Company upon consummation of the Merger after
having served as the Vice President of Operations of Toys "R" Us
International since 1989. During his service as Vice President of Operations
for Toys "R" Us International, Mr. Szopinski was responsible for directing
the operational development of that company's $2.7 billion international
business extending across 27 countries and a total of 394 superstores.
<PAGE>
Mr. Szopinski had been employed by Toys "R" Us in various positions of
increasing responsibility during the 22 years prior to assuming his role as
that company's Vice President of Operations in 1989.

Larry T. Lakin became the Company's Chief Financial Officer following
consummation of the Tender Offer, and was elected Executive Vice President
and director of the Company following consummation of the Merger. Mr. Lakin
previously served as the Chief Financial Officer and a principal of Shiara,
Inc. ("Shiara"), a private fragrance company and cosmetics venture, from
April 1994 to December 1997. Prior to Shiara, Mr. Lakin served as Vice
President of Finance and principal of River Road Distributors, Inc. from
November 1992 to March 1994. Previously, Mr. Lakin served as Chief Financial
Officer and/or Vice President of Finance of the international operations of
Faberge Inc., LJN Toys Ltd., Toys "R" Us International and Max Factor & Co.'s
international operations and Controller of Chrysler Corporation--France.

William C. Boyd has served as Executive Vice President of the Company
since June 1987 and prior thereto was employed by the Company in various
capacities since 1949.

J. Theodore Everingham has served as Vice President, General Counsel
and Secretary of the Company since July 1995. He was self-employed in the
private practice of law from January 1995 to July 1995 and was a partner of
the law firm of Dykema Gossett PLLC from April 1975 through December 1994.

David P. Spalding became a director of the Company upon consummation
of the Tender Offer, and has served as Vice Chairman of Cypress since its
formation in April 1994. Prior to joining Cypress, he was a Managing Director
in the Merchant Banking Group at Lehman Brothers Inc. from February 1991 to
April 1994. Prior to 1991 he was a Senior Vice President in the Merchant
Banking Group at Lehman Brothers Inc. Mr. Spalding is also a director of Lear
Corporation, AMTROL Inc. and Williams Scotsman, Inc.

James A. Stern became a director of the Company upon consummation of
the Tender Offer, and has been Chairman of Cypress since its formation in
April 1994. Prior to joining Cypress, Mr. Stern spent his entire career with
Lehman Brothers Inc., most recently as head of the Merchant Banking Group.
During his twenty years with Lehman Brothers, he also served as head of
Lehman's High Yield and Primary Capital Markets Groups, and was co-head of
Investment Banking. In addition, Mr. Stern was a member of Lehman's Operating
Committee. Mr. Stern is also a director of AMTROL Inc., Cinemark USA, Inc.,
Lear Corporation, Noel Group, Inc., R.P. Scherer Corporation, Genesis
ElderCare Corp., and a trustee of Tufts University.

Bahram Shirazi became a director of the Company upon consummation of
the Tender Offer, and has been a principal of Cypress since its formation in
April 1994. Prior to joining Cypress, he was a Vice President in the Merchant
Banking Group at Lehman Brothers Inc. from 1992 to 1994.
<PAGE>
Compensation of Directors

The Company currently pays no compensation to its non-employee
directors, nor does it pay any additional remuneration to employees or
executive officers of the Company for serving as directors.

Compensation Committee Interlocks and Insider Participation; Compensation of
Executive Officers

The Company's newly formed compensation committee (the "Compensation
Committee") is comprised of three non-employee directors and will be
responsible for establishing the Company's executive compensation policies,
reviewing the compensation of officers and key employees, recommending and
approving changes in compensation and reviewing and recommending changes in
the Company's employee benefit programs and management succession plans. The
Compensation Committee currently consists of Messrs. Spalding, Stern and
Shirazi.

The annual base salaries of the Company's executive officers for
fiscal 1998 are as follows: Mr. Baczko, $500,000; Mr. Szopinski, $250,000;
Mr. Lakin, $250,000; Mr. Boyd, $163,000; and Mr. Everingham, $125,000.

Stock Option Grants

In connection with the Transactions, all options to acquire Holdings
Common Stock issued under Holdings' Amended and Restated 1986 Stock Incentive
Plan and its 1996 Stock Incentive Plan (collectively, the "Previous Stock
Option Plans") were modified to be exercisable solely for a cash amount equal
to the difference between each option's exercise price and the price paid for
each Former Share in the Merger. All modified options that were exercisable
for value have been exercised and paid. On February 6, 1998, the Company
terminated the Previous Stock Option Plans and cancelled all remaining
options issued thereunder. The Company and Holdings intend to implement a new
stock option plan.

Employment Agreements

The Company intends to enter into employment agreements with Messrs.
Baczko, Szopinski and Lakin. It is expected that these agreements will
address typical employment issues including compensation, termination and the
executives' ability to compete with the Company.

Severance Agreements

Prior to the consummation of the Transactions, Holdings had entered
into a severance agreement with Mr. Everingham, the Vice President, General
Counsel and Secretary of Holdings and the Company. Under the severance
agreement Holdings has agreed to pay Mr. Everingham a lump sum equal to half
of his annual base salary if, within one year following the Merger,
Mr. Everingham either is terminated by Holdings without Cause (as defined
therein) or he terminates his employment with Holdings for Good Reason (as
defined therein) (a "Qualifying Termination"). Under the severance agreement
<PAGE>
Holdings also has agreed to provide continuing medical insurance benefits to
Mr. Everingham for a period of one year should a Qualifying Termination
occur.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

All of the outstanding capital stock of the Company is owned by
Holdings. The authorized capital stock of Holdings consists of 100,000,000
shares of Holdings Common Stock and 1,000,000 shares of preferred stock, par
value $1.00 per share. As of June 1, 1998, 31,000,000 shares of Holdings
Common Stock and no shares of preferred stock were issued and outstanding on
a fully diluted basis.

The following table sets forth certain information as to the
beneficial ownership of Holdings Common Stock as of April 1, 1998 by (i)
owners of more than 5% of the outstanding shares of Holdings Common Stock,
(ii) each executive officer and director of Holdings, and (iii) all executive
officers and directors of Holdings, as a group. Except as indicated in the
footnotes to this table, the Company believes that the persons named in the
table have sole voting and investment power with respect to all shares shown
as beneficially owned by them.

<TABLE>
<CAPTION>
Shares Of Holdings Common Stock
--------------------------------------------
Amount Percentage
Beneficially of
Beneficial Owners Owned<F2> Class
- ----------------- --------------------- ----------------------
<S> <C> <C>

Principal Shareholders:
Cypress Merchant Banking Partners L.P.<F3> . . . . . . . 29,295,900 94.5%
c/o The Cypress Group L.L.C.
65 East 55th Street
New York, New York 10022

Cypress Offshore Partners L.P.<F2><F3> . . . . . . . . . 1,517,353 4.9%
c/o The Cypress Group L.L.C.
65 East 55th Street
New York, New York 10022

Executive Officers and Directors:
Joseph R. Baczko . . . . . . . . . . . . . . . . . . . . 186,747 <F1>
Adam Szopinski . . . . . . . . . . . . . . . . . . . . . -- --
Larry T. Lakin . . . . . . . . . . . . . . . . . . . . . -- --
William C. Boyd . . . . . . . . . . . . . . . . . . . . -- --
J. Theodore Everingham . . . . . . . . . . . . . . . . . -- --
David P. Spalding(b) . . . . . . . . . . . . . . . . . . -- --
James A. Stern(b) . . . . . . . . . . . . . . . . . . . -- --
Bahram Shirazi . . . . . . . . . . . . . . . . . . . . . -- --
All executive officers and directors as a group (8 persons) 186,747 <F1>

<F1> Represents holdings of less than 1%.
<F2> The amounts and percentage of Holdings Common Stock beneficially owned
are reported on the basis of rules and regulations of the Commission
governing the determination of beneficial ownership of securities.
Under such rules and regulations, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or to direct the voting of
such security, or "investment power," which includes the power to
dispose of or to direct the disposition of such security. A person is
also deemed to be a beneficial owner of any securities which that
person has a right to acquire beneficial ownership of within 60 days.
Under these rules and regulations, more than one person may be deemed
a beneficial owner of the same securities and a person may be deemed
to be a beneficial owner of securities in which he has no economic
interest.
<F3> Cypress Offshore and CMBP are affiliates of Cypress. Messrs. Spalding
and Stern are members of Cypress and may be deemed to share beneficial
ownership of the shares of Holdings Common Stock shown as beneficially
owned by the Cypress Funds. Both of such individuals disclaim
beneficial ownership of such shares.
<F4> Cypress Offshore owns its interest in Holdings through its wholly
owned subsidiary, Cypress Garden Ltd.
</TABLE>
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The summaries of the following agreements do not purport to be
complete and, while the Company believes that the summaries of the material
provisions of such agreements are accurate and complete summaries of all
material terms, such summaries are subject to, and qualified in their
entirety by reference to, the agreements summarized below, including the
definitions therein of certain terms.

Certain Fees Relating to the Transactions

Pursuant to an agreement entered into on January 6, 1998 between
Acquisition Corp. and Cypress Advisors Inc., an affiliate of Cypress,
Holdings (as successor by merger to Acquisition Corp.) has paid Cypress
Advisors Inc. $4.5 million in fees for providing services relating to the
consummation of the Tender Offer, Merger, Senior Credit Facility, certain
related transactions and the Offering. Cypress Advisors Inc. is also entitled
to receive reimbursement for all expenses reasonably incurred by it in
connection with the Transactions and the Offering. The Company believes that
its agreement with Cypress is on terms no less favorable to Holdings than
those which could have been achieved with unrelated third parties.

Preceding his election as an executive officer of the Company,
Mr. Baczko served as a consultant to Cypress and Acquisition Corp. in
connection with the Transactions. In consideration thereof, Acquisition Corp.
paid approximately $0.5 million to Mr. Baczko. Additionally, in connection
with the Transactions, Mr. Szopinski received a signing bonus of
approximately $0.2 million from Acquisition Corp.

Indemnification Agreement

Pursuant to a letter agreement dated December 19, 1997, Acquisition
Corp. agreed to indemnify the Cypress Funds and their directors, officers and
limited partners against any losses or liabilities incurred by them which
arise out of or are based upon the Tender Offer, the Schedule 14D-1 filed
with the Commission in connection with the Tender Offer and any other
transactions contemplated by the Schedule 14D-1. As successor by merger to
Acquisition Corp., Holdings is bound by the terms of the indemnification
agreement.

Registration Rights Agreement

Pursuant to a registration rights agreement dated as of December 23,
1997 (the "Investor Registration Rights Agreement"), CMBP and Cypress Garden
Ltd. (collectively, the "Cypress Entities") and any of their direct or
indirect transferees have the right, under certain circumstances and subject
to certain conditions, to request that Holdings (as successor by merger to
Acquisition Corp.) register under the Securities Act shares of Holdings
Common Stock held by them. Subject to certain conditions and exceptions, the
Cypress Entities and their transferees also have the right to require that
the shares of Holdings Common Stock held by them be included in any
registration under the Securities Act commenced by Holdings. The Investor
<PAGE>
Registration Rights Agreement provides that Holdings will pay all expenses in
connection with the first six registrations requested by the Cypress Entities
and in connection with any unrequested registration undertaken by Holdings.
The agreement also provides that Holdings will indemnify sellers of Holdings
Common Stock and their affiliates for any liability they might incur under
the securities laws based on a material untrue statement or omission
contained in the registration statement or prospectus unless such
misstatement or omission was made in reliance on written information provided
by the seller to Holdings specifically for use in the registration statement
or prospectus.

Management Stockholders Agreement

Holdings intends to enter into a stockholders agreement (the
"Stockholders Agreement") with Mr. Baczko, the Company's new Chairman, CEO
and President, in connection with his ownership of Holdings Common Stock.
Among other things, the Stockholders Agreement is expected to provide for
purchase and sale rights in the event that Mr. Baczko is no longer employed
by the Company and Holdings and to place restrictions on the transfer of
shares of Holdings Common Stock held by Mr. Baczko. The Stockholders
Agreement will also grant Mr. Baczko certain registration rights under, and
bind Mr. Baczko to certain of the conditions and obligations of, the Investor
Registration Rights Agreement, provided that Mr. Baczko will not have demand
registration rights.

Sale Participation Agreement

The Cypress Entities intend to enter into a sale participation
agreement (the "Sale Participation Agreement") with Mr. Baczko in connection
with his ownership of Holdings Common Stock. Among other things, the Sale
Participation Agreement is expected to contain customary tag-along and
drag-along rights relating to the rights and obligations of Mr. Baczko to
include his shares of Holdings Common Stock in sales of Holdings Common Stock
by the Cypress Entities.
<PAGE>

OTHER INDEBTEDNESS

The following summaries of the material terms and conditions of the
Senior Credit Facility and certain other indebtedness do not purport to be
complete and, while the Company believes that they are accurate and complete
summaries of all material terms, such summaries are qualified in their
entirety by reference to the Senior Credit Facility and the other agreements
summarized below.

Senior Credit Facility

General. The Company has entered into a Senior Credit Facility dated as
of December 24, 1997 (the "Credit Facility Closing Date") with various banks
and financial institutions, including The Chase Manhattan Bank ("Chase"), as
bank lender and administrative agent for the bank lenders party thereto, and
Goldman Sachs Credit Partners L.P. ("Credit Partners"), as bank lender and
documentation agent. The agreement provides for (i) a Term Loan Facility for
up to $85 million in term loans available during the period ending 120 days
after the Credit Facility Closing Date and (ii) a Revolving Credit Facility
for up to an aggregate of $110 million in revolving credit loans and letters
of credit, with outstanding letters of credit not to exceed $25 million. In
connection with the Offering, the Company reduced commitments available under
the Term Loan Facility to $25 million from $85 million.

Use of Facility. The Term Loan Facility may be used, in general and
subject to specified limitations on amounts: (i) to refinance a portion of
the Holdings Notes, (ii) to refinance a portion of the Company's existing
mortgages as necessary, (iii) to satisfy certain financial obligations under
the former Chairman's employment agreement, (iv) to cover costs relating to
the exercise of appraisal rights and options in connection with the
Transactions, (v) to cover other transaction costs associated with the
Transactions and (vi) for general corporate purposes. The Revolving Credit
Facility may be used to repay a portion of the Company's existing
indebtedness and for general corporate purposes. Letters of credit may be
issued only for general corporate purposes.

Security, Guarantees. The Company's obligations under the Senior Credit
Facility are unconditionally guaranteed by Holdings and certain existing and
subsequently acquired direct and indirect subsidiaries of Holdings. The
Senior Credit Facility and guarantees are secured by substantially all of the
assets of Holdings, the Company and certain existing and subsequently
acquired direct and indirect subsidiaries of Holdings; such assets include
real property not subject to other mortgages, personal property (including
inventory) and the capital stock of the Company and Holdings' other direct
and indirect subsidiaries.

Maturity. Term loans provided pursuant to the Term Loan Facility mature
seven years after the Credit Facility Closing Date. The Term Loan Facility
will amortize in equal quarterly installments beginning in fiscal 1999 in an
aggregate amount equal to 8.8% of the aggregate Term Loan Facility amount and
increasing at each anniversary. Subsequent annual amortization will be 10.6%,
12.9%, 14.7%, 20.6% and 32.4% for fiscal years 2000, 2001, 2002, 2003 and
<PAGE>
2004, respectively, subject to prepayment as described below. Revolving
credit loans obtained pursuant to the Revolving Credit Facility mature six
years after the Credit Facility Closing Date.

Interest. Term loans provided pursuant to the Term Loan Facility will
bear interest, at the Company's election, at an annual rate equal to the
Adjusted LIBO Rate (as defined therein) plus 2.50% or Alternative Base Rate
(as defined therein) plus 1.50%, provided that such margins may be reduced if
the Company meets certain senior leverage ratio tests. Revolving credit loans
obtained pursuant to the Revolving Credit Facility bear interest, at the
Company's election, at an annual rate equal to the Adjusted LIBO Rate (as
defined therein) plus 2.25% or Alternative Base Rate (as defined therein)
plus 1.25%, provided that such margins may be reduced if the Company meets
certain senior leverage ratio tests. The Alternate Base Rate is the highest
of Chase's Prime Rate (as defined therein), the Federal Funds Effective Rate
(as defined therein) plus 0.50% and the Base CD Rate (as defined therein)
plus 1.00%. Adjusted LIBO Rate and the Base CD Rate will at all times include
statutory reserves (and, in the case of the Base CD Rate, FDIC assessment
rates).

Fees. The Company is required to pay the lenders a commitment fee equal
to 0.50% per annum on the undrawn portion of the commitments in respect to
the Term Loan Facility and the Revolving Credit Facility, with such fee
commencing to accrue on the Credit Facility Closing Date and payable
quarterly in arrears after the Credit Facility Closing Date. The Company also
is required to pay a letter of credit fee on the face amount of all
outstanding letters of credit at an annual rate up to the applicable margin
on Eurodollar Loans under the Revolving Credit Facility then in effect plus a
fronting fee equal to 0.25% per annum, payable quarterly, on the face amount
of each letter of credit. All commitment fees, letter of credit fees and
fronting fees are computed on the basis of a year of 360 days and are payable
for the actual number of days elapsed.

Prepayments. Borrowings under the Term Loan Facility, in general, must
be prepaid with (i) 75% of excess cash flow, subject to reduction based on
the senior leverage ratio of the Company, (ii) 100% of the net cash proceeds
of certain non-ordinary-course asset sales or other dispositions of property
(including by casualty) by Holdings, the Company's or Holdings' existing and
subsequently acquired direct and indirect subsidiaries not reinvested in the
Company's business (subject to limited exceptions) and (iii) 100% of the net
cash proceeds of certain issuances of equity and debt obligations of Holdings
or the Company or their subsidiaries. In addition, the Company must repay all
borrowings under the Revolving Credit Facility and refrain from taking
additional revolving credit loans to the extent necessary in order that there
be a period of at least 30 consecutive days in each fiscal year of Holdings
during which no borrowings under the Revolving Credit Facility are
outstanding. Subject to these provisions, term loans and revolving credit
loans may be prepaid at any time at the option of the Company.

Covenants. The Senior Credit Facility includes customary types of
affirmative covenants including those that require the Company to (i) provide
certain financial information to the lenders, (ii) maintain all rights,
<PAGE>
privileges and permits material to the conduct of its business, (iii) give
notice of the occurrence of certain material events, (iv) maintain its
material property and adequate insurance, (v) keep proper account of all
transactions material to its business, (vi) allow the lenders to inspect its
records and properties and (vii) comply with laws.

The Senior Credit Facility also includes customary types of negative
covenants applicable to the Company Holdings and their subsidiaries including
limitations on certain types of indebtedness, liens, guarantees, loans,
dividends, redemptions of debt and capital stock, mergers, asset sales,
investments, capital expenditures, amendments to or waivers of the terms of
other material indebtedness (including the Notes) and transactions with
affiliates.

Ratios. The Senior Credit Facility requires that the Company and
Holdings comply with certain financial tests, including a maximum
consolidated debt to consolidated EBITDA ratio and a minimum consolidated
EBITDA to consolidated net cash interest expense ratio.

Events of Default. The Senior Credit Facility contains customary types
of events of default including defaults relating to material breach of a
representation, warranty or covenant contained therein, non-payment of
principal or interest, cross default and acceleration, bankruptcy, material
judgments, certain ERISA events, actual or asserted invalidity of any
guaranty or security document and change in control.

Mortgage Loans

As of January 25, 1998, an aggregate of approximately $19.2 million
was outstanding under 20 mortgage loans executed by the Company during 1995
and 1996 in favor of Midland Commercial Financing Corp. ("Midland") and
Midland Loan Services, L.P. Amounts outstanding under the Midland mortgage
loans bear interest at rates of either 8.31%, 8.70% or 9.28% per annum and
will mature in the years 2005 and 2006. The Midland mortgage loans are
secured by a total of 20 of the Company's store properties.

On April 22, 1996, the Company executed six mortgage loans in favor
of First Union National Bank of North Carolina ("First Union"). As of January
25, 1998, approximately $4.3 million was outstanding under the loans which
are secured by six of the Company's store properties. Amounts outstanding
under the First Union mortgages bear interest at rates of either 9.375% or
9.625% per annum and mature in April 2006. As a result of the Transactions,
the "change of control" default provisions under the First Union mortgages
were triggered. Consequently, there has been a default. This default has not
triggered and will not trigger any cross default provisions in the Senior
Credit Facility or in any other agreements relating to indebtedness of the
Company. First Union is currently in the process of evaluating the
Transactions. At the completion of such evaluation (expected to be completed
during the second quarter of fiscal 1998), if necessary, the Company will
refinance these mortgage loans with available borrowings under the Term Loan
Facility.
<PAGE>
On January 25, 1996, the Company executed six mortgage loans in favor
of People's Bank ("People's"). As of January 25, 1998, approximately
$4.6 million was outstanding under the loans which are secured by six of the
Company's store properties. Amounts outstanding under the People's mortgages
bear interest at 7.80% per annum and mature in February 2001.

