PENTACON INC, S-4/A, 1999-05-07

PENTACON INC
S-4/A, 1999-05-07
MACHINERY, EQUIPMENT & SUPPLIES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1999

REGISTRATION NO. 333-77081
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------

PENTACON, INC.*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<CAPTION>
<S> <C> <C>
DELAWARE 5085 76-0531585
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------

10375 RICHMOND AVE., SUITE 700
HOUSTON, TEXAS 77042
(713) 860-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS PRINCIPAL EXECUTIVE OFFICES)

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

BRUCE M. TATEN
SENIOR VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER,
CORPORATE SECRETARY AND GENERAL COUNSEL
10375 RICHMOND AVE., SUITE 700
HOUSTON, TEXAS 77042
(713) 860-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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

COPIES TO:

CHRISTOPHER S. COLLINS
ANDREWS & KURTH L.L.P.
600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77002
(713) 220-4200

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective.

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

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective Amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------

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.

================================================================================
* The subsidiaries of Pentacon, Inc. will guarantee the securities being
registered hereby and therefore are also registrants. Information about such
additional registrants appears on the following pages.
<PAGE>
ADDITIONAL REGISTRANTS

ALATEC CABLE HARNESS & ASSEMBLY DIVISION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 5085 95-4635930
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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ALATEC FASTENER AND COMPONENT GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
CALIFORNIA 5085 95-4619561
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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ALATEC INTERNATIONAL SALES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
U.S. VIRGIN ISLANDS 5085 66-0419714
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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ALATEC PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
CALIFORNIA 5085 95-2748943
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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ALATEC RACE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
CALIFORNIA 5085 95-4619562
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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ASI AEROSPACE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 5085 33-0453406
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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AXS SOLUTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 5085 25-1797606
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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<PAGE>
CAPITOL BOLT & SUPPLY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
TEXAS 5085 74-1750631
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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MAUMEE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
INDIANA 5085 35-1458381
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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PACE PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
TEXAS 5085 74-2879730
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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PENTACON AEROSPACE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
NEVADA 5085 76-0602590
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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PENTACON INDUSTRIAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
NEVADA 5085 76-0602591
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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POLLARD ACQUISITION CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 5085 75-2600681
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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SALES SYSTEMS, LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
PENNSYLVANIA 5085 23-2093530
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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<PAGE>
TEXAS INTERNATIONAL AVIATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
TEXAS 5085 75-0576731
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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TIA INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
U.S. VIRGIN ISLANDS 5085 66-0533077
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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TRACE ALATEC SUPPLY COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
CALIFORNIA 5085 95-4619560
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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WEST COAST AERO PRODUCTS HOLDING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 5085 13-3555274
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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<PAGE>
PROSPECTUS

[Pentacon Logo]

OFFER TO EXCHANGE
$1,000 PRINCIPAL AMOUNT OF 12 1/4% SERIES B NOTES DUE 2009
FOR EACH $1,000 PRINCIPAL AMOUNT OF OUTSTANDING
12 1/4% SERIES A NOTES DUE 2009
($100,000,000 IN PRINCIPAL AMOUNT OUTSTANDING)

THE EXCHANGE OFFER

o Expires 5:00 p.m., New York City time, June 9, 1999, unless extended.

o Subject to certain customary conditions, which we may waive, the
exchange offer is not conditioned upon a minimum aggregate principal
amount of Series A Notes being tendered.

o All outstanding Series A Notes validly tendered and not withdrawn will
be exchanged.

o The exchange offer is not subject to any condition other than that the
exchange offer not violate applicable law or any applicable
interpretation of the staff of the Securities and Exchange Commission
("SEC" or "Commission").

THE EXCHANGE NOTES

o The terms of the exchange notes to be issued in the exchange offer are
substantially identical to the existing notes, except that we have
registered the exchange notes with the SEC. In addition, the exchange
notes will not be subject to certain transfer restrictions, and
certain provisions relating to an increase in the stated interest rate
on the existing notes will be eliminated.

o Interest on the exchange notes will accrue from March 30, 1999 at the
rate of 12 1/4% per annum, payable semi-annually in arrears on each
April 1 and October 1, beginning October 1, 1999.

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

YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 11 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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

THE DATE OF THIS PROSPECTUS IS MAY 11, 1999.
<PAGE>
FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about Pentacon, Inc. and general economic
conditions, including, among other things:

o our anticipated internal and external growth strategies,

o anticipated trends in our businesses and industry and those of our
customers,

o our ability to control costs,

o our ability to integrate acquired businesses and

o the performance of our significant customers.

We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
------------------------

NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE UNIFORM
SECURITIES ACT WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER
RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR
QUALIFICATION OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR
TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE TO ANY PROSPECTIVE
PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE
PROVISIONS OF THIS PARAGRAPH.

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

AVAILABLE INFORMATION

The Company has filed with the Commission a registration statement under
the Securities Act on Form S-4 with respect to the exchange notes offered by
this prospectus. As allowed by Commission rules, this prospectus does not
contain all the information set forth in the registration statement. With
respect to any contract, agreement or other document filed as an exhibit to the
registration statement, please see the exhibits for a more complete description
of the matter involved.

The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files periodic reports, proxy statements and
other information with the Commission. Reports, proxy and information
statements, and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be obtained at
prescribed rates by writing to the Commission, Public Reference Section, 450
Fifth Street N.W., Washington, D.C. 20549. The Commission also maintains a web
site (http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants, including the Company, that file
electronically with the Commission.

i
<PAGE>
SUMMARY

THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. PLEASE READ THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS. THE TERMS "THE COMPANY," "OUR COMPANY" AND "WE" AS USED IN
THIS PROSPECTUS REFER TO PENTACON, INC. AND ITS SUBSIDIARIES AND PREDECESSORS AS
A COMBINED ENTITY, EXCEPT WHERE IT IS CLEAR FROM THE CONTEXT THAT SUCH TERM
MEANS ONLY PENTACON, INC., THE PARENT COMPANY. THE TERM "PENTACON" AS USED IN
THIS PROSPECTUS REFERS TO PENTACON, INC., THE PARENT COMPANY. THE TERMS
"SUBSIDIARIES" AND "OUR SUBSIDIARIES" AS USED IN THIS PROSPECTUS REFER TO
ALL OF PENTACON'S OPERATING SUBSIDIARIES. ON OCTOBER 28, 1998, THE COMPANY
CHANGED ITS FISCAL YEAR END FROM SEPTEMBER 30 TO DECEMBER 31. ACCORDINGLY, IN
SOME INSTANCES YEAR-END FINANCIAL INFORMATION MAY BE PRESENTED AS OF SEPTEMBER
30 AND IN OTHER INSTANCES YEAR-END FINANCIAL INFORMATION (PARTICULARLY PRO FORMA
DATA) MAY BE PRESENTED AS OF DECEMBER 31. INVESTORS SHOULD CAREFULLY CONSIDER
THE INFORMATION UNDER THE HEADING "RISK FACTORS." IN ADDITION, CERTAIN
STATEMENTS INCLUDE FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. SEE "FORWARD-LOOKING STATEMENTS."

THE COMPANY

We are the second largest distributor of fasteners and small parts to
original equipment manufacturers (OEMs) in the United States. Fasteners and
small parts are incorporated into a wide variety of end use applications across
a broad spectrum of industries and include screws, bolts, nuts, washers, pins,
rings, fittings, springs, electrical connectors and similar small parts, many of
which are specialized or highly engineered for particular applications. We are
also an industry leader in providing advanced inventory management services for
fasteners and small parts, including procurement, just-in-time delivery, quality
assurance testing, advisory engineering services, component kit production,
small component assembly and electronic data interchange to OEMs. We offer our
customers comprehensive supply chain management solutions designed to reduce
their procurement and management costs and enhance their production
efficiencies. We believe that the fastener distribution industry is in the early
stages of consolidation. We attribute this consolidation primarily to OEMs
focusing on their core competencies, streamlining their production processes and
reducing their overall production costs by reducing the number of their
suppliers and by outsourcing certain inventory management functions to more
efficient providers. Our objective is to differentiate ourselves from our
competitors and benefit from the consolidation of the fastener industry by
leveraging our nationwide distribution network, critical mass, breadth of
product line and sophisticated supply chain management capabilities to expand
our market position.

According to the Freedonia Group, Inc., total sales by fastener
manufacturers in 1996 (the latest period for which we believe industry data is
available) were approximately $8.0 billion domestically and $25 billion
globally. The U.S. fastener market is estimated to have over 2,000 distributors
serving OEMs; however, including our company, we estimate that there are only 9
fastener distributors which have annual sales in excess of $100 million. Our
company was initially formed through the combination of five companies, each of
which has over 25 years of experience in the fastener distribution industry.
Since then, we have acquired four additional companies in separate transactions.
Total U.S. manufacturer sales of fasteners have increased at a compound annual
rate of approximately 4.1% during the four years ended December 1996; however,
we have achieved (on a consolidated basis after giving effect to all of our
acquisitions) an internal compound annual sales growth rate for product sales
and services of approximately 20.0% during the five years ended December 1998.
We believe our strong growth during this period resulted from (1) the expansion
of our product offerings, (2) the expansion of services to additional customer
locations, (3) the delivery of superior customer service and (4) marketing
value-added inventory management services. Assuming all of our acquisitions of
all of our subsidiaries and our initial public offering had occurred on January
1, 1998, we would have had sales of $285 million and earnings before interest,
taxes, depreciation and

1
<PAGE>
amortization of $38 million for the twelve months ended December 31, 1998. See
footnote 1 to "Summary Financial Data."

Although fasteners and other small parts constitute a majority of the total
number of parts needed by OEMs to produce their end products, they represent
only a small fraction of the total materials costs of the end product. We
estimate that, on average, it may cost an OEM up to five times the direct cost
of a fastener to manage its procurement and use in the production process. The
relatively high cost for an OEM to internally manage its procurement and
inventory of fasteners results from (1) the vast number and individual
quantities of fasteners and other small parts needed to be maintained in
inventory to avoid the risk of stockouts, (2) the substantial administrative
cost of purchasing and handling such a large number of small parts, (3) the time
and costs of managing a large number of vendors and (4) the need to perform
fastener quality assurance testing.

We have two principal operating groups: our Aerospace Group and our
Industrial Group. Our Aerospace Group serves the aerospace and aeronautics
industries and our Industrial Group serves a broad base of industrial
manufacturers producing items such as diesel engines, locomotives, power
turbines, motorcycles, telecommunications equipment and refrigeration equipment.
Our largest customers include The Boeing Company, Cummins Engine Company,
General Electric Corporation, Harley-Davidson, Inc., the Hughes Aircraft
subsidiary of General Motors Corporation, Lockheed Martin Corporation and The
Trane Company. Our relationships with these customers have been built over a
period of 8 to 30 years.

BUSINESS STRENGTHS

We believe that we have a strong competitive position because of our
business strengths:

o LONG-TERM CUSTOMER RELATIONSHIPS. We believe our success is closely
linked to our ability to maintain and cultivate customer
relationships. During their operating histories, which have exceeded
on average 25 years, our subsidiaries have established a number of
strong long-term customer relationships. We have had relationships
with our ten largest customers for an average of 18 years. Sales to
these customers represented approximately 40% of our pro forma revenue
for the year ended December 31, 1998. In many cases, these
relationships involve significantly integrating ourselves into our
customers' inventory management systems by providing procurement,
information system and on-site management services (which may include
locating employees at customer sites on a full-time basis) designed to
improve our customers' operating efficiencies. We believe these
relationships will continue to provide significant growth
opportunities as our OEM customers consolidate suppliers and further
outsource inventory management services.

o BREADTH OF PRODUCTS AND SERVICES. We believe OEMs are seeking to
reduce their operating costs by, among other things, decreasing the
number of suppliers they use, often eliminating suppliers which
provide only a limited range of products and services. We distribute
over 100,000 types of fasteners and small parts and provide an
extensive array of supply chain management services. Certain of the
fasteners we provide are only made available to a limited number of
distributors that are recognized as authorized dealers. For example,
we are one of a limited number of U.S. fastener distributors that has
direct access to and can supply the full range of highly engineered
fasteners required by aerospace customers. We believe that the
sophistication and scope of our service offerings combined with the
breadth of our product offerings increase our opportunities for sales
growth and capturing market share.

o NATIONAL PRESENCE; CRITICAL MASS. We operate a national sales and
distribution network with 32 distribution facilities in 14 states. To
serve our aerospace clients, we also maintain sales offices in Europe
and Australia. We believe our national presence provides us with a
significant advantage in competing for business with multi-site OEMs
since smaller

2
<PAGE>
distributors often cannot effectively serve multi-site customers. In
addition, our national presence provides us with opportunities to grow
business with existing multi-site customers by cross-marketing between
sites and providing company-wide procurement and inventory management
solutions. We believe our size and geographical diversity may provide
us with opportunities to form strategic alliances with suppliers which
could lead to purchasing synergies and reliable access to fasteners
and small parts.

o DIVERSIFIED INDUSTRY PLATFORM. We serve approximately 7,500 customers
which operate in a wide range of markets in both the aerospace and
industrial sectors. Principal markets within the aerospace sector
include airframe, defense, space, satellite communications, and
commercial and general aviation. Principal markets within the
industrial sector include industrial machinery, electrical machinery
and electronics, motor vehicles and fabricated metal products. In
calendar 1998, approximately 57% of our revenue was derived from
aerospace customers and 43% was derived from industrial customers.
While our ten largest customers represented approximately 40% of our
pro forma revenues in calendar 1998, no other customer represented
more than 1.2% of our revenues on a pro forma basis in calendar 1998.
Over time we expect that through certain targeted acquisitions, we
will become further diversified with industrial customers providing a
larger share of our revenues. We believe that our diversified customer
mix is a competitive strength and helps us to better balance industry
cycles. By participating in a wide variety of industries, we are also
able to share the best inventory management practices across all of
our industry segments.

o STRONG MANAGEMENT TEAM. Our company benefits from the extensive
experience of our management team. Our executive and operating
management have combined experience of over 100 years in the fastener
and OEM distribution businesses. Collectively, our senior management
team and employees own approximately 45% of our company's stock on a
fully-diluted basis. In addition to our significant industry
experience, our senior executives have collectively completed over 100
merger and acquisition transactions and have extensive public company
experience.

BUSINESS STRATEGY

Our objective is to further our market position as a leading distributor of
fasteners and small parts and to enhance shareholder value. Key elements of our
business strategy include:

o CONTINUE TO DELIVER SUPERIOR CUSTOMER SERVICE. Our customers choose
fastener suppliers based, in significant part, on the quality and
reliability of service. We believe that superior customer service
includes: meeting just-in-time delivery schedules which are critical
to our customers' production processes and providing innovative supply
chain management services, which can help our customers improve their
operating efficiencies and reduce their costs. By providing these
services, we become more integrated into our customers' internal
manufacturing and decision making processes. We believe such
integration leads to higher sales to existing customers and improves
customer retention. In connection with our strategy to continuously
improve customer service, we continue to identify and adopt "best
practices" of each of our subsidiaries that can be successfully
implemented throughout the company. Some of our customers have
recognized our superior customer service. For example, we received
Cummins' awards for 100% On-Time Delivery and for Outstanding
Performance for Cost Reduction and Partnership in Continuous
Improvement, in each of the last four years (1995-1998).

o GROW SALES REVENUE. We seek to grow internally generated revenues by:
capturing market share from smaller competitors who cannot match our
product breadth, services or geographic coverage; pursuing the
expanding opportunities to deliver a wide range of inventory

3
<PAGE>
management services which less sophisticated distributors are unable
to provide; expanding the number of sites to which we provide services
for our existing multi-site customers; and pursuing new multi-site
customers. To leverage our breadth of products and services and our
broad geographic presence, we have developed a national marketing and
sales effort to focus on penetrating existing and new multi-site OEM
accounts.

o CAPITALIZE ON INTEGRATION OPPORTUNITIES. We believe there are
significant opportunities to leverage our capabilities to further
increase our revenues and operating efficiencies. We are initiating
our revenue enhancement strategy by implementing a cross-selling
program to existing customers. Our national footprint is an integral
component of our strategy to sell more integrated inventory management
services and products to multi-site customers nationwide. We will seek
to expand operating margins by realizing purchasing economies and
exploiting operational efficiencies. We believe that centralizing
purchasing activities will allow us to realize volume discounts.
Further, as we integrate our operations we are beginning to realize
further efficiencies through (1) the elimination of redundant
facilities, (2) headcount reductions, (3) plant reconfigurations, (4)
the implementation of common information systems in our Aerospace
Group, (5) administrative savings and (6) reductions in working
capital.

o PURSUE STRATEGIC ACQUISITIONS. We have a disciplined acquisition
program, which targets companies that will help us increase our
presence in markets we currently serve, develop new customer
relationships and expand our range of products and services. Since our
initial public offering in March 1998, we have increased our annual
pro forma revenues from $168 million to $285 million for the year
ended December 31, 1998, through our acquisition of four additional
companies: Pace Products, Inc., D-Bolt Company, Inc., Texas
International Aviation, Inc. and ASI Aerospace Group Inc. The addition
of Texas International Aviation, Inc. and ASI Aerospace Group Inc.
added significant product depth and market share in the aerospace
fastener distribution industry and resulted in our Aerospace Group
becoming one of the premier aerospace fastener distribution and
related service companies in the United States. We believe there are a
significant number of acquisition candidates and that we are regarded
as an attractive acquiror because of our position as an industry
leader and the potential for our targets to realize improved growth
and profitability as part of our company. All of our acquisitions have
been immediately accretive to earnings and we expect future
acquisitions also will be immediately accretive.

4
<PAGE>
THE EXCHANGE OFFER

Registration Rights Agreement...... We sold the existing notes on March
30, 1999 to the initial purchasers
under a purchase agreement dated
March 25, 1999. Pursuant to the
purchase agreement, Pentacon, our
subsidiaries who guaranteed our
obligations under the existing notes
and the initial purchasers entered
into a registration rights agreement
which granted the holders of the
existing notes certain exchange and
registration rights. This exchange
offer is intended to satisfy certain
of our obligations under the
registration rights agreement.
The Exchange Offer................. We are offering to exchange up to
$100,000,000 of the exchange notes
for up to $100,000,000 of the
existing notes. Existing notes may be
exchanged only in $1,000 increments.
The terms of the exchange notes are
identical in all material respects to
the existing notes except for certain
transfer restrictions and
registration rights relating to the
existing notes and certain provisions
relating to an increase in the stated
interest rate on the existing notes.
Resale............................. We believe that you will be able to
freely transfer the exchange notes
without registration or any
prospectus delivery requirement;
however, certain broker-dealers and
certain of our affiliates may be
required to deliver copies of this
prospectus if they resell any
exchange notes.
Expiration Date.................... 5:00 p.m., New York City time, on
June 9, 1999, unless the exchange
offer is extended. You may withdraw
existing notes you tender pursuant
to the exchange offer at any time
prior to 5:00 p.m., New York City
time, on June 9, 1999. See "The Exchange
Offer -- Expiration Date; Extensions;
Amendments."
Accrued Interest on the Exchange
Notes and the Existing Notes..... The exchange notes will bear interest
at a rate of 12 1/4% per annum,
payable semi-annually on April 1 and
October 1 of each year, commencing
October 1, 1999. Holders of exchange
notes of record at the close of
business on the March 15 and
September 15 immediately preceding
such interest payment date will
receive interest accruing from the
most recent date to which interest
has been paid. The interest rate on
the exchange notes will increase to
12 3/4% per annum if our EBITDA for
each of the quarters ended March 31,
1999 and June 30, 1999 is not at
least $7.25 million.
Termination of the Exchange Offer.. We may terminate the exchange offer
if we determine that our ability to
proceed could be materially impaired
due to the occurrence of certain
conditions. We do not expect any of
the foregoing conditions to occur,
although there can be no assurance
that such conditions will not occur.
You will have certain rights against
us under the registration rights
agreement should we fail to
consummate the exchange offer. See
"The Exchange Offer --
Termination."
Procedures for Tendering Existing
Notes............................ If you wish to accept the exchange
offer, sign and date the letter of
transmittal in accordance with the
instructions, and deliver the letter
of transmittal, along with the
existing notes and any other required
documentation, to the exchange agent.
By executing the letter of
transmittal, you will represent to us
that, among other things:

5
<PAGE>
o the exchange notes you receive
will be acquired in the ordinary
course of your business,
o you have no arrangement with
any person to participate in the
distribution of the exchange
notes, and
o you are not an affiliate of
Pentacon or, if you are an affiliate,
you will comply with the
registration and prospectus
delivery requirements of the
Securities Act to the extent
applicable.
Special Procedures for Beneficial
Owners........................... If you are a beneficial owner whose
existing notes are registered in the
name of a broker, dealer, commercial
bank, trust company or other nominee
and wish to tender such existing
notes in the exchange offer, please
contact the registered holder as soon
as possible and instruct them to
tender on your behalf and comply with
our instructions set forth elsewhere
in this prospectus.
Guaranteed Delivery
Procedures....................... If you wish to tender your existing
notes, you may, in certain instances,
do so according to the guaranteed
delivery procedures set forth
elsewhere in this prospectus under
"The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights.................. You may withdraw existing notes you
tender pursuant to the exchange offer
by furnishing a written or facsimile
transmission notice of withdrawal to
the exchange agent containing the
information set forth in "The
Exchange Offer -- Withdrawal of
Tenders."
Acceptance of Existing Notes and
Delivery of Exchange Notes....... Subject to certain conditions (as
summarized above in "Termination of
the Exchange Offer" and described
more fully in "The Exchange
Offer -- Termination"), we will
accept for exchange any and all
existing notes that are properly
tendered in the exchange offer prior
to the expiration date. See "The
Exchange Offer -- Procedures for
Tendering." The exchange notes
issued pursuant to the exchange offer
will be delivered promptly following
the expiration date.
Exchange Agent..................... State Street Bank and Trust Company,
the trustee under the indenture, is
serving as exchange agent in
connection with the exchange offer.
The mailing address of the exchange
agent and the address for deliveries
by overnight courier is State Street
Bank and Trust Company, Two
International Place, P.O. Box 778,
Boston, Massachusetts 02110, and the
address for hand deliveries is State
Street Bank and Trust Company, Two
International Place, 4th Floor,
Boston, Massachusetts 02110. For
assistance and requests for
additional copies of this Prospectus,
the Letter of Transmittal or the
Notice of Guaranteed Delivery, the
telephone number for the exchange
agent is (617) 664-5587, and the
facsimile number for the exchange
agent is (617) 664-5290.

SEE "THE EXCHANGE OFFER" FOR MORE DETAILED INFORMATION CONCERNING THE
TERMS OF THE EXCHANGE OFFER.

6
<PAGE>
SUMMARY OF TERMS OF EXCHANGE NOTES

Issuer................................... Pentacon, Inc.
10375 Richmond Avenue, Suite 700
Houston, Texas 77042
Tel: (713) 860-1000

Notes Offered............................ $100,000,000 aggregate principal
amount of 12% Senior Subordinated
Notes due 2009.

Maturity................................. April 1, 2009.

Interest Payment Dates................... April 1 and October 1 commencing
October 1, 1999.

Guarantees............................... Each of our subsidiaries will fully
and unconditionally guarantee the
exchange notes on a senior
subordinated basis. Future
subsidiaries also may be required to
guarantee the exchange notes on a
senior subordinated basis. See
"Description of the
Notes -- Subsidiary Guarantees."

Ranking.................................. The exchange notes will be unsecured
senior subordinated obligations and
will be subordinated to all our
existing and future senior
indebtedness. The exchange notes will
rank equally with all our other
existing and future senior
subordinated indebtedness and will
rank senior to all our subordinated
indebtedness. The guarantees will be
unsecured senior subordinated
obligations and will be subordinated
to all existing and future senior
indebtedness of the guarantors. The
terms "senior indebtedness" and
"subordinated indebtedness" are
defined in the "Description of the
Notes -- Certain Definitions"
section of this prospectus.

Assuming the issuance of the existing
notes and our use of the net proceeds
occurred on December 31, 1998, we
would have had $41.4 million of
senior indebtedness outstanding and
our subsidiaries would have had $3.5
million of senior indebtedness
outstanding, excluding their
guarantee of the $41.4 million of our
senior indebtedness.

Optional Redemption...................... We may redeem the exchange notes, in
whole or in part, at any time on or
after April 1, 2004, at the
redemption prices set forth in this
prospectus. See "Description of the
Notes -- Optional Redemption."

Optional Redemption Upon Certain
Equity Offerings....................... On or before April 1, 2002, we may
redeem up to 35% of the exchange
notes with the net proceeds of
certain equity offerings at 112.25%
of the principal amount thereof, plus
accrued interest, if at least 65% of
the aggregate principal amount of the
exchange notes originally issued
remains outstanding. See
"Description of the
Notes -- Optional Redemption."

7
<PAGE>
Change of Control........................ Upon certain change of control
events, each holder of exchange notes
may require us to repurchase all or a
portion of its notes at a purchase
price equal to 101% of the principal
amount thereof, plus accrued
interest. Our ability to repurchase
the exchange notes upon a change of
control event will be limited by the
terms of our debt agreements. In
addition, we cannot assure you that
we will have the financial resources
to repurchase the exchange notes. See
"Description of the Notes -- Change
of Control."

Certain Covenants........................ The indenture governing the exchange
notes will contain covenants that,
among other things, will limit our
ability and the ability of certain of
our subsidiaries to:

o incur additional indebtedness,

o pay dividends on, redeem or
repurchase our capital stock,

o make investments,

o engage in transactions with
affiliates,

o create certain liens,

o in the case of certain of our
subsidiaries, guarantee
indebtedness,

o sell assets,

o sell capital stock of
restricted subsidiaries, and

o consolidate, merge or transfer
all or substantially all our
assets and the assets of our
subsidiaries on a consolidated
basis.

These covenants are subject to
important exceptions and
qualifications, which are described
in the "Description of the Notes"
section of this prospectus.

Risk Factors............................. See "Risk Factors" for a discussion
of factors you should carefully
consider before deciding to invest in
the exchange notes.

Certain Tax Considerations............... For federal income tax purposes, the
exchange notes will be treated as
having been issued with original
issue discount equal to the
difference between the issue price of
the existing notes and their stated
redemption price at maturity. As a
result, holders may be required to
include amounts in income prior to
the receipt of cash attributable
thereto. See "Certain United States
Federal Income Tax Considerations."

SEE "DESCRIPTION OF THE NOTES" FOR MORE DETAILED INFORMATION CONCERNING
THE TERMS OF THE EXCHANGE NOTES.

8
<PAGE>
SUMMARY FINANCIAL DATA

The pro forma consolidated financial data give effect to all the
Acquisitions by Pentacon as if such acquisitions were consummated as of the
beginning of the periods presented, but do not give effect to the issuance and
sale of the notes, except where noted below. The pro forma results of operations
are not necessarily indicative of the results that would have occurred had the
Acquisitions been consummated as of October 1, 1996 or that might be attained in
the future.

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
HISTORICAL PRO FORMA(1) ------------ -------------
----------- ---------------------------------- THREE LAST TWELVE
FISCAL TWELVE FISCAL THREE MONTHS MONTHS MONTHS
YEAR MONTHS YEAR ENDED ENDED ENDED
ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
9/30/98(2) 9/30/97 9/30/98 1997 1998 1998
----------- --------- --------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 141,078 $ 223,673 $ 283,794 $ 65,345 $ 66,720 $ 285,169
Cost of sales........................ 91,026 150,652 188,813 43,844 45,021 189,990
----------- --------- --------- ------------ ------------ -------------
Gross profit..................... 50,052 73,021 94,981 21,501 21,699 95,179
Operating expenses................... 36,524 49,485 59,746 15,161 14,575 59,160
Goodwill amortization................ 1,111 3,407 3,400 853 853 3,400
----------- --------- --------- ------------ ------------ -------------
Operating income................. 12,417 20,129 31,835 5,487 6,271 32,619
Other (income) expense, net.......... (91) (30) (44) 77 (7) (128)
Interest expense..................... 2,448 10,248 10,467 2,555 3,102 11,014
----------- --------- --------- ------------ ------------ -------------
Income before taxes.............. 10,060 9,911 21,412 2,855 3,176 21,733
Income taxes......................... 5,373 5,461 10,172 1,520 1,545 10,242
----------- --------- --------- ------------ ------------ -------------
Net income....................... $ 4,687 $ 4,450 $ 11,240 $ 1,335 $ 1,631 $ 11,491
=========== ========= ========= ============ ============ =============
OTHER DATA:
EBITDA(3)............................ $ 14,306 $ 25,369 $ 36,862 $ 6,743 $ 7,765 $ 37,884
Depreciation and amortization........ 1,798 5,210 4,983 1,333 1,487 5,137
Capital expenditures................. 3,097 952 4,296 355 795 4,736
SELECTED RATIOS:
As adjusted long-term debt (including
current maturities) to
EBITDA(3)(4)....................... 3.8x
EBITDA to as adjusted interest
expense(3)(4)...................... 2.4x
Ratio of earnings to fixed charges(5)
Actual........................... 4.4x 2.0x
Pro forma(6)..................... 3.0x 1.2x
Supplemental pro forma(7)........ 1.9x
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-------------------------------
HISTORICAL AS ADJUSTED(8)
---------- --------------
<S> <C> <C>
(Dollars in thousands)
BALANCE SHEET DATA
Total assets......................... $ 301,353 $304,853
Long-term debt (including current
maturities......................... 138,589 142,089
Stockholders' equity................. 116,610 116,610
</TABLE>
- ------------
(1) The pro forma income statement data assumes that the Acquisitions and our
initial public offering occurred at the beginning of the period presented
(except for Capitol, whose historical results for the twelve months from
September 1, 1996 to August 31, 1997 were used for the twelve months ended
September 30, 1997 pro forma information). These pro forma results are not
necessarily indicative of the results we would have obtained had these
events actually then occurred or of our future results. During the periods
presented above, the Acquired Businesses were not under common control or
management and, therefore, the data presented may not be comparable to or
indicative of our post-Acquisition results. The pro forma income statement
data is based on available information and certain assumptions that
management deems appropriate and should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
prospectus. Neither the potential cost savings from consolidating certain
operational and administrative functions nor the costs of corporate
overhead, other than salaries of executive officers, nor those other costs
and savings actually experienced after the Acquisitions have been included
in the pro forma financial information. In addition, the pro forma
information may not be indicative of actual 1999 results of operations. See
"Risk Factors -- Concentration of Customer Base; Factors Relating to
Certain Customers" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Introduction."

(2) On October 28, 1998, we changed our fiscal year end from September 30 to
December 31.

(3) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
is not intended to represent cash flow in accordance with generally accepted
accounting principles and does not represent the measure of cash available
for distribution. EBITDA is commonly used to analyze companies on the basis
of operating performance, leverage and liquidity, and provides additional
information for evaluating our ability to make payments on the notes. EBITDA
is not intended as an alternative to earnings from continuing operations or
net income.

(4) Gives effect to the refinancing of a portion of our historical debt with the
net proceeds received from the issuance and sale of the existing notes.

(5) For purposes of this ratio, "earnings" consist of earnings before income
taxes and fixed charges, and "fixed charges" consist of interest expense,
the interest portion of rental expense and amortization of debt issuance
costs.

(6) Gives effect to the refinancing of a portion of our historical debt with the
net proceeds received from the offering of the existing notes.

(7) Gives effect to the businesses we have acquired as if such acquisitions were
consummated as of the beginning of the periods presented and to the
refinancing of a portion of our historical debt with the net proceeds
received from the offering of the existing notes.

(8) The as adjusted balance sheet data adjusts for the issuance and sale of the
existing notes and the application of the net proceeds therefrom to reduce
borrowings under our bank credit facility. The as adjusted amounts do not
reflect an approximately $1.4 million, net of tax, write-off of debt
issuance costs on our bank credit facility as a result of the restructuring
and partial extinguishment of the bank credit facility, which has been
recorded in the quarter ended March 31, 1999. Such amounts may be reborrowed
to the extent described in "Description of Bank Credit Facility" and "Use
of Proceeds."

10
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION
IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN THE NOTES.

SIGNIFICANT INDEBTEDNESS

We will be highly leveraged after the exchange offer. Assuming the issuance
of the existing notes and our use of the net proceeds had occurred on December
31, 1998 or February 28, 1999, on such dates we would have had $142.1 million
and $149.4 million, respectively, of total consolidated debt. Assuming the
issuance of the existing notes and the application of the net proceeds had
occurred on December 31, 1998 or February 28, 1999, on such dates we estimate we
would have had the ability to borrow up to an additional $32.1 million and $34.1
million, respectively, under our bank credit facility (based on borrowing base
limitations of $73.5 million and $82.9 million, respectively) and we may incur
other indebtedness in the future. Subject to borrowing base limitations, in the
future we will have borrowing capacity of $85.0 million under our bank credit
facility. See "Description of the Notes" and "Description of Bank Credit
Facility." Assuming the Acquisitions, the issuance of the existing notes and
our use of the net proceeds had occurred on January 1, 1998, our ratio of
earnings to fixed charges for the fiscal year ended December 31, 1998 would have
been 1.9:1.0.

Our high level of indebtedness could have important consequences to
noteholders, such as:

o limiting our ability to obtain additional financing to fund our growth
strategy, working capital, capital expenditures, debt service
requirements or other purposes;

o limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds
to pay debt service;

o limiting our ability to compete with others who are not as highly
leveraged; and

o limiting our ability to react to changing market conditions, changes
in our industry and in our customers' industries and economic
downturns.

Our ability to satisfy our debt obligations will depend upon our future
operating performance. Prevailing economic conditions and financial, business
and other factors, many of which are beyond our control, will affect our ability
to make payments on our debt obligations. If we can not generate sufficient cash
from operations to meet our other obligations, we may need to refinance or sell
assets. We can not assure you that our business will generate sufficient cash
flow, or that we will be able to obtain sufficient funding to make the payments
required by all of our debt.

SUBORDINATION OF THE EXCHANGE NOTES AND THE GUARANTEES; UNSECURED STATUS OF THE
EXCHANGE NOTES AND THE GUARANTEES

The exchange notes will be subordinated to all of our existing and future
senior indebtedness and the guarantees will be subordinated to all existing and
future senior indebtedness of the guarantors. Assuming the issuance of the
existing notes and our use of the proceeds had occurred on December 31, 1998 or
February 28, 1999, on such dates we would have had $44.9 million and $52.2
million, respectively, of consolidated senior indebtedness outstanding. Pentacon
and the guarantors expect to incur additional senior indebtedness under our bank
credit facility and otherwise. See "Description of Bank Credit Facility." In
the event of a bankruptcy, liquidation or dissolution of Pentacon or any
guarantor, the assets available to pay obligations on the notes or the
guarantees, as applicable, will only be available after all payments had been
made on senior indebtedness. We can not assure you that sufficient assets would
remain to make any payments on the exchange notes or the guarantees. In
addition, certain events of default under certain senior indebtedness would
prohibit Pentacon and the guarantors from making any payments on the exchange
notes and the guarantees. The term "senior indebtedness" is defined in the
"Description of the Notes -- Certain Definitions" section of this prospectus.

11
<PAGE>
The exchange notes will not be secured by any of Pentacon's assets and the
guarantees will not be secured by any of the assets of the guarantors. Our
obligations under our bank credit facility are secured by substantially all of
our assets and the assets of the guarantors. If Pentacon or a guarantor becomes
insolvent or is liquidated, or if payment under our bank credit facility is
accelerated, the lenders under our bank credit facility would have a claim on
such assets before the holders of the exchange notes. See "Description of Bank
Credit Facility."

HOLDING COMPANY STRUCTURE; GUARANTEES MAY BE UNENFORCEABLE DUE TO FRAUDULENT
CONVEYANCE STATUTES

Pentacon is a holding company. Our subsidiaries conduct all of our
consolidated operations and own substantially all of our consolidated assets.
Consequently, our cash flow and our ability to meet our debt service obligations
depend upon the cash flow of our subsidiaries and the payment of funds by the
subsidiaries to us in the form of loans, dividends or otherwise. Their ability
to make any payments will depend on their earnings, the terms of their
indebtedness, tax considerations and legal restrictions. In addition, as
described below, the guarantees may be unenforceable under certain
circumstances. In such event, and to the extent one of our future subsidiaries
is not a guarantor, all claims against such subsidiaries will need to be
satisfied before funds will be available to Pentacon to meet its obligations.
While our existing subsidiaries are obligated to guarantee the exchange notes,
future subsidiaries may not become guarantors.

Although laws differ among various jurisdictions, in general, under
fraudulent conveyance laws, a court could subordinate or avoid any guarantee if
it found that:

o the guarantee was incurred with actual intent to hinder, delay or
defraud creditors, or

o the guarantor did not receive fair consideration or reasonably
equivalent value for the guarantee and the guarantor was any of the
following:

-- insolvent or was rendered insolvent because of the guarantee,

-- engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital, or

-- intended to incur, or believed that it would incur, debts beyond
its ability to pay at maturity.

If a court avoided a guarantee as a result of fraudulent conveyance, or held it
unenforceable for any other reason, noteholders would cease to have a claim
against the guarantor and would be creditors solely of Pentacon and the
remaining guarantors.

RESTRICTIONS IN DEBT AGREEMENTS

The operating and financial restrictions and covenants in our debt
agreements, including the bank credit facility and the indenture governing the
notes, may adversely affect our ability to finance future operations or capital
needs or to engage in other business activities. Our bank credit facility
includes covenants that will require us to meet certain financial ratios and
financial tests, including a maximum total debt to Adjusted EBITDA (as defined
therein) ratio, a maximum senior debt to Adjusted EBITDA ratio, a minimum fixed
charge coverage ratio, a minimum net worth test and a maximum capital
expenditures test. Such covenants, required ratios and tests may require that we
take action to reduce debt or to act in a manner contrary to our business
objectives. If we breach any of these restrictions or covenants or suffer a
material adverse change which restricts our borrowing ability under our bank
credit facility, we would be unable to borrow funds thereunder without a waiver.
A breach could cause a default under the exchange notes and our other debt. Our
indebtedness may then become immediately due and payable. We may not have or be
able to obtain sufficient funds to make these accelerated payments, including
payments on the exchange notes. See "Description of Bank Credit Facility" and
"Description of the Notes."

12
<PAGE>
CONCENTRATION OF CUSTOMER BASE; FACTORS RELATING TO CERTAIN CUSTOMERS

A significant portion of our revenue has historically been generated from a
limited number of customers, although not necessarily from the same customers
year to year. For the year ended December 31, 1998, our ten largest customers
collectively accounted for approximately 40% of our pro forma revenues, of which
our four largest customers represented approximately 30% of these revenues. We
estimate that The Boeing Company and Cummins Engine Company (excluding our sales
to subcontractors to each of them) would have accounted for approximately 10%
and 12%, respectively, of our pro forma revenues for the year ended December 31,
1998. Our ability to maintain these relationships is dependent upon our
customers' continued satisfaction with the price and quality of our products and
services. There can be no assurance that we will maintain our relationships with
these or our other customers. The loss of these customers or any other
significant customer for any reason or a reduction in business with a
significant customer for any reason could result in a material loss of revenue
or otherwise have a material adverse effect on our results of operations and
financial condition. In addition, from time to time, certain of our customers
seek to implement competitive bidding and other procedures designed to reduce
prices for fasteners and other small parts, which may lower our gross margins on
sales to these customers. We will seek to mitigate any adverse impact to gross
margins in the future through our own cost reduction initiatives and by
providing additional services to these customers, provided there can be no
assurances as to the timing or the extent to which such mitigating efforts will
offset lower margins.

We expect our 1999 results of operations to be adversely affected by
certain factors relating to The Boeing Company and Cummins Engine Company (as
discussed in "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Introduction"). We estimate that, in calendar 1998,
Boeing and its subcontractors accounted for approximately 20% of our pro forma
revenues. The Boeing Company's commercial airframe operations and related
subcontractors built up excess fastener inventory in 1998 in anticipation of
production levels for certain aircraft which are now expected not to
materialize. On December 1, 1998, Boeing announced that it will reduce its
planned production rates of certain commercial aircraft in 2000 by 20% in
response to the economic crisis in Asia. As a result of these factors, Boeing
and related subcontractors have reduced their fastener orders compared with
historical periods and we expect such reductions in orders from these factors to
continue through the third quarter of 1999. Our operating results have been and
will be adversely affected by these developments. While we expect our fastener
shipments to reach levels commensurate with Boeing's production levels in the
third quarter of calendar 1999, we expect these levels to be moderately lower
than those experienced in 1998 absent further developments, but there can be no
assurances that such will be the case. In addition, on February 23, 1999, Boeing
announced that a number of its projects and product lines (including certain
commercial airplane programs) were underperforming (i.e., providing negative
returns or breaking even on an economic value added basis). It announced that it
plans to seek to improve the profitability of certain of its underperforming
programs (including through cost cutting and maintaining lower inventory levels)
and that it may abandon or divest itself of those that cannot be satisfactorily
improved. At this time, we do not know Boeing's detailed plans and cannot
determine the impact of this most recent announcement on our business. A
significant loss of business from Boeing and its subcontractors or a significant
reduction in the gross margin percentages earned on sales to them may have a
material adverse effect on our financial condition and results of operations.
See "Business -- Customers" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

CUSTOMER INDUSTRY RISKS AND CYCLICALITY

We sell a significant number of our products to customers in industries
that experience significant fluctuations in demand because of changes in
economic conditions, consumer demand and other factors beyond our or their
control. As a result, we may not be able to increase or maintain our level of
sales in periods of economic stagnation or downturn in our customers'
industries. For example, approximately 26% of our pro forma revenues in calendar
1998 was derived from the commercial

13
<PAGE>
airframe industry. In the past, the commercial airframe industry has been
adversely affected by a number of factors, including increased fuel and labor
costs and intense price competition. We expect that the cyclicality of the
commercial airframe industry could adversely affect our commercial airframe
fastener sales and any economic slowdown could adversely affect our industrial
fastener sales in the future.

LIMITED COMBINED OPERATING HISTORY

Prior to March 10, 1998, we conducted no operations other than in
connection with our initial public offering and the acquisition of the original
five founding companies. Since March 10, 1998, we have acquired four more
companies, which increased our annual pro forma revenues from $168 million to
$285 million for the year ended December 31, 1998. Our senior management group
has been working together for only a short time and there are no assurances that
the management group will be able to effectively manage the combined entity. The
pro forma combined financial data contained in this prospectus cover periods
when our subsidiaries were not under common control and may not be indicative of
our future financial or operating results. Prior to the acquisition of our
businesses, our subsidiaries were each private companies with different
objectives, management information systems and accounting and other standards.
Our subsidiaries have operated separately and on a decentralized basis. We have
begun to centralize a number of administrative functions and to seek uniform
reporting and operating standards among our subsidiaries. Management at our
subsidiaries are still adapting to those standards which are designed to achieve
operating synergies and result in cost savings. There are no assurances that
such integration activities will achieve these results.

RISKS RELATED TO ACQUISITION STRATEGY

A disciplined acquisition program is part of our business strategy. The
success of this program in the future will depend upon finding strategic
acquisition candidates at attractive prices. We expect to face competition for
acquisition candidates, which may limit the number of acquisition opportunities
and lead to higher acquisition prices. We may not be able successfully to
integrate newly acquired businesses without unplanned costs, delays or other
difficulties and we may not be able to achieve our targeted synergies and cost
savings.

We may need to finance our acquisitions with debt and/or equity. Assuming
the issuance of the existing notes and the application of the net proceeds had
occurred on December 31, 1998 or February 28, 1999, we would have had
approximately $32.1 million and $34.1 million, respectively, available for
borrowing under our bank credit facility (based on borrowing base limitations of
$73.5 million and $82.9 million, respectively), all of which would be available
for acquisitions. Any borrowings incurred to finance acquisitions could mature
prior to the exchange notes and could reduce the cash available to make payments
on the exchange notes. We may be limited in our ability to issue equity if our
common stock does not maintain a sufficient market value or if potential
acquisition candidates are unwilling to accept common stock in exchange for the
sale of their businesses. In addition, we may not be able to obtain any
additional financing on terms that are acceptable to us. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

INTEGRATION OF COMPUTER SYSTEMS AND RELIANCE ON COMPUTER SYSTEMS

Our subsidiaries operated as independent companies prior to their
acquisition. We intend to coordinate and integrate the management and
information systems (MIS) of our subsidiaries. Our Aerospace Group is in the
process of migrating to an information system developed by DYMAX Products Inc.,
which is expected to be completed by July 1999. This system should facilitate
product ordering, pricing and reporting among the companies in our Aerospace
Group. We are also in the process of planning the integration of MIS systems
within our Industrial Group. Although we may not immediately implement a single
reporting system in our Industrial Group, we have identified various

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integration opportunities which we expect will enable our Industrial Group to
obtain certain operating and reporting efficiencies.

Our MIS systems are used for ordering products, recording and analyzing
financial results, controlling inventory and performing other important
functions. We may not be able to coordinate and integrate these systems
economically. We also may experience delays, disruptions and unanticipated
expenses in so doing. Any such event could have a material adverse effect on our
business, financial condition and results of operations. We will not be able
fully to achieve certain contemplated operating efficiencies and competitive
advantages until we have fully coordinated and integrated these systems. Until
we have done so, which may not occur for several years, we will rely primarily
on the separate systems of our operating subsidiaries. After these systems are
integrated, we will rely heavily on them in our daily operations. As a result,
any interruption in the operation of these systems may have a material adverse
effect on our business.

RELIANCE ON KEY PERSONNEL

We depend heavily upon the continuing efforts of our executive officers,
group managers and the senior management of our operating subsidiaries. In
addition, we may depend on the senior management of any significant business we
acquire in the future. If any key personnel do not continue in their management
roles, our business, financial condition and results of operations could be
materially impaired until we are able to retain a replacement. See
"Management."

DEPENDENCE ON SUPPLIERS

Although no one supplier accounted for more than 5% of total products
purchased in the year ended December 31, 1998, certain types of specialized
fasteners are available from only a limited number of sources. If those sources
became unavailable to us, we would not be able to continue to sell such
fasteners unless we could locate an alternative supplier. Our inability to
supply certain types of fasteners may adversely affect our sales and our
relationship with the customers requiring such fasteners.

COMPETITION

We do business in a highly fragmented and competitive industry. Competition
in our industry is based primarily on breadth of products, quality and breadth
of services, price and geographic proximity. We compete with a large number of
fastener distributors on a regional and local basis. Some of our competitors may
have greater financial resources than we do and/or established customer
relationships with certain customers for whose business we compete. See
"Business -- Competition."

YEAR 2000

We are in the process of evaluating and resolving the potential impact of
the year 2000 problem on our computerized information systems and other
infrastructure that contain embedded technology. The year 2000 problem is the
result of computer programs being written using two digits (rather than four) to
define the applicable year. Any of our programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000, which could result in miscalculations or system failures.

We believe that substantially all of our computerized information systems
and other infrastructure that contain embedded technology are already year 2000
ready or will be modified so as to become year 2000 ready by mid-1999. Based on
preliminary information, the incremental costs of addressing potential problems
are not currently expected to have a material adverse impact on our financial
condition or results of operations. However, if we, our customers or our vendors
are unable to resolve such processing issues in a timely manner or have not
identified all of the year 2000 associated issues, our ability to conduct
business may be materially adversely affected and our financial condition and
results of operations could be materially adversely impacted.

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Through December 31, 1998, we had spent $0.1 million in costs that are
directly attributable to addressing year 2000 issues. We estimate that we will
incur $0.3 million in additional costs during calendar 1999 relating to year
2000 issues. We expect to spend approximately $3.0 million to purchase software
and hardware and on implementation expenses associated with the migration to a
common information technology system in our aerospace group. We believe that
these costs are not, for the most part, directly related to year 2000 issues,
but instead are for a new system needed to integrate our operations in the
aerospace business.

We are developing and evaluating contingency plans in the event that we do
not complete all of our remediation plans in a timely manner or that third
parties who provide us with goods or services fail to address their year 2000
issues appropriately. These plans include identification of alternative
suppliers and service providers, depletion of safety stocks of inventory and
identification of important areas of record retention.

RISKS ASSOCIATED WITH GOVERNMENT REGULATION

Our operations are subject to a number of federal, state and local
regulations relating to the protection of the environment and to work place
health and safety. In addition, the Fastener Quality Act, when implemented, will
impose additional tracking, marking and testing requirements, and may require
accreditation of our laboratories, that could result in operating costs that
could adversely affect our business, financial condition and results of
operations. See "Business -- Government Regulation."

POSSIBLE INABILITY TO PURCHASE THE EXCHANGE NOTES UPON A CHANGE OF CONTROL

Upon certain change of control events, each holder of exchange notes may
require us to repurchase all or a portion of its exchange notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued interest. Our
ability to repurchase the exchange notes upon a change of control event could be
limited by the terms of our debt agreements. Upon a change of control event, we
may be required to repay the outstanding principal and any accrued interest on
any other amounts owed by us under our bank credit facility. We cannot assure
you that we would be able to repay amounts outstanding under our bank credit
facility or obtain necessary consents under such facility to repurchase the
exchange notes. Any requirement to offer to purchase any outstanding exchange
notes may result in us having to refinance our outstanding indebtedness, which
we may not be able to do. In addition, even if we were able to refinance such
indebtedness, such financing may be on terms unfavorable to us. The term
"Change of Control" is defined in "Description of the Notes -- Certain
Definitions."

A TRADING MARKET FOR THE EXCHANGE NOTES MAY NOT DEVELOP

There has not been an established trading market for the notes. Although
each initial purchaser has informed us that it currently intends to make a
market in the exchange notes, it has no obligation to do so and may discontinue
making a market at any time without notice.

We do not intend to apply for listing of the exchange notes on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.

The liquidity of any market for the exchange notes will depend upon the
number of holders of the exchange notes, our performance, the market for similar
securities, the interest of securities dealers in making a market in the
exchange notes and other factors. As a result, you cannot be sure than an active
trading market will develop for the exchange notes.

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THE EXCHANGE OFFER

PURPOSE AND EFFECT OF THE EXCHANGE OFFER

The existing notes were sold by the Company on March 30, 1999 to the
initial purchasers, Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities
LLC and Sanders Morris Mundy Inc., pursuant to a purchase agreement. As a
condition to the purchase of the existing notes by the initial purchasers, the
Company and the guarantors entered into a registration rights agreement with the
initial purchasers, which requires, among other things, that promptly following
the issuance and sale of the existing notes, the Company and the guarantors file
with the Commission the registration statement with respect to the exchange
notes, use their reasonable best efforts to cause the registration statement to
become effective under the Securities Act and, upon the effectiveness of the
registration statement, offer to the holders of the existing notes the
opportunity to exchange their existing notes for a like principal amount of
exchange notes, which will be issued without a restrictive legend and may be
reoffered and resold by the holder without restrictions or limitations under the
Securities Act. A copy of the registration rights agreement has been filed as an
exhibit to the registration statement of which this prospectus is a part. The
term "holder" with respect to the exchange offer means any person in whose
name existing notes are registered on the Company's books.

Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the exchange
notes issued pursuant to the exchange offer may be offered for resale, resold
and otherwise transferred by the holders thereof (other than holders who are
broker-dealers or a person that is an "affiliate" (within the meaning of Rule
405 of the Securities Act) of the Company) without further compliance with the
registration and prospectus delivery provisions of the Securities Act. However,
any purchaser of notes who is an affiliate of the Company or who intends to
participate in the exchange offer for the purpose of distributing the exchange
notes, or any broker-dealer who purchased the notes from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
(1) will not be able to rely on the interpretations by the staff of the
Commission set forth in the above-mentioned no-action letters; (2) will not be
able to tender its notes in the exchange offer; and (3) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the notes unless such sale or transfer
is made pursuant to an exemption from such requirements. The Company does not
intend to seek its own no-action letter, and there is no assurance that the
staff of the Commission would make a similar determination with respect to the
exchange notes as it has in such no-action letters to third parties. See "Plan
of Distribution."

As a result of the filing and effectiveness of the registration statement
of which this prospectus is a part, the Company and the guarantors will not be
required to pay an increased interest rate on the existing notes. Following the
consummation of the exchange offer, holders of existing notes not tendered will
not have any further registration rights except in certain limited circumstances
requiring the filing of a shelf registration statement, and the existing notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for the existing notes could be adversely affected.

TERMS OF THE EXCHANGE OFFER

Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, the Company will accept all existing notes
properly tendered and not withdrawn prior to 5:00 p.m. New York City time on the
expiration date. After authentication of the exchange notes by the trustee or an
authenticating agent, the Company will issue $1,000 principal amount of exchange
notes in exchange for each $1,000 principal amount of outstanding existing notes
accepted in the exchange offer. Holders may tender some or all of their existing
notes pursuant to the exchange offer in denominations of $1,000 and integral
multiples thereof.

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Each holder of existing notes (other than certain specified holders) who
wishes to exchange existing notes for exchange notes in the exchange offer will
be required to represent that (1) it is not an affiliate of the Company or any
guarantor of the notes, (2) any exchange notes to be received by it were
acquired in the ordinary course of its business and (3) it has no arrangement
with any person to participate in the distribution (within the meaning of the
Securities Act) of the exchange notes.

Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. The staff of the SEC has taken the position
that participating broker-dealers may fulfill their prospectus delivery
requirements with respect to the exchange notes (other than a resale of an
unsold allotment from the original sale of the notes) with the prospectus
contained in the exchange offer registration statement. The Company will be
required to allow participating broker-dealers to use the prospectus contained
in the exchange offer registration statement (subject to certain "black out"
periods) following the exchange offer, in connection with the resale of exchange
notes received in exchange for notes acquired by such participating
broker-dealers for their own account as a result of market-making or other
trading activities. See "Plan of Distribution."

The form and terms of the exchange notes are identical in all material
respects to the form and terms of the existing notes except that (1) the
exchange notes will be issued in a transaction registered under the Securities
Act, (2) the exchange notes will not be subject to transfer restrictions and (3)
certain provisions relating to an increase in the stated interest rate on the
existing notes provided for in certain circumstances will be eliminated. The
exchange notes will evidence the same debt as the existing notes. The exchange
notes will be issued under and entitled to the benefits of the indenture.

As of the date of this prospectus, $100,000,000 aggregate principal amount
of the existing notes is outstanding. In connection with the issuance of the
existing notes, the Company arranged for the existing notes, which were
initially purchased by qualified institutional buyers as defined pursuant to
Rule 144A under the Securities Act, to be issued and transferable in book-entry
form through the facilities of the depositary, acting as depositary. The
exchange notes will also be issuable and transferable in book-entry form through
the depositary.

This prospectus, together with the accompanying letter of transmittal, is
initially being sent to all registered holders as of the close of business on
May 11, 1999. The Company intends to conduct the exchange offer in accordance
with the applicable requirements of the Exchange Act, and the rules and
regulations of the Commission thereunder, including Rule 14e-1, to the extent
applicable. The exchange offer is not conditioned upon any minimum aggregate
principal amount of existing notes being tendered, and holders of the existing
notes do not have any appraisal or dissenters' rights under the General
Corporation Law of the State of Delaware or under the indenture in connection
with the exchange offer. The Company shall be deemed to have accepted validly
tendered existing 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 for the purpose of receiving
exchange notes from the Company and delivering exchange notes to such holders.

If any tendered existing notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted existing notes will be returned, at the
Company's cost, to the tendering holder thereof as promptly as practicable after
the expiration date.

Holders who tender existing notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
existing notes pursuant to the exchange offer. The Company will pay all charges
and expenses, other than certain applicable taxes, in connection with the
exchange offer. See "-- Solicitation of Tenders; Fees and Expenses."

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NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF EXISTING NOTES AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING ALL OR ANY PORTION OF THEIR EXISTING NOTES PURSUANT TO THE
EXCHANGE OFFER. MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF EXISTING NOTES MUST MAKE THEIR OWN DECISION WHETHER
TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF
EXISTING NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF
TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN
FINANCIAL POSITION AND REQUIREMENTS.

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "expiration date" shall mean 5:00 p.m., New York City time, on
June 9, 1999, 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 Company expressly reserves the right, in its sole discretion (1) to
delay acceptance of any existing notes, to extend the exchange offer or to
terminate the exchange offer and to refuse to accept existing 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 (2) to
amend the terms of the exchange offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof by the Company to the registered
holders of the existing notes. 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 such amendment.

Without limiting the manner in 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 publish, advise 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 date of issuance of the
existing notes that are tendered in exchange for the exchange notes (or the most
recent date on which interest was paid or duly provided for on the existing
notes surrendered in exchange for the exchange notes). Accordingly, holders of
existing notes that are accepted for exchange will not receive interest that is
accrued but unpaid on such existing notes at the time of tender. Interest on the
exchange notes will be payable semi-annually on each April 1 and October 1,
commencing on October 1, 1999.

PROCEDURES FOR TENDERING

Only a holder may tender its existing notes in the exchange offer. To
tender in the exchange offer, a holder must complete, sign and date the letter
of transmittal or a facsimile thereof, have the signatures thereof guaranteed if
required by the letter of transmittal, and mail or otherwise deliver such letter
of transmittal or such facsimile, together with the existing 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 the depositary's
book-entry transfer facility system may make book-entry delivery of the existing
notes by causing the depositary to transfer such existing notes into the
exchange agent's account in accordance with the depositary's procedure for such
transfer. Although delivery of existing notes may be effected through book-entry
transfer into the exchange agent's account at the depositary, the letter of
transmittal (or facsimile thereof), with any

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required signature guarantees and any other required documents, must, in any
case, be transmitted to and received 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 THE DEPOSITARY IN ACCORDANCE
WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.

The tender by a holder will constitute an agreement between such holder,
the Company and the exchange agent in accordance with the terms and subject to
the conditions set forth herein and in the letter of transmittal.

THE LETTER OF TRANSMITTAL WILL INCLUDE REPRESENTATIONS TO THE COMPANY THAT,
AMONG OTHER THINGS, (1) THE EXCHANGE NOTES RECEIVED PURSUANT TO THE EXCHANGE
OFFER ARE BEING ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON
RECEIVING SUCH EXCHANGE NOTES (WHETHER OR NOT SUCH PERSON IS THE HOLDER), (2)
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, (3)
NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON IS AN "AFFILIATE," AS DEFINED IN
RULE 405 UNDER THE SECURITIES ACT, OF THE COMPANY OR ANY GUARANTOR, (4) THE
HOLDER IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF
THE EXCHANGE NOTES, AND (5) IF THE TENDERING HOLDER IS A BROKER OR DEALER (AS
DEFINED IN THE EXCHANGE ACT) (A) IT ACQUIRED THE EXISTING NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND
(B) IT HAS NOT ENTERED INTO ANY ARRANGEMENT OR UNDERSTANDING WITH THE COMPANY,
ANY GUARANTOR OR ANY "AFFILIATE" OF THE COMPANY OR ANY GUARANTOR (WITHIN THE
MEANING OF RULE 405 UNDER THE SECURITIES ACT) TO DISTRIBUTE THE EXCHANGE NOTES
TO BE RECEIVED IN THE EXCHANGE OFFER. In the case of a broker-dealer that
receives exchange notes for its own account in exchange for existing notes which
were acquired by it as a result of market-making or other trading activities,
the letter of transmittal will also include an acknowledgment that the
broker-dealer will deliver a copy of this prospectus in connection with the
resale by it of exchange notes received pursuant to the exchange offer. See
"Plan of Distribution."

THE METHOD OF DELIVERY OF EXISTING NOTES AND THE LETTER 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 DELIVERY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY ALSO REQUEST THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES EFFECT SUCH TENDER FOR HOLDERS IN EACH CASE
AS SET FORTH HEREIN AND IN THE LETTER OF TRANSMITTAL.

Any beneficial owner whose existing 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 promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the letter of transmittal and delivering his existing notes, either
make appropriate arrangements to register ownership of the existing notes in
such owner's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.

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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.
or a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act unless the existing notes tendered pursuant
thereto are tendered (1) by a registered holder who has not completed the box
entitled "Special Registration Instructions" or "Special Delivery
Instructions" of the letter of transmittal or (2) for the account of an
eligible institution. If the letter of transmittal is signed by a person other
than the registered holder listed therein, such existing notes must be endorsed
or accompanied by appropriate bond powers which authorize such person to tender
the existing notes on behalf of the registered holder, in either case signed as
the name of the registered holder or holders appears on the existing notes. If
the letter of transmittal or any existing notes or bond powers are signed or
endorsed 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 such letter of transmittal.

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered existing notes will be
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
existing notes not properly tendered or any existing 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 existing 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 existing notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of existing notes, 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 existing
notes nor shall any of them incur any liability for failure to give such
notification. Tenders of existing notes will not be deemed to have been made
until such irregularities have been cured or waived. Any existing notes received
by the exchange agent that the Company determines are not properly tendered or
the tender of which is otherwise rejected by the Company and as to which the
defects or irregularities have not been cured or waived by the Company will be
returned by the exchange agent to the tendering holder unless otherwise provided
in the letter of transmittal, as soon as practicable following the expiration
date.

In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any existing 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 existing 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.

BOOK-ENTRY TRANSFER

The Company understands that the exchange agent will make a request
promptly after the date of this prospectus to establish accounts with respect to
the existing notes at the DTC for the purpose of facilitating the exchange
offer, and subject to the establishment thereof, any financial institution that
is a participant in the book-entry transfer facility's system may make
book-entry delivery of existing notes by causing such book-entry transfer
facility to transfer such existing notes into the exchange agent's account with
respect to the existing notes in accordance with the book-entry transfer
facility's procedures for such transfer. Although delivery of existing notes may
be effected through book-entry transfer into the exchange agent's account at the
book-entry transfer facility, an appropriate letter of transmittal properly
completed and duly executed with any required signature guarantee and all other

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required documents must in each case be transmitted to and received or confirmed
by the exchange agent at its address set forth below on or prior to the
expiration date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures. Delivery
of documents to the book-entry transfer facility does not constitute delivery to
the exchange agent.

GUARANTEED DELIVERY PROCEDURES

Holders who wish to tender their existing notes and (1) whose existing
notes are not immediately available, or (2) who cannot deliver their existing
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;

(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 transmittal, mail or hand delivery)
setting forth the name and address of the holder, the certificate
number or numbers of such holder's existing notes and the principal
amount of such existing 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 existing
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 existing notes in proper form for transfer (or confirmation
of a book-entry transfer into the exchange agent's account at the
depositary of existing 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.

Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their existing notes according to the
guaranteed delivery procedures set forth above.

WITHDRAWAL OF TENDERS

Except as otherwise provided herein, tenders of existing 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 existing notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the expiration date. Any such notice of withdrawal must (1) specify the name of
the person having deposited the existing notes to be withdrawn (the
"Depositor"), (2) identify the existing notes to be withdrawn (including the
certificate number or numbers and principal amount of such existing notes or, in
the case of existing notes transferred by book-entry transfer, the name and
number of the account at the depositary to be credited), (3) be signed
transmittal by which such existing notes were tendered (including any required
signature guarantee) or be accompanied by documents of transfer sufficient to
permit the trustee with respect to the existing notes to register the transfer
of such existing notes into the name of the Depositor withdrawing the tender and
(4) specify the name in which any such existing 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) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any existing 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 existing notes so withdrawn are validly
retendered. Any existing notes that have been tendered but are not accepted for
exchange will be returned to the holder thereof without

22
<PAGE>
cost to such holder as soon as practicable after withdrawal, rejection of tender
or termination of the exchange offer. Properly withdrawn existing notes may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.

TERMINATION

Notwithstanding any other term of the exchange offer, the Company will not
be required to accept for exchange, or to exchange exchange notes for, any
existing notes, and may terminate or amend the exchange offer as provided herein
before the acceptance of such existing notes if, in the Company's judgment, the
Company's ability to proceed with the exchange offer can reasonably be expected
to be impaired as a result of certain events set forth in the registration
rights agreement. Accordingly, the exchange offer is subject to the following
conditions: (1) that the exchange offer does not violate applicable law or any
applicable interpretation of the staff of the Commission, (2) 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 no
material adverse development shall have occurred in any action or proceeding
existing as of March 30, 1999 with respect to the Company or any of the
subsidiary guarantors, (3) that all governmental approvals shall have been
obtained, which approvals the Company and the subsidiary guarantors deem
necessary for the consummation of the exchange offer and (4) that the existing
notes are tendered in accordance with the terms of the exchange offer.

If the Company determines that it may terminate the exchange offer for any
of the reasons set forth above, the Company may (1) refuse to accept any
existing notes and return any existing notes that have been tendered to the
holders thereof, (2) extend the exchange offer and retain all existing notes
tendered prior to the expiration date of the exchange offer, subject to the
rights of such holders of tendered existing notes to withdraw their tendered
existing notes or (3) waive such termination event with respect to the exchange
offer and accept all properly tendered existing 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, 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, if the exchange offer would otherwise expire during such
period.

EXCHANGE AGENT

State Street Bank and Trust Company, the trustee under the indenture, has
been appointed as exchange agent for the exchange offer. In such capacity, the
exchange agent has no fiduciary duties and will be acting solely on the basis of
directions of the Company. Requests for assistance and requests for additional
copies of this prospectus or of the letter of transmittal should be directed to
the exchange agent addressed as follows:

By Mail: State Street Bank and Trust Company
Two International Place
P.O. Box 778
Boston, Massachusetts 02110

By Hand Delivery or Overnight State Street Bank and Trust Company
Courier: Two International Place, 4th Floor
Boston, Massachusetts 02110
Facsimile Transmission: (617) 664-5290
Confirm by Telephone: (617) 664-5587

DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.

23
<PAGE>
SOLICITATION OF TENDERS; FEES AND EXPENSES

The expenses of soliciting tenders pursuant to the exchange offer will be
borne by the Company. The principal solicitation 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,
telephone or telecopier.

The Company has not retained any dealer-manager in connection with the
exchange offer and 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 costs and expenses
in connection therewith and will indemnify the exchange agent for all losses and
claims incurred by it as a result of the exchange offer. 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 existing notes and in handling or forwarding tenders for exchange.

The expenses to be incurred in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and accounting and
legal fees and printing costs, will be paid by the Company.

The Company will pay all transfer taxes, if any, applicable to the exchange
of existing notes pursuant to the exchange offer. If, however, certificates
representing exchange notes or existing 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 registered holder of the
existing notes tendered, or if tendered existing notes are registered in the
name of any person other than the person signing the letter of transmittal, or
if a transfer tax is imposed for any reason other than the exchange of existing
notes pursuant to the exchange offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the letter of transmittal, the amount
of such transfer taxes will be billed by the Company directly to such tendering
holder.

ACCOUNTING TREATMENT

The exchange notes will be recorded at the same carrying value as the
existing notes, as reflected in the Company's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company upon the consummation of the exchange offer. The
expenses of the exchange offer will be amortized by the Company over the term of
the exchange notes.

FEDERAL INCOME TAX CONSEQUENCES

The exchange of exchange notes for existing notes pursuant to the exchange
offer should not be treated as an "exchange" for United States federal income
tax purposes because the exchange notes should not be considered to differ
materially in kind or extent from the existing notes. Rather, the exchange notes
received by a United States holder should be treated as a continuation of the
existing notes in the hands of such holder. As a result, there should be no
United States federal income tax consequences to United States holders
exchanging existing notes for exchange notes pursuant to the exchange offer.

OTHER

Participation in the exchange offer is voluntary. Holders of the existing
notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.