On August 19, 1997, the Company executed a mortgage loan in favor of
National Realty Funding L.C. ("National Realty"). As of January 25, 1998,
approximately $1.6 million was outstanding under the loan which is secured by
a Company property located in Huntington, New York. Amounts outstanding under
the mortgage with National Realty bear interest at 9.10% per annum and mature
in September 2007.

Capital Leases

The Company has entered into capital leases covering approximately 40
real properties. The implicit interest rates under the leases vary between
9.3% and 18.2% and the leases expire between the years 1998 and 2011. As of
January 25, 1998, the capitalized obligations outstanding under the leases
totalled approximately $11.6 million.
<PAGE>
THE EXCHANGE OFFER

General

The Company hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (which together constitute the Exchange Offer), to exchange up to
$115,000,000 aggregate principal amount of Exchange Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to the
Expiration Date and not withdrawn as permitted pursuant to the procedures
described below. The Exchange Offer is being made with respect to all of the
Old Notes.

As of the date of this Prospectus, $115,000,000 aggregate principal
amount of the Old Notes is outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about
, 1998, to all holders of Old Notes known to the Company. The
Company's obligation to accept Old Notes for exchange pursuant to the
Exchange Offer is subject to certain conditions set forth under
"--Termination" below. The Company currently expects that each of the
conditions will be satisfied and that no waivers will be necessary.

Purpose of the Exchange Offer

In connection with the Offering, the purchasers of the Old Notes
became entitled to the benefits of certain registration rights. Pursuant to
the Registration Rights Agreement, the Company agreed to use its best efforts
to cause the Exchange Offer Registration Statement, of which this Prospectus
is a part, to become effective with respect to the Exchange Offer for the
Exchange Notes not later than 150 days after the date of the issuance of the
Old Notes and to consummate the Exchange Offer within 30 business days of the
Exchange Offer Registration Statement being declared effective. Subject to
the terms and conditions stated herein, all Old Notes validly tendered and
not withdrawn will be accepted for exchange upon consummation of the Exchange
Offer. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Exchange Offer Registration Statement of which this Prospectus
is a part.

If (i) the Exchange Offer is not permitted by applicable law or (ii)
any holder of Old Notes notifies the Company within 20 business days
following the consummation of the Exchange Offer that (A) it is prohibited by
law or Commission policy from participating in the Exchange Offer, (B) it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for
such resales or (C) it is a broker-dealer and owns Old Notes acquired
directly from the Company or an affiliate of the Company, the Company will be
required to file a Shelf Registration Statement to cover resales of the Notes
by the holders thereof.

If (i) the Company fails to file within 60 days of the closing of the
Offering, or cause to become effective within 150 days of the closing of the
<PAGE>
Offering, the Exchange Offer Registration Statement, or (ii) the Company is
obligated to provide a Shelf Registration Statement and such Shelf
Registration Statement is not filed within 30 days, or declared effective
within 150 days, of the date on which the Company became so obligated, or
(iii) the Company fails to consummate the Exchange Offer within 30 business
days of the date on which the Exchange Offer Registration Statement was
required to be declared effective by the Commission or (iv) the Shelf
Registration Statement or the Exchange Offer Registration Statement is
declared effective but shall thereafter cease to be effective or usable in
connection with resales of the Notes for the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (i)
through (iv) above a "Registration Default"), then the Company shall pay to
each holder of Transfer Restricted Securities (as defined herein), with
respect to the first 90-day period following such Registration Default,
liquidated damages in an amount equal to $0.05 per week per $1,000 in
principal amount of Transfer Restricted Securities held by such holder. The
amount of such liquidated damages will increase by an additional $0.05 per
week per $1,000 in principal amount of Transfer Restricted Securities held by
such holders for each subsequent 90-day period until such Registration
Default has been cured, up to a maximum of $0.50 per week. Following the
cure of all Registration Defaults, the accrual of all liquidated damages will
cease.

The Exchange Offer shall be deemed consummated for purposes of the
Registration Rights Agreement upon the occurrence of (i) the filing and
effectiveness under the Securities Act of the Exchange Offer Registration
Statement relating to the Exchange Notes, (ii) the maintenance of the
Exchange Offer Registration Statement continuously effective and the keeping
of the Exchange Offer open for a period not less than 20 business days and
(iii) the delivery by the Company to the Registrar under the Indenture of
Exchange Notes in the same aggregate principal amount as the aggregate
principal amount of Old Notes tendered by holders thereof pursuant to the
Exchange Offer.

Terms of the Exchange

Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal, the Company will
accept all Old Notes properly tendered and not withdrawn prior to 5:00 p.m.,
New York City time, on the Expiration Date. The Company will issue $1,000
principal amount of Exchange Notes in exchange for each $1,000 principal
amount of outstanding Old Notes accepted in the Exchange Offer. Holders may
tender some or all of their Old Notes pursuant to the Exchange Offer in
denominations of $1,000 and integral multiples thereof. The Exchange Notes
have terms identical in all material respects to the terms of the Old Notes
except that the Exchange Notes have been registered under the Securities Act,
and therefore will not bear legends restricting their transfer and will not
contain certain provisions providing for registration rights and liquidated
damages relating to the Old Notes under certain circumstances described in
the Registration Rights Agreement, which provisions will terminate as to all
the Notes upon consummation of the Exchange Offer.
<PAGE>
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for exchange.

The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for sale, resold or otherwise transferred by any holder
without compliance with the registration and prospectus delivery provisions
of the Securities Act. Instead, based on no-action letters issued by the
staff of the Commission to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than (i) a broker-dealer who purchased such Old Notes
directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act provided that the holder is
acquiring the Exchange Notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Old Notes
wishing to accept the Exchange Offer must represent to the Company that such
conditions have been met.

Each broker-dealer that receives Exchange Notes in exchange for Old
Notes held for its own account, as a result of market-making or other trading
activities, 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, such 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 such broker-dealer in connection with resales of
Exchange Notes where such Exchange Notes were acquired by such broker-dealer
as a result of market-making or trading activities. The Company has agreed
that for a period of 120 days after the consummation of the Exchange Offer it
will make this Prospectus and any amendment or supplement to this Prospectus
available to any such broker-dealer for use in connection with any such
resale. See "Plan of Distribution".

In connection with the issuance of the Old Notes, the Company
arranged for the Old Notes initially purchased by qualified institutional
buyers or in offshore transactions in reliance on Regulation S under the
Securities Act to be issued and transferable in book-entry form through the
facilities of DTC, acting as depositary. The Exchange Notes are also issuable
and transferable in book-entry form through DTC. See "Description of Exchange
Notes--Book-Entry, Delivery and Form".

The Company shall be deemed to have accepted validly tendered Old
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. See "--Exchange Agent." The Exchange Agent will act as
agent for the tendering holders of Old Notes for the purpose of receiving
<PAGE>
Exchange Notes from the Company and delivering Exchange Notes to such
holders.

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

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

Expiration Date; Extensions; Amendments

The Exchange Offer will expire at 5:00 p.m., New York City time, on
the Expiration Date. The term "Expiration Date" shall mean _______________
__, 1998 unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date to
which the Exchange Offer is extended. The Expiration Date will be at least 20
business days after the commencement of the Exchange Offer in accordance with
Rule 14e-1(a) under the Exchange Act. In order to extend the Expiration Date,
the Company will notify the Exchange Agent of any extension by oral or
written notice prior to 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Such notice may state
that the Company is extending the Exchange Offer for a specified period of
time. During any such extension, all Old Notes previously tendered will
remain subject to the Exchange Offer unless properly withdrawn. The Company
does not anticipate extending the Expiration Date.

The Company expressly reserves the right (i) to delay acceptance of
the Old Notes, to extend the Exchange Offer or terminate the Exchange Offer
and refuse to accept Old Notes not previously accepted, if any of the
conditions set forth herein under "--Termination" shall have occurred and
shall not have been waived by the Company (if permitted to be waived by the
Company), by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, and (ii) to amend the terms of the
Exchange Offer in any manner deemed by it to be advantageous to the holders
of the Old Notes. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as is practicable by oral or written
notice thereof. If the Exchange Offer is amended in a manner determined by
the Company to constitute a material change, the Company will promptly
disclose such amendment in a manner reasonably calculated to inform the
holders of the Old Notes of such amendment.

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

Interest on the Exchange Notes

The Exchange Notes will bear interest from the last Interest Payment
Date on which interest was paid on the Old Notes so surrendered or, if no
interest has been paid on such Notes, from February 26, 1998, the date of
issuance of the Old Notes, payable semi-annually in arrears on March 1 and
September 1 of each year, commencing on September 1, 1998, at the rate of
10 1/4% per annum. Holders of Old Notes accepted for exchange will be deemed
to have waived the right to receive any payment in respect of interest on the
Old Notes accrued from February 26, 1998 until the date of the issuance of
the Exchange Notes. Consequently holders who exchange their Old Notes for
Exchange Notes will receive the same interest payment on September 1, 1998
(the first interest payment date with respect to the Old Notes and the
Exchange Notes) that they would have received had they not accepted the
Exchange Offer.

Procedures for Tendering

To tender in the Exchange Offer, a holder must properly complete,
sign and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Old Notes (unless such tender is being effected pursuant to
the procedure for book-entry transfer described below) and any other required
documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on
the Expiration Date.

Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the Exchange Agent at
its address set forth herein under "--Exchange Agent" prior to 5:00 p.m., New
York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN
ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.

The tender by a holder of Old Notes 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.

Delivery of all documents must be made to the Exchange Agent at its
address set forth herein. Holders may also request that their respective
brokers, dealers, commercial banks, trust companies or nominees effect such
tender for the holders.
<PAGE>
The method of delivery of Old Notes and the Letters of Transmittal
and all other required documents to the Exchange Agent is at the election and
risk of the holders. Instead of delivery by mail, it is recommended that
holders use an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure timely delivery. NO LETTER OF TRANSMITTAL OR
OLD NOTES SHOULD BE SENT TO THE COMPANY.

Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. The term "holder" with respect to the Exchange Offer means any person
in whose name Old Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder, or any person whose Old Notes are held of record by DTC
who desires to deliver such Old Notes by book-entry transfer at DTC.

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

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

If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such
person to tender the Old Notes on behalf of the registered holder, in either
case signed as the name of the registered holder or holders appears on the
Old Notes.

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

All questions as to the validity, form, eligibility (including time
of receipt), acceptance and withdrawal of the tendered Old Notes will be
<PAGE>
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Company's acceptance
of which would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the absolute right to waive any irregularities or
conditions of tender as to particular Old Notes. The Company's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under
any duty to give notification of defects or irregularities with respect to
tenders of Old Notes nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such irregularities have been cured or waived. Any Old Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost by the Exchange Agent to the tendering holder of such Old Notes
unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.

In addition, the Company expressly reserves the right in its sole
discretion to (a) purchase or make offers for any Old Notes that remain
outstanding subsequent to the Expiration Date, or, as set forth under
"--Termination," to terminate the Exchange Offer and (b) to the extent
permitted by applicable law, purchase Old Notes in the open market, in
privately negotiated transactions or otherwise. The terms of any such
purchases or offers may differ from the terms of the Exchange Offer.

By tendering, each holder of Old Notes will represent to the Company
that, among other things, the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is the
holder, that neither the holder nor any other person has an arrangement or
understanding with any person to participate in the distribution of the
Exchange Notes and that neither the holder nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or, if an affiliate, such holder or such other person will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.

Guaranteed Delivery Procedures

Holders who wish to tender their Old Notes and (i) whose Old Notes
are not immediately available, or (ii) who cannot deliver their Old Notes,
the Letter of Transmittal, or any other required documents to the Exchange
Agent prior to the Expiration Date, or if such holder cannot complete the
procedure for book-entry transfer on a timely basis, may effect a tender if:

(a) The tender is made through an Eligible Institution;
<PAGE>
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within five business days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Old Notes to be tendered in proper form for
transfer and any other documents required by the Letter of Transmittal, will
be deposited by the Eligible Institution with the Exchange Agent; and

(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.

Withdrawal of Tenders

Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.

To withdraw a tender of Old Notes in the Exchange Offer, a facsimile
transmission or letter notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) include a statement that the Depositor is withdrawing its
election to have Old Notes exchanged, and identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount
of such Old Notes), (iii) be signed by the Depositor in the same manner as
the original signature on the Letter of Transmittal by which such Old Notes
were tendered (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to permit the Trustee with respect to the
Old Notes to register the transfer of such Old Notes into the name of the
Depositor withdrawing the tender and (iv) specify the name in which any such
Old Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of
receipt) for such withdrawal notices will be determined solely by the
Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered. Any
Old Notes which have been tendered but which are not accepted for exchange
will be returned to the holder thereof without cost to such holder as soon as
is practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be re-tendered by following
<PAGE>
one of the procedures described above under "--Procedures for Tendering" at
any time prior to the Expiration Date.

Termination

The Exchange Offer shall not be subject to any conditions, other than
(i) that the Exchange Offer does not violate applicable law or any applicable
interpretation of the staff of the Commission, (ii) that no action or
proceeding shall have been instituted or threatened in any court or by or
before any governmental agency or body with respect to the Exchange Offer and
(iii) that there shall not have been adopted or enacted any law, statute,
rule or regulation that would render the Exchange Offer illegal. There can be
no assurance that any such condition will not occur.

If the Company determines that it may terminate the Exchange Offer,
as set forth above, the Company may (i) refuse to accept any Old Notes and
return any Old Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Old Notes tendered prior to the
Expiration Date, subject to the rights of such holders of tendered Old Notes
to withdraw their tendered Old Notes, or (iii) waive such termination event
with respect to the Exchange Offer and accept all properly tendered Old Notes
that have not been withdrawn. If such waiver constitutes a material change in
the Exchange Offer, the Company will disclose such change by means of a
supplement to this Prospectus that will be distributed to each registered
holder of Old Notes, and the Company will extend the Exchange Offer for a
period of five to ten business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders of the Old
Notes, if the Exchange Offer would otherwise expire during such period.

Consequences of Failure to Exchange

Holders of Old Notes who do not exchange their Old Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend
thereon. Old Notes not exchanged pursuant to the Exchange Offer will continue
to remain outstanding in accordance with their terms. In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act.

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

As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to
<PAGE>
all the rights and limitations applicable thereto under the Indenture, except
for any such rights under the Registration Rights Agreement that by their
terms terminate or cease to have further effectiveness as a result of the
making of this Exchange Offer. All untendered Old Notes will continue to be
subject to the restrictions on transfer set forth in the Indenture. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered Old Notes could be adversely affected.

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

Exchange Agent

Bankers Trust Company, the Trustee under the Indenture, has been
appointed as Exchange Agent for the Exchange Offer. Questions and requests
for assistance and inquiries for additional copies of this Prospectus or of
the Letter of Transmittal should be directed to the Exchange Agent addressed
as follows:

By Mail:
BT Services Tennessee, Inc.
Corporate Trust and Agency Group
Securities Payment Unit
PO Box 291207
Nashville, TN 37229-1207

By Overnight Courier:
BT Services Tennessee, Inc.
Corporate Trust and Agency Group
Securities Payment Unit
648 Grassmere Park Road
Nashville, TN 37211

By Hand Delivery:
BT Services Tennessee, Inc.
Corporate Trust and Agency Group
Securities Payment Unit
123 Washington Street
1st Floor
New York, NY 10006

Facsimile Transmission:
(615) 835-3701

For Information Telephone:
(800) 735-7777
<PAGE>
Fees and Expenses

The expenses of soliciting tenders pursuant to the Exchange Offer
will be borne by the Company. The principal solicitation for tenders pursuant
to the Exchange Offer is being made by mail. Additional solicitations may be
made by officers and regular employees of the Company and its affiliates in
person, by telegraph or telephone.

The Company will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for its services
and will reimburse the Exchange Agent for its reasonable out-of-pocket
expenses in connection therewith. The Company may also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus, Letters of
Transmittal and related documents to the beneficial owners of the Old Notes
and in handling or forwarding tenders for exchange.

Reasonable expenses incurred in connection with the Exchange Offer,
including expenses of the Exchange Agent and Trustee and accounting and legal
fees, other than certain applicable taxes and counsel fees, will be paid by
the Company.

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

General

The Old Notes were, and the Exchange Notes will be, issued pursuant
to the Indenture, dated as of February 26, 1998, between the Issuer and
Bankers Trust Company, as 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"). The Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture (which is filed as an exhibit to the
Exchange Offer Registration Statement and of which this Prospectus forms a
part) and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture does not purport to be
complete and, while the Company believes that the summary of the material
provisions of the Indenture contained herein constitutes a complete and
accurate summary of such material terms, such summary is qualified in its
entirety by reference to the Indenture, including the definitions therein of
certain terms used below. Copies of the Indenture will be made available as
set forth under the caption "--Additional Information". The definitions of
certain terms used in the following summary are set forth below under the
caption "--Certain Definitions". For purposes of this "Description of Exchange
Notes", the term "Issuer" refers only to Frank's Nursery & Crafts, Inc. and
not to any of its Subsidiaries.

The Notes will be general unsecured obligations of the Issuer and
will be subordinated in right of payment to all existing and future Senior
Debt of the Issuer. See--"Subordination". As of January 25, 1998, after
giving pro forma effect to the Transactions, the Offering and the application
of the proceeds therefrom, the Issuer would have had approximately $73.2
million of Senior Debt outstanding, including $30.3 million of outstanding
borrowings under the Senior Credit Facility. In addition, the Issuer would
have had $103.0 million of additional borrowings available under the Senior
Credit Facility. The Indenture permits the incurrence of additional
indebtedness, including additional Senior Debt, subject to certain
restrictions. See "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock".

As of the date of the Indenture, none of the Issuer's Subsidiaries
were Restricted Subsidiaries. Under certain circumstances, the Issuer will be
able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.

Principal, Maturity and Interest

The Notes are limited in aggregate principal amount to $250.0 million
and mature on March 1, 2008. An aggregate of $115,000,000 in principal amount
of Notes was issued pursuant to the Offering, and an aggregate of
$135,000,000 in principal amount of Notes may be issued in the future
(subject to the covenant described under the caption "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock"). Interest on the
<PAGE>
Notes will accrue at the rate of 10 1/4% per annum and will be payable
semi-annually in arrears on March 1 and September 1 of each year, commencing
on September 1, 1998, to Holders of record on the immediately preceding
February 15 and August 15. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months. Principal of and premium
and interest, if any, on the Notes will be payable at the office or agency of
the Issuer maintained for such purpose within the City and State of New York
or, at the option of the Issuer, payment of interest, if any, may be made by
check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all payments of
principal, premium and interest, if any, with respect to Notes the Holders of
which have given wire transfer instructions to the Issuer will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Issuer,
the Issuer's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of
$1,000 and integral multiples thereof.

Subordination

The payment of principal of and premium and interest, if any, on the
Notes will be subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt of the Issuer, whether outstanding on the date of the Indenture
or thereafter incurred.

Upon any distribution to creditors of the Issuer in a liquidation or
dissolution of the Issuer or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Issuer or its property, an
assignment for the benefit of creditors or any marshaling of the Issuer's
assets and liabilities, the holders of Senior Debt of the Issuer will be
entitled to receive payment in full in cash or Cash Equivalents of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt, regardless of whether such interest is an allowed claim in such
proceeding) before the Holders of Notes will be entitled to receive any
payment with respect to the Notes, and until all Obligations with respect to
Senior Debt are paid in full, any distribution to which the Holders of Notes
would be entitled shall be made to the holders of Senior Debt (except that
Holders of Notes may receive Permitted Junior Securities and payments made
from the trust described under the caption "--Legal Defeasance and Covenant
Defeasance").

The Issuer also may not make any payment upon or in respect of the
Notes (except in Permitted Junior Securities or from the trust described
under the caption "--Legal Defeasance and Covenant Defeasance") if (i) a
default in the payment of the principal of or premium or interest, if any, on
any Designated Senior Debt occurs and is continuing or (ii) any other default
occurs and is continuing with respect to any Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default
<PAGE>
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Issuer or the holders of such
Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured
or waived and (b) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date
on which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated. No new period of
payment blockage may be commenced unless and until 360 days have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice unless such default shall have been
cured or waived for a period of not less than 180 consecutive days.

The Indenture further requires that the Issuer promptly notify
holders of Senior Debt if payment of the Notes is accelerated because of an
Event of Default.

As a result of the subordination provisions described above, in the
event of a liquidation or insolvency, Holders of Notes may recover less
ratably than creditors of the Issuer who are holders of Senior Debt. As of
January 25, 1998, after giving pro forma effect to the Transactions, the
Offering and the application of the proceeds therefrom, the Issuer would have
had approximately $73.2 million of Senior Debt outstanding. The Issuer will
be able to incur additional Senior Debt in the future, subject to certain
limitations. See "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock".

"Designated Senior Debt" means (i) so long as the Senior Bank Debt is
outstanding, any Indebtedness outstanding under the Senior Bank Debt and
(ii) at any time thereafter, any other Senior Debt or Guarantor Senior Debt
permitted under the Indenture the principal amount of which is $15.0 million
or more and that has been designated by the Issuer as "Designated Senior
Debt".

"Guarantor Senior Debt" means with respect to any Guarantor (i) all
Indebtedness of such Guarantor outstanding under Credit Facilities and all
Hedging Obligations with respect thereto, (ii) any other Indebtedness of such
Guarantor permitted to be incurred under the terms of the Indenture, unless
the instrument under which such Indebtedness is incurred expressly provides
that it is subordinated in right of payment to the Subsidiary Guarantee of
such Guarantor and (iii) all Obligations of such Guarantor with respect to
the foregoing. Notwithstanding anything to the contrary in the foregoing,
Guarantor Senior Debt will not include (a) any liability for federal, state,
local or other taxes owed or owing by such Guarantor, (b) any Indebtedness of
such Guarantor to any of its Subsidiaries or other Affiliates, (c) any trade
payables or (d) any Indebtedness that is incurred in violation of the
Indenture.

"Permitted Junior Securities" means Equity Interests in the Issuer or
debt securities of the Issuer or the relevant Guarantor that are subordinated
to all Senior Debt (and any debt securities issued in exchange for Senior
<PAGE>
Debt) or Guarantor Senior Debt (and any debt securities issued in exchange
for Guarantor Senior Debt), as applicable, to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt or
the Subsidiary Guarantees are subordinated to Guarantor Senior Debt, as
applicable, pursuant to the Indenture.

"Senior Bank Debt" means all Obligations under or in respect of the
Senior Credit Facility, together with any refunding, refinancing or
replacement, in whole or in part, of such Indebtedness.

"Senior Debt" of the Issuer means (i) all Indebtedness of the Issuer
outstanding under Credit Facilities and all Hedging Obligations with respect
thereto, (ii) any other Indebtedness of the Issuer permitted to be incurred
under the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is subordinated in right
of payment to the Notes and (iii) all Obligations of the Issuer with respect
to the foregoing. Notwithstanding anything to the contrary in the foregoing,
Senior Debt of the Issuer will not include (a) any liability for federal,
state, local or other taxes owed or owing by the Issuer, (b) any Indebtedness
of the Issuer to any of its Subsidiaries or other Affiliates, (c) any trade
payables or (d) any Indebtedness that is incurred in violation of the
Indenture.

Optional Redemption

Except as set forth in the following paragraph, the Notes will not be
redeemable at the Issuer's option prior to March 1, 2003. Thereafter, the
Notes will be subject to redemption at any time or from time to time at the
option of the Issuer, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest, if any,
thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on March 1 of the years indicated below:

Percentage of
Principal
Amount
Year ----------------
2003 . . . . . . . . . . . . . . . . . . . 105.125%
2004 . . . . . . . . . . . . . . . . . . . 102.562%
2005 and thereafter . . . . . . . . . . . . 100.000%

Notwithstanding the foregoing, prior to March 1, 2001, the Issuer may
redeem up to 35% of the aggregate principal amount of Notes originally issued
under the Indenture at a redemption price of 110.25% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the redemption
date, with the net cash proceeds of one or more public offerings of Capital
Stock of (i) the Issuer or (ii) Holdings to the extent the net cash proceeds
thereof are (a) contributed to the Issuer as a capital contribution to the
common equity of the Issuer or (b) used to purchase Equity Interests of the
Issuer (in either case, other than Disqualified Stock); provided that (i) at
least 65% of the aggregate principal amount of the Notes remain outstanding
<PAGE>
immediately after the occurrence of such redemption (excluding Notes held by
the Issuer and its Subsidiaries) and (ii) each such redemption shall occur
within 90 days after the date of the closing of any such offering of Capital
Stock of the Issuer.

Selection and Notice

If less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any,
on which the Notes are listed, or, if the Notes are not so listed, on a pro
rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided that no Notes of $1,000 or less shall be redeemed in
part. Notices of redemption shall be mailed by first class mail at least 30
but not more than 60 days before the redemption date to each Holder of Notes
to be redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. Notes called for redemption become
due on the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called for redemption.

Mandatory Redemption

Except as set forth below under the caption "--Repurchase at the
Option of Holders", the Issuer is not required to make mandatory redemption
or sinking fund payments with respect to the Notes.

Repurchase at the Option of Holders

Change of Control

Upon the occurrence of a Change of Control, the Issuer will be
obligated to make an offer (a "Change of Control Offer") to each Holder of
Notes to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any,
thereon to the date of purchase (the "Change of Control Payment"). Within 30
days following any Change of Control, the Issuer will mail a notice to each
Holder describing the transaction or transactions that constitute the Change
of Control and offering to repurchase Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 75 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice. The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
<PAGE>
On the Change of Control Payment Date, the Issuer will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of
all Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions
thereof being purchased by the Issuer. The Paying Agent will promptly mail to
each Holder of Notes so tendered the Change of Control Payment for such
Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note will be in a principal amount of $1,000 or an
integral multiple thereof. The Indenture provides that, prior to complying
with the provisions of this covenant, but in any event within 90 days
following a Change of Control, the Issuer will either repay all outstanding
Senior Debt or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt to permit the repurchase of Notes required
by this covenant. The Issuer will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.

The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except
as described above with respect to a Change of Control, the Indenture does
not contain provisions that permit the Holders of the Notes to require the
Issuer to repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.

The Senior Credit Facility prohibits, and future credit agreements or
other agreements relating to Senior Debt to which the Issuer becomes a party
may prohibit, the Issuer from purchasing any Notes following a Change of
Control and provide that certain change of control events with respect to the
Issuer would constitute a default thereunder. In the event a Change of
Control occurs at a time when the Issuer is prohibited from purchasing Notes,
the Issuer could seek the consent of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If
the Issuer does not obtain such a consent or repay such borrowings, the
Issuer will remain prohibited from purchasing Notes. The Issuer's failure to
purchase tendered Notes following a Change of Control would constitute an
Event of Default under the Indenture which would, in turn, constitute a
default under the Senior Credit Facility. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to
the Holders of Notes. See "--Subordination".

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

The Indenture provides that the Issuer will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless
(i) the Issuer or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of
the consideration therefor received by the Issuer or such Restricted
Subsidiary is in the form of cash; provided that the amount of (a) any
liabilities (as shown on the Issuer's or such Restricted Subsidiary's most
recent balance sheet) of the Issuer or such Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated
to the Notes or any guarantee thereof) that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases the
Issuer or such Restricted Subsidiary from further liability and (b) any
securities, notes or other obligations received by the Issuer or such
Restricted Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the Issuer or such
Restricted Subsidiary into cash (to the extent of the cash received) shall be
deemed to be cash for purposes of this provision.

Notwithstanding the immediately preceding paragraph, the Issuer and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraph if (i) the Issuer or the applicable
Restricted Subsidiary, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the fair market value of the assets or
other property sold, issued or otherwise disposed of (as evidenced by a
resolution of the Issuer's Board of Directors set forth in an Officers'
Certificate delivered to the Trustee), and (ii) at least 75% of the
consideration for such Asset Sale constitutes assets or other property of a
kind usable by the Issuer and its Restricted Subsidiaries in a Permitted
Business; provided that any consideration not constituting assets or property
of a kind usable by the Issuer and its Restricted Subsidiaries in a Permitted
Business on the date of such Asset Sale received by the Issuer or any of its
Restricted Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall constitute Net Proceeds subject to the
provisions of the immediately succeeding paragraph.

Within 270 days of the receipt of any Net Proceeds from an Asset
Sale, the Issuer may apply such Net Proceeds, at its option, (i) to repay
Senior Debt (and to correspondingly reduce commitments with respect thereto
in the case of revolving borrowings) or (ii) to the acquisition of a
controlling interest in a Permitted Business, the making of a capital
expenditure or the acquisition of other long-term assets, in each case, used
or useful in a Permitted Business. Pending the final application of any such
Net Proceeds, the Issuer may temporarily reduce Senior Debt or otherwise
invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
<PAGE>
exceeds $10.0 million, the Issuer will be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Issuer may use any remaining Excess
Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of an Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.

Certain Covenants

Restricted Payments

The Indenture provides that the Issuer will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of the
Issuer's or any of its Restricted Subsidiary's Equity Interests (including,
without limitation, any payment in connection with any merger or
consolidation involving the Issuer or any Restricted Subsidiary) or to any
direct or indirect holders of the Issuer's Equity Interests in their capacity
as such (other than dividends or distributions (a) payable in Equity
Interests (other than Disqualified Stock) of the Issuer or (b) to the Issuer
or any Wholly Owned Restricted Subsidiary of the Issuer); (ii) purchase,
redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Issuer) any Equity Interests of the Issuer or any direct or indirect parent
of the Issuer (other than any such Equity Interests owned by the Issuer or
any Wholly Owned Restricted Subsidiary of the Issuer); (iii) make any payment
on or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness of the Issuer or any Restricted Subsidiary
that is subordinated to the Notes, except a payment of interest or principal
at Stated Maturity; or (iv) make any Restricted Investment (all such payments
and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:

(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and

(b) the Issuer would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described below under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
<PAGE>
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Issuer and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii) and (iv) of the next succeeding paragraph),
is less than the sum, without duplication, of (i) 50% of the Consolidated Net
Income of the Issuer for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Issuer's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Issuer as a contribution to its common equity
capital or from the issue or sale since the date of the Indenture of Equity
Interests of the Issuer (other than Disqualified Stock) or from the issue or
sale of Disqualified Stock or debt securities of the Issuer that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Issuer and other than Disqualified Stock or convertible debt securities
that have been converted into Disqualified Stock), plus (iii) 50% of any
dividends received by the Issuer or a Wholly Owned Restricted Subsidiary
after the date of the Indenture from an Unrestricted Subsidiary of the
Issuer, to the extent that such dividends were not otherwise included in
Consolidated Net Income of the Issuer for such period, plus (iv) to the
extent that any Restricted Investment that was made after the date of the
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial amount
of such Restricted Investment, plus (v) to the extent that any Unrestricted
Subsidiary is redesignated as a Restricted Subsidiary after the date of the
Indenture, the fair market value of the Issuer's Investment in such
Subsidiary as of the date of such redesignation.

The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of
the Indenture; (ii) the redemption, repurchase, retirement, defeasance or
other acquisition of any Equity Interests of the Issuer or subordinated
Indebtedness of the Issuer or any Guarantor in exchange for, or out of the
net cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Issuer) of, other Equity Interests of the Issuer (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (iii) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Restricted Subsidiary of the Issuer to the holders of its
Equity Interests on a pro rata basis; (v) (a) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the
Issuer or any Restricted Subsidiary of the Issuer held by any member of the
Issuer's (or any of its Restricted Subsidiaries') management or Board of
Directors pursuant to any management equity subscription agreement, stock
<PAGE>
option agreement or other similar agreement and (b) the payment of dividends
to Holdings to permit Holdings to repurchase, redeem, or otherwise acquire or
retire for value any Equity Interests of Holdings or any Restricted
Subsidiary of Holdings held by any member of Holdings' (or any of its
Restricted Subsidiaries') management or Board of Directors pursuant to any
management equity subscription agreement, stock option agreement or other
similar agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$1.0 million in any twelve-month period and no Default or Event of Default
shall have occurred and be continuing immediately after such transaction;
(vi) following the initial public offering of common stock of the Issuer or
Holdings, the payment of dividends by the Issuer in an aggregate amount in
any year not to exceed 6% of the aggregate net cash proceeds received by the
Issuer in connection with such initial public offering and any subsequent
public offering of common stock of the Issuer or Holdings; provided, however,
that no Default or Event of Default shall have occurred and be continuing
immediately after such transaction; (vii) repurchases of Capital Stock deemed
to occur upon exercise of stock options if such Capital Stock represents a
portion of the exercise price of such options; (viii) any payment by the
Issuer to Holdings to permit Holdings to pay any federal, state, local or
other taxes that are then actually due and owing by Holdings; (ix) the
payment of dividends to Holdings to the extent required to pay general
corporate and overhead expenses incurred by Holdings; provided that such
amounts shall not exceed $1.0 million in any twelve-month period; (x) the
payment of dividends to Holdings to permit Holdings to redeem its Senior
Notes and Convertible Notes; (xi) the payment of dividends to Holdings to
permit Holdings to pay any Merger Consideration and any transaction costs in
connection with the Transactions; provided that such amounts shall not exceed
$5.0 million in the aggregate; (xii) the payment of dividends to Holdings to
permit Holdings to pay financial advisory, financing, underwriting or
placement fees to Cypress and its Affiliates; (xiii) the payment of dividends
to Holdings to permit Holdings to pay any employment, noncompetition,
compensation or confidentiality arrangements entered into with its employees
in the ordinary course of business; (xiv) the payment of dividends to
Holdings to permit Holdings to pay fees and indemnities to directors and
officers of Holdings; and (xv) other Restricted Payments in an aggregate
amount not to exceed $10.0 million.

The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Issuer and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
<PAGE>
Any such designation by the Board of Directors shall be evidenced to
the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions. If,
at any time, any Unrestricted Subsidiary would fail to meet the definition of
an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Issuer as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock", the Issuer
shall be in default of such covenant). The Board of Directors of the Issuer
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Issuer of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the
covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock", calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference
period and (ii) no Default or Event of Default would be in existence
immediately following such designation.

Incurrence of Indebtedness and Issuance of Preferred Stock

The Indenture provides that the Issuer will not, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) or issue
any shares of Disqualified Stock and will not permit any of its Subsidiaries
to incur Indebtedness or issue shares of preferred stock; provided, however,
that, so long as no Default or Event of Default has occurred and is
continuing, the Issuer may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Issuer's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred or such Disqualified Stock is issued
would have been at least 2.0 to 1.0, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred or the Disqualified Stock had been
issued at the beginning of such four-quarter period.

The provisions of the first paragraph of this covenant will not apply
to the incurrence of any of the following (collectively, "Permitted Debt"):

(i) the incurrence by the Issuer and the Guarantors of
Indebtedness under one or more Credit Facilities in an aggregate
principal amount at any time outstanding not to exceed $195.0 million
(with letters of credit being deemed to have a principal amount equal
to the maximum potential liability of the Issuer and the Guarantors
thereunder), less the aggregate amount of all Net Proceeds of Asset
Sales applied to repay any such Indebtedness pursuant to clause
<PAGE>
(i) of the second paragraph of the covenant described above under
the caption "--Repurchase at the Option of Holders--Asset Sales";

(ii) the incurrence by the Issuer and the Guarantors of
Indebtedness represented by the Notes, the Exchange Notes and any
Subsidiary Guarantees;

(iii) the incurrence by the Issuer and its Restricted Subsidiaries
of the Existing Indebtedness;

(iv) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for,
or the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was
permitted by the Indenture to be incurred by the first paragraph of
this covenant, or by clauses (ii), (iii), (iv), (vi), (vii), (viii),
(ix), (x) and (xii);

(v) the incurrence of Indebtedness between or among the Issuer
and any of its Wholly Owned Restricted Subsidiaries; provided,
however, that (a) if the Issuer is the obligor on such Indebtedness,
such Indebtedness is expressly subordinated to the prior payment in
full of all Obligations with respect to the Notes and (b) any
subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Issuer or
a Wholly Owned Restricted Subsidiary, and any sale or other transfer
of any such Indebtedness to a Person that is not either the Issuer or
a Wholly Owned Restricted Subsidiary, shall be deemed, in each case,
to constitute an incurrence of such Indebtedness by the Issuer or
such Restricted Subsidiary, as the case may be;

(vi) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding;

(vii) the incurrence by any of the Issuer's Restricted
Subsidiaries of Indebtedness or Preferred Stock incurred and
outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Issuer (other than Indebtedness or
preferred stock incurred in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Restricted Subsidiary or was acquired
by the Issuer); provided that the principal amount (or accreted
value, as applicable) or aggregate liquidation preference, as
applicable, of such Indebtedness or Preferred Stock, as the case may
be, together with any other outstanding Indebtedness and Preferred
Stock incurred pursuant to this clause (vii) does not exceed $5.0
million;
<PAGE>
(viii) the incurrence by the Issuer or any Restricted Subsidiary of
Indebtedness (including Capital Lease Obligations) financing the
purchase, lease or improvement of property (real or personal) or
equipment (whether through the direct purchase of assets or the
Capital Stock of any Person owning such assets), in each case,
incurred no more than 180 days after such purchase, lease or
improvement of such property in respect of such Indebtedness;
provided, however, at the time of the incurrence of such Indebtedness
and after giving effect thereto, the aggregate principal amount of
all Indebtedness incurred pursuant to this clause (viii) and then
outstanding shall not exceed the greater of $10.0 million and 10% of
Adjusted Consolidated Assets;

(ix) the incurrence by the Issuer of Indebtedness in connection
with the acquisition of a Permitted Business in respect of such
Indebtedness; provided, however, that the aggregate amount of
Indebtedness incurred pursuant to this clause (ix) and then
outstanding shall not exceed $20.0 million;

(x) the guarantee by the Issuer or any of the Guarantors of
Indebtedness that was permitted to be incurred by another provision
of this covenant;

(xi) the incurrence by the Issuer's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such
event shall be deemed to constitute an incurrence of Indebtedness by
a Restricted Subsidiary of the Issuer that was not permitted by this
clause (xi); and

(xii) the incurrence by the Issuer or its Restricted Subsidiaries
of Indebtedness in an aggregate principal amount which, together with
all other Indebtedness of the Issuer outstanding on the date of such
incurrence (other than Indebtedness permitted by clauses (i) through
(xi) above or the first paragraph of this covenant) does not exceed
$30.0 million; provided that the aggregate principal amount of
Indebtedness incurred by Restricted Subsidiaries of the Company
pursuant to this clause (xii) and then outstanding shall not exceed
$2.0 million.

For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or
is entitled to be incurred pursuant to the first paragraph of this covenant,
the Issuer shall, in its sole discretion, classify such item of Indebtedness
in any manner that complies with this covenant and such item of Indebtedness
will be treated as having been incurred pursuant to only one of such clauses
or pursuant to the first paragraph hereof. Accrual of interest, the accretion
of accreted value, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms and the payment of dividends on
preferred stock in the form of additional shares of the same class of
preferred stock will not be deemed to be an incurrence of Indebtedness or an
<PAGE>
issuance of preferred stock for purposes of this covenant; provided, in each
such case, that the amount thereof is included in the Fixed Charges of the
Issuer as accrued.

Limitation on Other Senior Subordinated Debt

The Indenture provides that (i) the Issuer will not directly or
indirectly incur any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt and senior in any respect in right of payment to
the Notes and (ii) no Guarantor will incur any Indebtedness that is
subordinate or junior in right of payment to its Guarantor Senior Debt and
senior in any respect in right of payment to such Guarantor's Subsidiary
Guarantee.

Liens

The Indenture provides that the Issuer will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien securing Indebtedness or trade payables on
any asset now owned or hereafter acquired, or any income or profits therefrom
or assign or convey any right to receive income therefrom, except Permitted
Liens.

Sale and Leaseback Transactions

The Indenture provides that the Issuer will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Issuer and the Guarantors may enter into a
sale and leaseback transaction if (i) the Issuer or such Guarantor could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant
described above under the caption "--Incurrence of Indebtedness and Issuance
of Preferred Stock" and (b) incurred a Lien to secure such Indebtedness
pursuant to the covenant described above under the caption "--Liens", (ii) the
gross cash proceeds of such sale and leaseback transaction are at least equal
to the fair market value (as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee)
of the property that is the subject of such sale and leaseback transaction
and (iii) the transfer of assets in such sale and leaseback transaction is
permitted by, and the proceeds of such transaction are applied in compliance
with, the covenant described above under the caption "--Repurchase at the
Option of Holders--Asset Sales".