As a result of the making of, and upon acceptance for exchange of all
validly tendered existing notes pursuant to the terms of, this exchange offer,
the Company will have fulfilled a covenant

24
<PAGE>
contained in the terms of the registration rights agreement. Holders of the
existing notes who do not tender their certificates in the exchange offer will
continue to hold such certificates and will be entitled to all the rights, and
subject to the limitations applicable thereto, under the indenture governing the
notes, except for any such rights under the registration rights agreement that
by their term terminate or cease to have further effect as a result of the
making of this exchange offer. See "Description of the Notes." All untendered
existing notes will continue to be subject to the restrictions on transfer set
forth in the indenture. To the extent that existing notes are tendered and
accepted in the exchange offer, the trading market for untendered existing notes
could be adversely affected.

The Company may in the future seek to acquire untendered existing notes in
the open market or through privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company intends to make any such acquisitions
of existing notes in accordance with the applicable requirements of the Exchange
Act, and the rules and regulations of the Commission thereunder, including Rule
14e-1, to the extent applicable. The Company has no present plan to acquire any
existing notes that are not tendered in the exchange offer or to file a
registration statement to permit resales of any existing notes that may be but
are not tendered pursuant to the exchange offer.

25
<PAGE>
USE OF PROCEEDS

The Company will not receive any cash proceeds from the issuance of the
exchange notes. In consideration for issuing the exchange notes as contemplated
in this prospectus, the Company will receive in exchange existing notes in like
principal amount, the terms of which are identical in all material respects to
the exchange notes except that the exchange notes will be issued in a
transaction registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and certain provisions relating to an increase
in the stated interest rate on the existing notes provided for under certain
circumstances will be eliminated. The existing notes surrendered in exchange for
exchange notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the exchange notes will not result in a change in the indebtedness
of the Company.

26
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at
December 31, 1998 on an actual basis, and as adjusted to give effect to the sale
of the existing notes and the application of the net proceeds therefrom. See
"Use of Proceeds." The financial data in the following table should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto included elsewhere in this prospectus.

AS OF
DECEMBER 31, 1998
--------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(Dollars in thousands)
Current maturities of long-term debt and
capital lease obligations(2).......... $ 31,957 $ 405
-------- --------------
Long-term debt and capital lease
obligations, net of current
portion............................... 106,632 44,468
Notes offered hereby.................... -- 97,216
-------- --------------
Total long-term debt............... 106,632 141,684
Stockholders' equity:
Preferred stock, $0.01 par value,
10,000,000 shares authorized,
no shares issued and outstanding...... -- --
Common stock, $0.01 par value,
51,000,000 shares authorized,
16,668,129 shares issued and
outstanding(3)........................ 167 167
Additional paid-in capital.............. 100,501 100,501
Retained earnings(4).................... 15,942 15,942
-------- --------------
Total stockholders' equity......... 116,610 116,610
-------- --------------
Total capitalization............... $255,199 $258,699
======== ==============
- ------------
(1) As adjusted to reflect the sale of the existing notes and the application of
the net proceeds therefrom. Following the sale of the existing notes and the
application of the net proceeds therefrom, the Company estimates it would
have available under its bank credit facility approximately $32.1 million
and $34.1 million at December 31, 1998 and February 28, 1999, respectively,
for subsequent borrowings (based on borrowing base limitations of $73.5
million and $82.9 million, respectively).

(2) A portion of the Company's borrowings under its bank credit facility has
been classified as current liabilities. See "Description of Bank Credit
Facility."

(3) Includes 667,000 shares of restricted common stock. Excludes (i) outstanding
options to purchase 1,109,105 shares at a weighted average exercise price of
$10.24 and (ii) outstanding warrants to purchase 50,000 shares at $6.00 per
share.

(4) The as adjusted amount does not reflect an approximately $1.4 million, net
of tax, write-off of debt issuance costs on our bank credit facility as a
result of the restructuring and partial extinguishment of the bank credit
facility which has been recorded in the quarter ended March 31, 1999.

27
<PAGE>
SELECTED FINANCIAL DATA

Pentacon was incorporated in March 1997. Simultaneously with the closing of
the initial public offering of its common stock, in March 1998, Pentacon
acquired in separate transactions (the "Initial Acquisitions") five
businesses: Alatec Products, Inc. (Alatec), AXS Solutions Inc. (AXS), Capitol
Bolt & Supply, Inc. (Capitol), Maumee Industries, Inc. (Maumee), and Sales
Systems, Limited (SSL) (collectively referred to as the "Founding Companies").
For financial reporting purposes, Alatec has been identified as the accounting
acquiror. Accordingly, the historical financial statements of Alatec have become
the historical financial statements of the Company. The selected historical
financial data as of and for the years ended December 31, 1995 and 1996, nine
months ended September 30, 1997, and year ended September 30, 1998 have been
derived from Pentacon's audited financial statements. The selected historical
financial data as of and for the year ended December 31, 1994, and as of and for
the three months ended December 31, 1997 and 1998 has been derived from
unaudited financial statements of Pentacon which have been prepared on the same
basis as the audited financial statements and, in the opinion of Pentacon,
reflect all adjustments consisting of normal recurring adjustments necessary for
a fair presentation of such data. Since March 1998, Pentacon has acquired in
separate transactions (the "Subsequent Acquisitions" and, together with the
Initial Acquisitions, the "Acquisitions") four additional businesses: Pace
Products, Inc., D-Bolt Company, Inc., Texas International Aviation, Inc. and ASI
Aerospace Group, Inc. The companies acquired in the Acquisitions are referred to
as the "Acquired Businesses."

The pro forma consolidated financial data give effect to all businesses
acquired by Pentacon as if such acquisitions were consummated as of the
beginning of the periods presented, but do not give effect to the offering of
the notes, except where noted below. The pro forma results of operations are not
necessarily indicative of the results that would have occurred had the
acquisitions been consummated as of October 1, 1996 or that might be attained in
the future.
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------------------------
THREE MONTHS
FISCAL ENDED
YEAR ENDED NINE MONTHS YEAR DECEMBER 31,
--------------------------------- ENDED ENDED --------------------
12/31/94 12/31/95 12/31/96 9/30/97 9/30/98(2) 1997 1998
--------- --------- --------- ------------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Revenues............................. $33,700 $41,204 $44,726 $ 42,296 $ 141,078 $ 14,502 $ 66,720
Cost of sales........................ 21,926 26,196 26,707 25,114 91,026 8,555 45,021
--------- --------- --------- ------------ ----------- --------- ---------
Gross profit......................... 11,774 15,008 18,019 17,182 50,052 5,947 21,699
Operating expenses................... 10,238 11,285 12,818 11,664 36,524 5,397 14,575
Goodwill amortization................ -- -- -- -- 1,111 20 853
--------- --------- --------- ------------ ----------- --------- ---------
Operating income................. 1,536 3,723 5,201 5,518 12,417 530 6,271
Other (income) expense, net.......... 13 69 (56) (26) (91) (13) (7)
Interest expense..................... 686 1,235 1,118 1,015 2,448 295 3,102
--------- --------- --------- ------------ ----------- --------- ---------
Income before taxes.............. 837 2,419 4,139 4,529 10,060 248 3,176
Income taxes......................... 384 995 1,628 1,860 5,373 103 1,545
--------- --------- --------- ------------ ----------- --------- ---------
Net income....................... $ 453 $ 1,424 $ 2,511 $ 2,669 $ 4,687 $ 145 $ 1,631
========= ========= ========= ============ =========== ========= =========
Earnings per Share --
Basic & Diluted.................... $ 0.85 $ 0.90 $ 0.45 0.05 $ 0.10
OTHER DATA:
EBITDA(3)............................ $ 1,654 $ 3,925 $ 5,437 $ 5,673 $ 14,306 $ 588 $ 7,765
Depreciation and amortization........ 131 271 180 129 1,798 45 1,487
Capital expenditures................. 118 89 114 138 3,097 85 795
SELECTED RATIOS:
Ratio of earnings to fixed charges(4)
Actual........................... 2.0x 2.7x 4.2x 4.9x 4.4x 1.7x 2.0x
Pro forma(5)..................... 3.0x 1.2x
Supplemental pro forma(6)........

PRO FORMA(1)
---------------------------------------
TWELVE THREE MONTHS
MONTHS FISCAL YEAR ENDED
ENDED ENDED DECEMBER 31,
9/30/97 9/30/98 1997
-------- ------------ -------------
STATEMENT OF OPERATIONS DATA:
Revenues............................. $223,673 $283,794 $65,345
Cost of sales........................ 150,652 188,813 43,844
-------- ------------ -------------
Gross profit......................... 73,021 94,981 21,501
Operating expenses................... 49,485 59,746 15,161
Goodwill amortization................ 3,407 3,400 853
-------- ------------ -------------
Operating income................. 20,129 31,835 5,487
Other (income) expense, net.......... (30) (44) 77
Interest expense..................... 10,248 10,467 2,555
-------- ------------ -------------
Income before taxes.............. 9,911 21,412 2,855
Income taxes......................... 5,461 10,172 1,520
-------- ------------ -------------
Net income....................... $ 4,450 $ 11,240 1,335
======== ============ =============
Earnings per Share --
Basic & Diluted.................... $ 0.27 $ 0.67 $ 0.08
OTHER DATA:
EBITDA(3)............................ $ 25,369 $ 36,862 $ 6,743
Depreciation and amortization........ 5,210 4,983 1,333
Capital expenditures................. 952 4,296 355
SELECTED RATIOS:
Ratio of earnings to fixed charges(4)
Actual...........................
Pro forma(5).....................
Supplemental pro forma(6)........ 1.9x
</TABLE>

28
<PAGE>

<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------------
AS OF DECEMBER 31, AS OF SEPTEMBER 30, AS OF
------------------------------- -------------------- DECEMBER 31,
1994 1995 1996 1997 1998 1998
--------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
BALANCE SHEET DATA:
Total assets............................ $ 19,902 $ 23,226 $ 28,519 $ 34,911 $ 304,391 $301,353
Long-term debt (including current
maturities)........................... 9,671 10,698 11,588 14,050 149,894 138,589
Stockholders' equity.................... 3,695 5,119 7,630 8,384 114,914 116,610
</TABLE>
- ------------
(1) The pro forma income statement data assumes that the Acquisitions and our
initial public offering occurred at the beginning of the period presented
(except for Capitol, whose historical results for twelve months from
September 1, 1996 to August 31, 1997 were used for the twelve months ended
September 30, 1997 pro forma information). These pro forma results are not
necessarily indicative of the results we would have obtained had these
events actually then occurred or of our future results. During the periods
presented above, the Acquired Businesses were not under common control or
management and, therefore, the data presented may not be comparable to or
indicative of post-Acquisition results to be achieved by the Company. The
pro forma income statement data is based on available information and
certain assumptions that management deems appropriate and should be read in
conjunction with the other financial statements and notes thereto included
elsewhere in this prospectus. Neither the potential cost savings from
consolidating certain operational and administrative functions nor the costs
of corporate overhead, other than salaries of executive officers, nor those
other costs and savings actually experienced after the acquisitions have
been included in the pro forma financial information. In addition, the pro
forma information may not be indicative of actual 1999 results of
operations. See "Risk Factors -- Concentration of Customer Base; Factors
Relating to Certain Customers" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Introduction."

(2) On October 28, 1998, we changed our fiscal year end from September 30 to
December 31.

(4) For purposes of this ratio, "earnings" consist of earnings before income
taxes and fixed charges, and "fixed charges" consist of interest expense,
the interest portion of rental expense and amortization of debt issuance
costs.

(5) Gives effect to the refinancing of a portion of our historical debt with the
net proceeds received from the offering of the existing notes.

(6) Gives effect to the businesses we have acquired as if such Acquisitions were
consummated as of the beginning of the periods presented and to the
refinancing of a portion of our historical debt with the net proceeds
received from the offering of the existing notes.

29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE "SELECTED
FINANCIAL DATA" APPEARING ELSEWHERE IN THIS PROSPECTUS.

INTRODUCTION

Pentacon was incorporated in March 1997. Simultaneously with the closing of
the initial public offering of its common stock, on March 10, 1998, Pentacon
acquired in separate transactions five businesses: Alatec Products, Inc.
(Alatec), AXS Solutions Inc. (AXS), Capitol Bolt & Supply, Inc. (Capitol),
Maumee Industries, Inc. (Maumee) and Sales Systems, Limited (SSL). For financial
reporting purposes, Alatec has been identified as the accounting acquiror.
Accordingly, the historical financial statements of Alatec have become the
historical financial statements of Pentacon. Since March 10, 1998, Pentacon has
acquired in separate transactions four additional businesses: Pace Products,
Inc., D-Bolt Company, Inc., Texas International Aviation, Inc. and ASI Aerospace
Group, Inc.

Pentacon adopted a fiscal year-end of September 30, and the accounting
acquiror, Alatec, changed its fiscal year-end to September 30 to conform to
Pentacon's fiscal year-end. The nine-month period ended September 30, 1997 is
therefore used for comparison purposes to the years ended September 30, 1998 and
December 31, 1996. On October 28, 1998, the Company changed its fiscal year end
from September 30 to December 31.

All Acquisitions of the Company have been accounted for under the purchase
method of accounting. Accordingly, the Historical Consolidated Financial
Statements of the Company include the operating results of the Acquired
Businesses from the date of their acquisition. Because the Company's historical
consolidated operating results have been significantly affected by the number,
timing and size of the Acquisitions, pro forma financial data are provided
herein for a more meaningful period-to-period comparison of the Company's
operating results. The pro forma financial data for the quarters ended December
31, 1997 and 1998 and the years ended September 30, 1997 and 1998 have been
prepared assuming all of the Acquisitions were consummated as of the beginning
of such periods, but do not give effect to the offering of the notes. The pro
forma results of operations are not necessarily indicative of the results that
would have occurred had the Acquisitions been consummated as of the beginning of
the periods presented or that might be attained in the future. Our pro forma
1998 results may not be indicative of our 1999 results, as discussed below.

The Company's revenues are derived from the sale of fasteners and other
small parts with associated inventory management services. Revenues are
recognized upon shipment of the product to the customer. Cost of goods and
services consists primarily of materials, cost of products sold, costs for
product processing and modification, freight and obsolescence. Operating
expenses consist primarily of compensation and related benefits, advertising,
facility rent and utilities, communications and professional fees.

The Company's future results of operations will be affected by a variety of
factors, including, by way of example, its ability to compete for new customers
and maintain or increase levels of business with existing customers, its ability
to source fastener products desired by its customers at costs resulting in
favorable margins to the Company, the extent to which it pursues acquisitions
and its ability to integrate those acquisitions, inventory levels and events and
trends involving significant customers. The Company has a number of customers
that account for a significant portion of its revenues and a change in some of
the factors described above with respect to a particular customer could have a
material adverse effect on the Company's results of operations and prospects. In
1999, the Company expects to focus on a number of opportunities to further
penetrate existing customers and to further integrate its Acquired Businesses.
However, we expect our 1999 results of operations to be adversely affected by
certain factors relating to our two largest customers, The Boeing Company and
Cummins Engine Company.

30
<PAGE>
In the case of Boeing, we expect to continue to be impacted by the excess
fastener inventory position of Boeing and its subcontractors through the third
quarter of 1999 and by Boeing's plans to reduce production levels in 2000.
However, we cannot determine the impact of Boeing's most recent announcement
that it may divest or eliminate certain businesses and seek to improve
profitability at others (including through cost reductions and lower inventory
levels). In addition, in February 1999, one of the Company's two largest
customers completed a reengineering effort designed to reduce the number of its
parts distributors and reduce its product and procurement costs. As the result
of a competitive process, the Company has been selected as the primary fastener
and small parts distributor to supply this customer, which is expected to lead
to additional future revenues, although sales to such customer will be at lower
gross margin percentages than in the periods ended December 31, 1998. To offset
such lower margins, the Company expects to reduce certain costs associated with
supplying this customer over time, provided there can be no assurance that such
cost reductions will fully offset such lower margins. The Company believes these
factors will cause reported results of operations (including EBITDA) for the
first three quarters of 1999 to be lower than the comparable pro forma periods
of 1998, which is expected to lead to lower operating results for 1999 as
compared with pro forma 1998. See "Risk Factors -- Concentration of Customer
Base; Factors Relating to Certain Customers" and "Business -- Customers."

The Company currently operates under a decentralized management structure
with each subsidiary utilizing its existing management information system and is
in the process of consolidating its management and management information
systems. In addition, the Company anticipates that it will realize savings from
(i) greater volume discounts from suppliers, (ii) consolidation of insurance
programs and other general and administrative expenses and (iii) synergies among
the subsidiaries which will generate cost reductions and cross selling benefits.
However, there will be certain costs related to the Company's new corporate
management, costs associated with being a public company and integration costs.
None of these savings and only a portion of the costs are reflected in the Pro
Forma or Historical Combined Statement of Operations.

HISTORICAL THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THE PRO FORMA
THREE MONTHS ENDED DECEMBER 31, 1997

The following table sets forth the historical results of operations for the
three months ended December 31, 1998 and the results of operations of the
Acquired Businesses on a pro forma basis and such results as a percentage of
revenues. The pro forma financial data have been prepared assuming all
Acquisitions were consummated as of the beginning of such periods.

<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
-------------------- --------------------
DECEMBER 31, 1997 DECEMBER 31, 1998
-------------------- --------------------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Revenues............................. $ 65,345 100.0% $ 66,720 100.0%
Cost of sales........................ 43,844 67.1 45,021 67.5
--------- --------- --------- ---------
Gross profit......................... 21,501 32.9 21,699 32.5
Operating expenses................... 15,161 23.2 14,575 21.8
Goodwill amortization................ 853 1.3 853 1.3
--------- --------- --------- ---------
Operating income..................... $ 5,487 8.4% $ 6,271 9.4%
========= ========= ========= =========
</TABLE>

REVENUES. Revenues increased 2.1% to $66.7 million for the three months
ended December 31, 1998 from $65.3 million for the three months ended December
31, 1997. The increase in revenues in the industrial sector of $0.8 million or
2.8% was primarily due to increases in sales to existing customers partially
offset by reduced sales to one of the Company's two largest customers. The
increase in revenues in the aerospace sector of $0.6 million or 1.6% resulted
primarily from the sale of inventory management services to new and existing
customers partially offset by lower sales to a large aerospace customer.

31
<PAGE>
COST OF SALES. Cost of sales increased $1.2 million, or 2.7%, to $45.0
million for the three months ended December 31, 1998 from $43.8 million for the
three months ended December 31, 1997. As a percentage of revenues, cost of sales
increased from 67.1% in the three months ended December 31, 1997 to 67.5% in the
three months ended December 31, 1998. The decline in margins as a percentage of
sales was a result of reduced margins in the industrial sector primarily from a
decrease in margins with one of the Company's two largest customers and lower
margins experienced with a new customer. This decline was partially offset by an
increase in aerospace sector margins resulting primarily from increased sales of
inventory management services.

OPERATING EXPENSES. Operating expenses decreased $0.6 million, or 3.9%, to
$14.6 million for the three months ended December 31, 1998 from $15.2 million
for the three months ended December 31, 1997. As a percentage of revenues,
operating expenses decreased to 21.8% for the three months ended December 31,
1998 from 23.2% for the three months ended December 31, 1997. The decrease was
primarily attributable to reductions in personnel and related costs while
maintaining a level volume of sales and lower sales commissions resulting from
decreased international sales.

OPERATING INCOME. Due to the factors discussed above, operating income
increased $0.8 million to $6.3 million for the three months ended December 31,
1998 from $5.5 million for the three months ended December 31, 1997. As a
percentage of revenues, operating income increased to 9.4% for the three months
ended December 31, 1998 from 8.4% for the three months ended December 31, 1997.

PRO FORMA YEAR ENDED SEPTEMBER 30, 1998 COMPARED WITH THE PRO FORMA YEAR
ENDED SEPTEMBER 30, 1997

The following table sets forth the results of operations of the Acquired
Businesses on a pro forma basis and such results as a percentage of revenues.
The pro forma financial data have been prepared assuming all Acquisitions were
consummated as of the beginning of such periods.

<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------
SEPTEMBER 30, 1997 SEPTEMBER 30, 1998
--------------------- ---------------------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Revenues............................. $ 223,673 100.0% $ 283,794 100.0%
Cost of sales........................ 150,652 67.4 188,813 66.5
---------- --------- ---------- ---------
Gross profit......................... 73,021 32.6 94,981 33.5
Operating expenses................... 49,485 22.1 59,746 21.1
Goodwill amortization................ 3,407 1.5 3,400 1.2
---------- --------- ---------- ---------
Operating income..................... $ 20,129 9.0% $ 31,835 11.2%
========== ========= ========== =========
</TABLE>

REVENUES. Revenues increased by $60.1 million, or 26.9%, from $223.7
million for the year ended September 30, 1997 to $283.8 million for the twelve
months ended September 30, 1998. Approximately 74.7% of the increase in revenues
was due to an increase in revenues of companies in the aerospace sector of $44.9
million which primarily related to increases in sales to existing customers. The
increase in revenues of companies in the industrial sector of $15.2 million was
primarily attributable to increases in sales to existing customers.

COST OF SALES. Cost of sales increased by $38.1 million, or 25.3%, from
$150.7 million for the year ended September 30, 1997 to $188.8 million for the
year ended September 30, 1998. As a percentage of revenues, cost of sales
decreased from 67.4% in the year ended September 30, 1997 to 66.5% for the year
ended September 30, 1998. The decrease was primarily due to a combination of a
1.2 percentage point decrease at companies in the industrial sector and a 0.2
percentage point decrease at companies in the aerospace sector. The decrease in
cost of sales as a percentage of revenues at industrial sector companies was the
result of the ability to implement selective price increases and improvement in
product mix.

OPERATING EXPENSES. Operating expenses increased by $10.2 million, or
20.6%, from $49.5 million in the year ended September 30, 1997 to $59.7 million
in the year ended September 30, 1998.

32
<PAGE>
As a percentage of revenues, operating expenses decreased from 22.1% for the
year ended September 30, 1997 to 21.1% for the year ended September 30, 1998.
The decrease in operating expenses as a percentage of revenues was the result of
an increase in revenues without a commensurate increase in operating expenses.
This result was partially offset by an increase in expenses relating to the
establishment of a corporate office.

OPERATING INCOME. Due to the factors discussed above, operating income
increased by $11.7 million from $20.1 million for the year ended September 30,
1997 to $31.8 million for the year ended September 30, 1998. As a percentage of
revenues, operating income increased from 9.0% for the year ended September 30,
1997 to 11.2% for the year ended September 30, 1998.

COMBINED PRO FORMA DATA

The Company also reports combined pro forma results of operations in press
releases and on Form 10-K. The combined pro forma results of operations assumes
that the Initial Acquisitions and the Company's initial public offering were
closed at the beginning of the period presented and the Subsequent Acquisitions
are only included from each acquisition date. On this basis, the Company
reported revenues of $39.0 million and $66.7 million, gross profit of $13.7
million and $21.7 million and operating income of $2.5 million and $6.3 million
for the quarters ended December 31, 1997 and 1998, respectively. Additionally,
the Company reported revenues of $146.1 million and $187.1 million, gross profit
of $49.5 million and $64.4 million and operating income of $12.5 million and
$18.2 million for the years ended September 30, 1997 and 1998, respectively. The
combined pro forma results of operations and management's discussion and
analysis of financial condition and results of operations of such combined pro
forma data are not included in this prospectus.

HISTORICAL THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THE THREE
MONTHS ENDED DECEMBER 31, 1997

The historical financial information represents the information of Alatec
prior to the Initial Acquisitions and the initial public offering and the
consolidated results of Pentacon subsequent to the Initial Acquisitions and the
initial public offering on March 10, 1998. The following table sets forth
certain selected historical financial data as a percentage of historical
revenues for the periods indicated:

<TABLE>
<CAPTION>
HISTORICAL
THREE MONTH PERIOD ENDED
DECEMBER 31,
------------------------------------------
1997 1998
-------------------- --------------------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Revenues................................ $ 14,502 100.0% $ 66,720 100.0%
Cost of sales........................... 8,555 59.0 45,021 67.5
--------- --------- --------- ---------
Gross profit............................ 5,947 41.0 21,699 32.5
Operating expenses...................... 5,397 37.2 14,575 21.8
Goodwill amortization................... 20 0.1 853 1.3
--------- --------- --------- ---------
Operating income........................ $ 530 3.7% $ 6,271 9.4%
========= ========= ========= =========
</TABLE>

REVENUES. Revenues increased $52.2 million, or 360.0% from $14.5 million
for the three months ended December 31, 1997 to $66.7 million for the three
months ended December 31, 1998. The increase in revenues primarily results from
the Acquisitions (See Note 2 to Consolidated Pentacon, Inc. Financial
Statements).

COST OF SALES. Cost of sales increased $36.4 million, or 423.3%, from $8.6
million for the three months ended December 31, 1997 to $45.0 million for the
three months ended December 31, 1998. The increase in cost of sales primarily
results from the Acquisitions (See Note 2 to Consolidated Pentacon, Inc.
Financial Statements).

OPERATING EXPENSES. Operating expenses increased $9.2 million, or 170.4%,
from $5.4 million for the three months ended December 31, 1997 to $14.6 million
for the three months ended

33
<PAGE>
December 31, 1998. The increase in operating expenses primarily results from the
Acquisitions (See Note 2 to Consolidated Pentacon, Inc. Financial Statements).

OPERATING INCOME. Operating income increased $5.8 million, or 1,160.0%,
from $0.5 million for the three months ended December 31, 1997 to $6.3 million
for the three months ended December 31, 1998 due to the factors noted above.

NON OPERATING COSTS AND EXPENSE. Interest expense for the three months
ended December 31, 1998 totaled $3.1 million compared to $0.3 million for the
three months ended December 31, 1997. The increase in interest expense primarily
results from the Acquisitions (See Note 2 to Consolidated Pentacon, Inc.
Financial Statements).

PROVISION FOR INCOME TAXES. The provision for income taxes for the three
months ended December 31, 1998 was $1.5 million (an effective rate of 48.6%)
compared with $0.1 million (an effective rate of 41.5%) for the three months
ended December 31, 1997. The higher effective tax rate for the year ended
December 31, 1998 primarily results from expenses of $3.8 million recorded for
goodwill amortization and stock-based compensation, which are not deductible for
income tax purposes.

HISTORICAL YEAR ENDED SEPTEMBER 30, 1998 COMPARED WITH THE NINE MONTHS
ENDED SEPTEMBER 30, 1997

The following table sets forth the results of operations of Alatec for the
nine months ended September 30, 1997 and the Acquired Businesses for periods
subsequent to the respective acquisitions on a historical basis for the year
ended September 30, 1998 and such results as a percentage of revenues.

<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1998
-------------------- ---------------------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Revenues................................ $ 42,296 100.0% $ 141,078 100.0%
Cost of sales........................... 25,114 59.4 91,026 64.5
--------- --------- ---------- ---------
Gross profit............................ 17,182 40.6 50,052 35.5
Operating expenses...................... 11,664 27.6 36,524 25.9
Goodwill amortization................... -- -- 1,111 0.8
--------- --------- ---------- ---------
Operating income........................ $ 5,518 13.0% $ 12,417 8.8%
========= ========= ========== =========
</TABLE>

REVENUES. Revenues increased by $98.8 million, or 233.6%, from $42.3
million for the nine months ended September 30, 1997 to $141.1 million for the
year ended September 30, 1998. The increase in revenues primarily results from
the Acquisitions during the year ended September 30, 1998. (See Note 2 to
Consolidated Pentacon, Inc. Financial Statements).

COST OF SALES. Cost of sales increased by $65.9 million, or 262.5%, from
$25.1 million for the nine months ended September 30, 1997 to $91.0 million for
the year ended September 30, 1998. The increase in cost of sales primarily
results from the Acquisitions during the year ended September 30, 1998. (See
Note 2 to Consolidated Pentacon, Inc. Financial Statements).

OPERATING EXPENSES. Operating expenses increased by $24.8 million, or
212.0%, from $11.7 million for the nine months ended September 30, 1997 to $36.5
million for the year ended September 30, 1998. The increase in operating
expenses primarily results from the Acquisitions during the year ended September
30, 1998. (See Note 2 to Consolidated Pentacon, Inc. Financial Statements).

OPERATING INCOME. Operating income increased by $6.9 million, or 125.5%,
from $5.5 million for the nine months ended September 30, 1997 to $12.4 million
for the year ended September 30, 1998 due to the factors noted above.

NON OPERATING COSTS AND EXPENSES. Interest expense for the year ended
September 30, 1998 totaled $2.4 million compared with $1.0 million for the nine
months ended September 30, 1997. The

34
<PAGE>
increase in interest expense related to the higher level of borrowings
outstanding during the period primarily as a result of the Acquisitions.

PROVISION FOR INCOME TAXES. The provision for income taxes for the year
ended September 30, 1998 was $5.4 million (an effective tax rate of 53.4%),
compared with $1.9 million (an effective tax rate of 41.1%) for the nine months
ended September 30, 1997. The higher effective tax rate in 1998 primarily
related to expenses totaling $2.9 million recorded in 1998 for goodwill
amortization and stock-based compensation which are not deductible for income
tax purposes.

HISTORICAL NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE YEAR
ENDED DECEMBER 31, 1996

The following table sets forth the results of operations of Alatec for the
nine months ended September 30, 1997 and the Acquired Businesses for periods
subsequent to the respective acquisitions on a historical basis for the year
ended December 31, 1996 and such results as a percentage of revenues.

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Revenues................................ $ 44,726 100.0% $ 42,296 100.0%
Cost of sales........................... 26,707 59.7 25,114 59.4
--------- --------- --------- ---------
Gross profit............................ 18,019 40.3 17,182 40.6
Operating expenses...................... 12,818 28.7 11,664 27.6
--------- --------- --------- ---------
Operating income........................ $ 5,201 11.6% $ 5,518 13.0%
========= ========= ========= =========
</TABLE>

REVENUES. Revenues for the year ended December 31, 1996 were $44.7 million
compared to revenues for the nine months ended September 30, 1997 of $42.3
million, a decrease of 5.4%. The decrease was a result of non-comparability of
periods. Revenues increased by $9.0 million, or 27.0%, from $33.3 million for
the nine months ended September 30, 1996 to $42.3 million for the nine months
ended September 30, 1997. Approximately $1.0 million of this increase was
attributable to new customers and approximately $8.0 million was due to an
increase in net sales to existing customers.

COST OF SALES. As a percentage of revenues, cost of sales remained
relatively constant at 59.4% in the nine months ended September 30, 1997
compared to 59.7% in the year ended December 31, 1996.

OPERATING EXPENSES. As a percentage of revenues, operating expenses
decreased from 28.7% in the year ended December 31, 1996 to 27.6% in the nine
months ended September 30, 1997. This percentage decrease was a result of an
increase in revenues without a commensurate increase in administrative costs.

OPERATING INCOME. As a percentage of revenues, operating income increased
from 11.6% in the year ended December 31, 1996 to 13.0% in the nine months ended
September 30, 1997 as a result of the factors discussed above.

NON OPERATING COSTS AND EXPENSES. Interest expense for the nine months
ended September 30, 1997 totaled $1.0 million compared to $1.1 million for the
year ended December 31, 1996.

PROVISION FOR INCOME TAXES. The provision for income taxes for the nine
months ended September 30, 1997 was $1.9 million (an effective tax rate of
41.1%), compared with $1.6 million (an effective tax rate of 39.3%) for the year
ended December 31, 1996. The higher effective tax rate in 1997 primarily related
to an increase in nondeductible expenses.

35
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

The Company generated $12.0 million of net cash from operating activities
during the three months ended December 31, 1998, primarily from working capital
reductions. Net cash used in investing activities was $0.8 million for capital
expenditures. Net cash used in financing activities was $11.3 million for the
three months ended December 31, 1998 and primarily consisted of $19.1 million
repayment of debt partially offset by $7.8 million of borrowings on debt. At
December 31, 1998, the Company had working capital of $78.7 million and total
debt of $138.6 million.

The Company used $18.7 million of net cash from operating activities during
the year ended September 30, 1998, primarily for working capital requirements.
Net cash used in investing activities was $102.1 million, $21.9 million of which
represents the cash paid for the Founding Companies, net of cash acquired, and
$77.0 million of which represents cash paid in the Subsequent Acquisitions, net
of cash acquired. Net cash provided by financing activities was $121.0 million
for the year ended September 30, 1998 and primarily consisted of $50.8 million
of net proceeds of the Company's initial public offering and $171.6 million of
borrowings on long-term debt partially offset by $99.9 million of repayment of
long-term debt.

Currently, Pentacon has in effect a credit agreement (the "Bank Credit
Facility") which provides Pentacon with a revolving line of credit of up to $85
million for general corporate purposes, future acquisitions, capital
expenditures and working capital, subject to a borrowing base limitation.
Assuming the issuance of the existing notes and the application of the net
proceeds had occurred on December 31, 1998 or February 28, 1999, on such dates,
the Company estimates that it would have had the ability to borrow up to an
additional $32.1 million and $34.1 million, respectively, under the bank credit
facility (based on borrowing base limitations of $73.5 million and $82.9
million, respectively). The Bank Credit Facility is secured by the stock of the
Company's subsidiaries and the Company's assets. The Bank Credit Facility, among
other things, prohibits the payment of dividends by the Company, restricts the
Company's incurring or assuming other indebtedness and requires the Company to
comply with certain financial covenants including a maximum total debt to
Adjusted EBITDA ratio, a maximum senior debt to Adjusted EBITDA ratio, a minimum
fixed charge ratio, a minimum net worth test and a maximum capital expenditures
test. The Bank Credit Facility will terminate and all amounts outstanding
thereunder, if any, will be due and payable December 31, 2001. See "Description
of Bank Credit Facility."

Based upon the Company's projections of the ensuing year's pro forma
trailing EBITDA, a portion of the borrowings under the Bank Credit Facility was
classified as a current liability at December 31, 1998. (See Note 2 to the
Consolidated Financial Statements.)