Dividend and Other Payment Restrictions Affecting Subsidiaries

The Indenture provides that the Issuer will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to
(i)(a) pay dividends or make any other distributions to the Issuer or any of
its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to
<PAGE>
any other interest or participation in, or measured by, its profits, or
(b) pay any indebtedness owed to the Issuer or any of its Restricted
Subsidiaries, (ii) make loans or advances to the Issuer or any of its
Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Issuer or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the Senior Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Senior
Credit Facility as in effect on the date of the Indenture, (c) the Indenture,
the Notes, the Exchange Notes and the Subsidiary Guarantees, (d) applicable
law, (e) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Issuer or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), 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; provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred,
(f) by reason of customary non-assignment or subletting provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described
in clause (iii) above on the property so acquired, (h) in the case of clause
(iii) above, restrictions contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such security
agreements or mortgages, (i) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or disposition,
or (j) Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced.

Issuances and Sales of Equity Interests in Wholly Owned Restricted
Subsidiaries

The Indenture provides that the Issuer (i) will not, and will not
permit any Wholly Owned Restricted Subsidiary of the Issuer to, transfer,
convey, sell, lease or otherwise dispose of any Equity Interests in any
Wholly Owned Restricted Subsidiary of the Issuer to any Person (other than
the Issuer or a Wholly Owned Restricted Subsidiary of the Issuer), unless
(a) such transfer, conveyance, sale, lease or other disposition is of all the
Equity Interests in such Wholly Owned Restricted Subsidiary and (b) the cash
Net Proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with the covenant described above under the caption
<PAGE>
"--Repurchase at the Option of Holders--Asset Sales", and (ii) will not permit
any Wholly Owned Restricted Subsidiary of the Issuer to issue any of its
Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Issuer or a Wholly Owned Restricted Subsidiary of the Issuer.

Merger, Consolidation or Sale of Assets

The Indenture provides that the Issuer may not consolidate or merge
with or into (whether or not the Issuer is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (i) the Issuer
is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Issuer) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Issuer) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Issuer under the Notes, the Indenture
and the Registration Rights Agreement pursuant to a supplemental indenture in
a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the
case of a merger of the Issuer with or into a Wholly Owned Restricted
Subsidiary of the Issuer, the Issuer or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Issuer), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (a) will have Consolidated Net Worth immediately after
the transaction equal to or greater than the Consolidated Net Worth of the
Issuer immediately preceding the transaction and (b) will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock". Notwithstanding clause
(iv) above, the Issuer may consolidate with or merge with or into (A) another
Person if such Person is a single purpose corporation that has not conducted
any business or incurred any Indebtedness or other liabilities and such
transaction is being consummated solely to change the state of incorporation
of the Issuer or (B) Holdings; provided, however, that, in the case of clause
(B), (x) Holdings shall not have owned any assets other than assets owned by
Holdings on the date of the Indenture, including the Capital Stock of the
Issuer (and other immaterial assets incidental to its ownership of such
Capital Stock) or conducted any business other than owning the Capital Stock
of the Issuer, (y) Holdings shall not have any Indebtedness or other
liabilities (other than ordinary course liabilities incidental to its
ownership of the Capital Stock of the Issuer) and (z) immediately after
giving effect to such consolidation or merger, the Issuer, Holdings or the
Person formed by or surviving such consolidation or merger (if other than the
<PAGE>
Issuer or Holdings) shall have a pro forma Fixed Charge Coverage Ratio that
is not less than the Fixed Charge Coverage Ratio of the Issuer immediately
prior to such consolidation or merger.

Transactions with Affiliates

(a) The Indenture provides that the Issuer will not, and will not
permit any of its Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to,
or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms
that are no less favorable to the Issuer or such Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the Issuer
or such Restricted Subsidiary with an unrelated Person and (ii) the Issuer
delivers to the Trustee (a) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $2.0 million, a resolution of the Board of Directors set forth in
an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (i) above and that such Affiliate Transaction has been approved
by a majority of the disinterested members of the Board of Directors and
(b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, an
opinion as to the fairness to the Issuer of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment
banking firm of national standing.

(b) The provisions of the foregoing paragraph (a) shall not prohibit
(i) any Restricted Payment permitted to be paid pursuant to the covenant
described under the caption "--Restricted Payments", (ii) any issuance of
securities, or other payments, benefits, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors of the
Issuer, (iii) the grant of stock options or similar rights to employees and
directors of the Issuer pursuant to plans approved by the Board of Directors,
(iv) loans or advances to employees in the ordinary course of business in
accordance with the past practices of the Issuer or its Restricted
Subsidiaries, but in any event not to exceed $2.0 million in the aggregate
outstanding at any one time, (v) the payment of reasonable fees to directors
of the Issuer and its Restricted Subsidiaries who are not employees of the
Issuer or its Restricted Subsidiaries, (vi) any payment by the Issuer to
Holdings to permit Holdings to pay any federal, state, local or other taxes
that are then actually due and owing by Holdings, (vii) indemnification
agreements with, and the payment of fees and indemnities to, directors,
officers and employees of the Issuer and its Restricted Subsidiaries, in each
case, in the ordinary course of business, (viii) any employment,
compensation, noncompetition or confidentiality agreement entered into by the
Issuer and its Restricted Subsidiaries with its employees in the ordinary
course of business, (ix) the payment by the Issuer of fees, expenses and
other amounts to Cypress and its Affiliates in connection with the Merger;
provided that the aggregate amount paid under this clause (ix) shall not
<PAGE>
exceed $5.0 million, (x) payments by the Issuer or any of its Restricted
Subsidiaries to Cypress and its Affiliates made pursuant to any financial
advisory, financing, underwriting or placement agreement, or in respect of
other investment banking activities, in each case, as determined by the Board
of Directors in good faith, (xi) any agreement as in effect as of the date of
the Indenture or any amendment or replacement thereto or any transaction
contemplated thereby so long as any such amendment or replacement agreement
is not more disadvantageous to the Holders of the Notes in any material
respect than the original agreement as in effect on the date of the
Indenture, and (xii) any Affiliate Transaction between the Issuer and a
Wholly Owned Subsidiary or between Wholly Owned Subsidiaries of the Issuer.

Subsidiary Guarantees

(a) The Indenture provides that the Issuer will not permit any
Restricted Subsidiary to guarantee the payment of any Indebtedness of the
Issuer or any Indebtedness of any other Restricted Subsidiary (in each case,
the "Guaranteed Debt") unless (i) if such Restricted Subsidiary is not a
Guarantor, such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a Subsidiary Guarantee
of payment of the Notes by such Restricted Subsidiary, (ii) if the Notes or
the Subsidiary Guarantee (if any) of such Restricted Subsidiary are
subordinated in right of payment to the Guaranteed Debt, the Subsidiary
Guarantee under the supplemental indenture shall be subordinated to such
Restricted Subsidiary's guarantee with respect to the Guaranteed Debt
substantially to the same extent as the Notes or the Subsidiary Guarantee are
subordinated to the Guaranteed Debt under the Indenture, (iii) if the
Guaranteed Debt is by its express terms subordinated in right of payment to
the Notes or the Subsidiary Guarantee (if any) of such Restricted Subsidiary,
any such guarantee of such Restricted Subsidiary with respect to the
Guaranteed Debt shall be subordinated in right of payment to such Restricted
Subsidiary's Subsidiary Guarantee with respect to the Notes substantially to
the same extent as the Guaranteed Debt is subordinated to the Notes or the
Subsidiary Guarantee (if any) of such Restricted Subsidiary, (iv) such
Restricted Subsidiary waives and will not in any manner whatsoever claim or
take the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Issuer or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee, and (v) such Restricted Subsidiary shall deliver to the
Trustee an opinion of counsel to the effect that (A) such Subsidiary
Guarantee of the Notes has been duly executed and authorized and (B) such
Subsidiary Guarantee of the Notes constitutes a valid, binding and
enforceable obligation of such Restricted Subsidiary, except insofar as
enforcement thereof may be limited by bankruptcy, insolvency or similar laws
(including, without limitation, all laws relating to fraudulent transfers)
and except insofar as enforcement thereof is subject to general principles of
equity.

(b) Notwithstanding the foregoing and the other provisions of the
Indenture, any Subsidiary Guarantee by a Restricted Subsidiary of the Notes
shall provide by its terms that it shall be automatically and unconditionally
released and discharged upon (i) any sale, exchange or transfer, to any
<PAGE>
Person not an Affiliate of the Issuer, of all of the Issuer's 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
(ii) the release or discharge of the guarantee which resulted in the creation
of such Subsidiary Guarantee, except a discharge or release by or as a result
of payment under such guarantee.

Reports

The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Issuer will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuer was required to file such
Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition
and results of operations of the Issuer and its consolidated Subsidiaries
(showing in reasonable detail, either on the face of the financial statements
or in the footnotes thereto and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the financial condition and
results of operations of the Issuer and its Restricted Subsidiaries separate
from the financial information and results of operations of the Unrestricted
Subsidiaries of the Issuer) and, with respect to the annual information only,
a report thereon by the Issuer's certified independent accountants and
(ii) all current reports that would be required to be filed with the
Commission on Form 8-K if the Issuer was required to file such reports, in
each case, within the time periods specified in the Commission's rules and
regulations. In addition, following the consummation of the exchange offer
contemplated by the Registration Rights Agreement, whether or not required by
the rules and regulations of the Commission, the Issuer will file a copy of
all such information and reports with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Issuer has agreed that, for so long as any Notes
remain outstanding, it will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Act.

Events of Default and Remedies

The Indenture provides that each of the following constitutes an
Event of Default: (i) default for 30 days in the payment when due of interest
on, if any, with respect to, the Notes (whether or not prohibited by the
subordination provisions of the Indenture), (ii) default in payment when due
of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure
by the Issuer or any Restricted Subsidiary for 30 days to comply with the
provisions described under the captions "--Repurchase at the Option of
Holders--Change of Control", "--Repurchase at the Option of Holders--Asset
Sales", "--Certain Covenants--Restricted Payments", "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" or
<PAGE>
"--Certain Covenants--Merger, Consolidation or Sale of Assets"; (iv) failure by
the Issuer or any Restricted Subsidiary for 60 days after written notice by
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes to comply with any of its other agreements in the Indenture
or the Notes; (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Issuer or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Issuer or any of
its Restricted Subsidiaries), whether such Indebtedness or guarantee now
exists or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness prior to the expiration of the grace period provided in
such Indebtedness on the date of such default (a "Payment Default") or
(b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $25.0 million or more; (vi) failure by the Issuer or
any of its Significant Subsidiaries to pay final judgments aggregating in
excess of $25.0 million, which judgments are not paid, discharged or stayed
for a period of 60 days; (vii) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor, or any Person acing on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Subsidiary Guarantee; and
(viii) certain events of bankruptcy or insolvency with respect to the Issuer
or any of the Issuer's Restricted Subsidiaries that constitutes a Significant
Subsidiary or any group of Restricted Subsidiaries of the Issuer that, taken
together, would constitute a Significant Subsidiary. However, a default under
clauses (iii), (iv) and (vi) will not constitute an Event of Default until
the Trustee or the holders of 25% in aggregate principal amount of the
outstanding Notes notify the Issuer of the default and the Issuer does not
cure such default within the time specified after receipt of such notice.

If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Issuer, any Restricted
Subsidiary of the Issuer that constitutes a Significant Subsidiary or any
group of Restricted Subsidiaries of the Issuer that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes will become due
and payable without further action or notice. Holders of the Notes may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest.
<PAGE>
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.

The Issuer is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuer are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee
a statement specifying such Default or Event of Default.

No Personal Liability of Directors, Officers, Employees and Stockholders

No director, officer, employee or stockholder of the Issuer or any
Guarantor, as such, shall have any liability for any obligations of the
Issuer or any Guarantor under the Notes, the Subsidiary Guarantees, the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of
the Commission that such a waiver is against public policy.

Legal Defeasance and Covenant Defeasance

The Issuer may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes and to have
each Guarantor's obligation discharged with respect to its Subsidiary
Guarantee ("Legal Defeasance") except for (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of and
premium and interest, if any, on the Notes when such payments are due from
the trust referred to below, (ii) the Issuer's obligations with respect to
the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office
or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and
the Issuer's obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Issuer may, at its
option and at any time, elect to have the obligations of the Issuer and each
Guarantor released with respect to certain covenants that are described in
the Indenture ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under the caption "--Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the
Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Issuer must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
<PAGE>
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of and premium and interest, if any,
on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Issuer must specify whether the
Notes are being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Issuer shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (a) the Issuer has received from, or there has
been published by, the Internal Revenue Service a ruling or (b) since the
date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal 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 Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Issuer shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes 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; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance
or Covenant Defeasance will not result in a breach or violation of, or
constitute a default under any material agreement or instrument (other than
the Indenture) to which the Issuer or any of its Subsidiaries is a party or
by which the Issuer or any of its Subsidiaries is bound; (vi) the Issuer
shall have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (vii) the Issuer shall
have delivered to the Trustee an Officers' Certificate stating that the
deposit was not made by the Issuer with the intent of preferring the Holders
of Notes over the other creditors of the Issuer with the intent of defeating,
hindering, delaying or defrauding creditors of the Issuer or others; and
(viii) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.

Transfer and Exchange

A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuer is not required to transfer or
<PAGE>
exchange any Note selected for redemption. Also, the Issuer is not required
to transfer or exchange any Note for a period of 15 days before a selection
of Notes to be redeemed. The registered Holder of a Note will be treated as
the owner of it for all purposes.

Amendment, Supplement and Waiver

Except as provided in the next two succeeding paragraphs, the
Indenture, the Notes and the Subsidiary Guarantees may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender
offer or exchange offer for, Notes), and any existing default or compliance
with any provision of the Indenture, the Notes or the Subsidiary Guarantees
may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes (including, without limitation, consents
obtained in connection with a purchase of or tender offer or exchange offer
for Notes).

Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any
Note, (iv) waive a Default or Event of Default in the payment of principal of
or premium or interest, if any, on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that
resulted from such acceleration), (v) make any Note payable in money other
than that stated in the Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of
Notes to receive payments of principal of or premium or interest, if any, on
the Notes, (vii) waive a redemption payment with respect to any Note (other
than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"), (viii) release any Guarantor
from its Subsidiary Guarantee or (ix) make any change in the foregoing
amendment and waiver provisions. In addition, any amendment to the provisions
of Article 10 of the Indenture (which relate to subordination) will require
the consent of the Holders of at least 662/3% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of Holders of Notes.

Notwithstanding the foregoing, without the consent of any Holder of
Notes, the Issuer, a Guarantor (with respect to a Subsidiary Guarantee or the
Indenture to which it is a party) and the Trustee may amend or supplement the
Indenture, the Notes or any Subsidiary Guarantee to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to
or in place of certificated Notes, to provide for the assumption of the
Issuer's or any Guarantor's obligations to Holders of Notes in the case of a
<PAGE>
merger or consolidation or sale of substantially all of the Issuer's assets,
to make any change that would provide any additional rights or benefits to
the Holders of Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.

Concerning the Trustee

The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Issuer, to obtain payment of
claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.

The Holders of a majority in principal amount of the then outstanding
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. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.

Additional Information

Anyone who receives this Prospectus may obtain a copy of the
Indenture without charge by writing to Frank's Nursery & Crafts, Inc., 1175
West Long Lake Road, Troy, Michigan 48098, Attention: Chief Financial
Officer.

Book-Entry, Delivery and Form

Except as set forth below, Exchange Notes will be issued in
registered, global form in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof. Exchange Notes initially will be
represented by one or more Exchange Notes in registered, global form without
interest coupons (collectively, the "Global Exchange Notes"). The Global
Exchange Notes will be deposited with the Trustee as custodian for The
Depository Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC or its nominee, in each case, for credit to an account of a
direct or indirect participant in DTC as described below.

Except as set forth below, the Global Exchange Notes may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Exchange
Notes may not be exchanged for Exchange Notes in certificated form except in
<PAGE>
the limited circumstances described below. See "--Exchange of Book-Entry
Exchange Notes for Certificated Exchange Notes". Except in the limited
circumstances described below, owners of beneficial interests in the Global
Exchange Notes will not be entitled to receive physical delivery of
Certificated Exchange Notes (as defined below).

Initially, the Trustee will act as Paying Agent and Registrar. The
Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.

Depository Procedures

The following description of the operations and procedures of DTC,
Euroclear and Cedel are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them from time to time. The
Issuer takes no responsibility for these operations and procedures and urges
investors to contact the system or their participants directly to discuss
these matters.

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

DTC has also advised the Issuer that, pursuant to procedures
established by it, (i) upon deposit of the Global Exchange Notes, DTC will
credit the accounts of Participants with portions of the principal amount of
the Global Exchange Notes and (ii) ownership of such interests in the Global
Exchange Notes will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interest in the Global Exchange Notes).

Investors in the Global Exchange Notes may hold their interests
therein directly through DTC, if they are Participants in such system, or
indirectly through organizations (including Euroclear and Cedel) which are
Participants in such system. All interests in a Global Exchange Note,
including those held through Euroclear or Cedel, may be subject to the
procedures and requirements of DTC. Those interests held through Euroclear or
Cedel may also be subject to the procedures and requirements of such systems.
<PAGE>
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Exchange Note to such persons will
be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and
certain banks, the ability of a person having beneficial interests in a
Global Exchange Note to pledge such interests to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of
such interests, may be affected by the lack of a physical certificate
evidencing such interests.

Except as described below, owners of interests in the Global Exchange
Notes will not have Exchange Notes registered in their names, will not
receive physical delivery of Exchange Notes in certificated form and will not
be considered the registered owners or "Holders" thereof under the Indenture
for any purpose.

Payments in respect of the principal of, and premium, if any, and
interest on a Global Exchange Note registered in the name of DTC or its
nominee will be payable to DTC in its capacity as the registered Holder under
the Indenture. Under the terms of the Indenture, the Issuer and the Trustee
will treat the persons in whose names the Exchange Notes, including the
Global Exchange Notes, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes whatsoever.
Consequently, none of the Issuer, the Trustee or any agent of the Issuer or
the Trustee has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of any beneficial ownership
interest in the Global Exchange Notes, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the Global Exchange
Notes or (ii) any other matter relating to the actions and practices of DTC
or any of its Participants or Indirect Participants. DTC has advised the
Issuer that its current practice, upon receipt of any payment in respect of
securities such as the Exchange Notes (including principal and interest), is
to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in the
principal amount of beneficial interest in the relevant security as shown on
the records of DTC unless DTC has reason to believe it will not receive
payment on such payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of Exchange Notes will be governed by
standing instructions and customary practices and will be the responsibility
of the Participants or the Indirect Participants and will not be the
responsibility of DTC, the Trustee or the Issuer. Neither the Issuer nor the
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Exchange Notes, and the Issuer and
the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.

Except for trades involving only Euroclear and Cedel participants,
interests in the Global Exchange Notes are expected to be eligible to trade
in DTC's Same-Day Funds Settlement System and secondary market trading
<PAGE>
activity in such interests will, therefore, settle in immediately available
funds, subject in all cases to the rules and procedures of DTC and its
Participants. See "Same Day Settlement and Payment".

Transfers between Participants in DTC will be effected in accordance
with DTC's procedures and will be settled in same day funds, and transfers
between participants in Euroclear and Cedel will be effected in the ordinary
way in accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the
case may be, by its respective depository; however, such cross-market
transactions will require delivery of instructions to Euroclear or Cedel, as
the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depository to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Exchange Note in
DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositories for
Euroclear or Cedel.

DTC has advised the Issuer that it will take any action permitted to
be taken by a Holder of Exchange Notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global
Exchange Notes and only in respect of such portion of the aggregate principal
amount of the Exchange Notes as to which such Participant or Participants has
or have given such direction. However if there is an Event of Default under
the Exchange Notes, DTC reserves the right to exchange the Global Exchange
Notes for legended Exchange Notes in certificated form, and to distribute
such Exchange Notes to its Participants.

Although DTC, Euroclear and Cedel have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Exchange Notes
among Participants in DTC, Euroclear and Cedel, they are under no obligation
to perform or to continue to perform such procedures, and such procedures may
be discontinued at any time. Neither the Issuer nor the Trustee nor any of
their respective agents will have any responsibility for the performance by
DTC, Euroclear or Cedel or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

Exchange of Book-Entry Exchange Notes for Certificated Exchange Notes

A Global Exchange Note is exchangeable for definitive Exchange Notes
in registered certificated form ("Certificated Exchange Notes") if (i) DTC
(x) notifies the Issuer that it is unwilling or unable to continue as
depositary for the Global Exchange Notes and the Issuer thereupon fails to
appoint a successor depositary or (y) has ceased to be a clearing agency
registered under the Exchange Act, (ii) the Issuer, at its option, notifies
<PAGE>
the Trustee in writing that it elects to cause the issuance of the
Certificated Exchange Notes or (iii) there shall have occurred and be
continuing a Default or Event of Default with respect to the Exchange Notes.
In addition, beneficial interests in a Global Exchange Note may be exchanged
for Certificated Exchange Notes upon request but only upon prior written
notice given to the Trustee by or on behalf of DTC in accordance with the
Indentures. In all cases, Certificated Exchange Notes delivered in exchange
for any Global Exchange Note or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its customary
procedures).

Same Day Settlement and Payment

The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Exchange Notes (including principal, premium and
interest, if any,) be made by wire transfer of immediately available funds to
the accounts specified by the Global Exchange Note Holder. With respect to
Exchange Notes in certificated form, the Issuer will make all payments of
principal, premium and interest, if any, 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. The Exchange Notes represented by the Global Exchange
Notes 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 Exchange Notes will, therefore, be
required by the Depositary to be settled in immediately available funds. The
Issuer expects that secondary trading in any certificated Exchange Notes will
also be settled in immediately available funds.

Because of time zone differences, the securities account of a
Euroclear or Cedel participant purchasing an interest in a Global Exchange
Note from a Participant in DTC will be credited, and any such crediting will
be reported to the relevant Euroclear or Cedel participant, during the
securities settlement processing day (which must be a business day for
Euroclear and Cedel) immediately following the settlement date of DTC. DTC
has advised the Issuer that cash received in Euroclear or Cedel as a result
of sales of interests in a Global Exchange Note by or through a Euroclear or
Cedel participant to a Participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or
Cedel cash account only as of the business day for Euroclear or Cedel
following DTC's settlement date.

Registration Rights; Liquidated Damages

Pursuant to the Registration Rights Agreement, the Issuer agreed to
file with the Commission the Exchange Offer Registration Statement with
respect to the Exchange Notes and, upon the effectiveness of the Exchange
Offer Registration Statement, to offer to the Holders of Transfer Restricted
Securities pursuant to the Exchange Offer who are able to make certain
representations the opportunity to exchange their Transfer Restricted
Securities for Exchange Notes. If (i) the Issuer is not required to file the
<PAGE>
Exchange Offer Registration Statement or permitted to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities
notifies the Issuer prior to the 20th day following consummation of the
Exchange Offer that (a) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (b) that it may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales or
(c) that it is a broker-dealer and owns Old Notes acquired directly from the
Issuer or an affiliate of the Issuer, the Issuer will file with the
Commission a Shelf Registration Statement to cover resales of the Notes by
the Holders thereof who satisfy certain conditions relating to the provision
of information in connection with the Shelf Registration Statement. The
Issuer will use its best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the Commission.
For purposes of the foregoing, "Transfer Restricted Securities" means each
Old Note until (i) the date on which such Old Note has been exchanged by a
person other than a broker-dealer for an Exchange Note in the Exchange Offer,
(ii) following the exchange by a broker-dealer in the Exchange Offer of an
Old Note for an Exchange Note, the date on which such Exchange Note is sold
to a purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Old Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iv) the date on which such Old Note
is distributed to the public pursuant to Rule 144 under the Act.

The Registration Rights Agreement provides that (i) the Issuer will
file an Exchange Offer Registration Statement with the Commission on or prior
to 60 days after the date of the Indenture, (ii) the Issuer will use its best
efforts to have the Exchange Offer Registration Statement declared effective
by the Commission on or prior to 150 days after the date of the Indenture,
(iii) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Issuer will commence the Exchange Offer and use its
best efforts to issue, on or prior to 30 business days after the date on
which the Exchange Offer Registration Statement was declared effective by the
Commission, Exchange Notes in exchange for all Old Notes tendered prior
thereto in the Exchange Offer and (iv) if obligated to file the Shelf
Registration Statement, the Issuer will use its best efforts to file the
Shelf Registration Statement with the Commission on or prior to 30 days after
such filing obligation arises and to cause the Shelf Registration to be
declared effective by the Commission on or prior to 150 days after such
obligation arises. If (a) the Issuer fails to file any of the registration
statements required by the Registration Rights Agreement on or before the
date specified for such filing, (b) any of such registration statements is
not declared effective by the Commission on or prior to the date specified
for such effectiveness (the "Effectiveness Target Date"), (c) the Issuer
fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
<PAGE>
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above a "Registration
Default"), then the Issuer will pay liquidated damages to each Holder of
Notes, with respect to the first 90-day period immediately following the
occurrence of the first Registration Default, in an amount equal to $.05 per
week per $1,000 principal amount of Notes held by such Holder. The amount of
the liquidated damages will increase by an additional $.05 per week per
$1,000 principal amount of Notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum
amount of liquidated damages for all Registration Defaults of $.50 per week
per $1,000 principal amount of Notes. All accrued liquidated damages will be
paid by the Issuer on each Damages Payment Date to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified
by them or by mailing checks to their registered addresses if no such
accounts have been specified. Following the cure of all Registration
Defaults, the accrual of liquidated damages will cease.

Holders of Old Notes are required to make certain representations to
the Issuer (as described in the Registration Rights Agreement and Letter of
Transmittal) in order to participate in the Exchange Offer and will be
required to deliver certain information to be used in connection with the
Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have their Notes included in the Shelf
Registration Statement and benefit from the provisions regarding liquidated
damages set forth above.

Certain Definitions

Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms,
as well as any other capitalized terms used herein for which no definition is
provided.

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

"Adjusted Consolidated Assets" means at any time the total amount of
assets of the Issuer and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), after deducting
therefrom all current liabilities of the Issuer and its Restricted
Subsidiaries (excluding intercompany items), all as set forth on the
consolidated balance sheet of the Issuer and its Restricted Subsidiaries as
<PAGE>
of the end of the most recent fiscal quarter for which financial statements
are available prior to the date of determination.

"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the Voting
Stock of a Person shall be deemed to be control.

"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of
a sale and leaseback), excluding sales of services and products in the
ordinary course of business consistent with past practices (provided that the
sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Issuer and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described above under the
caption "--Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant) and (ii) the issue or sale by the Issuer or any of its Restricted
Subsidiaries of Equity Interests of any of the Issuer's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the
Issuer to a Wholly Owned Restricted Subsidiary or by a Wholly Owned
Restricted Subsidiary to the Issuer or to another Wholly Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Issuer or to another Wholly Owned Restricted Subsidiary,
(iii) the transfer of used, surplus or obsolete equipment in the ordinary
course of business, (iv) the sale and leaseback of any assets within 90 days
of the acquisition of such assets and (v) a Restricted Payment that is
permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments" will not be deemed to be Asset Sales.

"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the
rate of interest implicit in such transaction, determined in accordance with
GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).

"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
<PAGE>
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.

"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than one year from the date of acquisition,
(iii) certificates of deposit and eurodollar time deposits with maturities of
one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding one year and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of
$500.0 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within one year after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through
(v) of this definition.

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

(i) prior to the first public equity offering, the Principals
cease to be the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of a majority
in the aggregate of the total voting power of the Voting Stock of the
Issuer, whether as a result of issuance of securities of the Issuer,
any merger, consolidation, liquidation or dissolution of the Issuer,
any direct or indirect transfer of securities or otherwise (for
purposes of this clause (i) and clause (ii) below, the Principals
shall be deemed to beneficially own any Voting Stock of a corporation
(the "specified corporation") held by any other corporation (the
"parent corporation") so long as the Principals beneficially own (as
so defined), directly or indirectly, in the aggregate a majority of
the voting power of the Voting Stock of the parent corporation);

(ii) on or after the first public equity offering, any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), other than one or more Principals, is or becomes the beneficial
owner (as defined in clause (i) above, except that for purposes of
this clause (ii) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to
<PAGE>
acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the
total voting power of the Voting Stock of the Issuer; provided,
however, that the Principals beneficially own (as defined in clause
(i) above), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of the Voting Stock of the
Issuer than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors (for the purposes of
this clause (ii), such other person shall be deemed to beneficially
own any Voting Stock of a specified corporation held by a parent
corporation, if such other person is the beneficial owner (as defined
in this clause (ii)), directly or indirectly, of more than 35% of the
voting power of the Voting Stock of such parent corporation and the
Principals beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of such parent corporation and do
not have the right or ability by voting power, contract or otherwise
to elect or designate for election a majority of the Board of
Directors of such parent corporation);

(iii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of
the Issuer (together with any new directors whose election by such
Board of Directors or whose nomination for election by the
shareholders of the Issuer was approved by a vote of 66 2/3% of the
directors of the Issuer 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
Issuer then in office; or

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

"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus, to
the extent deducted in computing such Consolidated Net Income, (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale, (ii) provision for taxes based on income or profits of such
<PAGE>
Person and its Restricted Subsidiaries for such period, (iii) consolidated
interest expense of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable
Debt, commissions, discounts and other fees and charges incurred in respect
of letter of credit or bankers' acceptance financings, and net payments (if
any) pursuant to Hedging Obligations), plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent
that it represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period, minus
(v) non-cash items increasing such Consolidated Net Income for such period,
(other than accruals of income in the ordinary course of business in respect
of future cash payments) in each case, on a consolidated basis and determined
in accordance with GAAP. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of a
Person shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in the same proportion) that the Net Income of
such Restricted Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted
at the date of determination to be dividended to the Issuer by such
Restricted Subsidiary without prior approval (that has not been obtained) and
without direct or indirect restriction pursuant to the terms of its charter
and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such Restricted Subsidiary
or its stockholders.

"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent Person or a
Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded and
(v) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
<PAGE>
excluded, whether or not distributed to the Issuer or one of its Restricted
Subsidiaries.

"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (a) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date, plus (b) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (i) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the date of the
Indenture in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person, (ii) all investments as of such date
in unconsolidated Subsidiaries and in Persons that are not Subsidiaries
(except, in each case, Permitted Investments) and (iii) all unamortized debt
discount and expense and unamortized deferred charges as of such date, in
each case, determined in accordance with GAAP.

"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Issuer who (i) was a member of such
Board of Directors on the date of the Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a
majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.

"Credit Facilities" means, with respect to the Issuer, one or more
debt facilities (including, without limitation, the Senior Credit Facility)
or commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such receivables)
or letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
Indebtedness under Credit Facilities outstanding on the date on which Notes
are first issued and authenticated under the Indenture shall be deemed to
have been incurred on such date in reliance on the exception provided by
clause (i) of the definition of Permitted Debt.

"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.

"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after
the date on which the Notes mature; provided, however, that any Capital Stock
<PAGE>
that would constitute Disqualified Stock solely because the holders thereof
have the right to require the Issuer to repurchase such Capital Stock upon
the occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Issuer
may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments".

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

"Existing Indebtedness" means Indebtedness in existence on the date
of the Indenture (other than Indebtedness under Credit Facilities), until
such Indebtedness is repaid.

"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations),
(ii) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period, (iii) any interest
expense on Indebtedness of another Person that is guaranteed by such Person
or one of its Restricted Subsidiaries or secured by a Lien on assets of such
Person or one of its Restricted Subsidiaries (whether or not such guarantee
or Lien is called upon) and (iv) the product of (a) all dividend payments,
whether or not in cash, on any series of preferred stock of such Person or
any of its Restricted Subsidiaries, other than dividend payments on Equity
Interests payable solely in Equity Interests of the Issuer (other than
Disqualified Stock) or to the Issuer or a Restricted Subsidiary of the
Issuer, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.

"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person and its Restricted Subsidiaries
for such period. In the event that the Issuer or any of its Restricted
Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other
than revolving credit borrowings) or issues preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, guarantee or redemption of Indebtedness, or such
<PAGE>
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that
have been made by the Issuer or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to
have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation Date, shall be
excluded and (iii) the Fixed Charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.

"GAAP" means generally accepted accounting principles in the United
States of America set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect on the date of the Indenture.

"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit and reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.

"Hedging Obligations" means, with respect to any Person, the
obligations of such 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.

"Holdings" means FNC Holdings Inc. (formerly known as General Host
Corporation) and its successors.

"Indebtedness" means, with respect to any Person, (i) any
indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of
the foregoing indebtedness (other than letters of credit and Hedging
<PAGE>
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (ii) all indebtedness of others secured by
a Lien on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and (iii) to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person. The amount
of any Indebtedness outstanding as of any date shall be (i) the accreted
value thereof, in the case of any Indebtedness issued with original issue
discount, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.

"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with
GAAP. If the Issuer or any Subsidiary of the Issuer sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Issuer such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Issuer, the Issuer shall be deemed to
have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the third paragraph of the
covenant described above under the caption "--Certain Covenants--Restricted
Payments".

"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).

"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction
in respect of preferred stock dividends, excluding, however, (i) any gain
(but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions)
or (b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and (ii) any extraordinary or
non-recurring gain (but not loss), together with any related provision for
taxes on such extraordinary or non-recurring gain (but not loss).

"Net Proceeds" means the aggregate cash proceeds received by the
Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale
<PAGE>
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets
that were the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance
with GAAP.

"Non-Recourse Debt" means Indebtedness: (i) as to which neither the
Issuer nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise) or (c) constitutes the lender; (ii) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any other Indebtedness
(other than the Notes being offered hereby) of the Issuer or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and (iii) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of the Issuer or
any of its Restricted Subsidiaries.

"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

"Permitted Business" means any business which is the same as or
related, ancillary or complementary to the businesses of the Company on the
date of the Indenture.

"Permitted Investments" means (i) any Investment in the Issuer or in
a Wholly Owned Restricted Subsidiary of the Issuer; (ii) any Investment in
Cash Equivalents; (iii) any Investment by the Issuer or any Restricted
Subsidiary of the Issuer in a Person, if as a result of such Investment
(a) such Person becomes a Wholly Owned Restricted Subsidiary of the Issuer or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated
into, the Issuer or a Wholly Owned Restricted Subsidiary of the Issuer;
(iv) any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "--Repurchase at the
Option of Holders--Asset Sales"; (v) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Issuer; (vi) any Investment existing on the date of the Indenture;
(vii) payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business;
<PAGE>
(viii) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Issuer or any Restricted Subsidiary,
but in any event not to exceed $2.0 million in the aggregate outstanding at
any one time; (ix) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Issuer or
any Restricted Subsidiary or in satisfaction of judgments; and (x) other
Investments in any Person (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (x) that are
at the time outstanding, not to exceed $10.0 million.

"Permitted Liens" means (i) Liens securing Senior Debt or Guarantor
Senior Debt of the Issuer and its Restricted Subsidiaries that was permitted
by the terms of the Indenture to be incurred; (ii) Liens in favor of the
Issuer or any of its Restricted Subsidiaries; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with
the Issuer or any Restricted Subsidiary of the Issuer; provided that such
Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Issuer; (iv) Liens on property existing
at the time of acquisition thereof by the Issuer or any Restricted Subsidiary
of the Issuer, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory, regulatory, contractual or warranty requirements, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in
the ordinary course of business; (vi) Liens existing on the date of the
Indenture; (vii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefore; (viii) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent or being contested in
good faith, if such reserve or other appropriate provision, if any, as shall
be required by GAAP shall have been made in respect thereof; (ix) Liens
incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (x) judgment Liens not giving rise to an
Event of Default; (xi) easements, rights-of-way, zoning restrictions and
other similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the business
of the Issuer or any of its Restricted Subsidiaries; (xii) any interest or
title of a lessor under any Capital Lease Obligations; (xiii) purchase money
Liens to finance property or assets of the Issuer or any Restricted
Subsidiary of the Issuer acquired in the ordinary course of business; (xiv)
Liens upon specific items of inventory or other goods and proceeds of any
<PAGE>
Person securing such Person's obligations in respect of bankers' acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods; (xv) Liens securing
reimbursement obligations with respect to commercial letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof; (xvi) Liens securing Hedging Obligations that
are otherwise permitted to be incurred under the Indenture; (xvii) leases or
subleases granted to others that do not materially interfere with the
ordinary course of business of the Issuer and its Restricted Subsidiaries;
(xviii) Liens arising from filing Uniform Commercial Code financing
statements regarding leases; and (xix) Liens incurred in the ordinary course
of business of the Issuer or any Restricted Subsidiary of the Issuer with
respect to obligations that do not exceed $2.0 million at any one time
outstanding.

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

"Principals" means Cypress Merchant Banking Partners L.P., Cypress
Offshore Partners L.P., Cypress Garden Ltd. and any Person who on the date of
the Indenture is an Affiliate of any of the foregoing.

"Related Party" with respect to any Principal means (i) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Principal or
(ii) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (i).
<PAGE>
"Restricted Investment" means an Investment other than a Permitted
Investment.

"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.

"Senior Credit Facility" means that certain credit agreement, dated
as of December 24, 1997, by and among the Issuer, Cyrus Acquisition Corp.,
Holdings, the lenders party thereto, The Chase Manhattan Bank, as
Administrative Agent, Syndication Agent, Collateral Agent, Issuing Bank and
Swingline Lender and Goldman Sachs Credit Partners L.P., as Documentation
Agent, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time.

"Significant Subsidiary" means any Restricted Subsidiary that would
be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such
Regulation is in effect on the date hereof.

"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.

"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).

"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Issuer or any Restricted
Subsidiary unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Issuer or such Restricted
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Issuer; (c) is a Person with respect to which neither
the Issuer nor any of its Restricted Subsidiaries has any direct or indirect
obligation (1) to subscribe for additional Equity Interests or (2) to
maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; (d) has not
guaranteed or otherwise directly or indirectly provided credit support for
<PAGE>
any Indebtedness of the Issuer or any of its Restricted Subsidiaries; and
(e) has at least one director on its Board of Directors that is not a
director or executive officer of the Issuer any of its Restricted
Subsidiaries and has at least one executive officer that is not a director or
executive officer of the Issuer or any of its Restricted Subsidiaries.

"Voting Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.

"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by
(ii) the then outstanding principal amount of such Indebtedness.

"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE

The discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may
be repealed, revoked or modified so as to result in federal income tax
consequences different from those discussed below.

The exchange of Old Notes for Exchange Notes in the Exchange Offer
will not constitute a taxable event to holders for United States federal
income tax purposes. Consequently, no gain or loss will be recognized by a
holder upon receipt of an Exchange Note, the holding period of the Exchange
Note will include the holding period the Old Note and the basis of the
Exchange Note will be the same as the basis of the Old Note immediately
before the exchange.

In any event, persons considering the exchange of Old Notes for
Exchange Notes should consult their own tax advisors concerning the United
States federal income tax consequences in light of their particular
situations as well as any consequences arising under the laws of any other
taxing jurisdiction.

PLAN OF DISTRIBUTION

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 Old Notes where such Old 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 consummation of the Exchange Offer it
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resales. In addition, until
, 1998, all dealers effecting 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
negotiated prices. Any such resale may be made directly to purchasers or to
or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers
of any such 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
<PAGE>
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 consummation of the Exchange
Offer, 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 other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.

By its acceptance of the Exchange Offer, any broker-dealer that
receives Exchange Notes pursuant to the Exchange Offer hereby agrees to
notify the Company prior to using the Prospectus in connection with the sale
or transfer of Exchange Notes, and acknowledges and agrees that, upon receipt
of notice from the Company of the happening of any event which makes any
statement in the Prospectus untrue in any material respect or which requires
the making of any changes in the Prospectus in order to make the statements
therein not misleading or which may impose upon the Company disclosure
obligations that may have a material adverse effect on the Company (which
notice the Company agrees to deliver promptly to such broker-dealer), such
broker-dealer will suspend use of the Prospectus until the Company has
notified such broker-dealer that delivery of the Prospectus may resume and
has furnished copies of any amendment or supplement to the Prospectus to such
broker-dealer.

LEGAL MATTERS

Certain legal matters will be passed upon for the Company by Simpson
Thacher & Bartlett, New York, New York.

INDEPENDENT ACCOUNTANTS

The financial statements of Frank's Nursery & Crafts, Inc. as of
January 25, 1998 and January 26, 1997 and for each of the two years in the
period ended January 26, 1997 and for the four-week period and forty-eight
week period ended January 25, 1998 and December 28, 1997, respectively,
included in this Prospectus have been so included in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
<PAGE>
INDEX TO FINANCIAL STATEMENTS

FRANK'S NURSERY & CRAFTS, INC.

Page No.