On March 10, 1998, the Company completed its initial public offering of
5,980,000 shares of the Company's common stock at a price to the public of
$10.00 per share. The net proceeds to the Company from the initial public
offering (after deducting underwriting discounts, commissions and expenses) were
approximately $50.8 million. Of this amount, $21.9 million (net of cash
acquired) was used to pay the cash portion of the purchase price relating to the
Initial Acquisitions, with the remainder being used to pay certain indebtedness
of the Founding Companies, make capital expenditures and fund working capital
requirements. On April 20, 1998, the Company's registration statement covering
3,350,000 additional shares of common stock for use in connection with future
acquisitions was declared effective. During the year ended September 30, 1998,
an additional 1,134,010 shares of the Company's common stock were issued in
connection with acquisitions (See Note 2 to the Consolidated Pentacon, Inc.
Financial Statements).

The Company may require significant additional capital and/or debt. The
Company intends to seek additional capital as necessary to fund its operating
plans through one or more funding sources that may include borrowings under the
Bank Credit Facility or offerings of debt and/or equity securities of the
Company. The Bank Credit Facility anticipates certain reductions in the line of
credit made available under the Bank Credit Facility. Although management
believes that it will be able to obtain such additional capital or debt or will
be able to refinance its existing debt, there can be no

36
<PAGE>
assurances that sufficient funds will be available to the Company at the time it
is required or on terms acceptable to the Company. Failure of the Company to
obtain such additional capital or debt, or to refinance its existing debt, would
have a material and adverse effect on the Company.

The Company's liquidity requirements consist of working capital needs,
ongoing capital expenditures, scheduled debt service obligations and its
acquisition program. The Company's primary requirements for working capital have
been directly related to increased inventory as a result of revenue growth. The
Company's capital expenditures were $3.8 million for the year ended December 31,
1998. The Company expects capital expenditures to be approximately $5.1 million
over the next twelve months, including information system related expenditures
as discussed below.

The Company currently operates in a decentralized information systems
environment and uses a variety of software, computer systems and related
technologies for accounting and reporting purposes and for revenue-generating
activities. The Pentacon subsidiaries which primarily serve the aerospace
industry are in the process of migrating to a common information system which
will facilitate product ordering, pricing and reporting among these companies.
This migration is expected to be completed by July 1999. The total expenditures
for these information systems are expected to be approximately $3.0 million, the
majority of which will be capitalized as computer hardware and software as it is
installed and depreciated over the estimated useful life of the assets. Funding
for these expenditures will come from operating cash flows and the Bank Credit
Facility as necessary.

SEASONALITY AND QUARTERLY FLUCTUATIONS

The Company experiences modest seasonal declines in the fourth calendar
quarter due to declines in its customers' activities in that quarter. Quarterly
results may also be materially affected by the timing of acquisitions and the
timing and magnitude of acquisition integration costs. Accordingly, the
operating results for any three-month period are not necessarily indicative of
the results that may be achieved for any subsequent fiscal quarter or for a full
fiscal year.

YEAR 2000

The Company is working to resolve the potential impact of the year 2000 on
the processing of date-sensitive information by the Company's computerized
information systems and other infrastructure that contains embedded technology.
The year 2000 problem is the result of computer programs being written using two
digits (rather than four) to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in miscalculations
or system failures.

The Company believes that substantially all of its computerized information
systems and other infrastructure that contains embedded technology are year 2000
compliant or will be modified so as to become year 2000 compliant by mid-1999.
Based on preliminary information, costs of addressing potential problems are not
currently expected to have a material adverse impact on the Company's financial
position, results of operations or cash flows. However, if the Company, its
customers or vendors are unable to resolve such processing issues in a timely
manner, it could have a significant impact on the Company's ability to conduct
its business and result in a material financial risk.

In addition, the Company is continually attempting to assess the level of
year 2000 preparedness of its key suppliers, distributors, customers and service
providers. The Company has sent, and will continue to send, letters,
questionnaires and surveys to its significant business partners inquiring about
their year 2000 efforts. If a significant supplier or customer of the Company
fails to be year 2000 compliant, the Company could suffer a material loss of
business or incur material expenses.

Through December 31, 1998, the Company had spent $0.1 million in costs that
are directly attributable to addressing year 2000 issues. Management currently
estimates that the Company will incur $0.3 million in additional costs during
1999 relating to year 2000 issues. The Company expects that it will spend
approximately $3.0 million to purchase software and hardware and on
implementation expenses associated with the migration to a common information
technology system in

37
<PAGE>
the Company's Aerospace Group. The Company believes that these costs are not,
for the most part, directly related to year 2000 issues, but are required for
the implementation of its new system in the Aerospace Group.

The Company is developing and evaluating contingency plans in the event
that the Company has not completed all of its remediation plans in a timely
manner or if third parties who provide goods or services to the Company fail to
address their year 2000 issues appropriately. These plans include identification
of alternative suppliers and service providers, depletion of safety stocks of
inventory and identification of important areas of record retention.

INFLATION

Inflation has not had a material impact on the Company's results of
operations for the last three years.

38
<PAGE>
BUSINESS

THE COMPANY

The Company is the second largest distributor of fasteners and small parts
to original equipment manufacturers ("OEMs") in the United States. Fasteners
and small parts are incorporated into a wide variety of end use applications
across a broad spectrum of industries and include screws, bolts, nuts, washers,
pins, rings, fittings, springs, electrical connectors and similar small parts,
many of which are specialized or highly engineered for particular applications.
The Company is also an industry leader in the provision of advanced inventory
management services for fasteners and small parts, including procurement,
just-in-time delivery, quality assurance testing, advisory engineering services,
component kit production, small component assembly and electronic data
interchange to OEMs. The Company offers its customers comprehensive supply chain
management solutions designed to reduce their procurement and management costs
and enhance their production efficiencies. The Company believes that the
fastener distribution industry is in the early stages of consolidation. The
Company attributes this consolidation primarily to OEMs focusing on their core
competencies, streamlining their production processes and reducing their overall
production costs by reducing the number of their suppliers and by outsourcing
certain inventory management functions to more efficient providers. The
Company's objective is to differentiate itself from its competitors and to
benefit from the consolidation of the fastener industry by leveraging its
nationwide distribution network, critical mass, breadth of product line and
sophisticated supply chain management capabilities.

The Company has two principal operating groups: the Aerospace Group and the
Industrial Group. The Aerospace Group serves the aerospace and aeronautics
industries and the Industrial Group serves a broad base of industrial
manufacturers, which produce items such as diesel engines, locomotives, power
turbines, motorcycles, telecommunications equipment and refrigeration equipment.
The Company's largest customers include The Boeing Company, Cummins Engine
Company, General Electric Corporation, Harley-Davidson, Inc., the Hughes
Aircraft subsidiary of General Motors Corporation, Lockheed Martin Corporation
and The Trane Company. The Company's relationships with these large customers
have been built over a period of 8 to 30 years.

INDUSTRY OVERVIEW

Companies operating in the fastener distribution business can generally be
characterized by the end users they serve, which are comprised broadly of OEMs,
maintenance and repair operations ("MROs") and construction companies. The
traditional fastener distribution market is similar to most industrial
distribution markets. Fasteners are purchased from both domestic and overseas
manufacturers and sold to both domestic and overseas customers. The majority of
these fasteners are sold to OEM and MRO clients on a purchase order basis. Some
smaller distributors specialize along industry lines because of the uniqueness
of manufacturer requirements. Other smaller distributors provide a wide range of
fasteners used for general assembly. Larger distributors, such as the Company,
generally provide a wide range of fasteners as well as fasteners which meet
certain specialized industry needs.

U.S. sales by fastener manufacturers were estimated to be approximately
$8.0 billion in 1996; the global market for fasteners is estimated to be $25.0
billion. The fastener distribution market can reasonably be expected to be
larger than this because resales by fastener distributors include a markup on
the manufacturer's cost and include additional revenues for related value added
inventory management services. The OEM market represents approximately 80% of
the total U.S. fastener market, while the MRO market accounts for approximately
13%. Construction and other markets account for the remaining 7%. There are over
2,000 fastener distributors in the United States, none of which is responsible
for more than 5% of the market's sales. The Company believes that there are
currently only four other public companies whose primary business is fastener
distribution. The industry data provided herein were derived from several
sources, including Dun & Bradstreet and The

39
<PAGE>
Freedonia Group, Inc. The following table lists by sales volume the approximate
number of privately owned fastener companies in the U.S. as of December 7, 1998:

NUMBER OF PRIVATELY OWNED FASTENER DISTRIBUTION COMPANIES BY SALES VOLUME

NUMBER OF PRIVATE
SALES VOLUME COMPANIES
- ---------------------- ------------------
(Dollars in millions)
$100+ ..................................... 5
$50 - $100 ..................................... 5
$25 - $50 ..................................... 10
$10 - $25 ..................................... 52
$5 - $10 ..................................... 92
$2.5 - $5 ..................................... 164
< $2.5 ..................................... 1,734

Many customers are seeking to reduce their operating costs by decreasing
the number of their fastener distributors by often eliminating those suppliers
offering limited ranges of products and services. The Company believes that
these trends have placed some small, owner-operated fastener distributors at a
competitive disadvantage because of their limited product lines and inability to
provide value-added services. In addition, small distributors have limited
access to the capital resources necessary to modernize and expand their
capabilities, automate their inventory processes, offer component kit assembly
and install quality control laboratories. The owners of these businesses often
have not had an exit strategy, leaving them with few attractive liquidity
options.

BUSINESS STRATEGY

The Company's objective is to further its market position as a leading
distributor of fasteners and small parts and to enhance shareholder value. Key
elements of the Company's business strategy include:

CONTINUE TO DELIVER SUPERIOR CUSTOMER SERVICE. The Company's customers
choose fastener suppliers based, in significant part, on the quality and
reliability of service. The Company believes that superior customer
service includes (i) meeting just-in-time delivery schedules which are
critical to its customers' production processes and (ii) providing
innovative supply chain management services, which can help its
customers improve their operating efficiencies and reduce their costs.
By providing these services, the Company becomes more integrated into
its customers' internal manufacturing and decision making processes. The
Company believes such integration leads to higher customer sales to
existing customers and improves customer retention. In connection with
its strategy to continuously improve customer service, the Company
continues to identify and adopt "best practices" of each of its
subsidiaries that can be successfully implemented throughout the
Company. Some of our customers have recognized our superior customer
service. For example, we received Cummins' awards for 100% On-Time
Delivery and for Outstanding Performance for Cost Reduction and
Partnership in Continuous Improvement, in each of the last four years
(1995-1998).

GROW SALES REVENUE. The Company seeks to grow internally generated
revenues by (i) capturing market share from smaller competitors who
cannot match its product breadth, services or geographic coverage, (ii)
pursuing the expanding opportunities to deliver a wide range of
inventory management services which less sophisticated distributors are
unable to provide, (iii) expanding the number of sites to which it
provides services for its existing multi-site customers and (iv)
pursuing new multi-site customers. To leverage its breadth of products
and services and its broad geographic presence, the Company has
developed a

40
<PAGE>
national marketing and sales effort to focus on penetrating existing and
new multi-site OEM accounts.

CAPITALIZE ON INTEGRATION OPPORTUNITIES. The Company believes there are
significant opportunities to leverage the capabilities of its
subsidiaries to further increase its revenues and operating
efficiencies. The Company is initiating its revenue enhancement strategy
by implementing a cross-selling program to existing customers. The
Company's national footprint is an integral component of its strategy to
sell more integrated inventory management services and products to
multi-site customers nationwide. The Company will seek to expand
operating margins by realizing purchasing economies and exploiting
operational efficiencies. The Company believes that centralizing
purchasing activities will allow it to realize volume discounts.
Further, as the Company integrates its operations it is beginning to
realize further efficiencies through (i) the elimination of redundant
facilities, (ii) headcount reductions, (iii) plant reconfigurations,
(iv) the implementation of common information systems in its Aerospace
Group, (v) administrative savings and (vi) reductions in working
capital.

PURSUE STRATEGIC ACQUISITIONS. The Company has a disciplined
acquisition program, which targets companies that will help it increase
its presence in markets it currently serves, develop new customer
relationships and expand its range of products and services. Since the
Company's initial public offering in March 1998, it has increased its
annual pro forma revenues from $168 million to $285 million for the year
ended December 31, 1998 through the acquisition of four additional
companies: Pace Products, Inc., D-Bolt Company, Inc., Texas
International Aviation, Inc. and ASI Aerospace Group Inc. The addition
of Texas International Aviation, Inc. and ASI Aerospace Group Inc. added
significant product depth and market share in the aerospace fastener
distribution industry and resulted in the Company's Aerospace Group
becoming one of the premier aerospace fastener distribution and related
service companies in the United States. The Company believes there are a
significant number of acquisition candidates and that it is regarded as
an attractive acquiror because of its position as an industry leader and
the potential for its targets to realize improved growth and
profitability as part of the Company. All of the Company's acquisitions
have been immediately accretive to earnings and the Company expects
future acquisitions also will be immediately accretive.

PRODUCTS

The Company distributes over 100,000 different types of fasteners and other
small parts.

FASTENERS. Fasteners sold by the Company include screws, bolts, nuts,
washers, rings, pins, rivets and staples. These items come in a variety of
materials, sizes, platings and shapes. The variety and degree of engineering is
driven by the end-use requirement or specification of the fastener, such as
strength, resistance to corrosion, reusability and many other factors. The
Company's sales and purchasing departments have extensive knowledge of the
available products offered by fastener manufacturers and can assist OEMs in
selecting the appropriate fastener for a given application. Some of the more
common variable characteristics of the fasteners sold by the Company include:

o Materials -- The materials used in the manufacture of fasteners
include steel, brass, aluminum, nylon, bronze, stainless steel,
titanium, copper, polypropylene, alloys and other materials. Most of
these materials come in different grades with each having a unique set
of properties.

o Sizes -- The sizes vary by length, outside diameter, depth of the
threads, threads per inch or centimeter and pitch, or angle, of the
threads.

o Platings -- Platings may be applied to enhance the properties of a
given metal, and include zinc, cadmium, chrome, nickel, organic and
other materials.

41
<PAGE>
o Shapes -- The range of shapes is broad, including hex head, U-bolt,
L-bolt, shouldered, eye bolt, external tooth, internal tooth and many
others.

OTHER SMALL PARTS. The Company also distributes other small parts used by
OEMs to assemble their products. These items include standoffs, inserts, clamps,
spacers, springs, brackets, electrical connectors, small molded parts, cable
ties, plugs, hoses, fittings and other small parts. Like fasteners, these parts
come in many shapes, sizes and materials depending upon the designated end use.
OEMs are increasingly requesting that the Company provide these parts because
they are often used during the manufacturing or assembly process in conjunction
with the fasteners supplied by the Company.

SERVICES

In connection with its sale of fasteners and other small parts, the Company
also provides a wide range of value-added supply chain services to OEMs,
designed to reduce their parts procurement and management costs, enhance their
production efficiency and reduce their overall production costs. These
value-added services also benefit the Company by further integrating the Company
into its customers' manufacturing, planning and decision-making processes. The
Company's services include:

INVENTORY PROCUREMENT AND MANAGEMENT SYSTEMS. Increasingly,
manufacturers are outsourcing their inventory management needs to
distributors. These services range from installing a simple inventory
bin card system to developing a complete turn-key inventory management
system with full-time staff, which may be located on the customer's
site. These inventory systems are designed to meet the specific needs of
the Company's customers. They range in sophistication from helping the
OEM set appropriate order quantities and frequencies to delivering the
correct fastener or small part to the assembly floor on a just-in-time
basis. In some cases, the Company utilizes computer systems deployed at
the OEM's sites to facilitate the management of its fastener and parts
inventories. Inventory replenishment services and product consolidation
services decrease the number of invoices which the customer has to
process, decrease the number of vendors with whom the customer has to
process transactions, lower the customer's inventory carrying cost and
allow customers to focus on their core manufacturing business.

KIT AND SUB-ASSEMBLY SERVICES. OEMs often request that the Company
package several fasteners or parts into a package or "kit." A common
use of this service is to supply fastener kits included with products
the consumer is required to assemble such as lawn mowers, bicycles and
furniture. The use of kits has also expanded into the manufacturing
environment. Manufacturers frequently desire to have several related
fasteners or components arrive at the assembly line in a single package;
this ensures that all of the parts arrive at the same time and that no
part will be missed in the installation process. The kit process aids
the manufacturer by decreasing the number of distributors needed and
improves productivity by having the fasteners delivered to the assembly
line with the other related parts. Kit services improve the efficiency
and effectiveness of the manufacturing line and decrease the number of
"stock outs" and subsequent manufacturing line stoppages.

Customers may request that two or more parts in a kit be pre-assembled
into a single unit prior to being placed in the kit. These services are
closely related to the kit services offered by the Company. Similar to
kits, sub-assembly services performed by the Company improve the
productivity of the OEM's manufacturing line.

QUALITY ASSURANCE TESTING. These services involve the testing of
fasteners to ensure they meet the specifications stated by the
manufacturer. Although fasteners are not a significant part of the cost
of a product, they are often critical components whose failure can cause
the entire product to fail. As a result, many OEMs require strict
quality control with respect to the fasteners. The Company has installed
specialized equipment and laboratories and hired trained technicians to
perform quality control tests on some of their fastener products.
Quality assurance services lower the warranty costs of the OEMs. The
Company operates

42
<PAGE>
four laboratories to test fasteners. The laboratories can test
metallurgy, size consistency, corrosion and strength as well as other
properties. Additionally, two of its subsidiaries' locations are
ISO-9002 certified.

PRODUCT ENHANCEMENT SERVICES. In order to meet the exacting
requirements of customers, the Company maintains relationships with
suppliers that provide plating, galvanizing and coating services. These
services are used to enhance in-stock fasteners in order to meet the
specific requirements of OEMs. The ability of the Company to manage the
process and to respond quickly to small orders enhances the Company's
relationship with its customers.

ENGINEERING SERVICES. The Company also provides advice regarding the
types of fasteners to use in a product. These services are often used by
customers during early product development or re-engineering to decrease
the production cost, improve the assembly process or enhance the product
quality. The Company works with its customers' engineering departments
to select the appropriate fasteners and components based upon the
customer's specifications. These services often lower the customers'
cost by reducing the number of fasteners required to assemble the
product, replacing expensive special fasteners with less expensive
standard fasteners, reducing cycle times for new product development or
identifying different coatings to improve quality.

EDI SERVICES. The Company offers a wide range of EDI services to its
customers. In addition to offering invoice and payment options, the
Company can also offer its customers direct access to its current
inventory and the ability to enter an order directly into the Company's
system.

CUSTOMERS

The Company's subsidiaries have been in business for an average of 25 years
and have developed strong customer relationships. The Company serves
approximately 7,500 customers which manufacture a wide variety of products
including diesel engines, locomotives, power turbines, motorcycles,
telecommunications equipment, refrigeration equipment and aerospace equipment.
The Company's largest customers include The Boeing Company, Cummins Engine
Company, General Electric Corporation, Harley-Davidson, Inc., the Hughes
Aircraft subsidiary of General Motors Corporation, Lockheed Martin Corporation
and The Trane Company. Revenues for the year ended December 31, 1998 from The
Boeing Company and Cummins Engine Company, our two largest customers,
represented 10% and 12% of total revenues (on a pro forma basis), respectively.
The Company's relationships with The Boeing Company and Cummins Engine Company
have been built over the last 30 and 8 years, respectively. On December 1, 1998,
The Boeing Company announced that it will reduce its production rates of certain
commercial aircraft in response to the economic crisis in Asia. This reduction,
in conjunction with a buildup of fastener inventory at The Boeing Company, has
recently led to reduced demand by The Boeing Company for the Company's products.
See "Risk Factors -- Concentration of Customer Base; Factors Relating to
Certain Customers" and "Risk Factors -- Customer Industry Risks and
Cyclicality."

Several of Pentacon's customers have international operations and some have
requested that the Company provide products and services to them in their
foreign locations. Approximately 13% of the Company's revenues (on a pro forma
basis) during the year ended December 31, 1998 were to customer locations
outside of the United States. Prior to the formation of Pentacon, resource
constraints had limited the Company's subsidiaries' ability to expand
internationally. In the future, the Company intends to selectively pursue these
opportunities.

43
<PAGE>
The following table sets forth information with respect to the Company's
approximate combined pro forma revenues by customer industry base for the year
ended December 31, 1998:

PERCENTAGE OF THE COMPANY'S PRO FORMA REVENUES BY INDUSTRY

YEAR ENDED
DECEMBER 31, 1998
-----------------
AEROSPACE
Airframe........................... 26%
Defense............................ 17
Space and Communications........... 4
Other Aerospace.................... 10
---
Subtotal........................... 57
---
INDUSTRIAL
Industrial Machinery............... 17
Electrical Machinery &
Electronics...................... 9
Motor Vehicles..................... 3
Other Industrial................... 14
---
Subtotal........................... 43
---
TOTAL......................... 100%
===

CUSTOMER CONTRACTS

The Company often enters into contracts with certain of its customers which
identify the package of products and services to be provided by the Company to
its customers. Although the contracts generally are written to establish a
relationship for a period of several years, the agreements usually may be
canceled by either party without cause upon 30 to 90 days' notice. In certain
instances where limited use or unique fasteners are required to serve a customer
account, the agreement will include a provision that obligates the customer to
acquire the Company's accumulated inventory of fasteners if the contract is
terminated prematurely.

BACKLOG

The Company does not have any significant backlog of orders.

SALES AND MARKETING

The Company currently employs approximately 230 people in sales and
marketing. Within sales and marketing, the Company employs 49 direct sales
personnel, with the remaining being product specialists and indirect customer
service personnel. The Company's sales efforts are focused on developing new
business with mid-size and large-size OEMs which are likely to benefit from cost
savings and operating efficiencies from the products and services offered by the
Company, as well as expanding business with existing customers by serving
additional sites and/or expanding the breadth of products and services provided
to that customer. Prior to the formation of Pentacon, the Company's marketing
efforts were primarily directed at customers on a site-by-site basis. To
capitalize on the Company's national presence and the trend by OEMs to decrease
their number of suppliers, the Company recently developed a national sales,
marketing and service effort targeted at multi-site customers. The national
sales effort is focused on developing a coordinated marketing effort to maximize
customer penetration and provide multi-site OEMs with company-wide procurement
and inventory management solutions which maximize cost savings and operating
efficiencies.

An important element in the Company's overall marketing strategy is to
provide superior customer service. The Company believes superior customer
service includes providing breadth of

44
<PAGE>
products, advanced services, innovative supply chain management solutions and
timely delivery of products. To implement this strategy, customer accounts are
typically serviced by a Pentacon team, which, depending on the size of the
account, will be comprised of the direct sales representative and certain
specialists in operations, procurement and advanced services such as quality
assurance testing. A critical component of the Company's strategy is
continuously monitoring the quality of customer service through both qualitative
and quantitative methods. For larger customers, such monitoring may include
providing on-site customer service representatives and daily tracking of
just-in-time deliveries, production efficiencies and quality of fasteners and
parts.

DELIVERY

The Company utilizes several forms of transportation to deliver its
products to its customers depending upon the urgency and frequency of delivery,
the customer's preference and cost. The Company utilizes common carriers,
Company-owned trucks, and overnight delivery services to deliver products to its
customers. The cost of transportation generally is paid by the customer. The
Company does not believe that it is materially dependent on any single
transportation service or carrier and believes that it currently maintains good
relationships with all of its common carriers.

SUPPLIERS AND OPERATIONS

The Company sells fasteners and small parts manufactured by over 2,000
suppliers located in more than 15 countries. The Company purchases fasteners and
small parts directly from the manufacturers and, to a lesser degree, from
authorized distributors. During the year ended December 31, 1998, no one
supplier accounted for more than 5% of the total products purchased.

The Company's decision to purchase from a specific supplier is based on
product specifications, quality, reliability of delivery, production lead times
and price. The Company has established itself as a partner of choice with some
of its suppliers, and management believes that because of the Company's size,
national presence and top tier customers it will continue to attract premier
supplier relationships. The Company believes it can realize further synergies by
consolidating some of its purchasing activities at the corporate level in order
to achieve price concessions for large volume orders.

The Company maintains 32 distribution facilities in 14 states. The Company
has ongoing facilities rationalization initiatives to close or combine redundant
facilities. To date, the Company has identified three of five distribution
centers in the Aerospace Group and one in the Industrial Group to be closed.
Pentacon will continue to evaluate existing and future facilities to determine
whether further reductions can be made.

Pentacon's materials management and distribution operations begin when
suppliers deliver products to the Company. Once delivered, the products are
taken into inventory and receive various service additions depending on customer
requests. Service additions include product enhancement (such as plating,
galvanizing or coating), quality assurance testing, kitting and sub-assembly.
Once an order is received from the customer, products are picked from inventory,
counted, packaged and shipped by the Company. Depending on the customer's
service program, the products may receive further handling by the Company at the
customer location. For a just-in-time customer, the Company often has an
employee at the customer's location to receive the inventory, deliver the
products to the work areas, and reorder and replenish products as needed.

COMPETITION

The Company is engaged in a highly fragmented and competitive industry.
Competition is based primarily on breadth of products, quality and breadth of
services, price and geographic proximity. The Company competes with a large
number of fastener distributors on a regional and local basis. Some of the
Company's competitors have greater financial resources than the Company and/or
established customer relationships with certain customers for whose business we
compete. The Company may also face competition for acquisition candidates from
these companies.

45
<PAGE>
MANAGEMENT INFORMATION SYSTEMS

Each of the acquired companies operates a management and information system
("MIS") that is used to purchase, monitor and allocate inventory throughout
its facilities. All of these systems include computerized order entry, sales
analysis, inventory status, invoicing and payment, and all but one include
bar-code tracking. These systems are designed to improve productivity for both
the Company and its customers. Most of the subsidiaries use EDI, through which
they offer their customers a paperless electronic process for order entry,
shipment tracking, customer billing, remittance processing and other routine
matters.

The Company's subsidiaries operated as independent companies prior to their
acquisition. The Company intends to coordinate and integrate the MIS systems of
its subsidiaries. The Aerospace Group is in the process of migrating to an
information system developed by DYMAX Products Inc., which process is expected
to be completed by July 1999. This system should facilitate product ordering,
pricing and reporting among the companies in the Aerospace Group. The Company is
also in the process of planning the integration of MIS systems within the
Industrial Group. Although the Company may not immediately implement a single
reporting system in the Industrial Group, the Company has identified various
integration opportunities which the Company expects will enable the Industrial
Group to obtain certain operating and reporting efficiencies.

GOVERNMENT REGULATION

The Fastener Quality Act (the "Fastener Act") was enacted on November 16,
1990 and was subsequently amended in March 1996 and August 1998. The
implementation date has been delayed several times. Currently the Fastener Act
is scheduled to be implemented in June 1999. The Fastener Act is intended to
protect the public safety by deterring the introduction of non-conforming
fasteners into commerce and by improving the traceability of fasteners.
Generally, the Fastener Act covers fasteners including screws, nuts, bolts or
studs with internal or external threads and load indicating washers with nominal
diameters of greater than approximately one quarter inch, which contain metal or
are held out as meeting a standard or specification that requires
through-hardening. The Fastener Act also covers fasteners and washers that are
marked with a grade identification required by a specification or standard. An
estimated 25% to 55% of currently available fasteners meet this definition and
would therefore be subject to the Fastener Act's requirements.

Fastener distributors such as the Company would be subject to the Fastener
Act with respect to certain of its products, once the Fastener Act is
implemented. The Fastener Act places responsibility on fastener manufacturers
and distributors to ensure that fasteners conform to the standards and
specifications to which the manufacturer represents it has been manufactured by
having them tested in a laboratory accredited under the Fastener Act. Persons
who significantly alter fasteners must mark the fasteners so as to permit
identification of the source of the alteration. Further, the Fastener Act
prohibits manufacturers and distributors from commingling like fasteners from
more than two different lots in the same container during packaging.

The Company currently operates four quality control laboratories at its
facilities and believes it will not be obligated to make any significant
investment to comply with the Fastener Act. One of the Company's laboratories
has been accredited under the Fastener Act. The Company anticipates that the
majority of any additional costs resulting from compliance with the Fastener Act
will be included in the prices to its customers. Some small fastener
distributors that perform quality control testing may be unable to invest in the
quality control equipment or services required to comply with the Fastener Act
and may be forced to discontinue or reduce the portions of their business that
become subject to the Fastener Act.

The Company's operations are subject to various federal, state and local
laws and regulations, including those relating to worker safety and protection
of the environment. The Company is a distributor and does not generally engage
in manufacturing. As a result, environmental laws generally

46
<PAGE>
have a minimal effect on its operations. The Company believes it is in
substantial compliance with all applicable regulatory requirements.

EMPLOYEES

At December 31, 1998, the Company had approximately 850 employees. The
Company believes that its relationship with its employees is good.

PROPERTIES

The Company operates 32 distribution and sales facilities throughout the
United States. The Company also maintains offices in Europe and Australia to
service its aerospace customers. These facilities range in size from 1,000
square feet to 74,000 square feet, and generally consist of warehouse space with
a small amount of associated office space. Four of the facilities include
laboratory space for quality testing. All of the facilities are leased. The
Company's leases expire between 1999 and 2012. The Company believes that
suitable replacement space will be available as required. See "Certain
Transactions -- Transactions Involving Certain Officers, Directors and
Stockholders -- Leases of Real Property." The Company believes that its current
facilities are adequate for its expected needs over the next several years.
However, the Company may add new facilities as a result of acquisitions or due
to a customer's request for an on-site or local facility.

The Company's corporate headquarters are located at 10375 Richmond Avenue,
Suite 700, Houston, Texas 77042, telephone number: 713-860-1000.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings, other than
ordinary routine litigation incidental to its business that management believes
would not have a material adverse effect on its business, financial condition or
results of operations.

<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning the Company's
directors and executive officers:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- ---- ---------------------------------------------------
<S> <C> <C>
Mark E. Baldwin...................... 45 Chairman of the Board and Chief Executive Officer
Jack L. Fatica....................... 54 President, Chief Operating Officer and Director
Brian Fontana........................ 41 Senior Vice President and Chief Financial Officer
Bruce M. Taten....................... 43 Senior Vice President, Chief Administrative
Officer, Corporate Secretary and General Counsel
Robert M. Chiste..................... 51 Director
Cary M. Grossman..................... 45 Director
Donald B. List....................... 43 Director
Mary E. McClure...................... 58 Director
Michael W. Peters.................... 40 Director
Benjamin E. Spence, Jr............... 45 Director
Clayton K. Trier..................... 47 Director
</TABLE>

MARK E. BALDWIN became Chief Executive Officer of the Company in September
1997 and became Chairman of the Board in November 1997. Mr. Baldwin has been
involved in the organization of the Company and the Company's initial public
offering. From 1980 through August 1997, Mr. Baldwin was employed by Keystone
International, Inc., a publicly traded manufacturer of industrial valves and
controls, serving most recently as President of the Industrial Valves & Controls
Group, a division with 17 manufacturing locations and multiple company-owned
sales and distribution locations in 15 countries.

JACK L. FATICA became President, Chief Operating Officer and director of
the Company in March 1998. Mr. Fatica has over 30 years of experience in the
fastener distribution business. He has been employed by AXS or its predecessors
since 1967 and currently serves as its Chief Executive Officer.

BRIAN FONTANA joined the Company in October 1997. From 1996 to 1997, Mr.
Fontana served as Executive Vice President and Chief Financial Officer of Prime
Service, Inc., one of the largest rental equipment companies in the United
States. From 1990 to 1996, he was employed by National Convenience Stores
Incorporated, most recently as Vice President and Chief Financial Officer. From
1985 to 1990, Mr. Fontana was employed by NationsBank as a Vice President of
Corporate Banking and earlier by Allied Bank of Texas as Assistant Vice
President.

BRUCE M. TATEN joined the Company in October 1997. From 1993 to 1997, Mr.
Taten was employed by Keystone International, Inc., most recently as Vice
President and General Counsel. From 1988 to 1993, Mr. Taten practiced law with
Sutherland Asbill & Brennan, a law firm based in Atlanta, Georgia. From 1983 to
1986, Mr. Taten practiced law with the New York firm of Simpson, Thacher &
Bartlett. Mr. Taten is a C.P.A. and an attorney.

ROBERT M. CHISTE became a director of the Company in March 1998. Mr. Chiste
is Chairman and Chief Executive Officer of TriActive Technologies, Inc. From
August 1997 to June 1998, Mr. Chiste was President of the Industrial Services
Group of Philip Services Corp. He served as Vice Chairman of Allwaste, Inc.
("Allwaste"), a provider of industrial and environmental services, from May
1997 through July 1997, President and Chief Executive Officer of Allwaste from
November 1994 through July 1997 and director of Allwaste from January 1995
through August 1997. Philip Services Corp. acquired Allwaste effective July 31,
1997. Mr. Chiste served as Chief Executive Officer and President of America
National Power, Inc., a successor company of Transco Energy Ventures Company,
from its creation in 1986 until August 1994. During the same period, he served
as Senior Vice President of Transco Energy Company. From 1980 to 1986, Mr.
Chiste served in various executive roles with

48
<PAGE>
Enron Oil & Gas and its predecessor companies. Mr. Chiste also serves as a
director of Innovative Valve Technology, Inc. and of Franklin Credit Management
Corp., a New York-based financial services company.

CARY M. GROSSMAN has been a director of the Company since March 1997. Mr.
Grossman co-founded McFarland, Grossman & Company, Inc. ("MGCO"), an
investment banking firm, in 1991, and serves as its Chief Executive Officer.
MGCO formed the Company in 1997 and sponsored the Company through its initial
public offering. From 1977 until 1991, Mr. Grossman was engaged in the practice
of public accounting. Mr. Grossman is a C.P.A. Mr. Grossman also is a director
of Omniplex Communications Group, Inc.

DONALD B. LIST became a director of the Company in March 1998 and is
President of Pentacon Aerospace Group, Inc. Mr. List has over 20 years of
experience in the fastener distribution business and has served as President of
Alatec Products, Inc. since 1981.