Report of Independent Accountants . . . . . . . . . . . F-2

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

Statements of Operations . . . . . . . . . . . . . . . F-4

Statements of Changes in Shareholder's Equity . . . . . F-5

Statements of Cash Flows . . . . . . . . . . . . . . . F-6

Notes to Financial Statements . . . . . . . . . . . . F-7
<PAGE>
Report of Independent Accountants

To the Board of Directors and Shareholder of
Frank's Nursery & Crafts, Inc.

In our opinion, the accompanying balance sheets and the related
statements of income, changes in shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of Frank's
Nursery & Crafts, Inc. (a wholly-owned subsidiary of FNC Holdings Inc.,
formerly "General Host Corporation") at January 25, 1998 and January 26,
1997, and the results of their operations and their cash flows for the four-
week period and forty-eight week period ending January 25, 1998 and December
28, 1997, respectively, and the two years ended January 26, 1997 and January
28, 1996, respectively, in conformity with generally accepted accounting
principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.

/s/ Price Waterhouse LLP
Price Waterhouse LLP
Bloomfield Hills, Michigan
March 13, 1998
<PAGE>
Frank's Nursery & Crafts, Inc.
(a wholly-owned subsidiary of Holdings)
Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
January 25, January 26,
1998 1997
---------------------- ------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 16,100 $ 3,526
Accounts and notes receivable . . . . . . . . . . . . . . . . . . . . . . 4,607 3,028
Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 81,051 81,575
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . 6,218 9,458
------- -------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 107,976 97,587
------- -------
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . 217,880 220,626
Intangibles, less accumulated amortization of $173 and $10,653 at
January 25, 1998 and January 26, 1997, respectively . . . . . . . . . . 95,825 15,266
Other assets and deferred charges . . . . . . . . . . . . . . . . . . . . . . 13,248 10,544
------- -------
$434,929 $344,023
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,852 $ 27,870
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,677 39,186
Notes payable to banks . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . 1,780 2,254
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 96,309 69,310
------- -------
Long-term debt:
Senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,189 127,761
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 65,000
------- -------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . 167,189 192,761
------- -------
Other liabilities and deferred credits . . . . . . . . . . . . . . . . . . . 17,778 6,271
Commitments and contingencies

Shareholder's equity:
Common stock $1.00 par value, 5,000,000 shares authorized, 246 shares
issued 246 246
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . 165,754 48,146
Intercompany payable (receivable) . . . . . . . . . . . . . . . . . . . . (693) 115,147
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,654) (87,858)
------- -------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 153,653 75,681
------- -------
$434,929 $344,023
======= =======
</TABLE>

See accompanying notes.
<PAGE>
Frank's Nursery & Crafts, Inc.
(a wholly-owned subsidiary of Holdings)

Statements of Operations
(dollars in thousands)

<TABLE>
<CAPTION>
Post- Pre-
acquisition acquisition
Period Period
(Successor- (Predecessor-
basis) basis)
Four-Weeks Forty-Eight
Ended Weeks Ended
January 25, December 28, January 26, January 28,
1998 1997 1997 1996
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Sales . . . . . . . . . . . . . . . . . . . . . . . $ 14,814 $ 515,204 $530,752 $593,270
Other income (expense) . . . . . . . . . . . . . . . (17) (2,010) (226) 507
-------- -------- -------- --------
14,797 513,194 530,526 593,777
-------- -------- -------- --------
Costs and expenses:
Cost of sales, including buying and occupancy . . . 17,532 367,008 383,099 429,181
Selling, general and administrative . . . . . . . . 7,318 137,872 138,355 148,502
Provision for store closings and other costs . . . . 6,677
Impairment loss . . . . . . . . . . . . . . . . . . 1,720
Interest and debt expense . . . . . . . . . . . . . 1,601 19,632 20,863 23,845
-------- -------- -------- --------
26,451 532,909 542,317 601,528
-------- -------- -------- --------
Net loss . . . . . . . . . . . . . . . . . . . . . . . $(11,654) $ (19,715) $(11,791) $ (7,751)
======== ======== ======== ========
</TABLE>

See accompanying notes.

<PAGE>
Frank's Nursery & Crafts, Inc.
(A wholly-owned subsidiary of Holdings)

Statements of Changes in Shareholder's Equity
Fiscal Years Ended January 25, 1998, January 26, 1997
and January 28, 1996
(dollars in thousands)

<TABLE>
<CAPTION>
Common Capital in Inter- Total
Stock Excess of company Retained Shareholder's
Issued Par Value Payable Earnings Equity
------------- ------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance at January 29, 1995 . . . . . . . . $ 246 $ 48,146 $ 74,041 $(68,316) $ 54,117
Net loss . . . . . . . . . . . . . . . . . (7,751) (7,751)
Increase in intercompany payable . . . . . 59,892 59,892
------ ------ ------ ------ ------
Balance at January 28, 1996 . . . . . . . . 246 48,146 133,933 (76,067) 106,258
Net loss . . . . . . . . . . . . . . . . . (11,791) (11,791)
Decrease in intercompany payable . . . . . (18,786) (18,786)
------ ------ ------ ------ ------
Balance at January 26, 1997 . . . . . . . . 246 48,146 115,147 (87,858) 75,681
Net loss for the forty-eight week (pre-
acquisition) period ended December 28,
1997 . . . . . . . . . . . . . . . . . . . (19,715) (19,715)
Changes due to acquisition:
Equity contribution . . . . . . . . . . 166,000 166,000
Purchase accounting adjustments . . . . (48,392) 107,573 59,181
Decrease in intercompany liability . . . . (114,706) (114,706)
------ ------ ------ ------ ------
Balance at December 28, 1997 . . . . . . . 246 165,754 441 -0- 166,441
Net loss for the four-week (post-
acquisition) period ended January 25, 1998 (11,654) (11,654)
Decrease in intercompany liability . . . . (1,134) (1,134)
------ ------ ------ ------ ------
Balance at January 25, 1998 . . . . . . . . $ 246 $165,754 $ (693) $(11,654) $153,653
====== ====== ====== ====== ======
</TABLE>

See accompanying notes.

<PAGE>
Frank's Nursery & Crafts, Inc.
(a wholly-owned subsidiary of Holdings)

Statements of Cash Flows
(dollars in thousands)

<TABLE>
<CAPTION>
Post-acquisition Pre-acquisition
Period Period
(Successor- (Predecessor-
basis) basis)
Four-Weeks Forty-Eight
Ended Weeks Ended
January 25, December 28, January 26, January 28,
1998 1997 1997 1996
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net Loss . . . . . . . . . . . . . . . . . . . . . . $(11,654) $ (19,715) $(11,791) $ (7,751)
Noncash adjustments:
Depreciation and amortization . . . . . . . . . . 1,500 20,115 22,377 22,888
Provision for store closings and other costs . . . 6,677
Impairment loss . . . . . . . . . . . . . . . . . 1,720
Gains from sales of property, plant and
equipment . . . . . . . . . . . . . . . . . . . (2,981)
Other . . . . . . . . . . . . . . . . . . . . . . (1,343) (3,188) 860 487
-------- -------- -------- --------
(11,497) 2,628 11,446 15,624
Changes in current assets and current liabilities:
Decrease (increase) in accounts and notes
receivable . . . . . . . . . . . . . . . . . . . 129 242 (530) 232
Decrease (increase) in inventory . . . . . . . . . (2,892) (757) 6,587 (924)
Decrease (increase) in prepaid expense . . . . . . 1,473 (167) (665) (672)
Increase (decrease) in accounts payable . . . . . (10,981) 13,963 91 (13,949)
Increase (decrease) in accrued expenses . . . . . (11,040) (8,061) 1,249 (11,982)
-------- -------- -------- --------

Net cash provided by (used for) operations (34,808) 7,848 18,178 (11,671)
-------- -------- -------- --------

Cash flows from investing activities:
Addition to property, plant and equipment . . . . . 34 (12,472) (4,371) (5,497)
Proceeds from sales of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . 12,597 930 342
-------- -------- -------- --------

Net cash provided by (used for) investing
activities . . . . . . . . . . . . . . . . . . . . 34 125 (3,441) (5,155)
-------- -------- -------- --------

Cash flows from financing
Issuance of long-term debt . . . . . . . . . . . . . 1,625 5,137 34,984

<PAGE>
Post-acquisition Pre-acquisition
Period Period
(Successor- (Predecessor-
basis) basis)
Four-Weeks Forty-Eight
Ended Weeks Ended
January 25, December 28, January 26, January 28,
1998 1997 1997 1996
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>

Debt issue costs . . . . . . . . . . . . . . . . . . (3,745) (439) (1,681)
Increase (decrease) in intercompany payable . . . . (1,134) (114,706) (18,786) 59,892
Payment of long-term debt and capital lease
obligations . . . . . . . . . . . . . . . . . . . (98) (65,073) (1,994) (77,117)
Equity contribution, net . . . . . . . . . . . . . . 166,000
Other . . . . . . . . . . . . . . . . . . . . . . . 12,695 (3,689)
Increase (decrease) in notes payable to banks . . . 47,500
-------- -------- -------- --------

Net cash provided by (used for) financing
activities . . . . . . . . . . . . . . . . . . . . 11,463 27,912 (16,082) 16,078
-------- -------- -------- --------

Increase (decrease) in cash and cash equivalents . . . (23,311) 35,885 (1,345) (748)
Cash and cash equivalents at beginning of period . . . 39,411 3,526 4,871 5,619
-------- -------- -------- --------

Cash and cash equivalents at end of period . . . . . . $ 16,100 $ 39,411 $ 3,526 $ 4,871
======== ======== ======== ========
</TABLE>

See accompanying notes.

<PAGE>
Frank's Nursery & Crafts, Inc.
(a wholly-owned subsidiary of Holdings)
Notes to Financial Statements

NOTE 1: ACCOUNTING POLICIES

Frank's Nursery & Crafts, Inc. ("Frank's" or the "Company") is a wholly-owned
subsidiary of FNC Holdings Inc. (formerly "General Host Corporation").
Frank's is a leading specialty retailer of lawn and garden products, crafts
and Christmas merchandise. Below are those accounting policies considered to
be significant.

The Company operates entirely in one industry segment, the lawn and garden
retail industry defined to include green goods, fertilizers, gardening
accessories, lawn furniture, Christmas merchandise and snow removal, power
and watering equipment.

The fiscal year is normally comprised of 52 or 53 weeks, ending on the last
Sunday in January. The 1997, 1996 and 1995 fiscal years each reflect a 52-
week period ended January 25, 1998, January 26, 1997 and January 28, 1996,
respectively. Because of the acquisition (see Note 6), the accompanying
financial statements for fiscal 1997 represent the financial position,
results of operations and cash flows of Frank's for the forty-eight week
period prior to the acquisition and the four-week period subsequent to the
acquisition. The post-acquisition period has been presented on the purchase
basis of accounting, and is therefore not comparable to the historical
financial information presented for the forty-eight week pre-acquisition
period. In addition, as a result of the cross guarantees on the debt,
Holdings debt and related issue costs and interest accruals have been
included in the Frank's financial statements. The financial statements have
been prepared in accordance with generally accepted accounting principles
and, as such, include amounts based on management's best estimates. Actual
results could differ from those estimates.

Cash equivalents are highly liquid investments, such as U.S. government
securities and bank certificates of deposit having original maturities of
three months or less, and are carried at cost plus accrued interest.

Merchandise inventories are stated at the lower of cost or market, with cost
being determined under the first-in, first-out method.

Pre-Opening costs are expensed as incurred.

Advertising costs are expensed when the advertising first takes place.
Advertising expenditures were $24,006,000 for the forty-eight weeks ended
December 28, 1997, $753,000 for the four weeks ended January 25, 1998,
$22,262,000 for 1996 and $24,373,000 for 1995.

Store closing costs include provisions for estimated future net lease
obligations, nonrecoverable investments in fixed assets, and other expenses
directly related to discontinuance of operations. During 1993, previous
<PAGE>
management of the Company approved a plan to exit twenty-six unprofitable
Frank's stores and to dispose of certain other properties. During the forty-
eight weeks ended December 28, 1997 the Company recorded a charge of
$6,677,000 for store closing cost. As a result of the acquisition, new
management has identified two additional unprofitable Frank's stores and has
accelerated its plan for the disposal of these stores, thereby reducing the
anticipated residual value. However, management is unable to estimate an
expected completion date due to existing subleases and economic factors
associated with the sale of real estate. The additional store closures and
reduced residual value approximating $5.4 million has been included as a
liability when allocating the purchase price. Store closure costs included in
Accrued expenses and other liabilities and deferred credits approximate
$11,609,000 at January 25, 1998, $2,132,000 at January 26, 1997 and
$4,347,000 at January 28, 1996. Provisions for store closings are charged to
operations in the period when the decision is made to close a retail unit.

Property, plant and equipment, including significant improvements thereto,
are recorded at cost. Expenditures for repairs and maintenance are charged
to expense as incurred. The cost of plant and equipment is depreciated over
the estimated useful lives using the straight-line method. Estimated useful
lives, including capital leases, are: buildings, 10-40 years or, if shorter,
the terms of the lease; equipment, 3-20 years. Leasehold improvements are
depreciated over the lease terms of the respective leases or the estimated
useful lives. Upon sale or other disposition of assets, the cost and related
accumulated depreciation are removed from the accounts and the resulting gain
or loss, if any, is recognized in the statement of income.

Intangibles, including costs in excess of net assets of acquired businesses,
are amortized over 40 years using the straight-line method.

Impairment of long-lived assets, including goodwill, is reviewed on a store
by store basis annually or when events and circumstances warrant such a
review by the Company in accordance with Statement of Financial Accounting
Standards No. 121, "Impairment of Long-Lived Assets," (FAS 121) by comparing
estimated future undiscounted cash flows associated with the asset to the
asset's carrying value to determine if an impairment exists. If the expected
future cash flows are less than the carrying amount of such assets, the
Company recognizes an impairment loss for the difference between the carrying
amount and their estimated fair value. Fair value is estimated using expected
discounted future cash flows. During the forty-eight weeks ended December 28,
1997 the Company recorded an impairment loss of $1,720,000 primarily for
leasehold improvements at nine stores resulting principally from declining
store traffic and declining gross margins.

Other postretirement benefits are recognized in the financial statements
during the period in which service is provided.

Leases that meet the accounting criteria for capital leases are recorded as
property, plant and equipment, and the related capital lease obligations (the
aggregate present value of minimum future lease payments, excluding executory
costs such as taxes, maintenance and insurance) are included in long-term
debt. Depreciation and interest are charged to expense, and rent payments
<PAGE>
are treated as payments of long-term debt, accrued interest and executory
costs. All other leases are accounted for as operating leases, and rent
payments are charged to expense as incurred.

Income taxes for Frank's are included in the consolidated U.S. federal income
tax return of Holdings. In preparing its financial statements, Frank's has
determined its tax provision on a separate return basis. Deferred income tax
assets and liabilities are determined based on the difference between the
financial carrying amounts and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse.

NOTE 2: INTERCOMPANY TRANSACTIONS AND ALLOCATIONS

Allocated Corporate Services:

The results of the Company include 100% of Holdings' costs incurred for
certain corporate overhead, such as risk management, human resources,
corporate law, corporate finance and accounting, treasury and public affairs.
100% of Holdings' costs incurred, aggregated $5,782,000, $(1,240,000),
$4,705,000, and $4,508,000 for the forty-eight weeks ended December 28, 1997,
the four weeks ended January 25, 1998 and for the fiscal years ended January
26, 1997 and January 28, 1996, respectively.

Cash Management:

Frank's utilized Holdings' centralized cash management services. Under this
arrangement Frank's accounts receivable are collected and cash disbursements
were funded by Holdings on a daily basis. Net activity between Holdings and
Frank's was reflected in the intercompany payable as shown in the statements
of cash flows.

NOTE 3: OTHER INCOME (EXPENSE)

<TABLE>
<CAPTION>
Four Weeks
Ended Forty-Eight Weeks
January 25, Ended December 28,
1998 1997 1996 1995
---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Interest on cash and cash equivalents and
marketable securities $ 0 $ 1,035 $ 0 $ 0
Gain (loss) on the sale of property and the
termination or sale of leases (29) 1,382 (264) 469
Cost associated with the disposition 0 (4,594) 0 0
Other 12 167 38 38
---- ------- ----- ----
Total $(17) $(2,010) $(226) $507
==== ======= ===== ====

</TABLE>

<PAGE>
NOTE 4: INCOME TAXES

Differences between income taxes of continuing operations and income taxes
based on statutory federal income tax rates applied to income before taxes
are as follows:

<TABLE>
<CAPTION>
Four-Weeks Forty-Eight
Ended Weeks Ended
January 25, December 28,
1998 1997 1996 1995
-------------- -------------- -------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Federal income taxes based on statutory
rates $ (3,962) $(6,703) $(4,009) $(2,635)
Increases (decreases) in rates resulting
from:
Limitation (utilization) of tax loss
carryforwards 3,946 6,508 3,850 2,097
Amortization of intangibles and other
acquisition costs 15 183 136 136
Other 1 12 23 402
------- ------- ------- -------
$ -- $ -- $ -- $ --
======= ======= ======= =======
</TABLE>

The tax effects of the principal temporary deferred tax assets and
liabilities are as follows:
<PAGE>

<TABLE>
<CAPTION>
January 25, 1998 January 26, 1997
----------------------- -----------------------
(In thousands)
<S> <C> <C>
Liabilities:
Property, plant & equipment $(14,765) $(14,708)
-------- --------
Gross deferred tax liabilities (14,765) (14,708)
-------- --------
Assets:
Inventory 1,867 736
Accrued expenses 4,924 3,241
Other 1,520 606
Store closing reserve 3,061 796
NOL carryforward 23,028 14,866
-------- --------
Gross deferred tax assets 34,400 20,245
-------- --------
Net deferred tax asset 19,635 5,537
Valuation allowance (19,635) (5,537)
-------- --------
$ $
======== ========
</TABLE>

Due to the Company's historical operating results, a valuation allowance
for the net deferred tax asset balance is recorded at January 25, 1998 and
January 26, 1997.

As discussed in Note 1, Frank's files a consolidated tax return with
Holdings. At January 25, 1998 the federal tax NOL carryforwards, for
Holdings, on a consolidated basis, approximated $92,000,000. As a result of
the valuation allowance, approximately $57,000,000 of these carryforwards
have not been benefitted and utilization will be recognized against goodwill.
The net operating loss will expire as follows: in January 2009 --
$39,000,000, January 2010 -- $3,000,000, January 2011 -- $6,000,000, January
2012 -- $8,500,000 and January 2013 -- $35,500,000.

At January 25, 1998 the federal tax NOL carryforwards attributable to
Frank's on a separate return basis approximated $67,700,000. As a result of
the valuation allowance, approximately $57,400,000 of these carryforwards
have not been benefitted and utilization will be recognized against goodwill.
The net operating loss will expire as follows: in January 2009 - $30,000,000,
January 2010 - $2,000,000, January 2011 $4,000,000 and January 2012 -
$7,700,000 and January 2013 - $24,000,000.

The Company underwent an ownership change on December 24, 1997. Net
operating losses incurred prior to the ownership change will be subject to
<PAGE>
usage limitations imposed by tax law. Of the Company's entire net operating
loss carryforward of $67,700,000, approximately $16,000,000 will not be
subject to the limitations imposed. The annual limitation is expected to be
approximately $7,200,000 per year.

NOTE 5: PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
January 25, 1998 January 26, 1997
------------------ ------------------
(In thousands)
<S> <C> <C>
Land $ 71,101 $ 45,328
Buildings:
Owned 160,170 169,141
Capital leases (Note 9) 17,445 17,445
Equipment 87,907 110,361
Leasehold improvements 48,183 48,328
Construction in progress 3,966 3,251
------- -------
388,772 393,854
Less accumulated depreciation, including capital lease amounts
of $11,691 and $10,889 170,892 173,228
------- -------
$217,880 $220,626
======= =======
</TABLE>

NOTE 6: ACQUISITION

On December 24, 1997 FNC Holdings Inc. was acquired through an equity tender
offer and the purchase of treasury shares from Holdings, and Holdings,
redeemed a majority in principal amount of Holdings' outstanding Senior Notes
pursuant to a separate debt tender offer. In addition, Holdings and Frank's
entered into a Senior Credit Facility (See Note 8). The proceeds of the
initial draw under the Senior Credit Facility, together with an equity
investment of $166 million by the investors, were used, among other thing, to
fund the equity and debt tender offers, to pay merger consideration, to
refinance certain indebtedness of Frank's and to pay fees and expenses
related to the Transactions described above. As a result of the
Transactions, $96,030,000 of goodwill was recorded.