MARY E. MCCLURE became a director of the Company in March 1998. Ms. McClure
co-founded Capitol Bolt & Supply, Inc. in 1966 and has served as Capitol's
President since 1981. Ms. McClure has served as Chairman of the Southwest
Fastener Association and as Chairman/President of the National Fastener
Distributor Association. Ms. McClure has also been inducted into the Fastener
Hall of Fame.

MICHAEL W. PETERS became a director of the Company in March 1998 and is
President of Pentacon Industrial Group, Inc. Mr. Peters has over 13 years of
experience in the fastener distribution business. He joined Maumee Industries,
Inc. in 1986 and has served as its Chief Executive Officer since July 1995.

BENJAMIN E. SPENCE, JR. became a director of the Company in March 1998. Mr.
Spence has over 22 years of experience in the fastener distribution business and
has served as President of Sales Systems, Limited since 1986.

CLAYTON K. TRIER became a director of the Company in March 1998. Mr. Trier
has served as Chairman, Chief Executive Officer and President of RV Centers,
Inc., a company created to consolidate the highly fragmented recreational
vehicle retail industry, since October 1998. From April 1997 to October 1998,
Mr. Trier was a private investor. In 1993, he was a founder of U.S. Delivery
Systems, Inc. ("U.S. Delivery"), a company created to consolidate the highly
fragmented local delivery industry, and Mr. Trier served as Chairman and Chief
Executive Officer of U.S. Delivery from its inception until April 1997. In March
1996, U.S. Delivery, a NYSE-listed company at that time, was acquired by
Corporate Express, Inc., a large publicly owned office products company, and Mr.
Trier served as a director of Corporate Express, Inc. from the acquisition date
until January 1997. From 1991 to 1993, Mr. Trier was President of Trier &
Partners, Inc., a consulting firm. From 1987 through 1990, Mr. Trier served as
President and Co-Chief Executive Officer of Allwaste, a provider of industrial
and environmental services listed on the NYSE. From 1974 to 1987, Mr. Trier was
at the international accounting firm of Arthur Andersen & Co., in which he was a
partner from 1983 to 1987. Mr. Trier also serves as a director of Creative
Master International, Inc. (Nasdaq: CMST), a manufacturer and distributor of
collectible-quality, die-cast replicas of cars, trucks and other items.

Directors are elected at each annual meeting of stockholders. The Board of
Directors is divided into three classes of directors, with directors serving
staggered three-year terms, expiring at the annual meeting of stockholders for
fiscal years 1999, 2000 and 2001, respectively. At each annual meeting of
stockholders, one class of directors will be elected for a full term of three
years to succeed to that class of directors whose terms are expiring. Messrs.
List's, Fatica's and Chiste's terms expire in 2001; Messrs. Spence's, Peters'
and Trier's terms expire in 2000 and Ms. McClure's, Mr. Baldwin's and Mr.
Grossman's terms expire in 1999. Mr. Grossman is the director elected by the
holders of the restricted common stock. The Company has agreed to nominate each
of the Directors from the Founding Companies for re-election upon any expiration
of their terms occurring prior to March, 2003.

49
<PAGE>
All officers serve at the discretion of the Board of Directors, subject to the
terms of their respective employment agreements. See "-- Employment
Agreements."

The Board of Directors has established an Audit Committee, a Compensation
Committee and a Committee on Director Affairs. The Audit Committee recommends
the appointment of auditors and oversees the accounting and audit functions of
the Company. The Compensation Committee determines executive officers' and key
employees' salaries and bonuses and administers the Pentacon, Inc. 1998 Stock
Plan. Messrs. Chiste and Trier serve as members of the Company's Compensation
Committee and Messrs. Chiste, Trier and Grossman comprise the Company's Audit
Committee. The Committee on Director Affairs administers the Company's corporate
governance program, recommends individuals to serve on the Company's Board of
Directors, and reviews transactions between the Company and its directors to
ensure fairness. Messrs. Trier, Grossman, Fatica and Baldwin serve as members of
the Committee on Director Affairs.

DIRECTORS' COMPENSATION

Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company receives an annual fee of $16,000 paid in equal quarterly amounts.
Directors of the Company are reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board of Directors or committees thereof, and for
other expenses incurred in their capacity as directors of the Company. Each
non-employee director receives stock options to purchase 15,000 shares of common
stock upon election to the Board of Directors and an annual grant of 5,000
options. Mr. Grossman was appointed lead director for fiscal 1999 for which he
is to receive an additional $10,000 and options to purchase 10,000 shares of
common stock. In March 1998, Messrs. Chiste and Trier each purchased 10,000
shares of common stock at $10.00 per share and the Company granted each of
Messrs. Chiste and Trier 10,000 shares of common stock pursuant to restricted
stock grants under the 1998 Stock Plan.

EXECUTIVE COMPENSATION

The following table presents compensation information for the Company's
Chief Executive Officer and five additional most highly compensated executive
officers (the "Named Executive Officers") for the year ended December 31,
1998. The Company was incorporated in March 1997 but did not conduct any
business operations until March 1998. As a result, none of the Named Executive
Officers received any compensation from the Company prior to March 1998.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
AWARDS
------------------------
ANNUAL COMPENSATION SECURITIES PAYOUTS
------------------------------------ RESTRICTED UNDERLYING -------
OTHER ANNUAL STOCK OPTION LTIP ALL OTHER
NAME SALARY(1) BONUS COMPENSATION AWARD(S) PLANS/SARS PAYOUTS COMPENSATION
- ---------------------------------------- --------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark E. Baldwin......................... $ 121,500 -- -- -- 185,000 -- --
Jack L. Fatica.......................... 121,500 -- -- -- -- -- $ 13,700
Donald B. List.......................... 121,500 -- -- -- -- -- 14,000
Michael W. Peters....................... 121,500 -- -- -- -- -- 14,500
Bruce M. Taten.......................... 121,500 -- -- -- 100,000 -- --
Brian Fontana........................... 121,500 -- -- -- 85,000 -- --
</TABLE>
- ------------
(1) Each of the Named Executive Officers' salaries are based on annual salaries
of $150,000.

50
<PAGE>
OPTION GRANTS

The following table sets forth information with respect to stock options
granted in 1998 under the Company's 1998 Stock Plan to the Named Executive
Officers.

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
-------------------------------------------------- AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES PRICE OPTION TERM(1)
GRANTED IN FISCAL PER EXPIRATION --------------------------
NAME (#) YEAR SHARE DATE 5% 10%
- ------------------------------------- ---------- ---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mark E. Baldwin(2)................... 185,500 16.76% $ 10.00 3/10/08 $ 1,163,446 $ 2,948,419
Jack L. Fatica....................... -0- -- -- -- -- --
Donald B. List....................... -0- -- -- -- -- --
Michael W. Peters.................... -0- -- -- -- -- --
Bruce M. Taten(2).................... 100,000 9.06% 10.00 3/10/08 628,890 1,593,740
Brian Fontana(2)..................... 85,000 7.70% 10.00 3/10/08 534,556 1,354,679
</TABLE>
- ------------
(1) The SEC requires disclosure of the potential realizable value or present
value of each grant. This disclosure assumes the options will be held for
the full term prior to exercise. These options may be exercised prior to the
end of the term. The actual value, if any, an executive officer may realize
will depend upon the excess of the stock price over the exercise price or
the date the option is exercised. There can be no assurance that the stock
price will appreciate at the rates shown in the table.

(2) The options awarded to Messrs. Baldwin, Taten and Fontana were issued in
connection with the initial public offering of the Company and vest
one-third on March 10, 2000 and the remainder on March 10, 2001.

OPTION EXERCISES AND YEAR-END VALUES

The following table sets forth information with respect to the value of
unexercised options held by Named Executive Officers of the Company. No options
were exercised by the Named Executive Officers of the Company during the year
ended December 31, 1998.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS HELD AT OPTIONS HELD AT
DECEMBER 31, 1998 DECEMBER 31, 1998
-------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark E. Baldwin...................... -0- 185,000 -0- -0-
Jack L. Fatica....................... -0- -0- -0- -0-
Donald B. List....................... -0- -0- -0- -0-
Michael W. Peters.................... -0- -0- -0- -0-
Bruce M. Taten....................... -0- 100,000 -0- -0-
Brian Fontana........................ -0- 85,000 -0- -0-
</TABLE>

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with each Named
Executive Officer of the Company that prohibit such officers from disclosing the
Company's confidential information and trade secrets and generally restrict
these individuals from competing with the Company for a period of two years
after the termination of their respective employment agreements. Messrs.
Baldwin's, Fatica's, Peters' and List's employment agreements have an initial
term of five years commencing March 10, 1998. The agreements for Messrs. Taten
and Fontana have an initial term of three years

51
<PAGE>
commencing March 10, 1998. All of the employment agreements are terminable by
the Company for "good cause" upon ten days' written notice and without
"cause" or for "good reason" by the officer upon thirty days' written
notice. All employment agreements provide that if the officer's employment is
terminated by the Company without "good cause," such officer will be entitled
to receive a lump-sum severance payment at the effective time of termination.

All of the employment agreements contain certain provisions concerning a
change-in-control of the Company, including the following: (i) in the event that
the executive is not notified by the acquiring company that it will assume the
Company's obligations under the employment agreement at least five days in
advance of the transaction giving rise to the change-in-control, the
change-in-control will be deemed a termination of the employment agreement by
the Company without "cause," and the provisions of the employment agreement
governing the same will apply, except that the severance amount otherwise
payable shall be tripled and the provisions which restrict competition with the
Company shall not apply; and (ii) in any change-in-control situation, such
officer may elect to terminate his employment by giving ten days' written notice
prior to the anticipated closing of the transaction giving rise to the
change-in-control, which will be deemed a termination of the employment
agreement by the Company without "cause," and the provisions of the employment
agreement governing the same will apply, except that the severance amount
otherwise payable shall be doubled and the time period during which such officer
is restricted from competing with the Company will be eliminated.

1998 STOCK PLAN

The Board of Directors has adopted, and the stockholders of the Company
have approved, the Pentacon, Inc. 1998 Stock Plan (the "1998 Stock Plan"). The
purpose of the 1998 Stock Plan is to provide directors, officers, key employees
and certain other persons who will be instrumental in the success of the Company
or its subsidiaries with additional incentives by increasing their proprietary
interest in the Company. The aggregate amount of common stock with respect to
which options or other awards may be granted may not exceed 1,700,000 shares
(subject to adjustment to reflect stock splits). As of December 31, 1998, the
Company had granted options and other awards for a total of 1,103,730 shares
under the 1998 Stock Plan.

52
<PAGE>
CERTAIN TRANSACTIONS

ORGANIZATION OF THE COMPANY

Simultaneously with the closing of its initial public offering in March
1998, the Company acquired by merger all of the issued and outstanding capital
stock of the Founding Companies, at which time each Founding Company became a
wholly owned subsidiary of the Company. The aggregate consideration paid by the
Company to acquire the Founding Companies consisted of (i) approximately $21.9
million in cash (net of cash acquired) and (ii) 6,720,000 shares of common
stock. In addition, certain indebtedness of the Founding Companies, which was
personally guaranteed by Founding Company stockholders, was repaid in connection
with the Initial Acquisitions.

In connection with the Initial Acquisitions, certain officers, directors
and holders of more than 5% of the outstanding shares of the Company, together
with trusts for which they act as trustees, received cash and shares of common
stock of the Company described in the following table. These amounts do not
include any S-corporation distributions which were made by certain of the
Founding Companies to their stockholders prior to the Initial Acquisitions.

<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
--------- ------------
<S> <C> <C>
(In thousands of dollars,
except share amounts)
Donald B. List....................... $ 12,666 2,969,493
Jack L. Fatica....................... 3,423 802,656
Michael Black........................ 3,844 901,321
Benjamin E. Spence, Jr. ............. 1,170 232,132
Mary E. McClure...................... 661 154,898
--------- ------------
Total........................... $ 21,764 5,060,500
========= ============
</TABLE>

On November 18, 1997, and in connection with the initial formation of the
Company, the Company sold 200,000, 125,000 and 125,000 shares of common stock of
the Company to Messrs. Baldwin, Taten and Fontana, respectively, for $0.01 per
share.

TRANSACTIONS INVOLVING CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS

LEASES OF REAL PROPERTY

Alatec leases certain of its facilities located in Chatsworth, California
from Mr. List, a director of the Company. The leases provide for a total annual
rent of $462,840 with the terms of the leases expiring in March 2012. Alatec
also pays taxes and utilities on the leased premises. The rent will be adjusted
in accordance with the Consumer Price Index ("CPI"), subject to a minimum of
4% and a maximum of 8%. In addition, Alatec leases its warehouse in Fremont,
California from FDR Properties, an entity controlled and partially owned by Mr.
List. This lease expires August 31, 2003 and provides for an annual rent of
$126,000. Alatec also pays taxes and utilities on those premises. The Company
leases from the List Family Trust an office and warehouse in Chatsworth,
California. The lease provides for an annual rental of $170,832 and terminates
in October 2012. Alatec also pays utilities and taxes on the premises. The
Company believes that the rent for each of these properties does not exceed fair
market value.

AXS leases certain real property located in Erie, Pennsylvania from JFJ
Realty Company, an entity owned in part by Mr. Fatica, a director and officer of
the Company. The lease for the property runs through August 2006 and provides
for an annual rent of $240,000 through August 30, 2001. Beginning September 1,
2001, the rent will be adjusted to fair market value as determined on February
1, 2001. Furthermore, AXS pays taxes and utilities on the leased premises. The
Company believes that the rent for this property does not exceed fair market
value.

53
<PAGE>
SSL leases certain real properties located in Chester, South Carolina from
Chester Associates, LLC, an entity owned in part by Mr. Spence, a director of
the Company. One facility in Chester, South Carolina is leased for an initial
five year term expiring December 31, 2002, with an option to extend the lease
for an additional five year term. The annual rent for the first year of this
lease is $61,250. The rent will increase each subsequent year of the lease based
on the CPI, not to increase more than 4%. SSL is responsible for utilities.
Also, certain warehouse space in South Carolina is leased to SSL by Chester
Associates, LLC. This warehouse is leased for an initial five year term expiring
December 31, 2002, with an option to extend for an additional five year term.
The annual rent for the first year of this lease is $55,000, with subsequent
rental rates to increase per the CPI, not to exceed 4% in any one year. SSL is
responsible for utilities. The Company believes that the rent for these
properties does not exceed fair market value.

OTHER TRANSACTIONS

Mr. List owns approximately 50% of a supplier from which the Company
purchased approximately $1.8 million of products during the fiscal year ended
September 30, 1998. The Company believes all such purchases have been at fair
market prices. The Company anticipates continuing to purchase products from the
supplier in the future so long as the prices and terms remain competitive with
those of alternative suppliers.

In March 1998 Mr. Fatica acquired certain life insurance policies from AXS
for the cash surrender value of the policy.

Mr. Grossman is a principal in McFarland, Grossman & Company ("MG&C"), an
investment banking and advisory firm. The Company engaged the services of an
employee of MG&C from March 10, 1998 until July 10, 1998 to assist the Company
with the development of its mergers and acquisition activities until the Company
could employ an individual to assume that function. Pursuant to this agreement,
the Company paid MG&C fees in the amount of $300,000 during the year ended
December 31, 1998. The Company also paid MG&C fees for the year ended December
31, 1998 in the amount of $600,000 in connection with the placement of the
Company's initial credit facility and $12,500 for consulting services rendered
in connection with the Company's high-yield offering (which was completed in
1999). The Company has entered into an indemnity agreement with certain
principals of MG&C in connection with the initial public offering and the
conduct of audit procedures at certain of the Founding Companies.

All of the directors of Pentacon, other than Messrs. Grossman, Chiste and
Trier, are employees of Pentacon or one of its subsidiaries and as such receive
employment-based compensation and benefits from the Company.

COMPANY POLICY

Any future transactions with directors, officers, employees or affiliates
of the Company must be approved in advance by a majority of disinterested
members of the Board of Directors.

54
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of the Company's
common stock as of February 28, 1999, by (i) all persons known to the Company to
be the beneficial owner of 5% or more thereof, (ii) each director and nominee
for director, (iii) each executive officer and (iv) all officers and directors
as a group. Unless otherwise indicated, the address of each such person is c/o
Pentacon, Inc., 10375 Richmond Avenue, Suite 700, Houston, Texas 77042. All
persons listed have sole voting and investment power with respect to their
shares unless otherwise indicated.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-----------------------
NUMBER PERCENT
----------- -------
<S> <C> <C>
Donald B. List(1).................... 2,979,493 17.9%
Jack L. Fatica(2).................... 1,043,220 6.3
Generations Family Limited
Partnership(3)....................... 901,321 5.4
Wellington Management Company,
LLP(4)............................... 835,000 5.0
Cary M. Grossman(5).................. 358,615 2.2
Michael W. Peters.................... 297,441 1.8
Benjamin E. Spence, Jr.(6)........... 253,332 1.5
Mark E. Baldwin...................... 207,100 1.2
Mary E. McClure(7)................... 184,470 1.1
Brian Fontana........................ 133,000 *
Bruce M. Taten....................... 132,000 *
Clayton K. Trier(8)(9)............... 45,000 *
Robert M. Chiste(8).................. 20,000 *
All officers and directors as a group
(14 persons)....................... 5,735,476 34.4%
</TABLE>

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

* Less than one percent.

(1) Includes an aggregate of 76,248 shares of common stock held by three trusts
for the benefit of Mr. List's minor children. Mr. List disclaims any
beneficial ownership of the shares owned by the trusts.

(2) Includes 92,782 shares of common stock owned by the Jason P. Fatica Trust
and 92,782 shares of common stock owned by the Ryan A. Fatica Trust of which
Mr. Fatica is co-trustee.

(3) Represents shares of common stock owned by the Generations Family Limited
Partnership of which Mr. Michael Black is General Partner. The Partnership
address is 4648 Craftsbury Circle, Fort Wayne, Indiana, 46818.

(4) Wellington Management Company, LLP ("WMC") in its capacity as investment
adviser may be deemed to beneficially own 835,000 shares of common stock
which are held of record by clients of WMC. WMC's address is 75 State
Street, Boston, Massachusetts, 02109.

(5) Consists of 152,000 shares owned directly by Mr. Grossman; 193,304 shares
owned by a family limited partnership of which Mr. Grossman is a general
partner; 12,875 shares owned by McFarland, Grossman & Company, Inc.; and 436
shares owned by Mr. Grossman's children. Mr. Grossman disclaims beneficial
ownership of shares held by the family limited partnership, McFarland,
Grossman & Company, and his children.

(6) Includes 4,350 shares of common stock owned by the Morgan E. Spence Trust
and 4,350 shares of common stock owned by the Alison R. Spence Trust of
which Mr. Spence is the trustee.

(7) Includes 84,243 shares of common stock owned by the Earl Milton McClure, Jr.
Residuary Trust of which Ms. McClure is trustee.

(8) Includes 10,000 shares granted as a restricted stock grant under the 1998
Stock Plan.

(9) Includes 2,000 shares of common stock owned by the KKT Trust and 2,000
shares of common stock owned by the JCT Trust of which Mr. Trier is trustee.

55
<PAGE>
DESCRIPTION OF BANK CREDIT FACILITY

The Company has entered into the Bank Credit Facility dated as of September
3, 1998, and amended as of December 31, 1998, as of February 12, 1999, as of
March 9, 1999 and as of March 29, 1999, with NationsBank, N.A. as the
administrative agent. The following is a summary description of the principal
terms of the Bank Credit Facility. The description set forth below does not
purport to be complete and is qualified in its entirety by reference to the
agreements setting forth the principal terms and conditions of the Bank Credit
Facility, which are available upon request from the Company. Capitalized terms
used herein without definition have the meanings ascribed to them in the Bank
Credit Facility.

STRUCTURE. Prior to the issuance of the existing notes, the Bank Credit
Facility consisted of (i) a revolving term loan of up to $40.0 million and (ii)
a revolving credit facility providing for revolving loans and letters of credit
in an aggregate principal amount at any time not to exceed $110.0 million. Upon
the closing of the offering of the existing notes and the use of the proceeds
therefrom, the revolving line of credit under the Bank Credit Facility was
reduced to $85.0 million, subject to a borrowing base limitation, and the
revolving term loan was fully repaid and canceled. Subject to certain
conditions, Pentacon may at any time irrevocably reduce the availability under
the revolving credit facility.

AMOUNTS OUTSTANDING; AVAILABILITY. At December 31, 1998, indebtedness
under the Bank Credit Facility consisted of outstanding borrowings under the
revolving term loan and revolving credit facility of $40.0 million and $95.1
million, respectively. Assuming the issuance of the existing notes had occurred
on December 31, 1998 or February 28, 1999 (including Pentacon's use of the net
proceeds and the changes to the structure of the Bank Credit Facility as
described above) the Company would have had $32.1 million and $34.1 million
available under the Bank Credit Facility as of December 31, 1998 and February
28, 1999, respectively. See "Use of Proceeds."

MATURITY; PREPAYMENTS. The revolving credit facility will mature on
December 31, 2001. Pentacon is required to use the proceeds from certain
issuances of capital stock and the proceeds from the incurrence of debt to repay
outstanding amounts under the Bank Credit Facility. Subject to certain
exceptions, amounts repaid under the revolving credit facility may be
reborrowed. The Bank Credit Facility permits optional prepayments with notice
and reimbursement for certain costs and requires prepayments in the event of the
sale of obsolete or no longer useful property of the Company.

SECURITY; GUARANTEE. Pentacon's obligations under the Bank Credit Facility
are unconditionally guaranteed by each existing and subsequently acquired or
organized subsidiary of Pentacon, subject to certain exceptions. The Bank Credit
Facility and the guarantees thereof are collateralized by Pentacon's and the
guarantors' accounts receivable, inventories, general intangibles and by
substantially all of their other personal property and the proceeds of the
foregoing, subject to certain limited exceptions. In addition, Pentacon has
pledged the stock of its subsidiaries as security for the Bank Credit Facility.

INTEREST. Borrowings under the Bank Credit Facility bear interest at
either (i) the higher of (a) the Federal Funds Rate plus 0.5% or (b) the Prime
Rate, plus, in each case, a margin of 0.25% to 1.50% or (ii) the London
interbank offered rate (LIBOR) plus a margin of 1.75% to 3.25%. The margin in
either case is determined based on the Company's debt to Adjusted EBITDA ratio
(the "Leverage Ratio"). Interest on the Bank Credit Facility is payable
quarterly, except that interest on loans based on LIBOR rates for periods of
less than three months is payable at such shorter intervals (i.e. one month).

FEES. Pentacon is required to pay the lenders, on a quarterly basis,
commitment fees which range from 0.25% to 0.50% on the unused portion of the
revolving credit facility determined based on the Leverage Ratio. Pentacon is
also obligated to pay: (i) a quarterly letter of credit fee equal to the margin
for LIBOR loans on the aggregate amount of outstanding letters of credit, (ii) a
fronting bank fee for the letter of credit issuing bank equal to 0.125% per
annum and (iii) certain other fees.

56
<PAGE>
COVENANTS. The Bank Credit Facility contains a number of covenants that,
among other things, restrict the ability of Pentacon and its subsidiaries to
dispose of assets, incur additional indebtedness, create encumbrances on assets,
enter into sale and leaseback transactions, make investments, loans,
distributions or advances, engage in mergers or consolidations, make capital
redemptions or repurchases, change the business conducted by Pentacon or its
subsidiaries or engage in certain transactions with affiliates, and certain
other corporate activities. In addition, the Bank Credit Facility requires that
the Company comply with specified financial ratios and financial tests,
including a maximum total debt to Adjusted EBITDA ratio, a maximum senior debt
to Adjusted EBITDA ratio, a minimum fixed charge coverage ratio, a minimum net
worth test and a maximum capital expenditures test. The permitted total debt to
Adjusted EBITDA ratio steps down over the period of the Bank Credit Facility,
with the step downs to the total debt to Adjusted EBITDA ratio being on March
31, 2000 and June 30, 2000.

EVENTS OF DEFAULT. The Bank Credit Facility contains customary events of
default, including non-payment of principal, interest or fees, inaccuracy of
representations or warranties, default in the payment of other debt, violation
of covenants, insolvency, certain judgments, invalidity of any of the security
instruments required by the Bank Credit Facility, certain change of control
events, change in usual business and the occurrence of certain other events that
could be expected to have a material adverse affect on the Company as described
therein.

57
<PAGE>
DESCRIPTION OF THE NOTES

The exchange notes will be issued, and the existing notes were issued,
under an indenture among the Company, each of the guarantors of the notes (the
"guarantors") and State Street Bank and Trust Company, as trustee. The
indenture is qualified under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), upon effectiveness of this registration statement for
the exchange offer. By its terms, however, the indenture incorporates certain
provisions of the Trust Indenture Act and, upon consummation of this exchange
offer, the indenture is subject to and governed by the Trust Indenture Act.
References to the "notes" include the exchange notes unless the context
otherwise requires. The following summary of the material provisions of the
indenture and the notes does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the provisions of the indenture and
the notes, including the definitions of certain terms contained therein and
those terms made part of the indenture by reference to the Trust Indenture Act.
The definitions of certain capitalized terms used in the following summary are
set forth below under "-- Certain Definitions." As used in this "Description
of the Notes," the term "Company" refers only to Pentacon, Inc. and not to
any of its subsidiaries.

GENERAL

The notes will be unsecured senior subordinated obligations of the Company
limited to $100,000,000 aggregate principal amount. The notes will be issued
only in fully registered form without coupons, in denominations of $1,000 and
integral multiples thereof. Principal of, premium, if any, and interest on the
notes are payable, and the notes are exchangeable and transferable, at the
office or agency of the Company in The City of New York maintained for such
purposes (which initially will be the corporate trust office of the trustee);
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the Person entitled thereto as shown on the security
register. No service charge will be made for any registration of transfer,
exchange or redemption of the notes, except in certain circumstances for any tax
or other governmental charge that may be imposed in connection therewith.

MATURITY, INTEREST AND PRINCIPAL

The notes will mature on April 1, 2009. Interest on the notes will accrue
at the rate of 12 1/4% per annum from the Issue Date through maturity; provided
that in the event either (x) EBITDA (as defined below) of the Company and the
Restricted Subsidiaries does not equal or exceed $7.25 million (the "EBITDA
Target") for the quarter ended March 31, 1999, the interest rate on the notes
will increase by 0.50% per annum to a rate of 12 3/4% per annum and the notes
would begin accruing interest at such higher rate on April 1, 1999, or (y)
EBITDA of the Company and the Restricted Subsidiaries does not equal or exceed
the EBITDA Target for the quarter ended June 30, 1999, the interest rate on the
notes will increase by 0.50% per annum to a rate of 12 3/4% per annum and the
notes would begin accruing interest at such higher rate on July 1, 1999;
provided, further, that the interest rate on the notes will not exceed 12 3/4%
per annum. Following any increase in interest rate as stated above, no further
adjustment (upward or downward) shall be made to the interest rate on the notes.
In the event the Company and the Restricted Subsidiaries meet the EBITDA Target
for each of the quarters ended March 31, 1999 and June 30, 1999, no adjustment
(upward or downward) will be made to the interest rate. In the event the
interest rate is increased pursuant to this paragraph, such event shall be
referred to as an "Interest Payment Triggering Event." The EBITDA Target is
not intended to be a projection and there can be no assurance that the Company
and the Restricted Subsidiaries will meet the EBITDA Target. If the Company
fails to file a quarterly report on Form 10-Q for a quarter when it would
otherwise be required by the Commission's rules, whether or not it is so
obligated to do so, for which the EBITDA Target is being determined, EBITDA for
such quarter shall be deemed to be less than the EBITDA Target.

As used in the preceding paragraph, "EBITDA" means "Consolidated Cash
Flow Available for Fixed Charges" as defined under "-- Certain Definitions"
below; provided that all Consolidated Cash

58
<PAGE>
Flow Available for Fixed Charges attributable to any Persons, assets or property
that were the subject of any Asset Acquisition or Investment (without giving
effect to the last sentence of the definition of Investment) made during the
quarters ended March 31, 1999 and June 30, 1999 shall be excluded from EBITDA.
EBITDA shall be derived from the applicable unaudited interim consolidated
financial statements of the Company and shall be determined in good faith by the
Company, consistent with the audited financial statements of the Company
included in this Prospectus, with all necessary normal recurring adjustments,
and shall be communicated to the trustee by officer's certificate signed by two
officers of the Company on or prior to the date such financial statements are
filed with the Commission.

Interest on the notes will be payable semi-annually on each April 1 and
October 1, commencing October 1, 1999, to the holders of record of notes at the
close of business on the March 15 and September 15, respectively, immediately
preceding such interest payment date. 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 Issue Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.

As discussed under "Registration Rights," pursuant to the registration
rights agreement, the Company has agreed to file with the Commission the
exchange offer registration statement, of which this prospectus is a part, and
to offer to the holders of notes who make certain representations the
opportunity to exchange their existing notes for exchange notes. In the event
that the Company is not permitted to consummate the exchange offer because the
exchange offer is not permitted by applicable law or Commission policy or, in
certain other circumstances, including if for any other reason the exchange
offer is not consummated within 150 days after the Issue Date, the Company will
file with the Commission the shelf registration statement with respect to
resales of the existing notes by the holders thereof. The interest rate on the
notes is subject to increase under certain circumstances if the Company is not
in compliance with its obligations under the registration rights agreement. See
"Registration Rights."

OPTIONAL REDEMPTION

OPTIONAL REDEMPTION. The notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after April 1, 2004, at the
redemption prices (expressed as percentages of the principal amount) set forth
below, plus accrued and unpaid interest thereon, if any, to the date of
redemption, if redeemed during the 12-month period beginning on April 1 of the
years indicated below:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ------------------------------------- ----------
<S> <C>
2004................................. 106.125%
2005................................. 104.083%
2006................................. 102.041%
2007 and thereafter.................. 100.000%
</TABLE>

OPTIONAL REDEMPTION UPON QUALIFIED EQUITY OFFERING. On or prior to April
1, 2002, the Company may, at its option, use the net proceeds of one or more
Qualified Equity Offerings (as defined below) to redeem up to 35% of the
originally issued aggregate principal amount of the notes, at a redemption price
in cash equal to 112.25% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the date of redemption; provided that at
least 65% of the aggregate principal amount of notes is outstanding following
such redemption. Notice of any such redemption must be given not later than 60
days after the consummation of any such Qualified Equity Offering.

As used in the preceding paragraph, a "Qualified Equity Offering" means
(i) any underwritten public offering of Capital Stock (other than Redeemable
Capital Stock) of the Company made on a primary basis by the Company pursuant to
a registration statement filed with and declared effective by the Commission in
accordance with the Securities Act or (ii) any sale of Capital Stock (other than

59
<PAGE>
Redeemable Capital Stock) for gross cash proceeds of at least $20.0 million to
one or more Persons, provided that such Persons are not Affiliates of the
Company at the time of such sale.

SELECTION AND NOTICE. In the event that less than all of the notes are to
be redeemed at any time, selection of notes for redemption shall 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 listed
on a national securities exchange, on a pro rata basis, by lot or by such method
as the trustee will deem fair and appropriate; provided, however, that no notes
of a principal amount of $1,000 or less shall be redeemed in part; provided,
further, however, that any such redemption made with the net proceeds of a
Qualified Equity Offering shall be made on a pro rata basis or on as nearly a
pro rata basis as practicable (subject to the procedures of The Depository Trust
Company or any other depositary). Notice of redemption will 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. If any note is to
be redeemed in part only, the notice of redemption that relates to such note
will state the portion of the principal amount thereof to be redeemed. A new
note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original note.
On and after the redemption date, interest will cease to accrue on notes or
portions thereof called for redemption so long as the Company has deposited with
the paying agent for the notes funds in satisfaction of the applicable
redemption price pursuant to the indenture.

CHANGE OF CONTROL

The indenture provides that, following the occurrence of a Change of
Control (the date of such occurrence being the "Change of Control Date"), the
Company will be obligated, within 60 days after the Change of Control Date, to
make and consummate an offer to purchase (a "Change of Control Offer") all of
the then outstanding notes at a purchase price (the "Change of Control Purchase
Price") in cash equal to 101% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the purchase date. The Company will be
required to purchase all notes properly tendered in the Change of Control Offer
and not withdrawn.

In order to effect such Change of Control Offer, the Company will, not
later than the 30th day after the Change of Control Date, be obligated to mail
to each holder of notes a notice of the Change of Control Offer, which notice
will govern the terms of the Change of Control Offer and will state, among other
things, the procedures that holders must follow to accept the Change of Control
Offer. The Change of Control Offer will be required to be kept open for a period
of at least 20 business days.

If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the notes that might be tendered by holders of notes seeking to accept the
Change of Control Offer. The Credit Facility prohibits the purchase of the notes
by the Company prior to full repayment of the indebtedness under the Credit
Facility. In addition, the Company may incur additional indebtedness in the
future, subject to certain limitations, which may have similar restrictions.
There can be no assurance that in the event of a Change of Control, the Company
will be able to obtain the necessary consents from lenders under the Credit
Facility or lenders under other indebtedness to consummate the Change of Control
Offer. If the Company fails to repurchase all of the notes tendered for
purchase, such failure will constitute an Event of Default under the indenture.
See "-- Events of Default" below.

The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act, and any other applicable securities laws
or regulations and any applicable requirements of any securities exchange on
which the notes are listed, in connection with the repurchase of notes pursuant
to a Change of Control Offer, and any violation of the provisions of the
indenture relating to such Change of Control Offer occurring as a result of such
compliance shall not be deemed a Default.

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SUBORDINATION

The payment of the Indebtedness evidenced by the notes, including, without
limitation, principal, premium, if any, and interest, will be subordinated in
right of payment, as set forth in the indenture, to the prior payment in full of
all Senior Indebtedness of the Company, whether outstanding at the Issue Date or
incurred thereafter. The indenture permits the Company and the Restricted
Subsidiaries to incur additional Indebtedness, including Senior Indebtedness.
See "-- Certain Covenants -- Limitation on Indebtedness."

The indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relating to the Company, or
any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary, or any assignment for the benefit of creditors or
other marshalling of assets or liabilities of the Company, all Senior
Indebtedness of the Company must be paid in full in cash before any payment,
distribution, repurchase or redemption (excluding any payment, distribution,
repurchase or redemption from trusts previously created pursuant to the
provisions described under "-- Defeasance or Covenant Defeasance of
Indenture," and excluding any payment, distribution, repurchase or redemption
of, or repurchase or redemption in exchange for, Permitted Junior Securities) is
made on account of any of the indebtedness represented by the notes. If any
payment is made to holders of the notes or the trustee on behalf of such
holders, that due to the subordination provisions of the indenture, should not
have been made to them, such holders or the trustee, as applicable, will be
required to pay such amount over to or for the benefit of holders of Senior
Indebtedness.

During the continuance of any default in the payment of any Designated
Senior Indebtedness pursuant to which the maturity thereof may immediately be
accelerated beyond any applicable grace period and after receipt by the trustee
from representatives of holders of such Designated Senior Indebtedness of
written notice of such default, no payment or distribution of any assets of the
Company of any kind or character (excluding any payment, distribution,
redemption or repurchase from trusts previously created pursuant to the
provisions described under "-- Defeasance or Covenant Defeasance of Indenture"
and excluding any payment or distribution of Permitted Junior Securities) shall
be made on account of any of the Indebtedness represented by, or the purchase,
redemption or other acquisition of, the notes unless and until such default has
been cured or waived or has ceased to exist or such Designated Senior
Indebtedness shall have been discharged or paid in full.

During the continuance of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may
immediately be accelerated (a "Non-payment Default") and upon the earlier to
occur of (a) the receipt by the trustee from the representatives of holders of
such Designated Senior Indebtedness of a written notice of such Non-payment
Default or (b) if such Non-payment Default results from the acceleration of the
notes, the date of such acceleration, no payment or distribution of any assets
of the Company of any kind or character (excluding any payment or distribution
from trusts previously created pursuant to the provisions described under
"-- Defeasance or Covenant Defeasance of Indenture" and excluding any payment
or distribution of Permitted Junior Securities) may be made by the Company on
account of any of the Indebtedness represented by, or the purchase, redemption
or other acquisition of, the notes for the period specified below (the "Payment
Blockage Period").

The Payment Blockage Period will commence upon the earlier of the receipt
of notice of a Non-payment Default by the trustee from the representatives of
holders of Designated Senior Indebtedness or the date of acceleration referred
to in clause (b) of the preceding paragraph, as the case may be, and will end on
the earlier to occur of the following events: (i) 179 days shall have elapsed
since the receipt of such notice of a Non-payment Default or the date of
acceleration referred to in clause (b) of the preceding paragraph (provided that
such Designated Senior Indebtedness shall not theretofore have been accelerated
and the Company has not defaulted with respect to the payment of such Designated
Senior Indebtedness), (ii) such default is cured or waived or ceases to exist or
such Designated Senior

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Indebtedness is discharged or (iii) such Payment Blockage Period shall have been
terminated by written notice to the Company or the trustee from the
representatives of holders of Designated Senior Indebtedness initiating such
Payment Blockage Period. After the end of any Payment Blockage Period the
Company shall promptly resume making any and all required payments in respect of
the notes, including any missed payments. Notwithstanding anything in the
subordination provisions of the indenture or the notes to the contrary, unless
the provisions of the second preceding paragraph apply, (x) in no event shall a
Payment Blockage Period extend beyond 179 days from the date of the receipt by
the trustee of the notice initiating such Payment Blockage Period, (y) there
shall be a period of at least 186 consecutive days in each 365-day period when
no Payment Blockage Period is in effect and (z) not more than one Payment
Blockage Period with respect to the notes may be commenced within any period of
365 consecutive days. A Non-payment Default with respect to Designated Senior
Indebtedness that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period cannot be made the basis for the
commencement of a second Payment Blockage Period, whether or not within a period
of 365 consecutive days, unless such default has been cured or waived for a
period of not less than 90 consecutive days and subsequently recurs. If,
notwithstanding the foregoing, the Company makes any payment or distribution to
the trustee or holders of the notes prohibited by the subordination provisions
of the indenture, then such payment or distribution will be required to be paid
over to or for the benefit of holders of Designated Senior Indebtedness.

If the Company fails to make any payment on the notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the indenture and would enable the holders of the notes to accelerate the
maturity thereof. See "-- Events of Default."

By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the notes and funds which would be otherwise
payable to the holders of the notes will be paid to the holders of Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full in
cash, and the Company may be unable to meet its obligations fully with respect
to the notes.

As of December 31, 1998 on a pro forma basis after giving effect to the
sale of the notes and the application of the net proceeds therefrom, the Company
would have had outstanding $41.4 million of Senior Indebtedness and the
guarantors would have had outstanding $3.5 million of Senior Indebtedness,
excluding their guarantee of $41.4 million of Senior Indebtedness of the
Company. The indenture limits, but does not prohibit, the incurrence by the
Company of additional Indebtedness which is senior to the notes, but prohibits
the incurrence of any Indebtedness contractually subordinated in right of
payment to any other Indebtedness of the Company and senior in right of payment
to the notes. See "Risk Factors -- Subordination of the Notes and the
Guarantees; Unsecured Status of the Notes and the Guarantees."

SUBSIDIARY GUARANTEES

The Company's payment obligations under the notes are jointly and severally
guaranteed by the guarantors. The obligations of each guarantor under its
guarantee is unconditional and absolute, irrespective of any invalidity,
illegality or unenforceability of any note or the indenture or any extension,
compromise, waiver or release in respect of any obligation of the Company or any
other guarantor under any note or the indenture, or any modification or
amendment of or supplement to the indenture. In order to incur Indebtedness
under the "Limitation on Indebtedness" covenant or to comply with any
requirements of any other debt instrument, the Company may cause future
Restricted Subsidiaries to become guarantors.

The obligations of any guarantor under its guarantee is subordinated, to
the same extent as the obligations of the Company in respect of the notes, to
the prior payment in full of all Senior Indebtedness of such guarantor, which
will include any guarantee issued by such guarantor of any

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Senior Indebtedness; provided that payment blockage periods in respect of the
guarantees may only be instituted by a holder of Designated Senior Indebtedness
of the Company entitled to the benefit of a guarantee from the applicable
guarantor at the same time as instituted in respect of Senior Indebtedness of
the Company and for a contemporaneous period. The obligations of each guarantor
under its guarantee are limited to the extent necessary to provide that such
guarantee does not constitute a fraudulent conveyance under applicable law. Each
guarantor that makes a payment or distribution under its guarantee shall be
entitled to a contribution from each other guarantor so long as the exercise of
such right does not impair the rights of holders of notes under any guarantee.
See "Risk Factors -- Holding Company Structure; Guarantees May be Unenforceable
due to Fraudulent Conveyance Statutes." A guarantor shall be released and
discharged from its obligations under its guarantee under certain limited
circumstances. See "-- Consolidation, Merger, Sale of Assets, Etc."

Notwithstanding the foregoing, but subject to the requirements described
under "-- Consolidation, Merger, Sale of Assets, Etc.," any guarantee by a
Restricted Subsidiary of the notes shall provide by its terms that it (and all
Liens securing the same) shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary, which transaction
is in compliance with the terms of the indenture (including, but not limited to,
the covenant described under "-- Limitation on Sale of Assets") and such
Restricted Subsidiary is simultaneously unconditionally released from all
guarantees, if any, by it of other Indebtedness of the Company or any Restricted
Subsidiaries or (ii) (with respect to any guarantees created after the date of
the indenture) the release by the holders of the Indebtedness of the Company
described above of their security interest or their guarantee by such Restricted
Subsidiary (including any deemed release upon payment in full of all obligations
under such Indebtedness), at a time when (A) no other Indebtedness of the
Company has been secured or guaranteed by such Restricted Subsidiary, as the
case may be, or (B) the holders of all such other Indebtedness which is secured
or guaranteed by such Restricted Subsidiary also release their security interest
in, or guarantee by such Restricted Subsidiary (including any deemed release
upon payment in full of all obligations under such Indebtedness). The Company
may, at any time, cause a Subsidiary to become a guarantor by executing and
delivering a supplemental indenture providing for the guarantee of payment of
the notes by such Subsidiary on the basis provided in the indenture.

CERTAIN COVENANTS

The indenture contains, among others, the following covenants:

LIMITATION ON INDEBTEDNESS. The indenture provides that the Company will
not, and will not permit any of the Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, issue, guarantee or in any manner become
liable for or with respect to, contingently or otherwise (in each case, to
"incur"), the payment of any Indebtedness (including any Acquired
Indebtedness); provided, however, that (i) the Company or a guarantor may incur
Indebtedness (including Acquired Indebtedness) and (ii) a Restricted Subsidiary
(which is not a guarantor) may incur Acquired Indebtedness, if, in either case,
immediately after giving pro forma effect thereto, the Consolidated Fixed Charge
Coverage Ratio of the Company is at least equal to 2.0:1.0.

Notwithstanding the foregoing, the Company and, to the extent set forth
below, the guarantors and the Restricted Subsidiaries may incur each and all of
the following (collectively, "Permitted Indebtedness"):

(i) Indebtedness of the Company or any guarantor under the Credit
Facility in an aggregate principal amount at any one time outstanding not
to exceed the greater of (x) $100.0 million or (y) the sum of (A) 85% of
the book value of the accounts receivable of the Company and the Restricted
Subsidiaries on a consolidated basis in accordance with GAAP and (B) 60% of
the book value of the inventory of the Company and the Restricted
Subsidiaries on a consolidated

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basis in accordance with GAAP, less any voluntary or mandatory prepayments
actually made thereunder (to the extent that the corresponding commitments
have been permanently reduced);

(ii) Indebtedness of the Company pursuant to the notes and
Indebtedness of any guarantor pursuant to a guarantee of the notes;

(iii) Indebtedness of the Company owing to a Restricted Subsidiary;
provided that any Indebtedness for borrowed money of the Company owing to a
Restricted Subsidiary is subordinated in accordance with provisions set
forth in the indenture; provided, further, that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a disposition,
pledge or transfer to a Restricted Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by the Company not permitted by this clause
(iii);

(iv) Indebtedness of a Restricted Subsidiary owing to and held by the
Company or another Restricted Subsidiary which is unsecured; provided that
(a) any disposition, pledge or transfer of any such Indebtedness to a
Person (other than the Company or a Restricted Subsidiary) shall be deemed
to be an incurrence of such Indebtedness by the obligor not permitted by
this clause (iv), and (b) any transaction pursuant to which any Restricted
Subsidiary, which has Indebtedness owing to the Company or any other
Restricted Subsidiary, ceases to be a Restricted Subsidiary shall be deemed
to be the incurrence of Indebtedness by such Restricted Subsidiary that is
not permitted by this clause (iv);

(v) Indebtedness of the Company or any Restricted Subsidiary under
Interest Rate Agreements not entered into for speculative purposes and
covering Indebtedness of the Company or such Restricted Subsidiary (which
Indebtedness (a) bears interest at fluctuating interest rates and (b) is
otherwise permitted to be incurred under this covenant);

(vi) Indebtedness of the Company or any Restricted Subsidiary under
Currency Agreements relating to (a) Indebtedness of the Company or such
Restricted Subsidiary and/or (b) obligations to purchase or sell assets or
properties, in each case, incurred in the ordinary course of business of
the Company; provided, however, that such Currency Agreements do not
increase the Indebtedness or other obligations of the Company outstanding
other than as a result of fluctuations in foreign currency exchange rates
or by reason of fees, indemnities and compensation payable thereunder;

(vii) Indebtedness of the Company or any guarantor represented by
Capitalized Lease Obligations or Purchase Money Obligations or other
Indebtedness incurred or assumed in connection with the acquisition or
development of real or personal movable or immovable property in each case
incurred for the purpose of financing or refinancing all or any part of the
purchase price or cost of construction or improvement of property used in
the business of the Company or such guarantor, in an aggregate principal
amount pursuant to this clause (vii) not to exceed $20.0 million per year;
provided, that the principal amount of any Indebtedness permitted under
this clause (vii) did not in each case at the time of incurrence exceed the
Fair Market Value, as determined by the Company or such guarantor in good
faith, of the acquired or constructed asset or improvement so financed;

(viii) reimbursement obligations under letters of credit and letters
of credit, in each case, to support workers compensation obligations and
bankers acceptances and performance bonds, surety bonds and performance
guarantees, of the Company or any guarantor, in each case, in the ordinary
course of business consistent with past practice;

(ix) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any
Indebtedness outstanding on the Issue Date or incurred under the first
paragraph of this covenant or clause (ii) above, including any successive
refinancings so long as the aggregate principal amount of Indebtedness
represented thereby is not increased by such refinancing plus the amount of
any stated or reasonably determined prepayment premium paid in connection
with such a refinancing, plus, the amount of expenses of the

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Company or a Restricted Subsidiary incurred in connection with such
refinancing and (A) in the case of any refinancing of Indebtedness that is
Subordinated Indebtedness, such new Indebtedness is subordinated to the
notes at least to the same extent as the Indebtedness being refinanced and
(B) such new Indebtedness has an Average Life to Stated Maturity equal to
or greater than the Average Life to Stated Maturity of the Subordinated
Indebtedness being repurchased, redeemed, defeased, retired, acquired or
paid; and

(x) Indebtedness of the Company or any Restricted Subsidiary in
addition to that described in clauses (i) through (ix) above, so long as
the aggregate principal amount of all such additional Indebtedness shall
not exceed $25.0 million outstanding at any one time in the aggregate.

LIMITATION ON RESTRICTED PAYMENTS. The indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly:

(i) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any payment to
the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company (other than dividends or distributions to the extent
payable in shares of Qualified Capital Stock of the Company or in options,
warrants or other rights to acquire shares of such Qualified Capital
Stock); or

(ii) purchase, redeem, defease or otherwise acquire or retire for
value, directly or indirectly, the Company's Capital Stock or any Capital
Stock of any Restricted Subsidiary (other than any such Capital Stock owned
by the Company or any Restricted Subsidiary); or

(iii) make any principal payment on, or purchase, repurchase, redeem,
defease, retire or otherwise acquire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any Subordinated
Indebtedness owed to and held by the Company or a Restricted Subsidiary);
or

(iv) declare or pay any dividend or make any distribution or payment
on or in respect of any Capital Stock of any Restricted Subsidiary or any
payment to the direct or indirect holders (in their capacities as such) of
any Capital Stock of any Restricted Subsidiary (other than to the Company
or any Restricted Subsidiary and other than to minority stockholders of any
Restricted Subsidiary, provided that such dividends, payments or
distributions are made on a pro rata basis to the stockholders of such
Restricted Subsidiary; or

(v) make any Investment (other than any Permitted Investment) in any
Person any of the foregoing actions described in clauses (i) through (v),
other than any such action that is a Permitted Payment (as defined below),
collectively, "Restricted Payments") (the amount of any such Restricted
Payment, if other than cash, shall be the Fair Market Value of the asset(s)
proposed to be transferred by the Company or such Restricted Subsidiary, as
the case may be, in each case, as determined by the board of directors of
the Company, whose determination shall be conclusive and evidenced by a
board resolution), unless (1) immediately before and immediately after
giving effect to such Restricted Payment on a pro forma basis, no Default
shall have occurred and be continuing; (2) immediately before and
immediately after giving effect to such Restricted Payment on a pro forma
basis, the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the provisions described under
"-- Limitation on Indebtedness," and (3) immediately after giving effect
to the proposed Restricted Payment, the aggregate amount of all such
Restricted Payments (including any Designation Amounts) declared or made
after the Issue Date, does not exceed an amount equal to the sum of,
without duplication:

(A) 50% of the cumulative Consolidated Net Income of the Company
during the period (treated as one accounting period) beginning on
January 1, 1999 and ending on the last day of the Company's last fiscal
quarter ending prior to the date of the Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income shall be a deficit, minus
100% of such deficit); plus

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(B) the aggregate Net Cash Proceeds received after the Issue Date
by the Company from the issuance or sale (other than to any of the
Restricted Subsidiaries) of Qualified Capital Stock of the Company or
from the exercise of any options, warrants or rights to purchase such
Qualified Capital Stock of the Company (except, in each case, to the
extent such proceeds are used to purchase, redeem or otherwise retire
Capital Stock or Subordinated Indebtedness as set forth in clause (ii)
or (iii) of the following paragraph and excluding the net cash proceeds
from any issuance and sale of Capital Stock or from any such exercises,
in each case, financed, directly or indirectly, using funds borrowed
from the Company or any Restricted Subsidiary until and to the extent
such borrowing is repaid); plus

(C) the aggregate Net Cash Proceeds received after the Issue Date
by the Company from the conversion or exchange, if any, of debt
securities or Redeemable Capital Stock of the Company or its
Subsidiaries into or for Qualified Capital Stock of the Company plus,
whether or not such debt securities or Redeemable Capital Stock were
issued prior to or after the Issue Date, the aggregate Net Cash Proceeds
from their original issuance, less any principal and sinking fund
payments made thereon; plus

(D) in the case of the disposition or repayment of any Investment
(in whole or in part) constituting a Restricted Payment made after the
Issue Date (other than an Investment made under clause (vi) of the
following paragraph), an amount (to the extent not included in
Consolidated Net Income) equal to the lesser of the return of capital
with respect to such Investment and the initial amount of such
Investment which was treated as a Restricted Payment, in either case,
less the cost of disposition of such Investment; plus

(E) so long as the Designation thereof was treated as a Restricted
Payment made after the Issue Date, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after
the Issue Date in accordance with "-- Limitations on Unrestricted
Subsidiaries" below, the Fair Market Value of the Capital Stock of such
Subsidiary owned by the Company and the Restricted Subsidiaries,
provided that such amount shall not in any case exceed the Designation
Amount with respect to such Restricted Subsidiary upon its Designation.

Notwithstanding the foregoing, and in the case of clauses (ii) through (v)
below, so long as no Default shall have occurred and be continuing or would
arise therefrom, the foregoing provisions shall not prohibit the following
actions (each of clauses (i) through (vii) being referred to as a "Permitted
Payment"):

(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of the indenture;

(ii) the repurchase, redemption, or other acquisition or retirement
of any shares of any class of Capital Stock of the Company in exchange for
(including any such exchange pursuant to the exercise of a conversion right
or privilege in connection with which cash is paid in lieu of the issuance
of fractional shares or scrip), or out of the Net Cash Proceeds of a
substantially concurrent issue and sale for cash to any Person (other than
to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the
Company; provided that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are excluded from clause (B) of the first
paragraph of this covenant;

(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or out of the Net Cash Proceeds of a
substantially concurrent issuance and sale for cash to any Person (other
than to the Company or any Restricted Subsidiary) of, any Qualified Capital
Stock of the Company, provided that the Net Cash Proceeds from the issuance
of such shares of Qualified Capital Stock are excluded from clause (B) of
the first paragraph (a) of this covenant;

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(iv) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) of the Company in
exchange for, or out of the Net Cash Proceeds of a substantially concurrent
issuance and sale for cash to any Person (other than to a Restricted
Subsidiary) of, new Subordinated Indebtedness of the Company (which may be
guaranteed by a guarantor on a basis such that it constitutes Subordinated
Indebtedness), provided that any such new Subordinated Indebtedness (1)
shall be in a principal amount that does not exceed the principal amount so
repurchased, redeemed, defeased, retired, acquired or paid (or, if such
Subordinated Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration
thereof, then such lesser amount as of the date of determination), plus the
amount of any stated or reasonably determined prepayment premium paid in
connection with such repurchase, redemption, defeasance, retirement,
acquisition or payment, plus the amount of expenses of the Company and the
Restricted Subsidiaries incurred in connection with such repurchase,
redemption, defeasance, retirement, acquisition or payment; (2) has an
Average Life to Stated Maturity equal to or greater than the Average Life
to Stated Maturity of the Subordinated Indebtedness being repurchased,
redeemed, defeased, retired, acquired or paid; and (3) is expressly
subordinated in right of payment to the notes at least to the same extent
as the Subordinated Indebtedness to be repurchased, redeemed, defeased,
retired, acquired or paid;

(v) the repurchase, redemption or other acquisition, cancellation or
retirement for value of any Capital Stock of the Company or similar
securities, held by (a) officers, directors or employees or former
officers, directors or employees of the Company or any of its Subsidiaries
(or their estates or beneficiaries under their estates) pursuant to any
management, stock option agreement or stock option plan, not to exceed $2.0
million in any fiscal year of the Company and (b) the repurchase,
redemption or other acquisition, cancellation or retirement for value of
any Capital Stock of the Company held by former owners of Subsidiaries of
the Company, that was, as of the date of acquisition of such stock by such
Persons subject to a lock-up agreement or other similar agreement with the
Company restricting the resale of such Capital Stock, so long as the
aggregate amount utilized under this clause (v) does not exceed $7.0
million during the term of the notes;

(vi) cash payments in lieu of fractional shares issuable as dividends
on preferred securities of the Company, not to exceed $250,000 in any
fiscal year of the Company; and

(vii) Investments (in addition to Permitted Investments) not to
exceed $10.0 million at any time outstanding.

In computing the amount of Restricted Payments previously made for purposes
of clause (3) of the first paragraph of this covenant, Restricted Payments under
the immediately preceding clause (i) of the immediately preceding paragraph
shall be included. If the Company makes a Restricted Payment which, at the time
of the making of such Restricted Payment would in the good faith determination
of the Company be permitted under the provisions of the indenture, such
Restricted Payment shall be deemed to have been made in compliance with the
indenture notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Consolidated Net Income of the Company
for any period.

LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not cause or permit any of the Restricted Subsidiaries to, directly or
indirectly, conduct any business or enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with, or
for the benefit of, any Affiliate of the Company or of a Restricted Subsidiary
(other than the Company or a Restricted Subsidiary) or any officer or director
of the Company or any Restricted Subsidiary unless such transaction or series of
related transactions is entered into in good faith and in writing and

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(a) such transaction is on terms that are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than those that
would be available in a comparable transaction in arm's-length dealings
with an unrelated third party, and

(b) with respect to any transaction or series of related transactions
involving aggregate value in excess of $5.0 million, the Company delivers
an officers' certificate to the trustee certifying that such transaction or
series of related transactions complies with the requirements of this
covenant and, with respect to any transaction or series of related
transactions involving aggregate value in excess of $10.0 million, either
(i) such transaction or series of transactions has been approved by a
majority of the Board of Directors of the Company, including a majority of
the Disinterested Directors of the Company, or in the event there is only
one Disinterested Director, by such Disinterested Director, or (ii) the
Company delivers to the trustee a written opinion of an Independent
Financial Advisor stating that the transaction or series of related
transactions is fair to the Company or such Restricted Subsidiary from a
financial point of view.

The requirements of this covenant shall not apply to (i) any transaction
with an officer, director or employee of the Company entered into in the
ordinary course of business (including compensation and employee benefit
arrangements with any officer or director of the Company, including under any
stock option or stock incentive plans); provided that such transaction has been
approved in the manner described in clause (b) above if such transaction would,
pursuant to clause (b) above, require such approval, (ii) the payment of
reasonable and customary compensation and fees to directors of the Company or
any Restricted Subsidiary who are not employees of the Company or any Restricted
Subsidiary, (iii) the payment of dividends otherwise in compliance with the
covenant "-- Limitation on Restricted Payments," (iv) indemnification
agreements for the benefit of officers, directors and employees, (v)
transactions with or among the Company and any Restricted Subsidiary or between
or among Restricted Subsidiaries, so long as no Person (other than a Restricted
Subsidiary) which would otherwise be an Affiliate, officer or director of the
Company or a Restricted Subsidiary has any direct or indirect interest in any
such Restricted Subsidiary, (vi) any transaction with Affiliates in existence on
the Issue Date as in effect on the Issue Date, and (vii) leases of property or
equipment or other agreements entered into in connection with an Asset
Acquisition with Persons that were not Affiliates, officers or directors of the
Company or a Restricted Subsidiary immediately prior to such Asset Acquisition.

LIMITATION ON LIENS. The indenture provides that the Company will not, and
will not cause or permit any Restricted Subsidiary to, directly or indirectly,
create, incur, assume, suffer to exist or affirm any Lien of any kind securing
any Pari Passu Indebtedness or Subordinated Indebtedness (including any
assumption, guarantee or other liability with respect thereto by any Restricted
Subsidiary) upon any of its property or assets (including any intercompany
notes), whether owned on the Issue Date or acquired after the Issue Date, or any
proceeds, income or profits therefrom, or assign or convey any right to receive
proceeds, income or profits therefrom, unless the notes are directly secured
equally and ratably with (or, in the case of Subordinated Indebtedness, prior or
senior to, with the same relative priority as the notes shall have with respect
to such Subordinated Indebtedness) the obligation or liability secured by such
Lien, except for Liens

(A) securing Acquired Indebtedness which were created prior to (and
not created in connection with, or in contemplation of) the incurrence of
such Pari Passu Indebtedness or Subordinated Indebtedness (including any
assumption, guarantee or other liability with respect thereto by any
Restricted Subsidiary) and which Indebtedness is permitted under the
provisions of the covenant described under "-- Limitation on
Indebtedness;" or

(B) securing any Indebtedness incurred in connection with any
refinancing, renewal, substitution or replacement of any such Indebtedness
described in clause (A), so long as the aggregate principal amount of
Indebtedness represented thereby is not increased by such refinancing by an
amount greater than the amount of any stated or reasonably determined

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prepayment premium paid in connection with such a refinancing plus the
amount of expenses of the Company and the Restricted Subsidiaries incurred
in connection with such refinancing;

PROVIDED, HOWEVER, that in the case of clauses (A) and (B) any such Lien only
extends to the assets that were subject to such Lien securing such Indebtedness
prior to the related acquisition by the Company or the Restricted Subsidiaries.

LIMITATION ON INCURRENCE OF SENIOR SUBORDINATED INDEBTEDNESS. The
indenture provides that the Company will not, and will not permit any guarantor
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
in any manner become directly or indirectly liable for or with respect to or
otherwise permit to exist any Indebtedness that is subordinate or junior in
right of payment to any Indebtedness of the Company or such guarantor, as the
case may be, unless such Indebtedness is also pari passu with the notes or the
guarantee of such guarantor or subordinate or junior, in right of payment to the
notes or such guarantee at least to the same extent as the notes or such
guarantee are subordinate or junior in right of payment to Senior Indebtedness
or Senior Indebtedness of such guarantor, as the case may be.

The indenture provides further that the Company will not cause or permit
any Restricted Subsidiary, other than the guarantors, directly or indirectly, to
secure the payment of any Senior Indebtedness of the Company and the Company
will not, and will not permit any Restricted Subsidiary to, pledge any
intercompany notes representing obligations of any Restricted Subsidiary (other
than the guarantors) to secure the payment of any Senior Indebtedness unless in
each case such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the indenture providing for a guarantee of payment of
the notes by such Restricted Subsidiary, which guarantee shall be on the same
terms as the guarantee of the Senior Indebtedness (if a guarantee of Senior
Indebtedness is granted by any such Restricted Subsidiary) except that the
guarantee of the notes need not be secured and shall be subordinated to the
claims against such Restricted Subsidiary in respect of Senior Indebtedness to
the same extent as the notes are subordinated to Senior Indebtedness of the
Company under the indenture.

LIMITATION ON SALE OF ASSETS. The indenture provides that the Company will
not, and will not cause or permit any Restricted Subsidiary to, directly or
indirectly, consummate an Asset Sale unless (i)at least 75% of the consideration
from such Asset Sale is received in cash or Cash Equivalents and (ii)the Company
or such Subsidiary receives consideration at the time of such Asset Sale at
least equal to the Fair Market Value of the shares or assets subject to such
Asset Sale.

If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness outstanding
as required by the terms thereof, or the Company determines not to apply such
Net Cash Proceeds to the permanent repayment of the Senior Indebtedness which is
required to be prepaid, or if no such Indebtedness under the Senior Indebtedness
is outstanding then, the Company or such Restricted Subsidiary may within 365
days of such Asset Sale, invest the Net Cash Proceeds in capital expenditures,
properties and other assets or inventories that (as determined by the board of
directors of the Company) replace the properties and assets that were the
subject of the Asset Sale or in properties and assets that will be used in the
businesses of the Company or its Subsidiaries existing on the Issue Date or in
businesses reasonably related thereto.

To the extent all or part of the Net Cash Proceeds of any Asset Sale are
not applied, or the Company determines not to so apply such Net Cash Proceeds,
within 365 days of such Asset Sale as described in the immediately preceding
paragraph (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the
Company shall, within 20 days after such 365th day or at any earlier time after
such Asset Sale, make an offer to purchase (the "Asset Sale Offer") all
outstanding notes up to a maximum principal amount (expressed as a multiple of
$1,000) of notes equal to such Unutilized Net Cash Proceeds, at a purchase price
in cash equal to 100% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the purchase date; PROVIDED, HOWEVER, that the
Asset Sale Offer may be deferred until there are aggregate Unutilized Net Cash
Proceeds equal to or in

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excess of $10.0 million, at which time the entire amount of such Unutilized Net
Cash Proceeds, and not just the amount in excess of $10.0 million, shall be
applied as required pursuant to this paragraph. An Asset Sale Offer will be
required to be kept open for a period of at least 20 business days.

With respect to any Asset Sale Offer effected pursuant to this covenant,
among the notes, to the extent the aggregate principal amount of notes tendered
pursuant to such Asset Sale Offer exceeds the Unutilized Net Cash Proceeds to be
applied to the repurchase thereof, such notes shall be purchased pro rata based
on the aggregate principal amount of such notes tendered by each Holder. To the
extent the Unutilized Net Cash Proceeds exceed the aggregate amount of notes
tendered by the Holders of the notes pursuant to such Asset Sale Offer, the
Company may retain and utilize any portion of the Unutilized Net Cash Proceeds
not applied to repurchase the notes for any purpose consistent with the other
terms of the indenture.

In the event that the Company makes an Asset Sale Offer, the Company shall
comply, to the extent applicable, with the requirements of Section 14(e) of the
Exchange Act, and any other applicable securities laws or regulations and any
applicable requirements of any securities exchange on which the notes are
listed, and any violation of the provisions of the indenture relating to such
Asset Sale Offer occurring as a result of such compliance shall not be deemed a
Default.

LIMITATION ON SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The
indenture provides that the Company will not sell and will not cause or permit
any Restricted Subsidiary of the Company to issue, sell or transfer any
Preferred Stock of any Restricted Subsidiary (other than to the Company or to a
Wholly-Owned Restricted Subsidiary) or permit any Person (other than the Company
or a Wholly-Owned Restricted Subsidiary) to own any Preferred Stock of any
Restricted Subsidiary. In addition, the Company will not sell or otherwise
dispose of any Capital Stock of a Restricted Subsidiary, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any of its Capital Stock except, subject to compliance with the other
covenants herein, (i) to the Company or a Restricted Subsidiary, (ii) directors'
qualifying shares, (iii) if, immediately after giving effect to such issuance,
sale or other disposition, either (x) neither the Company nor any of its
Subsidiaries own any Capital Stock of such Restricted Subsidiary or (y) such
Restricted Subsidiary would remain a Restricted Subsidiary, and (iv) if,
immediately after giving effect to such issuance, sale or other disposition,
such Restricted Subsidiary would no longer constitute a Restricted Subsidiary
and any Investment in such Person remaining after giving effect thereto would
have been permitted to be made (and shall be deemed to have been made) under the
covenant described under "-- Limitation on Restricted Payments" on the date of
such issuance, sale or other disposition.

LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The indenture provides that the Company will not, and will not
cause or permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective or enter into any
agreement with any Person that would cause to become effective, any consensual
encumbrance or restriction of any kind, on the ability of any Restricted
Subsidiary to (i) pay dividends, in cash or otherwise, or make any other
distribution on or in respect of its Capital Stock or any other interest or
participation in, or measured by, its profits, to the Company or any other
Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make any Investment in the Company or any
other Restricted Subsidiary or (iv) transfer any of its properties or assets to
the Company or any other Restricted Subsidiary, except for:

(a) any encumbrance or restriction existing under any agreement in
effect on the Issue Date;

(b) any encumbrance or restriction, with respect to a Subsidiary that
is not a Restricted Subsidiary of the Company on the Issue Date, in
existence at the time such Person becomes a Restricted Subsidiary of the
Company and not incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary; provided, however, that such
encumbrances

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and restrictions are not applicable to the Company or any other Restricted
Subsidiary, or the properties or assets of the Company or any other
Restricted Subsidiary;

(c) any encumbrance or restriction existing under any agreement that
extends, renews, refinances or replaces the agreements containing the
encumbrances or restrictions in the foregoing clauses (a) and (b), or in
this clause (c), provided that the terms and conditions of any such
encumbrances or restrictions are no more restrictive in any material
respect than those under or pursuant to the agreement evidencing the
Indebtedness so extended, renewed, refinanced or replaced; and

(d) with respect to (iv) above, any restriction in any customary
non-assignment provision in any contract or lease governing any leasehold
interest entered into in the ordinary course of business.

LIMITATIONS ON UNRESTRICTED SUBSIDIARIES. The indenture provides that the
Company will not make, and will not permit the Restricted Subsidiaries to make,
any Investment in Unrestricted Subsidiaries if, at the time thereof, the
aggregate amount of such Investments would exceed the amount of Restricted
Payments then permitted to be made pursuant to the covenant described under
"-- Limitation on Restricted Payments." Any Investments in Unrestricted
Subsidiaries permitted to be made pursuant to this covenant (i) will be treated
as a Restricted Payment in calculating the amount of Restricted Payments made by
the Company and (ii) may be made in cash or property.

The Company may designate after the Issue Date any Subsidiary (other than a
guarantor) as an "Unrestricted Subsidiary" under the indenture (a
"Designation") only if:

(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation;

(ii) the Company would be permitted to make an Investment at the time
of Designation (assuming the effectiveness of such Designation) pursuant to
the provision described under the first paragraph of "-- Limitation on
Restricted Payments" above in an amount (the "Designation Amount") equal
to the Fair Market Value of the interest of the Company or any Restricted
Subsidiary in such Subsidiary on such date calculated in accordance with
GAAP; and

(iii) the Company would be permitted under the indenture to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described under "-- Limitation on Indebtedness"
at the time of such Designation (assuming the effectiveness of such
Designation).