Pursuant to an agreement between Holding and Cypress Advisors, Inc., an
affiliate of Cypress (the majority shareholder of Holdings), Holding has paid
Cypress Advisors, Inc. $4.5 million in fees for providing services relating
to the consummation of the Transactions described above. Fees paid to Cypress
Advisors, Inc. have been included in the purchase price or debt acquisition
costs as appropriate.

<PAGE>
If FNC Holdings Inc. had been acquired and the Offering completed on January
26, 1997, the pro forma net loss for the fiscal year ended January 25, 1998
would have decreased by $2,007,000.

NOTE 7: ACCRUED EXPENSES

Accrued expenses are as follows:

<TABLE>
<CAPTION>
January 25, 1998 January 26, 1997
----------------------- -----------------------
(In thousands)
<S> <C> <C>
Taxes, other than income taxes $ 6,907 $ 6,072
Payroll and other compensation 6,626 5,689
Insurance 2,131 3,476
Interest 4,342 6,832
Liabilities related to acquisition 13,363
Other 20,308 17,117
------- -------
$ 53,677 $39,186
======= =======
</TABLE>

"Liabilities related to acquisition" represent the liability for the
untendered shares of General Host Common Stock purchased by Cypress at $5.50
per share.

<PAGE>

NOTE 8: LONG-TERM DEBT

<TABLE>
<CAPTION>
January 25, 1998 January 26, 1997
---------------- ----------------
(In thousands)
<S> <C> <C>
Senior debt:
Holdings 11 1/2% Senior Notes due February 15, 2002 $ 25,235 $ 78,000
Mortgage notes due on varying dates from February 1,
2001 to September 1, 2007 29,680 38,979
Notes payable to banks 37,500
Capital leases (Note 9) 11,554 12,518
Other 518
-------- --------

103,969 130,015
Less current portion 1,780 2,254
-------- --------

102,189 127,761
-------- --------

Subordinated debt:
Holdings 8% Convertible Subordinated Notes due
February 15, 2002 65,000 65,000
-------- --------
Total long-term debt $167,189 $192,761
======== ========
</TABLE>

The Holdings Senior Notes, issued at par, bear interest at 11 1/2%.
The Holdings Convertible Subordinated Notes, issued at par, bear interest at
8% and are convertible into common stock of the General Host at a conversion
price of $8.54 per share, subject to adjustments in certain events.

The mortgage notes have interest rates varying from 7.8% to 9.625%,
and the notes mature with balloon payments on varying dates from February 1,
2001 to May 1, 2006. The mortgage notes are secured by retail properties
owned by the Company.

At January 25, 1998 the Company has a senior secured credit facility
with various banks and financial institutions which provides for (i) a term
loan facility of up to $85 million (the "Term Loan Facility") and (ii) a
revolving credit facility of up to $110 million (the "Revolving Credit
Facility"). Term loans will mature seven years after the closing date of the
facility - December 24, 1997, in equal quarterly installments beginning in
fiscal 1999 in an aggregate amount equal to 8.8% of the aggregate Term Loan
Facility amount and increasing at each anniversary to 10.6%, 12.9%, 14.7%,
20.6% and 32.4% for fiscal years 2000, 2001, 2002, 2003, and 2004,
respectively. Revolving credit loans mature in December, 2003. The
<PAGE>
Company's initial borrowing under the Senior Credit Facility consisted of
$37.5 million in term loans and $10 million of revolving credit loans which
remained outstanding as of January 25, 1998.

Term loans provided pursuant to the Term Loan Facility will bear
interest, at the Company's election, at an annual rate equal to the Adjusted
LIBO Rate (London Interbank Offering Rate) plus 2.5% or Alternative Base Rate
(as defined therein) plus 1.5%, provided that such margins may be reduced if
the Company meets certain senior leverage ratio tests. Revolving credit
loans obtained pursuant to the Revolving Credit Facility bear interest, at
the Company's election, at an annual rate equal to the Adjusted LIBO Rate
plus 2.25% or Alternative Base Rate plus 1/25%, provided that such margins
may be reduced if the Company meets certain senior leverage ratio tests. The
Alternative Base Rate is the highest of the bank's Prime Rate, the Federal
Funds Effective Rate plus 0.50% and the base CD Rate plus 1.00%. In
addition, there is a commitment fee equal to 0.50% per annum on the total
undrawn portion of the Term Loan Facility and the Revolving Credit Facility.

In March 1998 the Company issued $115 million of 10 1/4% Senior
Subordinated Notes due March 1, 2008 (the "Offering") and utilized
approximately $110.7 million to pay down $17.2 million of indebtedness under
the Term Loan Facility and to repay the remaining outstanding 11 1/2% Senior
Notes of $25.2 million and the $65 million of 8% Convertible Subordinated
Notes including premium of $2,208,000 and accrued interest of $1,013,000 on
March 30, 1998. In conjunction with the Offering the Company wrote-off debt
issue costs of $1,317,000 related to the 11 1/2% Senior Notes and the 8%
Convertible Subordinated Notes.

The Company was in compliance with all of the bank agreement
covenants and other restrictions under all other debt agreements at January
25, 1998.

Under the most restrictive provisions of any of the Holdings or
Frank's debt agreements, total General Host shareholders' equity available to
pay cash dividends or purchase treasury stock was below the required minimum
level by $44,364,000 at January 25, 1998.

Aggregate maturities of long-term debt for the five years subsequent
to 1997, excluding capital lease obligations (Note 9), are $793,000 in 1998,
$865,000 in 1999, $941,000 in 2000, $4,651,000 in 2001 and $91,066,000 in
2002.
<PAGE>
NOTE 9: LEASES

The Company's capital leases are principally for retail stores, for periods
ranging up to 25 years. The Company's operating leases are principally for
retail store locations.

At January 25, 1998 lease obligations under capital leases, included
in long-term debt (Note 8), and operating leases with lease terms longer than
one year, are as follows:

<TABLE>
<CAPTION>
Capital Leases Operating Leases
----------------------- -----------------------
(In thousands)
<S> <C> <C>
Payable in 1998 $ 2,309 $ 12,046
1999 2,363 12,078
2000 2,322 11,378
2001 2,202 10,893
2002 2,078 10,313
Payable after 2003 8,353 64,705
-------- --------
Total minimum lease obligations 19,627 $121,413
========
Executory costs (13)
Amount representing future interest (8,043)
--------
Present value of net minimum lease obligations $ 11,571
========
Future sublease rental income $ 3,152
========
</TABLE>

Rent expense was $20,876,000 for the forty-eight weeks ended
December 28, 1997, $1,343,000 for the four weeks ended January 25, 1998,
$21,915,000 in 1996 and $22,473,000 in 1995. Rent expense includes
additional rentals based on retail store sales (in excess of the minimums
specified in leases) of $707,000 for the forty-eight weeks ended December 28,
1997, $(186,000) for the four weeks ended January 25, 1998, $691,000 in 1996
and $815,000 in 1995 and is reduced by sublease rental income of $603,000 in
1997, $859,000 in 1996 and $832,000 in 1995.

NOTE 10: PENSION PLAN

Retirement benefits for both salaried and hourly employees of the Company are
provided through a noncontributory, defined contribution plan of Holdings.
Contributions are determined by the Board of Directors of Holdings based upon
assessment of the Company's fiscal year's profitability as related to pre-
established financial objectives. There were no contributions made to the
plan for 1997, 1996 and 1995. The plan also includes a 401(k) component,
<PAGE>
permitting employees to invest from 1% to 10% of their salary in the
employee's choice of an equity fund, a balanced fund or a fixed income fund.
The plan does not provide an employer match.

NOTE 11: DISCLOSURES ABOUT 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:

Cash and cash equivalents
The carrying value amount approximates fair value because of the short
maturity of those investments.

Long-term debt
The fair value of the Company's long-term debt is estimated based upon the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.

The estimated fair values of the Company's financial instruments are
as follows:

<TABLE>
<CAPTION>
January 25, 1998 January 26, 1997
---------------------------------- -----------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------------- ---------------- ----------------- -----------------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 16,100 $ 16,100 $ 3,526 $ 3,526
Long-term debt $168,969 $169,978 $195,015 $178,180

</TABLE>

NOTE 12: LITIGATION AND OTHER CONTINGENCIES

In the normal course of business the Company is subject to various claims.
In the opinion of management, any ultimate liability arising from or related
to these claims should not have a material adverse effect on future results
of operations or the consolidated financial position of the Company.

NOTE 13: SUPPLEMENTAL CASH FLOW INFORMATION

Interest payments were $21,523,000 for the forty-eight weeks ended
December 28, 1997, $301,000 for the four weeks ended January 25, 1998,
$19,685,000 in 1996, and $23,286,000 in 1995. Income tax payments were
$47,000 for the forty-eight weeks ended December 28, 1997, $55,000 in 1996
and $449,000 in 1995.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given
or made, such information or representations must not be relied upon as
having been authorized. This Prospectus does not constitute an offer to sell
or the solicitation of an offer to buy any securities other than the
securities to which it relates or an offer to sell or the solicitation of an
offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or that the information contained herein is correct as of any time
subsequent to its date.
___________

TABLE OF CONTENTS

Page

Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . 10
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . 30
The Transactions . . . . . . . . . . . . . . . . . . . . . . . 39
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 42
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 43
Unaudited Pro Forma Financial Data . . . . . . . . . . . . . . 45
Selected Historical Financial and Other Data . . . . . . . . . 53
Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . 56
Business . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Management . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Security Ownership of Certain Beneficial Owners and Management 77
Certain Relationships and Related Transactions . . . . . . . . 79
Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . 81
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . 85
Description of Exchange Notes . . . . . . . . . . . . . . . . . 96
Certain United States Federal Income Tax Consequences of the
Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . 139
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . 140
Independent Accountants . . . . . . . . . . . . . . . . . . . . 140
Index to Financial Statements . . . . . . . . . . . . . . . . . 141

Until _______________, 1998 (90 days after the date of this Prospectus),
all dealers effecting transactions in the registered securities, whether or
not participating in this distribution, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
Frank's Nursery & Crafts, Inc.

_________________________

PROSPECTUS
_________________________

Offer to Exchange up to $115,000,000 of its 10 1/4% Series B Senior
Subordinated Notes due 2008 which have been Registered under the Securities
Act for any of its outstanding 10 1/4% Senior Subordinated Notes due 2008
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Officers and Directors

Section 561 of the Michigan Business Corporation Act authorizes
indemnification of directors and officers of Michigan corporations. The
Registrant's By-laws permit it to indemnify directors and officers against
expenses, attorneys' fees, judgments, fines and settlements reasonably
incurred in connection with any threatened, pending or completed action or
proceeding brought by a third party so long as the director or officer acted
in good faith and in a manner reasonably believed not to be opposed to the
best interests of the Company. The By-laws also allow the Registrant to
indemnify directors and officers against expenses and attorneys' fees related
to any threatened, pending or completed action brought by or in the right of
the Company so long as the director acted in good faith and in a manner
reasonably believed not to be opposed to the best interests of the Company.
Where the action is brought by or in the right of the Company, however, no
indemnification is allowed as to any claim where the director or officer is
judged to be liable for negligence or misconduct in the performance of his or
her duties to the Company unless such indemnification is specifically
approved by the court in which such action was brought.

Though the Registrant's By-laws permit indemnification in the
situations described above, each request for indemnification must be
individually authorized by (i) the board by a majority vote of a quorum
consisting of directors who were not parties to the action or proceeding,
(ii) by independent legal counsel in a written opinion if such quorum is not
obtainable or (iii) the Company's shareholders. To the extent that a
director or officer is successful on the merits or otherwise in defense of
any action, suit or proceeding, the Registrant's By-laws dictate that he or
she must be indemnified against expenses actually and reasonably incurred.

The Registrant maintains insurance coverage for losses incurred by
its directors and officers as a result of any actual or alleged Wrongful Act
(as defined therein) performed by them during the Policy Period (as defined
therein) or Discovery Period (as defined therein) while acting in their
respective capacities as directors or officers of the Company. The insurance
policy also covers losses incurred by the Company arising from a Securities
Claim (as defined therein) raised against the Company or a claim made against
its directors or officers during the Policy Period or Discovery Period where
the Registrant has indemnified the directors and officers for their personal
losses.

Item 21. Exhibits and Financial Statements

(a) Exhibits

See list of Exhibits.

(b) Financial Statement Schedules
<PAGE>
Schedules other than those listed above are omitted because
the conditions requiring their filing do not exist, or because the
required information is provided in the Consolidated Financial
Statements, including the notes thereto.

Item 22. Undertakings

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, 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
the 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.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Exchange Offer
Registration Statement;

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Exchange Offer
Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth
in the Exchange Offer Registration Statement;

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Exchange Offer Registration Statement.

(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
<PAGE>
(3) To remove from registration by means of post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.

(4) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Exchange Offer Registration Statement through the date of responding
to the request.

(5) 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 the
Exchange Offer Registration Statement when it became effective.

(6) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of
this Registration Statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration Form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the
applicable form.

(7) That every prospectus: (i) that is filed pursuant to
paragraph (6) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the Exchange Offer Registration
Statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement
on Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Troy, State of Michigan, on the 8th day of June,
1998.

Frank's Nursery & Crafts, Inc.

By: /s/ Joseph R. Baczko
Name: Joseph R. Baczko
Title: Chief Executive Officer
and President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement on Form S-4 has been signed by
the following persons in the capacities and on the dates indicated.

Signature Title Date

/s/ Joseph R. Baczko Chairman of the Board of June 8, 1998
Joseph R. Baczko Directors, Chief Executive
Officer and President
(Principal Executive Officer)

/s/ Adam Szopinski Executive Vice President, June 8, 1998
Adam Szopinski Chief Operating Officer and
Director

/s/ Larry T. Lakin Executive Vice President, June 8, 1998
Larry T. Lakin Chief Financial Officer and
Director (Principal Financial
and Accounting Officer)

/s/ David P. Spalding Director
David P. Spalding June 8, 1998

/s/ James A. Stern Director June 8, 1998
James A. Stern

/s/ Bahram Shirazi Director June 8, 1998
Bahram Shirazi

<PAGE>

EXHIBIT INDEX

Exhibit
Number Document Description

2.1 Agreement and Plan of Merger dated as of November 22, 1997,
between FNC Holdings Inc. (formerly known as General Host
Corporation) and Cyrus Acquisition Corp.<F1>
3.1 Articles of Incorporation of Frank's Nursery & Crafts, Inc.<F2>
3.2 By-laws of Frank's Nursery & Crafts, Inc.
4.1 Indenture dated as of February 26, 1998 between Frank's Nursery &
Crafts, Inc. and Bankers Trust Company<F1>
4.2 Registration Rights Agreement dated as of February 26, 1998 by and
among Frank's Nursery & Crafts, Inc. and Goldman, Sachs & Co. and
Chase Securities Inc.<F1>
5.1 Opinion of Simpson Thacher & Bartlett
10.1 Credit Agreement dated as of December 24, 1997 among Frank's
Nursery & Crafts, Inc., Cyrus Acquisition Corp., General Host
Corporation, the lenders party thereto, The Chase Manhattan Bank
and Goldman Sachs Credit Partners L.P.<F1>
12.1 Statements regarding computation of ratios<F1>
23.1 Consent of Simpson Thacher & Bartlett (included as part of its
opinion filed as Exhibit 5.1 hereto)
23.2 Consent of Price Waterhouse LLP
25.1 Statement of Eligibility on Form T-1 of Bankers Trust Company
under the Trust Indenture Act of 1939<F1>
99.1 Financial Data Schedules
99.2 Form of Letter of Transmittal used in connection with the Exchange
Offer<F2>
99.3 Form of Notice of Guaranteed Delivery used in connection with the
Exchange Offer<F2>
99.4 Form of Exchange Agent Agreement<F2>

<F1>Previously filed.
<F2>To be filed by amendment.

BY-LAWS

FRANK'S NURSERY & CRAFTS, INC.

(AS AMENDED THROUGH MARCH 27, 1981)
<PAGE>
BY-LAWS

FRANK'S NURSERY & CRAFTS, INC.

(AS AMENDED THROUGH MARCH 27, 1981)

OFFICES:

1. Registered Office: The registered office of Frank's Nursery &
Crafts, Inc. (hereinafter called the "Corporation") in the State of Michigan
shall be at Detroit, Michigan.

2. Other Offices: The Corporation may also have offices in such
other places as the Board of Directors may from time to time appoint or the
business of the Corporation requires. Such offices may be outside of this
State.

MEETINGS OF SHAREHOLDERS:

3. Place of Meeting: All meetings of the shareholders of the
Corporation shall be held at the office of the Corporation, at Detroit,
Michigan, or at such other place as may from time to time be fixed by the
Board of Directors or as shall be specified or fixed in the respective
notices or waiver of notice thereof.

4. Annual Meeting: The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as
may properly come before the meeting, shall be held on the fourth Thursday in
April in each year beginning in the year 1967, if not a legal holiday under
the laws of the state where such meeting is to be held, and if a legal
holiday under the laws of said state, on the next succeeding business day.
If the election of directors shall not be held on the date indicated herein
for any annual meeting or at any adjournment of such meeting, the Board of
Directors shall cause the election to be held at a special meeting as soon
thereafter as conveniently may be.

5. Special Meetings: Special meetings of the shareholders for
any purpose or purposes may be called at any time by the President or the
Executive Vice President, or by order of the Board of Directors.

6. Notice of Meetings; Waivers: Notice of the time, place and
purpose of every meeting of shareholders shall be given to every person
entitled to vote at such meeting at least ten days prior to the holding
thereof unless a shorter time is fixed by the Board of Directors. Meetings
may be held without notice if all shareholders are present or shall waive
notice in writing before or after the meeting.

7. Quorum: The holders or a majority of the outstanding capital
stock of the Corporation entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at each meeting of the
shareholders for the transaction of business except as otherwise provided by
law. In the absence of a quorum, the shareholders present in person or by
proxy entitled to vote may adjourn the meeting from time to time. At any
adjourned meeting at which a quorum may be present any business may be
<PAGE>
transacted which might have been transacted at the meeting as originally
called. Except as otherwise required by statute, no notice of any adjourned
meeting of the shareholders of the Corporation shall be required to be given.

8. Organization of Shareholders' Meetings: At every meeting of
the shareholders, the President or in his absence the Executive Vice
President, or in the latter's absence any Vice President, or in the absence
of the President and the Vice Presidents, a chairman chosen by a majority in
interest of the shareholders of the Corporation present in person or by proxy
and entitled to vote shall act as chairman; and the Secretary, or in his
absence any person appointed by the chairman, shall act as Secretary.

9. Business and Order of Business: At each meeting of the
shareholders, such business may be transacted as may properly be brought
before such meeting. The order of business at each meeting of shareholders
shall be as follows:

(1) Calling of roll.
(2) Proof of notice of meeting or waiver thereof.
(3) Reading and approval of any unapproved minutes.
(4) Report of officers and committees.
(5) Election of directors.
(6) Unfinished business.
(7) New business.
(8) Adjournment.

10. Voting: At each meeting of the shareholders, every
shareholder of the Corporation having the right to vote shall be entitled to
vote in person or by proxy appointed by an instrument in writing subscribed
by such shareholder and bearing a date not more than three years prior to
said meeting unless such instrument provides for a longer period. Each
shareholder having the right to vote, shall be entitled to one vote for each
share of the capital stock of the Corporation having voting power held by him
and registered in his name on the books of the Corporation on the record date
fixed by the Board of Directors pursuant to Section 33 of these By-Laws.
Excepting as otherwise required by statute, or by the Articles of
Incorporation, or by the By-Laws of the Corporation, at all meetings of the
shareholders all matters shall be decided by vote by the majority in interest
of the shareholders of the Corporation present in person or by proxy and
entitled to vote, a quorum being present.

11. Inspectors of Election: Whenever any shareholder present at a
meeting of shareholders of a corporation shall request the appointment of
inspectors, the chairman of the meeting shall appoint inspectors who need not
be shareholders. If the right of any person to vote at such meeting shall be
challenged, the inspectors of election shall determine such right. The
inspectors shall receive and count the votes either upon an election or for
the decision of any question and shall determine the result. Their
certificate of any vote shall be prima facie evidence thereof.

BOARD OF DIRECTORS:

12. General Powers: The business and all powers of the
Corporation, except as otherwise provided by the Articles of Incorporation,
the By-Laws or by statute, shall be managed by the Board of Directors.
<PAGE>
13. Number, Term of Office and Qualifications: The number of
Directors shall be no less than five (5) nor more than seven (7), and a
majority of the entire Board of Directors (as constituted at any given time)
may, and is hereby authorized to increase or decrease the number of Directors
within the aforesaid limits without amendment of this By-Law, provided,
however, that the tenure of office of any Director shall not be affected by
any increase in the number of Directors so made by the Board. A Director
need not be a shareholder. Directors may hold office until the annual
meeting of Shareholders next ensuing after their election and until their
respective successors are elected and qualified.