In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described under "-- Limitation on Restricted Payments" for all purposes of the
indenture in the Designation Amount.

The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time (x) provide credit support for or subject any of its
property or assets (other than the Capital Stock of any Unrestricted Subsidiary)
to the satisfaction of, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary), except any non-recourse guarantee given solely to support the
pledge by the Company or any Restricted Subsidiary of the Capital Stock of an
Unrestricted Subsidiary. No Unrestricted Subsidiary shall at any time guarantee
or otherwise provide credit support for any obligation of the Company or any
Restricted Subsidiary. All Subsidiaries of Unrestricted Subsidiaries shall
automatically be deemed to be Unrestricted Subsidiaries.

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The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:

(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation;

(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
indenture; and

(iii) any transaction (or series of related transactions) between
such Subsidiary and any of its Affiliates that occurred while such
Subsidiary was an Unrestricted Subsidiary would be permitted by the
covenant described under "-- Limitation on Transactions with Affiliates"
above as if such transaction (or series of related transactions) had
occurred at the time of such Revocation.

All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the trustee certifying compliance with the foregoing
provisions.

PROVISION OF FINANCIAL STATEMENTS. The indenture requires that for so long
as the notes are outstanding, whether or not the Company is subject to Section
13(a) or 15(d) of the Exchange Act, or any successor provision thereto, the
Company will, to the extent permitted by Commission practice and applicable law
and regulations, file with the Commission the annual reports, quarterly reports
and other documents which the Company would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d), or any successor provision
thereto, if the Company was so subject, such documents to be filed with the
Commission on or prior to the date (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the Company was so
subject. The Company will also in any event (x) within 15 days of each Required
Filing Date, whether or not permitted or required to be filed with the
Commission, (i) transmit or cause to be transmitted by mail to all holders of
notes, as their names and addresses appear in the security register, without
cost to such holders and (ii) file with the trustee, copies of the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, if the Company was subject to
either of such Sections and (y) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder at the Company's cost.

In addition, for so long as any notes remain outstanding, the Company will
furnish to the holders of notes and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, and, to any beneficial holder of
notes, if not obtainable from the Commission, information of the type that would
be filed with the Commission pursuant to the foregoing provisions, upon the
request of any such holder.

CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.

The indenture provides that the Company shall not, in any transaction or
series of related transactions, merge or consolidate with or into, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets as an entirety to, any Person or Persons, and the
Company shall not permit any of the Restricted Subsidiaries to enter into any
such transaction or series of related transactions if such transaction or series
of related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries (taken
as a whole), to any Person or Persons, unless at the time and after giving
effect thereto

(i) either (A)(1) if the transaction or transactions is a merger or
consolidation involving the Company, the Company shall be the Surviving
Person of such merger or consolidation or (2) if

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the transaction or transactions is a merger or consolidation involving a
Restricted Subsidiary, such Restricted Subsidiary shall be the Surviving
Person of such merger or consolidation, or (B)(1) the Surviving Person
shall be a corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and (2)(x)
in the case of a transaction involving the Company, the Surviving Person
shall expressly assume by a supplemental indenture executed and delivered
to the trustee, in form satisfactory to the trustee, all the obligations of
the Company under the notes and the indenture and the registration rights
agreement, and in each case, the indenture, the notes and the registration
rights agreement shall remain in full force and effect, or (y) in the case
of a transaction involving a Restricted Subsidiary that is a guarantor, the
Surviving Person shall expressly assume by a supplemental indenture
executed and delivered to the trustee, in form satisfactory to the trustee,
all the obligations of such Restricted Subsidiary under its guarantee and
the indenture and the registration rights agreement, and in each case, such
indenture, guarantee and the registration rights agreement shall remain in
full force and effect;

(ii) immediately after giving effect to such transaction or series of
related transactions on a pro forma basis, no Default or Event of Default
shall have occurred and be continuing; and

(iii) the Company, or the Surviving Person, as the case may be,
immediately after giving effect to such transaction or series of related
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under
the covenant described above under "-- Certain Covenants -- Limitation on
Indebtedness."

No guarantor (other than a guarantor whose guarantee is to be released in
accordance with the terms of its guarantee and the indenture as provided under
"-- Subsidiary Guarantees" above) shall, in any transaction or series of
related transactions, consolidate with or merge with or into another Person,
whether or not such Person is affiliated with such guarantor and whether or not
such guarantor is the Surviving Person, unless

(i) the Surviving Person (if other than such guarantor) is a
corporation organized and validly existing under the laws of the United
States, any State thereof or the District of Columbia;

(ii) the Surviving Person (if other than such guarantor) expressly
assumes by a supplemental indenture all the obligations of such guarantor
under its guarantee and the performance and observance of every covenant of
the indenture and the registration rights agreement to be performed or
observed by such guarantor; and

(iii) immediately after giving effect to such transaction or series
of related transactions on a pro forma basis, no Default shall have
occurred and be continuing.

In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the trustee, in form and substance reasonably satisfactory to the
trustee, an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture in respect thereof comply with the requirements under the
indenture. In addition, each guarantor, in the case of a transaction described
in the first paragraph hereunder, unless it is the other party to the
transaction or unless its guarantee will be released and discharged in
accordance with its terms as a result of the transaction, will be required to
confirm, by supplemental indenture, that its guarantee will continue to apply to
the obligations of the Company or the Surviving Person under the indenture.

Upon any consolidation or merger of the Company or any guarantor or any
transfer of all or substantially all of the assets of the Company in accordance
with the foregoing, in which the Company or a guarantor is not the Surviving
Person, the Surviving Person shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the indenture, the

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notes and the registration rights agreement or such guarantor under the
indenture, the guarantee of such guarantor and the registration rights
agreement, as the case may be, with the same effect as if such successor
corporation had been named as the Company or such guarantor, as the case may be,
therein; and thereafter, except in the case of (a) a lease or (b) any sale,
assignment, conveyance, transfer, lease or other disposition to a Restricted
Subsidiary of the Company or such guarantor, the Company shall be discharged
from all obligations and covenants under the indenture, the notes and the
registration rights agreement and such guarantor shall be discharged from all
obligations and covenants under the indenture, the registration rights agreement
and the guarantee of such guarantor, as the case may be.

The indenture provides that for all purposes of the indenture and the notes
(including the provision of this covenant and the covenants described under
"-- Certain Covenants -- Limitation on Indebtedness", "-- Certain
Covenants -- Limitation on Restricted Payments" and "-- Certain
Covenants -- Limitation on Liens"), Subsidiaries of any Surviving Person shall,
upon such transaction or series of related transactions, become Restricted
Subsidiaries unless and until designated as Unrestricted Subsidiaries pursuant
to and in accordance with the provisions described under "-- Certain
Covenants -- Limitations on Unrestricted Subsidiaries" and all Indebtedness,
and all Liens on property or assets, of the Company and the Restricted
Subsidiaries in existence immediately prior to such transaction or series of
related transactions will be deemed to have been incurred upon such transaction
or series of related transactions.

EVENTS OF DEFAULT

The following are "Events of Default" under the indenture:

(i) default in the payment of the principal of or premium, if any,
when due and payable, on any of the notes (at its Stated Maturity, upon
optional redemption, acceleration, required purchase, sinking fund,
scheduled principal payment or otherwise) (without regard to the
subordination provisions contained in the indenture); or

(ii) default in the payment of an installment of interest on any of
the notes, when due and payable, continued for 30 days or more (without
regard to the subordination provisions contained in the indenture); or

(iii) the Company or any guarantor fails to comply with any of its
obligations described under "-- Consolidation, Merger, Sale of Assets,
Etc.," "-- Change of Control" or "-- Certain Covenants -- Limitation on
Sale of Asset Sales;" or

(iv) the Company or any guarantor fails to perform or observe any
other term, covenant or agreement contained in the notes, the guarantees or
the indenture (other than a default specified in (i), (ii) or (iii) above)
for a period of 30 days after written notice of such failure requiring the
Company to remedy the same shall have been given (x) to the Company by the
trustee or (y) to the Company and the trustee by the holders of at least
25% in aggregate principal amount of the notes then outstanding; or

(v) default or defaults under one or more agreements, indentures or
instruments under which the Company, any guarantor or any Restricted
Subsidiary then has outstanding Indebtedness in excess of $10.0 million
individually or in the aggregate and either (a) such Indebtedness is
already due and payable in full or (b) such default or defaults results in
the acceleration of the maturity of such Indebtedness; or

(vi) (a) any guarantee ceases to be in full force and effect or is
declared null and void or (b) any guarantor denies that it has any further
liability under any guarantee, or gives notice to such effect (other than,
in each case, by reason of the termination of the indenture or the release
of any such guarantee in accordance with "-- Subsidiary Guarantees"),
provided, with respect to any guarantor that is not a Material Subsidiary,
if an event described under subclause (a) or (b) shall occur such event
shall not be an Event of Default unless such event shall have continued

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for a period of 30 days after (x) in the case of subclause (a) of this
clause (vi), written notice of such condition shall have been given to the
Company and the guarantor by the trustee or to the Company, the guarantor
and the trustee by the holders of 25% in the aggregate principal amount of
the notes then outstanding or (y) in the case of subclause (b) of this
clause (vi), the date of such denial or notice by the guarantor; or

(vii) one or more judgments, orders or decrees of any court or
regulatory or administrative agency for the payment of money in excess of
$10.0 million either individually or in the aggregate, not covered by
insurance (provided that, to the extent covered by insurance, the insurer
has not disclaimed or indicated an intent to disclaim responsibility for
the payment thereof) shall have been rendered against the Company, any
guarantor or any Restricted Subsidiary or any of their respective
properties and shall not have been discharged and either (a) any creditor
shall have commenced an enforcement proceeding upon such judgment, order or
decree or (b) there shall have been a period of 60 consecutive days during
which a stay of enforcement of such judgment, order or decree, by reason of
a pending appeal or otherwise, shall not be in effect; or

(viii) certain events of bankruptcy, insolvency or reorganization
with respect to the Company, any guarantor or any Material Subsidiary of
the Company shall have occurred; or

(ix) any holder of at least $10.0 million in aggregate principal
amount of Indebtedness of the Company, any guarantor or any Restricted
Subsidiary shall commence judicial proceedings to foreclose upon assets of
the Company, any guarantor or any of its Restricted Subsidiaries having an
aggregate Fair Market Value, individually or in the aggregate, in excess of
$10.0 million or shall have exercised any right under applicable law or
applicable security documents to take ownership of any such assets in lieu
of foreclosure.

If an Event of Default (other than as specified in clause (viii) with
respect to the Company) shall occur and be continuing, the trustee, by notice to
the Company, or the holders of at least 25% in aggregate principal amount of the
notes then outstanding, by notice to the trustee and the Company, may declare
the principal of, premium, if any, and accrued interest on all of the
outstanding notes due and payable immediately, upon which declaration all such
amounts payable in respect of the notes will become and be immediately due and
payable; provided that so long as the Credit Facility shall be in force and
effect, if an Event of Default shall have occurred and be continuing (other than
an Event of Default under clause (viii) with respect to the Company), any such
acceleration shall not be effective until the earlier to occur of (x) five
business days following delivery of a notice of such acceleration to the
representative under the Credit Facility and (y) the acceleration of any
Indebtedness under the Credit Facility. If an Event of Default specified in
clause (viii) above with respect to the Company occurs and is continuing, then
the principal of, premium, if any, and accrued interest on all of the
outstanding notes will ipso facto become and be immediately due and payable
without any declaration or other act on the part of the trustee or any holder of
notes.

Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the notes because an Event of Default specified in
clause (v) shall have occurred and be continuing, such declaration of
acceleration will be automatically annulled if the Indebtedness that is the
subject of such Event of Default has been discharged or paid (if permitted by
the terms thereof) or the requisite holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness, and written notice
of such discharge or rescission, as the case may be, shall have been given to
the trustee by the Company, within 45 days after such acceleration in respect of
the notes and no other Event of Default has occurred which has not been cured or
waived during such 45-day period.

After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the holders of a
majority in aggregate principal amount of the outstanding notes, by written
notice to the Company and the trustee, may rescind such declaration if (a) the
Company has paid or deposited with the trustee a sum sufficient to pay (i) all
sums paid or advanced by the trustee under the indenture and the reasonable
compensation, expenses, disbursements

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and advances of the trustee, its agents and counsel, (ii) all overdue interest
on all notes, (iii) the principal of and premium, if any, on any notes which
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the notes, and (iv) to the extent that payment of
such interest is lawful, interest upon overdue interest at the rate borne by the
notes, and (b) all Events of Default, other than the non-payment of principal
of, premium, if any, and interest on the notes that has become due solely by
such declaration of acceleration, have been cured or waived as provided in the
indenture.

No holder of any of the notes has any right to institute any proceeding
with respect to the indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding notes have made
written request, and offered reasonable indemnity, to the trustee to institute
such proceeding as trustee under the notes and the indenture, the trustee has
failed to institute such proceeding within 60 days after receipt of such notice
and the trustee, within such 60-day period, has not received directions
inconsistent with such written request by holders of a majority in aggregate
principal amount of the outstanding notes. Such limitations do not apply,
however, to a suit instituted by a holder of a note for the enforcement of the
payment of the principal of, premium, if any, or interest on such note on or
after the respective due dates expressed in such note.

During the existence of an Event of Default, the trustee is required to
exercise such rights and powers vested in it under the indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an Event of Default shall occur and be continuing, the trustee
under the indenture is not under any obligation to exercise any of its rights or
powers under the indenture at the request or direction of any of the holders
unless such holders shall have offered to the trustee reasonable security or
indemnity. Subject to certain provisions concerning the rights of the trustee,
the holders of a majority in aggregate principal amount of the outstanding notes
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee, or exercising any trust or power
conferred on the trustee under the indenture.

The Company is required to furnish to the trustee annual and quarterly
statements as to the performance by the Company and the guarantors of their
respective obligations under the indenture and as to any default in such
performance. The Company is also required to notify the trustee within five
business days of any event which is, or after notice or lapse of time or both
would become, an Event of Default.

DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE

The Company may, at its option and at any time, terminate the obligations
of the Company and the guarantors with respect to the outstanding notes
("defeasance"). Such defeasance means that the Company will be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
notes, except for (i) the rights of holders of outstanding notes to receive
payment in respect of the principal of, premium, if any, and interest on such
notes when such payments are due, (ii) the Company's obligations to issue
temporary notes, register the transfer or exchange of any notes, replace
mutilated, destroyed, lost or stolen notes and maintain an office or agency for
payments in respect of the notes, (iii) the rights, powers, trusts, duties and
immunities of the trustee, and (iv) the defeasance provisions of the indenture.
In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company and any guarantor with respect to certain
covenants that are set forth in the indenture, some of which are described under
"-- Certain Covenants" above, and any omission to comply with such obligations
will not constitute a Default or an Event of Default with respect to the notes
("covenant defeasance"). In the event covenant defeasance occurs, certain
events (not including non-payment, bankruptcy and insolvency events) described
under "-- Events of Default" will no longer constitute an Event of Default
with respect to the notes.

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In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the trustee, in trust, for the benefit of
the holders of the notes, cash in United States dollars, U.S. Government
Obligations (as defined in the indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of, premium,
if any, and interest on the outstanding notes to redemption or at maturity; (ii)
the Company shall have delivered to the trustee an opinion of independent
counsel in the United States to the effect that the holders of the outstanding
notes will not recognize income, gain or loss for federal income tax purposes as
a result of such defeasance or 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 defeasance or covenant defeasance had not
occurred (in the case of defeasance, such opinion must refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable federal
income tax laws); (iii) no Default shall have occurred and be continuing on the
date of such deposit or insofar as clause (viii) under the first paragraph under
"-- Events of Default" is concerned; (iv) such defeasance or covenant
defeasance shall not cause the trustee to have a conflicting interest with
respect to any securities of the Company or any guarantor; (v) such defeasance
or covenant defeasance shall not result in a breach or violation of, or
constitute a default under, any material agreement or instrument to which the
Company or any guarantor is a party or by which it is bound; (vi) such
defeasance or covenant defeasance shall not result in the trust arising from
such deposit constituting an investment company within the meaning of the
Investment Company Act of 1940, as amended, unless such trust shall be
registered under such Act or exempt from registration thereunder; (vii) the
Company shall have delivered to the trustee an opinion of independent counsel in
the United States 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; (viii) the Company shall have delivered to the trustee an officers'
certificate stating that the deposit was not made by the Company with the intent
of preferring the holders of the notes or any guarantee over the other creditors
of the Company or any guarantor with the intent of defeating, hindering,
delaying or defrauding creditors of the Company, any guarantor or others; (ix)
no event or condition shall exist that would prevent the Company from making
payments of the principal of, premium, if any, and interest on the notes on the
date of such deposit; and (x) the Company shall have delivered to the trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent under the indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with.

SATISFACTION AND DISCHARGE

The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture) as to all outstanding notes
when (i) either (a) all the notes theretofore authenticated and delivered
(except lost, stolen or destroyed notes which have been replaced or paid and
notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the trustee for
cancellation or (b) all notes not theretofore delivered to the trustee for
cancellation have become due and payable and the Company or any guarantor has
irrevocably deposited or caused to be deposited with the trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the notes not
theretofore delivered to the trustee for cancellation, for principal of,
premium, if any, and interest on the notes to the date of deposit together with
irrevocable instructions from the Company directing the trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company or any guarantor has paid all other sums payable under the indenture
by the Company and the guarantors; and (iii) the Company and each of the
guarantors have delivered to the trustee an officers' certificate and an opinion
of independent counsel each stating that (a) all conditions precedent under the
indenture relating to the satisfaction and discharge of the indenture have been
complied with and (b) such satisfaction and discharge will not result in a
breach or violation of, or constitute a default under, the indenture or any
other material agreement or instrument

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to which the Company, any guarantor or any Subsidiary is a party or by which the
Company, any guarantor or any Subsidiary is bound.

AMENDMENTS AND WAIVERS

From time to time, the Company and the guarantors, when authorized by
resolutions of their boards of directors, and the trustee may, without the
consent of the holders of any outstanding notes, amend, waive or supplement the
indenture or the notes for certain specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, qualifying, or
maintaining the qualification of, the indenture under the Trust Indenture Act,
or making any change that does not materially adversely affect the rights of any
holder. Other amendments and modifications of the indenture or the notes may be
made by the Company, the guarantors and the trustee with the consent of the
holders of not less than a majority of the aggregate principal amount of the
outstanding notes; provided that no such modification or amendment may, without
the consent of the holder of each outstanding note affected thereby,

(i) change the maturity of the principal of, or any installment of
interest on, any such note or alter the optional redemption or repurchase
provisions of any such note or the indenture in a manner adverse to the
Holders of the notes;

(ii) reduce the principal amount of (or the premium of) any such
note;

(iii) reduce the rate of or extend the time for payment of interest
on any such note;

(iv) change the place or currency of payment of principal of (or
premium) or interest on any such note;

(v) modify any provisions of the indenture relating to the waiver of
past defaults (other than to add sections of the indenture or the notes
subject thereto) or the right of the holders of notes to institute suit for
the enforcement of any payment on or with respect to any such note or any
guarantee or the modification and amendment provisions of the indenture and
the notes (other than to add sections of the indenture or the notes which
may not be amended, supplemented or waived without the consent of each
Holder therein affected);

(vi) reduce the percentage of the principal amount of outstanding
notes necessary for amendment to or waiver of compliance with any provision
of the indenture or the notes or for waiver of any Default in respect
thereof;

(vii) waive a default in the payment of principal of, premium, if
any, or interest on, or redemption payment with respect to, the notes
(except a rescission of acceleration of the notes by the holders thereof as
provided in the indenture and a waiver of the payment default that resulted
from such acceleration);

(viii) modify the ranking or priority of any note or the guarantee of
any guarantor in any adverse manner;

(ix) following the occurrence of a Change of Control or an Asset
Sale, modify the provisions of any covenant (or the related definitions) in
the indenture requiring the Company to make and consummate a Change of
Control Offer with respect to such Change of Control or an Asset Sale Offer
with respect to such Asset Sale or modify any of the provisions or
definitions with respect thereto in a manner materially adverse to the
Holders of notes affected thereby otherwise than in accordance with the
indenture; or

(x) release any guarantor from any of its obligations under its
guarantee or the indenture otherwise than in accordance with the indenture.

The holders of a majority in aggregate principal amount of the outstanding
notes, on behalf of all holders of notes, may waive compliance by the Company
and the guarantors with certain restrictive provisions of the indenture. Subject
to certain rights of the trustee, as provided in the indenture, the holders of a
majority in aggregate principal amount of the notes, on behalf of all holders of
the notes,

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may waive any past default under the indenture (including any such waiver
obtained in connection with a tender offer or exchange offer for the notes),
except a default in the payment of principal, premium or interest or a default
arising from failure to purchase any notes tendered pursuant to an offer to
purchase pursuant thereto, or a default in respect of a provision that under the
indenture cannot be modified or amended without the consent of the Holder of
each note that is affected.

GOVERNING LAW

The indenture and the notes and the guarantees are governed by the laws of
the State of New York, without regard to the principles of conflicts of law.

CERTAIN DEFINITIONS

"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (i) assumed in
connection with an Asset Acquisition from such Person or (ii) existing at the
time such Person becomes a Restricted Subsidiary of any other Person (other than
any Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a Restricted Subsidiary). Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary, as the case may be.

"AFFILIATE" means with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; or (ii) any other Person
that owns, directly or indirectly, 10% or more of such specified Person's
Capital Stock. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

"ASSET ACQUISITION" means (i) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person will
become a Restricted Subsidiary or will be merged or consolidated with or into
the Company or any Restricted Subsidiary or (ii) the acquisition by the Company
or any Restricted Subsidiary of the assets of any Person which constitute
substantially all of the assets of such Person, or any division or line of
business of such Person, or which is otherwise outside of the ordinary course of
business.

"ASSET SALE" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, for purpose of
this definition, a "transfer"), directly or indirectly, in one or a series of
related transactions, of: (i) any Capital Stock of any Restricted Subsidiary;
(ii) all or substantially all of the properties and assets of any division or
line of business of the Company or any Restricted Subsidiary; or (iii) any other
properties or assets of the Company or any Restricted Subsidiary other than in
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include any transfer of properties and assets (a) that
is governed by the provisions described under "-- Consolidation, Merger, Sale
of Assets, Etc.," (b) that is by the Company to any Restricted Subsidiary, or
by any Subsidiary to the Company or any Restricted Subsidiary in accordance with
the terms of the indenture, (c) that is obsolete, damaged or used equipment or
inventory in the ordinary course of business, (d) that constitutes a sale, lease
or other disposition of inventory, accounts receivable or other assets in the
ordinary course of business including for purposes of financing, (e) that
constitutes a Capitalized Lease Obligation, (f) having a fair market value that
does not exceed $500,000 or (g) that is made the subject of an Investment
consummated in compliance with "Certain Covenants -- Limitation on Restricted
Payments" above.

"ASSET SALE OFFER" has the meaning set forth under "-- Limitation on
Sale of Assets."

"AVERAGE LIFE TO STATED MATURITY" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such date to the
date or dates of each successive scheduled principal payment (including, without

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limitation, any sinking fund requirements) of such Indebtedness multiplied by
(b) the amount of each such principal payment by (ii) the sum of all such
principal payments.

"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants, options or rights exchangeable or
exercisable for or convertible into such capital stock, whether now outstanding
or issued after the date of the indenture.

"CAPITALIZED LEASE OBLIGATION" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and, for the purpose of
the indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP
consistently applied.

"CASH EQUIVALENTS" means, at any time, (i) any evidence of Indebtedness
with a maturity of not more than one year issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) demand or time deposits,
certificates of deposit or acceptances with a maturity of not more than one year
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$250.0 million; (iii) commercial paper with a maturity of not more than one year
issued by a corporation that is not an Affiliate of the Company organized under
the laws of any state of the United States or the District of Columbia and rated
at least A-1 by Standard & Poor's Corporation or at least P-1 by Moody's
Investors Service, Inc.; and (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (i)
and (ii) above entered into with any financial institution meeting the
qualifications specified in clause (ii) above.

"CHANGE OF CONTROL" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
"person" or "group" (as such terms are used in Section 13(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 50% or more of the total voting power of
the then outstanding Voting Stock of the Company; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the board of directors of the Company (together with any new directors whose
election to such board or whose nomination for election by the stockholders of
the Company was approved by a vote of 66 2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved), cease for any
reason to constitute a majority of such board of directors then in office; (iii)
the Company consolidates with or merges with or into any Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any corporation consolidates
with or merges into or with the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed into
or exchanged for cash, securities or other property, other than any such
transaction where the outstanding Voting Stock of the Company is not changed or
exchanged at all (except to the extent necessary solely to reflect a change in
the jurisdiction of incorporation of the Company or where (A) the outstanding
Voting Stock of the Company is changed into or exchanged for (x) Voting Stock of
the surviving corporation which is not Redeemable Capital Stock or (y) cash,
securities and other property (other than Capital Stock of the surviving
corporation) in an amount which could be paid by the Company as a Restricted
Payment as described under "-- Certain Covenants -- Limitation on Restricted
Payments" (and such amount shall be treated as a Restricted Payment subject to
the provisions in the indenture described under "-- Certain Covenants --
Limitation on Restricted Payments"), (B) no "person" or "group" owns
immediately after such

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transaction, directly or indirectly, 50% or more of the total outstanding Voting
Stock of the surviving corporation and (C) the holders of the Voting Stock of
the Company immediately prior to such transaction own, directly or indirectly,
not less than a majority of the total voting power of the then outstanding
Voting Stock of the surviving or transferee corporation immediately after such
transaction; or (iv) any order, judgment or decree shall be entered against the
Company decreeing the dissolution or split up of the Company and such order
shall remain undischarged or unstayed for a period in excess of sixty days.

"CHANGE OF CONTROL OFFER" has the meaning set forth under "-- Change of
Control."

"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any
period, (i) the sum of, without duplication, the amounts for such period, taken
as a single accounting period, of (a) Consolidated Net Income, (b) to the extent
reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to the
extent reducing Consolidated Net Income, Consolidated Interest Expense, and (d)
to the extent reducing Consolidated Net Income, Consolidated Income Tax Expense
less (ii) other non-cash items increasing Consolidated Net Income for such
period.

"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means the ratio of the
aggregate amount of Consolidated Cash Flow Available for Fixed Charges of the
Company for the four full fiscal quarters immediately preceding the date of the
transaction (the "Transaction Date") giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio for which consolidated financial
information of the Company is available (such four full fiscal quarter period
being referred to herein as the "Four Quarter Period") to the aggregate amount
of Consolidated Fixed Charges of the Company for such Four Quarter Period. For
purposes of this definition, "Consolidated Cash Flow Available for Fixed
Charges" and "Consolidated Fixed Charges" will be calculated, without
duplication, after giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence of any Indebtedness of the Company or any of
the Restricted Subsidiaries during the period commencing on the first day of the
Four Quarter Period to and including the Transaction Date (the "Reference
Period"), including, without limitation, the incurrence of the Indebtedness
giving rise to the need to make such calculation, as if such incurrence occurred
on the first day of the Reference Period, (ii) an adjustment to eliminate or
include, as applicable, the Consolidated Cash Flow Available for Fixed Charges
and Consolidated Fixed Charges of the Company directly attributable to assets
which are the subject of any Asset Sale or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring Acquired Indebtedness) occurring during the
Reference Period, as if such Asset Sale or Asset Acquisition occurred on the
first day of the Reference Period and (iii) the retirement of Indebtedness
during the Reference Period which cannot thereafter be reborrowed occurring as
if retired on the first day of the Reference Period. For purposes of this
definition, whenever pro forma effect is to be given to an Asset Sale or Asset
Acquisition such pro forma calculations shall be determined in accordance with
Article 11 of Regulation S-X under the Securities Act. In calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter will be deemed to
accrue at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date shall be deemed to have been in effect during the
Reference Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by Interest Rate Agreements, will be deemed to accrue at the rate per
annum resulting after giving effect to the operation of such agreements. If the
Company or any Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the above definition will give effect to the
incurrence of

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such guaranteed Indebtedness as if the Company or any Restricted Subsidiary had
directly incurred or otherwise assumed such guaranteed Indebtedness.

"CONSOLIDATED FIXED CHARGES" means, for any period, the sum of, without
duplication, the amounts for such period of (i) Consolidated Interest Expense
and (ii) the aggregate amount of cash dividends and other distributions paid or
accrued during such period in respect of Redeemable Capital Stock.

"CONSOLIDATED INCOME TAX EXPENSE" means, for any period, the provision
for federal, state, local and foreign income taxes payable by the Company and
the Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.

"CONSOLIDATED INTEREST EXPENSE" means, for any period, without
duplication, the sum of (a) the interest expense of the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (i) any amortization of
debt discount attributable to such period (other than amortization of debt
issuance costs), (ii) the net cost under or otherwise associated with Interest
Rate Agreements and Currency Agreements (in each case, including any
amortization of discounts), (iii) the interest portion of any deferred payment
obligation, (iv) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and (v) all
capitalized interest and all accrued interest, and (b) all but the principal
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company and the Restricted Subsidiaries during such
period and as determined on a consolidated basis in accordance with GAAP.

"CONSOLIDATED NET INCOME" means, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
on a consolidated basis as determined in accordance with GAAP, adjusted, to the
extent included in calculating such net income (or loss), by excluding, without
duplication, (i) all extraordinary gains or losses (net of all fees and expenses
relating thereto), (ii) the portion of net income (or loss) of the Company and
the Restricted Subsidiaries on a consolidated basis allocable to minority
interests of Persons in Restricted Subsidiaries or of the Company and the
Restricted Subsidiaries in unconsolidated Persons, except (in the case of
unconsolidated Persons) to the extent that cash dividends or distributions are
actually received by the Company or a Restricted Subsidiary, (iii) income of the
Company and the Restricted Subsidiaries derived from or in respect of
Investments in Unrestricted Subsidiaries, except to the extent that cash
dividends or distributions are actually received by the Company or a Restricted
Subsidiary, (iv) for purposes of "Certain Covenants -- Limitation on Restricted
Payments" above, net income (or loss) of any Person combined with the Company
or any of the Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (v) any gain or
loss realized upon the termination of any employee pension benefit plan, (vi)
gains (or losses), net of all fees and expenses relating thereto, in respect of
any Asset Sales by the Company or a Restricted Subsidiary, (vii) the net income
of any Restricted Subsidiary to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is not at the
time permitted, 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, and (viii) any gain, arising from the acquisition of any
securities, or the extinguishment, under GAAP, of any Indebtedness of the
Company or any Restricted Subsidiary.

"CONSOLIDATED NON-CASH CHARGES" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Company and the
Restricted Subsidiaries reducing Consolidated Net Income for such period (other
than any non-cash item requiring an accrual or reserve for cash disbursements in
any future period), determined on a consolidated basis in accordance with GAAP.

"COVENANT DEFEASANCE" has the meaning set forth under" -- Defeasance or
Covenant Defeasance of indenture."

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"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or its Restricted Subsidiaries against fluctuations in currency values.

"CREDIT FACILITY" means the Amended and Restated Credit Agreement dated
as of September 3, 1998 among the Company, the lenders named therein and
NationsBank, N.A. as administrative agent, as such agreement may be amended,
modified, supplemented, extended, restated, replaced (including replacement
after the termination of such agreement), restructured, increased, renewed or
refinanced from time to time in one or more credit agreements, loan agreements,
instruments or similar agreements, as such may be further amended, modified,
supplemented, extended, restated, replaced (including replacement after the
termination of such agreement), restricted, increased, renewed or refinanced
from time to time, in each case in accordance with and as permitted by the
indenture and whether or not with the same lenders or agents.

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

"DEFEASANCE" has the meaning set forth under "-- Defeasance or Covenant
Defeasance of Indenture."

"DESIGNATED SENIOR INDEBTEDNESS" means (a) all Senior Indebtedness,
liquidated or contingent, outstanding under the Credit Facility and (b) any
other Senior Indebtedness of the Company which, at the time of determination, is
in an aggregate principal amount outstanding or committed for of at least $50.0
million and is specifically designated in the instrument governing such Senior
Indebtedness as "Designated Senior Indebtedness" by the Company.

"DESIGNATION" has the meaning set forth under "-- Certain
Covenants -- Limitations on Unrestricted Subsidiaries."

"DESIGNATION AMOUNT" has the meaning set forth under "-- Certain
Covenants -- Limitations on Unrestricted Subsidiaries."

"DISINTERESTED DIRECTOR" means, with respect to any transaction or series
of related transactions, a member of the board of directors of the Company who
does not have any material direct or indirect financial interest in or with
respect to such transaction or series of related transactions.

"EVENT OF DEFAULT" has the meaning set forth under "-- Events of
Default."

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.

"FAIR MARKET VALUE" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length transaction, for cash,
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy. Fair Market Value shall
be determined by the Board of Directors of the Company acting in good faith
evidenced by a board resolution thereof delivered to the trustee.

"FOUR QUARTER PERIOD" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."

"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date of
determination and which are consistently applied for all applicable periods.

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

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shall include, without limitation, any agreement to maintain or preserve any
other Person's financial condition or to cause any other Person to achieve
certain levels of operating results.

"GUARANTEE" means, when used in reference to the guarantee of any
guarantor, the guarantee by any guarantor of the Company's obligations under the
indenture and the notes pursuant to a guarantee given in accordance with the
indenture.

"GUARANTOR" means the Subsidiaries listed as guarantors in the indenture
and any other Subsidiary which is a guarantor of the notes, including any Person
that executes or is required after the date of the indenture to execute a
guarantee of the notes as described in "-- Subsidiary Guarantees" and
"Certain Covenants -- Limitation on Incurrence of Senior Subordinated
Indebtedness," until a successor replaces such party pursuant to the applicable
provisions of the indenture and, thereafter, shall mean such successor;
provided, that for purposes hereof the term "guarantor" shall not include any
Unrestricted Subsidiary unless specifically provided otherwise.