14. Organization of Board Meetings: At each meeting of the Board
of Directors, the President, or in his absence the Executive Vice President,
or in the absence of both, a director chosen by a majority of the directors
present, shall act as chairman. The Secretary, or in his absence, any person
appointed by the chairman shall act as Secretary of the meeting.

15. Order of Business: At all meetings of the Board of Directors,
the business shall be transacted in the following order:

(1) Calling of roll.
(2) Proof of notice of meeting or waiver thereof.
(3) Reading and approval of any unapproved minutes.
(4) Report of officers and committees.
(5) Election of officers.
(6) Unfinished business.
(7) New business.
(8) Adjournment.

16. Removal of Directors: At any meeting of the shareholders of
the Corporation called for the purpose of removing any director, such
director may, in accordance with the laws of the State of Michigan, be
removed from office for cause, or without cause, and another be elected in
the place of the director removed.

17. Vacancies: Vacancies in the Board of Directors shall be
filled by the remaining members of the Board even though less than a quorum,
and each person so elected shall be a director until his successor is elected
by the shareholders, who may make such election at the next annual meeting of
the shareholders, or at any special meeting duly called for that purpose and
held prior thereto: Provided that where a vacancy arises by reason of the
removal of a director, the shareholders taking such action shall fill the
vacancy thus created.

18. Annual Meeting: The Board of Directors shall meet as soon as
practicable after each annual election of directors for the purpose of
organization, election of officers and the transaction of other business on
the same day and at the same place at which the shareholders' meeting is
held. Notice of such meeting need not be given. Such meeting may be held at
such other time or place as shall be specified in a notice to be given as
hereinafter provided for special meetings of the Board of Directors, or
according to consent and waiver of notice thereof, signed by all of the
directors.

19. Special Meetings; Notice: Special meetings of the Board of
Directors shall be held whenever called by the President, the Executive Vice
President or by two of the directors. Notice of each such meeting shall be
<PAGE>
mailed to each director addressed to him at his residence or usual place of
business at least three days before the day on which the meeting is to be
held or shall be directed to him at such place by telegraph, cable or radio,
or be delivered personally, or by telephone, not later than the day before
the day on which the meeting is to be held. Every such notice shall state
the time, place and purpose. Notice of special meetings of the Board may be
waived.

20. Quorum and Manner of Acting: A majority of the Board of
Directors shall be necessary to constitute a quorum for the transaction of
business and the action of a majority of the directors present at a meeting
at which a quorum is present shall be the acts of the Board of Directors:
Provided that if the directors shall severally and/or collectively consent in
writing to any acts to be taken by the Corporation, such action shall be as
valid corporate action as though it had been authorized at a meeting of the
Board of Directors. A member of the board or of a committee designated by
the board may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other. Participation in a meeting pursuant to
this subsection constitutes presence in person at the meeting.

21. Indemnification:

A. Third Party Actions: The Corporation shall have power to
indemnify any 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, where civil,
criminal, administrative (other than an action by or in
the right of the Corporation) by reason of the fact that
he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of
the Corporation 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 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 Corporation or its shareholders and with respect to
any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act
in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of
the corporation or its shareholders and, with respect to
any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.

B. Actions in the right of the Corporation: The Corporation
shall have power to indemnify any person who was or is a
party to or is threatened to be made a party to any
threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its
<PAGE>
favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a
director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit 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 corporation or its shareholders and except that no
indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and
only to the extent that the court in which such action or
suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which
such court shall deem proper.

C. Mandatory and permissive payments:

(1) To the extent that a director, officer, employee or
agent of the Corporation has been successful on the
merits or otherwise in defense of any action, suit
or proceeding referred to in subsections A or B
preceding or in defense of any claim, issue or
matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

(2) Any indemnification under subsections A or B
preceding (unless ordered by a court) shall be made
by the Corporation only as authorized in the
specific case upon a determination that
indemnification of the director, officer, employee
or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth
in subsections A or B. Such determination shall be
made in any one of the following ways:

a. By the board by a majority vote of a quorum
consisting of directors who were not parties to
such action, suit or proceeding.

b. If such quorum is not obtainable, or, even if
obtainable, when a quorum of disinterested
directors so directs, by independent legal
counsel in a written opinion.

c. By the shareholders.

D. Expense advances: Expenses incurred in defending a civil
or criminal action, suit or proceeding described in
subsections A or B may be paid by the corporation in
<PAGE>
advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in (2) of
subsection C upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to
repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the
Corporation.

E. Scope and continuation: Nothing contained in subsections
A through D shall affect any rights to indemnification to
which persons other than directors or officers may be
entitled by contract or otherwise by law. The
indemnification provided in subsections A through D
continues as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such
person.

F. Insurance: The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or
was a director, officer employee or agent of the
Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against
him and incurred by him in such capacity or arising out
of his status as such, whether or not the Corporation
would have power to indemnify him against such liability
under this Section 21.

22. The Board of Directors may, by resolution passed by a majority
of the whole Board, designate two or more of their number to constitute an
executive and/or any other committee, who, to the extent provided in said
resolution, shall have and exercise the authority of the Board of Directors
in the management of the business of the Corporation between the meetings of
the Board.

OFFICERS:

23. Election, Term of Office and Qualifications: The Board of
Directors of the Corporation shall elect a President, an Executive Vice
President, one or more Vice Presidents, a Secretary, a Treasurer, and such
other officers as they shall deem necessary, who shall hold office for the
period of a year, and until their successors are duly elected and qualified.
Any two offices, except those of President, Executive Vice President, and
Vice President, may be held by one person at the same time. No one of said
officers except the President and the Executive Vice President need be a
director, but a Vice President who is not a director cannot succeed to or
fill the office of President or Executive Vice President.

24. The President: The President shall preside at all meetings of
the shareholders and of the Board of Directors. He shall be the chief
executive officer of the Corporation. Subject to the control of the Board of
Directors, he shall have general supervision of the affairs of the
Corporation, and shall have the right to superintend and direct all the other
officers of the Corporation in the exercise of their powers and the
performance of their duties. He shall be Chairman of the Executive Committee
<PAGE>
or any other committee which may from time to time be appointed by the Board
of Directors. The President shall annually, prior to the holding of the
annual meeting of the shareholders, submit to the shareholders and to the
Board of Directors a report as to the condition and operations of the
Corporation. He shall perform all duties incident to the office of
President and such other duties as shall from time to time be assigned to him
by the Board of Directors, or as are prescribed by these By-Laws.

25. The Executive Vice President: During the absence or
disability of the President, the Executive Vice President shall exercise all
the functions of the President. He shall have such powers and discharge such
duties as may be assigned to him from time to time by the Board of Directors,
or as are prescribed by these By-Laws.

26. The Vice-Presidents: During the absence or disability of the
President and the Executive Vice President, the Vice Presidents, in the order
designated by the Board of Directors, shall exercise all the functions of the
President. Each Vice President shall have such powers and discharge such
duties as may be assigned to him from time to time by the Board of Directors.

27. The Secretary: The Secretary shall perform all duties
incident to the office of Secretary and such other duties as may from time to
time be assigned to him by the Board of Directors or the President.

28. The Treasurer: The Treasurer shall give such bond for the
faithful performance of his duties as the Board of Directors shall require.
He shall in general perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
by the Board of Directors or by the President.

29. Salaries: The salaries of the officers shall be fixed from
time to time by the Board of Directors. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.

30. Removal: Any officer elected or appointed by the Board of
Directors may be removed at any time with or without cause, by the
affirmative vote of a majority of the whole Board of Directors.

SHARES AND THEIR TRANSFER:

31. Certificates of Shares: Certificates of shares shall be signed
by or in the name of the Corporation by the President or the Executive Vice
President and the Treasurer or Assistant Treasurer, the Secretary or
Assistant Secretary of the Corporation, sealed with the corporate seal,
certifying the number and class of shares represented by such certificate,
which certificate shall state the terms and provisions of all classes of
shares; provided that where the certificate is signed by a transfer agent, or
an assistant transfer agent, or by a transfer clerk acting on behalf of the
Corporation, and a registrar, the signature of any such President, Executive
Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, and/or the seal of the Corporation may be a facsimile. In case
any officer or officers, who shall have signed, or whose facsimile signature
or signatures shall have been used on any such certificate or certificates,
shall cease to be such officer or officers of such Corporation whether
because of death, resignation, or otherwise, before such certificate or
certificates shall have been delivered by such Corporation such certificate
<PAGE>
or certificates may nevertheless be adopted by such Corporation and delivered
as though the person or persons who signed such certificate or certificates
or whose facsimile signature or signatures shall have been used thereon had
not ceased to be such officer or officers of such Corporation.

32. Transfer of Shares: Transfers of stock shall be made only
upon the transfer book of the Corporation kept at the office of the
Corporation or at the office of the transfer agent and before a new
certificate is issued, the old certificate shall be surrendered for
cancellation.

33. Record Date: The Board of Directors may fix in advance a date
not exceeding forty days preceding the date of any meeting of shareholders or
the date for payment of any dividend or the date for the allotment of rights
or the date when any change or conversion or exchange of capital stock shall
go into effect as a record date for the determination of shareholders
entitled to notice of and to vote at any such meeting; or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock and in such case such shareholders and only such shareholders
as shall be shareholders of record on the date so fixed shall be entitled to
such notice of and to vote at such meeting, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights,
as the case may be, notwithstanding any transfer of any stock on the books of
the Corporation or otherwise after any such record date fixed as aforesaid.

DIVIDENDS:

34. Source: The directors may declare and pay dividends upon the
shares of the capital stock of the Corporation, from earned surplus or from
such other sources as may be provided by law.

FINANCE:

35. Checks: All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.

SEAL:

36. Seal: The corporate seal shall consist of two concentric
circles between which is the name of the Corporation and in the center of
which shall be inscribed "Seal", and such seal as is impressed on the margin
hereof, is hereby adopted as the corporate seal of the Corporation. Any
document may be attested by the corporate seal being manually impressed
thereon; or a facsimile thereof may be used in lieu of such manual impression
and when so used shall be deemed to be the corporate seal if otherwise
properly authorized.

AMENDMENTS:

37. The shareholders by a majority vote, or the Board of Directors
by a majority vote, may make and alter any By-Law provided that the Board of
Directors shall not make or alter any By-Law fixing their number,
qualification, classification or term of office.
<PAGE>
RESOLVED THAT Sections 23 and 24 of the By-Laws of the Corporation shall
be amended to provide in their entirety as follows.

"23. Election, Term of Office and Qualifications: The Board
of Directors of the Corporation shall elect a Chairman of the
Board, a President, an Executive Vice President, one or more Vice
Presidents, a Secretary, a Treasurer, and such other officers as
they shall deem necessary, who shall hold office for the period of
a year and until their successors are duly elected and qualified.
Any two officers, except those of President, Executive Vice
President, and Vice President, may be held by one person at a the
same time. No one of said officers except a Chairman of the Board,
the President and the Executive Vice President need be a director,
but a Vice President who is not a director cannot succeed to or
fill the office of Chairman of the Board, President or Executive
Vice President.

"24. The President: The President shall preside at all
meetings of the shareholders and of the Board of Directors unless
such duty is assigned by the Board of Directors to a Chairman of
the Board. The President shall be the chief executive officer of
the Corporation. Subject to the control of the Board of Directors,
he shall have general supervision of the affairs of the
corporation, and shall have the right to superintend and direct all
the other officers of the Corporation in the exercise of their
powers and the performance of their duties. He shall be Chairman
of the Executive Committee or any other committee which may from to
time be appointed by the Board of Directors. The President shall
annually, prior to the holding of the annual meeting of the
shareholders, submit to the shareholders and to the Board of
Directors a report as to the condition and operations of the
Corporation. He shall perform all duties incident to the office of
President and such other duties as shall from time to time be
assigned to him by the Board of Directors, or as are prescribed by
these By-Laws."

ATTACHMENT A
<PAGE>
CONSENT TO ACTION BY THE SHAREHOLDER

OF FRANK'S NURSERY & CRAFTS, INC.

The undersigned, being the sole shareholder of Frank's Nursery &

Crafts, Inc. (the "Company"), a Michigan corporation, acting pursuant to

Section 1407 of the Michigan Corporation Law, does hereby consent to the

following resolutions:

RESOLVED, that the By-Laws of the Corporation be, and they hereby
are, amended by adding the following provision:

"SHAREHOLDER ACTION

38. The shareholders of the Corporation, by unanimous
written consent, are authorized and empowered to take any and
all action by and on behalf of the Corporation as may
otherwise be taken by the Board of Directors."

IN WITNESS WHEREOF, the undersigned has executed this consent as of the
26th day of March, 1984.

GENERAL HOST CORPORATION

By: /s/ James C. Hull
James C. Hull
Vice President & Controller

By: /s/ George K. Gill
George K. Gill
Treasurer
<PAGE>
FRANK'S NURSERY & CRAFTS, INC.

UNANIMOUS WRITTEN CONSENT OF THE SOLE SHAREHOLDER

March 11, 1991

The undersigned, being the sole shareholder of FRANKS'S NURSERY &

CRAFTS, INC., A Michigan corporation (the "Corporation"), does hereby consent

to, authorize and take the following action:

RESOLVED, that the By-laws of the Corporation be, and
they hereby are, amended by deleting the first sentence
of Section 13 and inserting in lieu thereof the
following:

"The number of directors shall be no less than
one nor more than three, and a majority of the
entire Board of Directors (as constituted at
any given time) may, and is hereby authorized,
to increase or decrease the name of Directors
within the aforesaid limits without amendment
of this By-law, provided, however, that the
tenure of office of any director shall not be
affected by any increase in the number of
directors so made by the Board."

and it is

FURTHER RESOLVED, that the following persons be, and they
hereby are, elected directors to hold office until the
next annual meeting of the Company and until their
successors have been duly elected and qualified

Harris J. Ashton
Robert M. Lovejoy, Jr.
<PAGE>
THE UNDERSIGNED has executed this consent as of the 11th day of
March, 1991.

GENERAL HOST CORPORATION

By: /s/ Harris J. Ashton

Harris J. Ashton, Chairman of the Board,
President & Chief Executive Officer

By: /s/ John R. Ficarro

John R. Ficarro, Vice President,
General Counsel & Assistant Secretary
<PAGE>
FRANK'S NURSERY & CRAFTS, INC.
UNANIMOUS WRITTEN CONSENT OF THE SOLE SHAREHOLDER

DECEMBER 23, 1997

The undersigned, being the sole shareholder of Frank's Nursery and
& Crafts, Inc., a Michigan corporation (the "Corporation"), does hereby
consent to, authorize and take the following action:

Resolved, that the By-laws of the Corporation be, and they hereby
are, amended by deleting the first sentence of Section 13 and inserting in
lieu thereof the following sentence:

"The number of Directors shall be no less than one nor more than
five, and a majority of the entire Board of Directors (as
constituted at any given time) may, and is hereby authorized to
increase or decrease the number of Directors within the aforesaid
limits without amendment of this By-law, provided, however, that
the tenure of office of any director shall not be affected by an y
increase in the number of directors so made by the Board."
<PAGE>
FRANK'S NURSERY & CRAFTS, INC.
UNANIMOUS WRITTEN CONSENT OF THE SOLE SHAREHOLDER

JANUARY 7, 1998

The undersigned, being the sole shareholder of Frank's Nursery &
Crafts, Inc., a Michigan corporation (the "Corporation"), does hereby consent
to, authorize and take the actions set forth on Exhibit A attached hereto.
<PAGE>
The undersigned has executed this consent as of the date first
above written

GENERAL HOST CORPORATION

By: /s/ Joseph R. Baczko
Name: Joseph R. Baczko
Title: Chairman, President and
Chief Executive Officer

By: /s/ J. Theodore Everingham
Name: J. Theodore Everingham
Title: Vice President and
General Counsel
<PAGE>
EXHIBIT A

RESOLVED, that the By-laws of the Corporation be, and they hereby
are, amended by deleting the first sentence of Section 13 and inserting in
lieu thereof the following sentence:

"The number of Directors shall be no less than one nor
more than six, and a majority of the entire Board of
Directors (as constituted at any given time) may, and is
hereby authorized to , increase or increase the number of
Directors within the aforesaid limits without amendment
of this By-law, provided, however, that the tenure of
office of any director shall not be affected by any
increase in the number of directors so made by the
Board."

RESOLVED, that all the existing Directors of the corporation are
removed, the number of Directors of the corporation is hereby increased to
six and the following persons are hereby elected as directors to hold office
until their respective successors are elected and qualified:

Joseph R. Baczko
James A. Stern
David P. Spalding
Bahram Shirazi
Larry T. Lakin
Adam Szopinski

Exhibit 5.1

Frank's Nursery & Crafts, Inc.
1175 West Long Lake Road
Troy, Michigan 48098

Ladies and Gentlemen:

We have acted as counsel to Frank's Nursery & Crafts, Inc., a Michigan
corporation (the "Company"), in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the issuance by
the Company of $115,000,00 aggregate principal amount of its 10 1/4% Series B
Senior Subordinated Notes due 2008 (the "Exchange Notes"). The Exchange
Notes are to be offered by the Company in exchange for (the "Exchange")
$115,000,000 aggregate principal amount of its outstanding 10 1/4% Senior
Subordinated Notes due 2008 (the "Old Notes"). The Old Notes have been, and
the Exchange Notes will be, issued under an Indenture dated as of February
26, 1998 (the "Indenture") between the Company and Bankers Trust Company, as
Trustee (the "Trustee").

We have examined the Registration Statement and the Indenture, which
has been filed with the Commission as an Exhibit to the Registration
Statement. In addition, we have examined, and have relied as to matters of
fact upon, the originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents and other
instruments and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such other
and further investigations, as we have deemed relevant and necessary as a
basis for the opinion hereinafter set forth.

In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity to original
documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such latter documents.

Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that, assuming that the
Indenture has been duly authorized and validly executed and delivered by the
parties thereto, when (1) the Indenture has been duly qualified under the
Trust Indenture Act of 1939, as amended, (2) the Board of Directors of the
Company, a duly constituted and acting committee thereof or duly authorized
officers thereof have taken all necessary corporate action to approve the
issuance and terms of the Exchange Notes, the terms of the Exchange Notes and
related matters and (3) the Exchange Notes have been duly executed,
authenticated, issued and delivered in accordance with the provisions of the
Indenture, upon the Exchange the Exchange Notes will constitute valid and
legally binding obligations of the Company, enforceable against the Company
in accordance with their terms.

Our opinion set forth in the paragraph immediately above is subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
<PAGE>
generally, general equitable principles (whether considered in a proceeding
in equity or at law) and an implied covenant of good faith and fair dealing.

We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the law of the State
of New York and the federal law of the United States.

We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus included therein.

Very truly yours,

/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT

EXHIBIT 23.2

Consent of Independent Accountants

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Frank's Nursery & Crafts, Inc. (File
No. 333-50815, Amendment No. 1) of our report dated March 13, 1998 relating
to the financial statements of Frank's Nursery & Crafts, Inc., which appears
in such Prospectus. We also consent to the references to us under the
headings "Independent Accountants" and "Selected Financial Data" in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."

/s/ Price Waterhouse LLP

Price Waterhouse LLP
Bloomfield Hills, Michigan
June 8, 1998

EXHIBIT 99.1

<TABLE>
<CAPTION>
FRANK'S NURSERY & CRAFTS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEAR ENDED JANUARY 25, 1998
(In thousands)

Additions
---------------------------------
Balance, Charged Charged Balance,
Beginning to Costs to Other End
of Year and Expenses Accounts Deductions of Year
-------------- --------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C>

Inventory valuation reserve: $ -0- $4,171(1) $ 4,171

Provision for store closing reserve:
Current 1,132 $1,500 1,000(4) $2,588(2) 1,044
Noncurrent 1,000 5,177 5,388(1) 1,000(3) 10,565

(1) Additions to Goodwill resulting from the Acquisition.
(2) Represents payments of liabilities.
(3) Reclassification to current portion of reserve.
(4) Reclassification from noncurrent portion of reserve.

</TABLE>

<TABLE>
<CAPTION>
FRANK'S NURSERY & CRAFTS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEAR ENDED JANUARY 26, 1997
(In thousands)

Additions
---------------------------------
Balance, Charged Charged Balance,
Beginning to Costs to Other End
of Year and Expenses Accounts Deductions of Year
--------------- --------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C>

Provision for store closing reserve:
Current $3,346 $2,212 $1,132
Noncurrent 1,000 1,000

</TABLE>