"INCUR" has the meaning set forth in "-- Certain Covenants -- Limitation
on Indebtedness." "Incurrence," "incurred" and "incurring" shall have the
meanings correlative to the foregoing.

"INDEBTEDNESS" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding (a) indemnities in connection
with the disposition of assets of businesses not to exceed the purchase price
for such assets, (b) customary agreements for purchase price adjustments, hold
backs or similar obligations in connection with an Asset Acquisition and (c) any
trade payables and other accrued current liabilities incurred or arising in the
ordinary course of business, but including, without limitation, all obligations,
contingent or otherwise, of such Person in connection with any letters of
credit, bankers acceptance or other similar credit transaction and in connection
with any agreement to purchase, redeem, exchange, convert or otherwise acquire
for value any Capital Stock of such Person, or any warrants, rights or options
to acquire such Capital Stock, now or hereafter outstanding, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (iv) all Capitalized Lease Obligations of such Person, (v) all
Indebtedness referred to in clauses (i) through (iv) above of other persons and
all dividends of other Persons, the payment of which is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon or with respect to property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
(vi) all guarantees of Indebtedness by such Person, (vii) except for purposes of
the covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments," all Redeemable Capital Stock issued by such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends, (viii) all obligations under Interest Rate
Agreements and Currency Agreements of such Person, and (ix) any amendment,
supplement, modification, deferral, renewal, extension, refunding or refinancing
of any liability of the types referred to in clauses (i) through (viii) above.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the indenture, and if such price is
based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.

"INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized accounting,
appraisal or investment banking firm (i) which does not, and whose directors,
officers and employees or Affiliates do not have, a direct or indirect financial
interest in the Company and (ii) which, in the judgment of

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the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.

"INTEREST RATE AGREEMENTS" means one or more of the following agreements
which shall be entered into by one or more financial institutions: obligations
of any Person pursuant to any arrangement with any other Person whereby,
directly or indirectly, such Person is entitled to receive from time to time
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by
such Person calculated by applying a fixed or a floating rate of interest on the
same notional amount or any other arrangement involving payments by or to such
Person based upon fluctuations in interest rates (including, without limitation,
interest rate swaps, caps, floors, collars and similar agreements) and/or other
types of interest rate hedging agreements from time to time.

"INVESTMENT" means, with respect to any Person, any direct or indirect
advance, loan or other extension of credit (including by means of a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others or otherwise), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person and all other items that would be
classified as investments on a balance sheet prepared in accordance with GAAP.
Investments shall exclude extensions of trade credit on commercially reasonable
terms in accordance with normal trade practices. In addition to the foregoing,
any Currency Agreement, Interest Rate Agreement, or similar agreement shall
constitute an Investment. Notwithstanding the foregoing, the acquisition of
assets, businesses or securities to the extent such Acquisition is for
consideration consisting of Qualified Capital Stock of the Company shall not be
an Investment.

"ISSUE DATE" means the original issue date of the notes under the
indenture.

"LIEN" means any mortgage or deed of trust, charge, pledge, lien
(statutory or other), privilege, security interest, hypothecation, cessation and
transfer, assignment for security, claim, deposit arrangement, or preference or
priority or other encumbrance upon or with respect to any property of any kind
(including any conditional sale, capital lease or other title retention
agreement, any leases in the nature thereof, and any agreement to give any
security interest), whether real, personal or mixed, movable or immovable, now
owned or hereafter acquired. A Person shall be deemed to own subject to a Lien
any property which it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement.

"MATERIAL SUBSIDIARY" means each Restricted Subsidiary of the Company
that is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X
under the Securities Act and the Exchange Act (as such regulation is in effect
on the Issue Date).

"NET CASH PROCEEDS" means (a) with respect to any Asset Sale by any
Person, the proceeds thereof (without duplication in respect of all Asset Sales)
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in form of, or stock or other assets
when disposed of for, cash or Cash Equivalents (except to the extent that such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) net of (i) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of legal counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes payable as a result of
such Asset Sale, (iii) payments made to retire Indebtedness where payment of
such Indebtedness is secured by the assets or properties the subject of such
Asset Sale, (iv) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) owning a beneficial interest in or having
a Lien on the assets subject to the Asset Sale and (v) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale (provided that the amount of

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any such reserves shall be deemed to constitute Net Cash Proceeds at the time
such reserves shall have been released or are not otherwise required to be
retained as a reserve), all as reflected in an officers' certificate delivered
to the trustee and (b) with respect to any issuance or sale of Capital Stock
that have been converted into or exchanged for Capital Stock as referred to
under "-- Certain Covenants -- Limitation on Restricted Payments," the
proceeds of such issuance or sale in the form of cash or Cash Equivalents
including payments in respect of deferred payment obligations when received in
the form of, or stock or other assets when disposed of for, cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary), net of attorney's
fees, accountant's fees and brokerage, consultation, underwriting and other fees
and expenses actually incurred in connection with such issuance or sale and net
of taxes paid or payable as a result thereof.

"PARI PASSU INDEBTEDNESS" means (a) any Indebtedness of the Company which
ranks pari passu in right of payment to the notes and (b) with respect to any
guarantor, Indebtedness which ranks pari passu in right of payment to the
guarantee of such guarantor.

"PERMITTED INDEBTEDNESS" has the meaning set forth under "-- Certain
Covenants -- Limitation on Indebtedness."

"PERMITTED INVESTMENTS" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) loans and
advances to employees made in the ordinary course of business not to exceed $1.0
million in the aggregate at any one time outstanding, (d) Interest Rate
Agreements and Currency Agreements permitted under clause (vi) or (vii) of the
second paragraph under "-- Certain Covenants -- Limitation on Indebtedness;"
(e) Investments represented by accounts receivable created or acquired in the
ordinary course of business, (f) loans or advances to vendors in the ordinary
course of business in an amount not to exceed $1.0 million at any time, (g)
Investments existing on the Issue Date and any renewal or replacement thereof on
terms and conditions no less favorable in any respect than that existing on the
Issue Date; (h) any Investment to the extent that the consideration therefor is
Qualified Capital Stock of the Company; (i) bonds, notes, debentures or other
securities received in connection with an Asset Sale permitted under
"-- Certain Covenants -- Limitation on Sale of Assets," not to exceed 25% of
the total consideration in such Asset Sale; (j) shares of Capital Stock or other
securities received in settlement of debts owed to the Company or any of the
Restricted Subsidiaries as a result of foreclosure, perfection or enforcement of
any Lien or indebtedness or in connection with any good faith settlement of a
bankruptcy proceeding; (k) the acceptance of notes payable from employees of the
Company or its Subsidiaries in payment for the purchase of Capital Stock by such
employees and (l) Investments in the Company, any Restricted Subsidiary or any
Person that as a result of such Investment becomes a Restricted Subsidiary or is
merged with or into or consolidated with the Company or a Restricted Subsidiary
(provided the Company or a Restricted Subsidiary is the survivor) as a result of
or in connection with such Investment.

"PERMITTED JUNIOR SECURITIES" means Capital Stock of the Company or debt
securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to at least the same
extent as the notes are subordinated to Senior Indebtedness.

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

"PREFERRED STOCK" means, with respect to any Person, Capital Stock of any
class or, classes (however designated) of such Person which is preferred as to
the payment of dividends or distributions, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over Capital Stock of any other class of such Person.

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"PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a Lien on
assets related to the business of the Company and its Restricted Subsidiaries
and any additions and accessions thereto, which are purchased by the Company or
any Restricted Subsidiary at any time after the notes are issued; provided that
(i) the security agreement or conditional sales or other title retention
contract pursuant to which the Lien on such assets is created (collectively a
"Purchase Money Security Agreement") shall be entered into within 180 days
after the purchase or substantial completion of the construction of such assets
and shall at all times be confined solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom, (ii)
at no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness and (iii) (A) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Purchase Money Security Agreement is entered into exceed 100% of the
purchase price to the Company and the Restricted Subsidiaries of the assets
subject thereto or (B) the Indebtedness secured thereby shall be with recourse
solely to the assets so purchased or acquired, any additions and accessions
thereto and any proceeds therefrom.

"QUALIFIED CAPITAL STOCK" of any Person means any and all Capital Stock
of such Person other than Redeemable Capital Stock.

"QUALIFIED EQUITY OFFERINGS" has the meaning set forth under
"-- Optional Redemption -- Optional Redemption upon Qualified Equity
Offering."

"REDEEMABLE CAPITAL STOCK" means any class or series of Capital Stock to
the extent that, either by its terms, by the terms of any security into which it
is convertible or exchangeable, or by contract or otherwise, is or upon the
happening of an event or passage of time would be, required to be redeemed prior
to any Stated Maturity of the principal of the notes or is redeemable at the
option of the holder thereof at any time prior to such Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
Stated Maturity.

"REFERENCE PERIOD" has the meaning set forth under the definition of
"Consolidated Fixed Charge Coverage Ratio."

"RESTRICTED PAYMENT" has the meaning set forth under "-- Certain
Covenants -- Limitation on Restricted Payments."

"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a board resolution
delivered to the trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "-- Certain
Covenants -- Limitations on Unrestricted Subsidiaries." Any such designation
may be revoked by a board resolution of the Board of Directors of the Company
delivered to the trustee, subject to the provisions of such covenant.

"REVOCATION" has the meaning set forth under "-- Certain
Covenants -- Limitations on Unrestricted Subsidiaries."

"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the Commission thereunder.

"SENIOR INDEBTEDNESS" means, with respect to the Company or any
guarantor, as applicable, the principal of, premium, if any, interest on any
Indebtedness of the Company or such guarantor, as the case may be, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to any
Indebtedness of the Company or such guarantor, as the case may be. Without
limiting the generality of the foregoing, "Senior Indebtedness" will include
the principal of, premium, if any, interest (including interest that would
accrue but for the filing of a petition initiating any proceeding under any
state or federal bankruptcy laws, whether or not such claim is allowable in such

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proceeding) on all obligations of every nature of the Company or such guarantor,
as the case may be, and all indemnity and other payment obligations from time to
time owed to the lenders under the Credit Facility, including, without
limitation, principal of and interest on, and all indemnities, fees and expenses
payable under the Credit Facility. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include, to the extent constituting Indebtedness, (i)
Indebtedness evidenced by the notes or the guarantors, (ii) Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of the Company or
any guarantor, (iii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company or any guarantees, (iv) Indebtedness which is
represented by Redeemable Capital Stock, (v) Indebtedness for goods, materials
or services purchased in the ordinary course of business or Indebtedness
consisting of trade payables or other current liabilities (other than any
current liabilities owing under the Credit Facility or the current portion of
any long-term Indebtedness which would constitute Senior Indebtedness but for
the operation of this clause (v)), (vi) Indebtedness of or amounts owed by the
Company or any guarantor for compensation to employees or for services rendered
to the Company or such guarantor, (vii) any liability for federal, state, local
or other taxes owed or owing by the Company or any guarantor, (viii)
Indebtedness of the Company or any guarantor to a Subsidiary of the Company, and
(ix) that portion of any Indebtedness which at the time of issuance is issued in
violation of the indenture.

"STATED MATURITY" means, with respect to any note or any installment of
interest thereon, the dates specified in such note as the fixed date on which
the principal of such note or such installment of interest is due and payable,
and when used with respect to any other Indebtedness, means the date specified
in the instrument governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or any installment of interest is due and
payable.

"SUBORDINATED INDEBTEDNESS" means, with respect to the Company,
Indebtedness of the Company which is expressly subordinated in right of payment
to the notes or, with respect to any guarantor, Indebtedness of such guarantor
which is expressly subordinated in right of payment to the guarantee of such
guarantor.

"SUBSIDIARY" means, with respect to any Person, (a) any corporation of
which the outstanding shares of Voting Capital Stock having at least a majority
of the votes entitled to be cast in the election of directors shall at the time
be owned, directly or indirectly, by such Person, or (b) any other Person of
which at least a majority of the shares of Voting Capital Stock are at the time,
directly or indirectly, owned by such first named Person.

"SURVIVING PERSON" means, with respect to any Person involved in any
consolidation or merger, or any sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of its properties and assets as an
entirety, the Person formed by or surviving such merger or consolidation or the
Person to which such sale, assignment, conveyance, transfer or lease is made.

"TRANSACTION DATE" has the meaning set forth under the definition of
"Consolidated Fixed Charge Coverage Ratio."

"UNRESTRICTED SUBSIDIARY" means each Subsidiary of the Company (other
than a guarantor) designated as such pursuant to and in compliance with the
covenant described under "Certain Covenants -- Limitations on Unrestricted
Subsidiaries." Any such designation may be revoked by a Board Resolution of the
Company delivered to the trustee, subject to the provisions of such covenant.

"UNUTILIZED NET CASH PROCEEDS" has the meaning set forth under
"-- Certain Covenants -- Limitation on Sale of Assets."

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

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"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of
which 100% of the outstanding Capital Stock is owned by the Company and/or
another Wholly-Owned Restricted Subsidiary. For purposes of this definition, any
directors' qualifying shares shall be disregarded in determining the ownership
of a Restricted Subsidiary.

BOOK-ENTRY; DELIVERY AND FORM

Notes will initially be represented by one or more permanent global notes
in definitive, fully registered book-entry form (the "Global Securities")
which will be registered in the name of a nominee of The Depositary Trust
Company ("DTC") or its nominee and deposited on behalf of purchasers of the
notes represented thereby with a custodian for DTC for credit to the respective
accounts of the purchasers (or to such other accounts as they may direct) at
DTC.

THE GLOBAL SECURITIES. The Company expects that pursuant to procedures
established by DTC (a) upon deposit of the Global Securities, DTC or its
custodian will credit on its internal system portions of the Global Securities
which shall be comprised of the corresponding respective amount of the Global
Securities to the respective accounts of persons who have accounts with such
depositary and (b) ownership of the notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC or
its nominee (with respect to interests of Participants (as defined below) and
the records of Participants (with respect to interests of persons other than
Participants). Such accounts initially will be designated by or on behalf of the
initial purchasers and ownership of beneficial interests in the Global
Securities will be limited to persons who have accounts with DTC
("Participants") or persons who hold interests through Participants.
Noteholders may hold their interests in a Global Security directly through DTC
if they are Participants in such system, or indirectly through organizations
which are Participants in such system.

So long as DTC or its nominee is the registered owner or holder of any of
the notes, DTC or such nominee will be considered the sole owner or holder of
such notes represented by such Global Securities for all purposes under the
indenture and under the notes represented thereby. No beneficial owner of an
interest in the Global Securities will be able to transfer such interest except
in accordance with the applicable procedures of DTC in addition to those
provided for under the indenture.

Payments of the principal, premium, interest and other amounts on the notes
represented by the Global Securities will be made to DTC or its nominee, as the
case may be, as the registered owner thereof. None of the Company, the trustee
or any paying agent under the indenture will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.

The Company expects that DTC or its nominee, upon receipt of any payment of
the principal, premium, interest or other amounts on the notes represented by
the Global Securities, will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the Global
Securities as shown on the records of DTC or its nominee. The Company also
expects that payments by Participants to owners of beneficial interests in the
Global Securities held through such Participants will be governed by standing
instructions and customary practice as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payment will be the responsibility of such Participants.
Transfers between Participants in DTC will be effected in accordance with DTC
rules and will be settled in immediately available funds.

DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of notes (including the presentation of notes for exchange as
described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Securities are credited and only in
respect of the aggregate principal amount of as to which such Participant or
Participants has or have given such direction.

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DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). DTC was created to hold securities for its Participants
and facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly ("Indirect Participants").

Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Securities among Participants of
DTC, DTC is under no obligation to perform such procedures, and such procedures
may be discontinued at any time. None of the Company, the trustee or the paying
agent will have any responsibility for the performance by DTC or its direct or
Indirect Participants of their respective obligations under the rules and
procedures governing their operations.

CERTIFICATED SECURITIES. Interests in the Global Securities will be
exchanged for physical delivery of certificates ("Certificated Securities")
only if (i) DTC is at any time unwilling or unable to continue as depositary for
the Global Securities, or DTC ceases to be a "Clearing Agency" registered
under the Exchange Act, and a successor depositary is not appointed by the
Company within 90 days or (ii) an event of default under the indenture has
occurred and is continuing with respect to the notes. Upon the occurrence of
either of the events described in the preceding sentence, the Company will cause
the appropriate Certificated Securities to be delivered, which Certificated
Securities will bear the legends referred to under the heading "Notice to
Investors."

REGISTRATION RIGHTS

The Company has entered into a registration rights agreement with the
initial purchasers pursuant to which the Company and the guarantors have agreed,
for the benefit of the holders of the existing notes, at the Company's cost, (i)
to cause to be filed with the SEC the registration statement of which this
prospectus is a part with respect to the exchange offer of the exchange notes
within 60 days after the date of issuance of the existing notes, (ii) to use
their reasonable best efforts to have this exchange offer registration statement
declared effective under the Securities Act within 120 days after the date of
issuance of the existing notes, (iii) to use their reasonable best efforts to
have this exchange offer registration statement remain effective until the
closing of the exchange offer and (iv) to use their reasonable best efforts to
cause this exchange offer to be consummated within 150 days after the date of
issuance of the existing notes.

Under the registration rights agreement, the Company is required to allow
participating broker-dealers to use the prospectus contained in the exchange
offer registration statement (subject to certain "black out" periods)
following the exchange offer, in connection with the resale of exchange notes
received in exchange for notes acquired by such participating broker-dealers for
their own account as a result of market-making or other trading activities.

The registration rights agreement shall be governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the registration rights agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the registration rights agreement, a copy of which is
available upon request to the Company. The registration rights agreement is also
attached as an exhibit to this registration statement. In addition, the
information set forth above concerning certain interpretations of and positions
taken by the staff of the SEC is not intended to constitute legal advice, and
prospective investors should consult their own advisors with respect to such
matters.

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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 existing notes where such existing notes were acquired as a result
of market-making activities or other trading activities.

The Company will not receive any proceeds from any sale of exchange notes
by broker-dealers. Exchange notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commission or concessions received by any
such person 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.

The Company has agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the notes), other than
commissions or concessions of any broker-dealers, and will indemnify the holders
of the notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

This general discussion of certain United States federal income and estate
tax consequences applies to you if you acquired existing notes at original issue
for cash and you exchange those existing notes for exchange notes in the
exchange offer. This discussion only applies to you if you purchased existing
notes in the offering for an amount equal to the "issue price" of such notes
and hold the exchange notes as a "capital asset," generally, for investment,
under Section 1221 of the Code. This summary, however, does not consider state,
local or foreign tax laws. In addition, it does not include all of the rules
which may affect the United States tax treatment of your investment in the
exchange notes. For example, special rules not discussed here may apply to you
if you are, including without limitation:

o a broker-dealer, a dealer in securities or a financial
institution;

o an insurance company;

o a tax-exempt organization;

o holding the exchange notes through partnerships or other
pass-through entities;

o holding the exchange notes as part of a hedge, straddle or other
risk reduction or constructive sale transaction; or

o you have a functional currency other than the U.S. dollar.

This discussion only represents our best attempt to describe certain
federal income tax consequences that may apply to you based on current United
States federal tax law. This discussion may in the end inaccurately describe the
federal income tax consequences which are applicable to you

91
<PAGE>
because the law may change, possibly retroactively, and because the Internal
Revenue Service or any court may disagree with this discussion.

This summary may not cover your particular circumstances because it does
not consider foreign, state or local tax rules, disregards certain federal tax
rules, and does not describe future changes in federal tax rules. Please consult
your tax advisor concerning the application of United States federal income tax
laws, as well as the laws of any state, local or foreign taxing jurisdiction, to
your particular situation rather than relying on this general description.

UNITED STATES HOLDERS

If you are a "U.S. Holder," as defined below, this section applies to
you. You are a "U.S. Holder" if you hold notes and you are:

o a citizen or resident of the United States;

o a corporation or partnership created or organized in the United
States or under the laws of the United States or of any political
subdivision;

o an estate the income of which is subject to United States federal
income tax regardless of its source; or

o a trust, if (i) a United States court can exercise primary
supervision over the administration of the trust and one or more
United States persons can control all substantial decisions of
the trust, or (ii) the trust was in existence on August 20, 1996
and has properly elected to continue to be treated as a United
States person.

ORIGINAL ISSUE DISCOUNT

The exchange notes will be treated as our indebtedness that is issued with
original issue discount ("OID") in an amount equal to the difference between
the "stated redemption price at maturity," i.e., the face amount of the
exchange notes, and the "issue price." U.S. Holders of exchange notes,
including holders that are cash method taxpayers, will be required to report
such OID as interest income on a constant yield to maturity basis, referred to
as the "Constant Yield Method," which will result in the inclusion of OID in
income in advance of the receipt of the corresponding cash payments at maturity.

Under the Constant Yield Method, the amount of OID allocable to each
accrual period of an exchange note will equal the product of the "adjusted
issue price" of such note at the beginning of such accrual period and the
"yield to maturity" of such note, less any payments of qualified stated
interest ("QSI") allocable to such accrual period. The "adjusted issue
price" of a note at the beginning of an accrual period will equal the "issue
price" of such note, increased by all previous inclusions of OID, and decreased
by any previous cash payments other than payments of QSI. The "issue price" of
a exchange note generally will be the first price at which a substantial portion
of the notes are sold other than to underwriters or persons acting in a similar
capacity. Thus, the issue price of the exchange notes will equal the price paid
by the initial purchasers. The "yield to maturity" is the discount rate that
will cause the present value of all interest and principal payments to be made
under the note to equal the issue price of the note.

TAXATION OF STATED INTEREST

QSI is stated interest, other than any stated interest payable in kind,
that is unconditionally payable at least annually at a single fixed rate.
Subject to the discussion under "Effect of an Interest Payment Triggering
Event" below, all of the stated interest on the exchange notes should qualify
as QSI because such interest is unconditionally payable throughout the term of
the exchange notes at a single fixed rate.

92
<PAGE>
You generally must pay federal income tax on QSI on the exchange notes:

o when it accrues, if you use the accrual method of accounting for
United States federal income tax purposes; or

o when you receive it, if you use the cash method of accounting for
United States federal income tax purposes.

EFFECT OF AN INTEREST PAYMENT TRIGGERING EVENT

We believe that it is significantly more likely than not that no Interest
Payment Triggering Event will occur. Accordingly, while not entirely free from
doubt, the possibility that the stated interest on the exchange notes will
increase as the result of an Interest Payment Triggering Event should be
disregarded for purposes of determining the yield and maturity of the exchange
notes and the qualification of the stated interest as QSI. Moreover, if an
Interest Payment Triggering Event was to occur, any increased interest payments
should also be considered QSI.

EFFECT OF MANDATORY OFFER TO REPURCHASE

The exchange notes are subject to a mandatory offer to repurchase to the
extent that we sell certain assets or experiences specific kinds of changes in
control. Although not free from doubt, based on our current expectations, we
believe that the mandatory offer to repurchase should be viewed as an incidental
contingency and should not be taken into account in applying the foregoing rules
with respect to the exchange notes.

SALE OR OTHER TAXABLE DISPOSITION OF EXCHANGE NOTES

You must recognize taxable gain or loss on the sale, exchange, redemption,
retirement or other taxable disposition of an exchange note. The amount of your
gain or loss equals the difference between the amount you receive for the
exchange note in cash or other property, valued at fair market value, minus the
amount attributable to accrued QSI on the exchange note, minus your adjusted tax
basis in the exchange note. Your initial tax basis in an exchange note equals
the price you paid for the existing note which you exchanged for the exchange
note increased by amounts previously includable in income as OID and reduced by
any payments other than payments of QSI made on such notes.

Your gain or loss will generally be a long-term capital gain or loss if
your holding period in the exchange note is more than one year. Otherwise, it
will be a short-term capital gain or loss. Payments attributable to accrued QSI
which you have not yet included in income will be taxed as ordinary interest
income.

RECEIPT OF EXCHANGE NOTES

Because the economic terms of the exchange notes and the existing notes are
identical, your exchange of existing notes for exchange notes under the exchange
offer will not constitute a taxable exchange of the existing notes. As a result:

o you will not recognize taxable gain or loss when you receive
exchange notes in exchange for existing notes;

o your holding period in the exchange notes will include your
holding period in the existing notes; and

o your basis in the exchange notes will equal your basis in the
existing notes.

BACKUP WITHHOLDING

You may be subject to a 31% backup withholding tax with respect to
payments of interest (including OID), principal and premium on, and any proceeds
upon the sale or disposition of, an exchange note. Certain holders, including,
among others, corporations and certain tax-exempt organizations, are generally
not subject to backup withholding. In addition, the 31% backup

93
<PAGE>
withholding tax will not apply to you if you provide your taxpayer
identification number ("TIN") in the prescribed manner unless:

o the IRS notifies us or our agent that the TIN you provided is
incorrect;

o you fail to report interest and dividend payments that you
receive on your tax return and the IRS notifies us or our agent
that withholding is required; or

o you fail to certify under penalties of perjury that you are not
subject to backup withholding.

You should consult your tax advisor as to your qualification for exemption
from backup withholding and the procedure for obtaining such an exemption. If
the 31% backup withholding tax does apply to you, you may use the amounts
withheld as a refund or credit against your United States federal income tax
liability as long as you provide certain information to the IRS.

LEGAL MATTERS

Certain legal matters in connection with the notes being offered hereby
will be passed upon for the Company by Andrews & Kurth L.L.P., Houston, Texas.

EXPERTS

Ernst & Young LLP, independent auditors, have audited the financial
statements of Pentacon, Inc., as of September 30, 1998 and 1997 and the year
ended September 30, 1998 and the period from inception (March 20, 1997) through
September 30, 1997, the consolidated financial statements of Alatec Products,
Inc., as of September 30, 1997 and for the year ended December 31, 1995 and the
period from January 1, 1997 through September 30, 1997, the financial statements
of AXS Solutions, Inc., as of December 31, 1996 and September 30, 1997 and for
the years ended December 31, 1995 and 1996 and the period from January 1, 1997
to September 30, 1997, the financial statements of Maumee Industries, Inc., as
of December 31, 1996 and September 30, 1997 and for the years ended December 31,
1995 and 1996 and the period from January 1, 1997 to September 30, 1997, the
financial statements of Sales Systems, Limited, as of December 31, 1996 and
September 30, 1997 and for the year ended December 31, 1996 and the period from
January 1, 1997 to September 30, 1997, as set forth in their reports. The
Company has included the above described financial statements in the prospectus
and elsewhere in the registration statement in reliance on Ernst & Young LLP's
reports, given on their authority as experts in accounting and auditing.

The Consolidated Financial Statements of Alatec Products, Inc. as of
December 31, 1996 and for the year then ended and of ASI Aerospace Group, Inc.
as of December 31, 1996 and 1997 and for the years ended December 31, 1995, 1996
and 1997 included in this prospectus and registration statement have been
audited by McGladrey & Pullen, LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.

Grant Thornton LLP, independent certified public accountants, have audited
the consolidated financial statements of Texas International Aviation, Inc. as
of December 31, 1997 and March 31, 1997, and for the nine months ended December
31, 1997 and the year ended March 31, 1997, as set forth in their report. The
Company has included financial statements in the prospectus and elsewhere in the
registration statement in reliance on Grant Thornton LLP's report, given on
their authority as experts in accounting and auditing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows the Company to "incorporate by reference" information into
this prospectus, which means that the Company can disclose information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain important
information about the Company and its financial condition.

The Company hereby incorporates by reference its (a) Annual Report on Form
10-K for the year ended September 30, 1998, (b) Transition Report for the three
months ended December 31, 1998 and (c) Current Report on Form 8-K, as filed with
the SEC on May 6, 1999.

The Company also incorporates by reference into this prospectus additional
documents that may be filed with the SEC from the date of this prospectus to the
date of the termination of the exchange offer. These include periodic reports,
such as Annual Reports on 10-K, Quarterly Reports on 10-Q and Current Reports on
8-K, as well as proxy statements.

Documents incorporated by reference are available from the Company without
charge, excluding all exhibits unless we have specifically incorporated by
reference an exhibit in this prospectus. You may obtain documents incorporated
by reference in this prospectus by requesting them in writing or by telephone
from us at the following address:

Pentacon, Inc.
10375 Richmond Ave., Suite 700
Houston, Texas 77042
Attention: Chief Financial Officer
(713) 860-1000

<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
------
PENTACON, INC. AND SUBSIDIARIES (PRO FORMA)

Unaudited Pro Forma Consolidated Statement of Operations --
Basis of Presentation ............................................ F-3
Pro Forma Consolidated Statement of Operations -- Unaudited ......... F-5
Notes to Unaudited Pro Forma Consolidated Statement of Operations ... F-6
PENTACON, INC. AND SUBSIDIARIES (UNAUDITED)
Historical Consolidated Balance Sheets .............................. F-7
Historical Consolidated Statements of Operations .................... F-8
Pro Forma Consolidated Statements of Operations ..................... F-9
Historical Consolidated Statements of Cash Flows .................... F-10
Notes to Consolidated Financial Statements .......................... F-11
PENTACON, INC. AND SUBSIDIARIES
Report of Independent Auditors ...................................... F-16
Independent Auditor's Report ........................................ F-17
Consolidated Balance Sheets ......................................... F-18
Consolidated Statements of Operations ............................... F-19
Consolidated Statements of Cash Flows ............................... F-20
Consolidated Statements of Stockholders' Equity ..................... F-21
Notes to Consolidated Financial Statements .......................... F-22
PENTACON, INC .........................................................
Report of Independent Auditors ...................................... F-35
Balance Sheets ...................................................... F-36
Statements of Operations ............................................ F-37
Statements of Stockholders' Deficit ................................. F-38
Statements of Cash Flows ............................................ F-39
Notes to Financial Statements ....................................... F-40

ALATEC PRODUCTS, INC ..................................................
Report of Independent Auditors ...................................... F-43
Independent Auditor's Report ........................................ F-44
Consolidated Balance Sheets ......................................... F-45
Consolidated Statements of Income ................................... F-46
Consolidated Statements of Stockholders' Equity ..................... F-47
Consolidated Statements of Cash Flows ............................... F-48
Notes to Consolidated Financial Statements .......................... F-49

AXS SOLUTIONS, INC ....................................................
Report of Independent Auditors ...................................... F-57
Balance Sheets ...................................................... F-58
Statements of Income ................................................ F-59
Statements of Shareholders'
Equity .............................................................. F-60
Statements of Cash Flows ............................................ F-61
Notes to Financial Statements ....................................... F-62

MAUMEE INDUSTRIES, INC ................................................
Report of Independent Auditors ...................................... F-68
Balance Sheets ...................................................... F-69
Statements of Operations ............................................ F-70
Statements of Stockholders'
Deficit ............................................................. F-71
Statements of Cash Flows ............................................ F-72
Notes to Financial Statements ....................................... F-73

F-1
<PAGE>
PAGE
------
SALES SYSTEMS, LIMITED
Report of Independent Auditors ...................................... F-78
Balance Sheets ...................................................... F-79
Statements of Income and Retained Earnings .......................... F-80
Statements of Cash Flows ............................................ F-81
Notes to Financial Statements ....................................... F-82

TEXAS INTERNATIONAL AVIATION, INC .....................................
Report of Independent Certified Public Accountants .................. F-86
Consolidated Balance Sheets ......................................... F-87
Consolidated Statements of Earnings ................................. F-88
Consolidated Statement of Stockholders' Equity ...................... F-89
Consolidated Statements of Cash Flows ............................... F-90
Notes to Consolidated Financial
Statements ....................................................... F-91

ASI AEROSPACE GROUP, INC ..............................................
Independent Auditor's Report ........................................ F-95
Consolidated Balance Sheets ......................................... F-96
Consolidated Statements of Operations ............................... F-97
Consolidated Statements of Stockholders' Equity ..................... F-98
Consolidated Statements of Cash Flows ............................... F-99
Notes to Consolidated Financial Statements .......................... F-101

F-2

<PAGE>
PENTACON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
BASIS OF PRESENTATION

Pentacon, Inc. ("Pentacon" or the "Company") was incorporated in March
1997. On March 10, 1998, Pentacon and separate wholly-owned subsidiaries
acquired in separate transactions (the "Initial Acquisitions"), simultaneously
with the closing of its initial public offering of its common stock, five
businesses: Alatec Products, Inc. (Alatec), AXS Solutions, Inc. (AXS), Capitol
Bolt & Supply, Inc. (Capitol), Maumee Industries, Inc. (Maumee), and Sales
Systems Limited (SSL), collectively referred to as the "Founding Companies."
The consideration for the Initial Acquisitions consisted of a combination of
cash and Common Stock. Because (i) the stockholders of the Founding Companies
owned a majority of the outstanding shares of common stock following the initial
public offering and the Initial Acquisitions, and (ii) the stockholders of
Alatec received the greatest number of shares of common stock among the
stockholders of the Founding Companies, for financial statement presentation
purposes, Alatec has been identified as the accounting acquiror. The Initial
Acquisitions have been accounted for using the purchase method of accounting.
Therefore, Alatec's historical financial statements as of September 30, 1997 and
for all periods prior to March 10, 1998 are presented as the historical
financial statements of the registrant. Unless the context otherwise requires,
all references herein to the Company include Pentacon and the Initial
Acquisitions.

The Unaudited Pro Forma Consolidated Statement of Operations of the Company
and the related notes thereto should be read in conjunction with the Financial
Statements of Pentacon, Alatec, AXS, Maumee and SSL and related notes thereto,
and management's discussion and analysis of financial condition and results of
operations related thereto, all of which are included in this Offering
Memorandum and the Company's Registration Statements filed with the United
States Securities and Exchange Commission from time to time.

In May 1998 the Company acquired Pace Products, Inc. ("Pace"), a
distributor of fasteners and other small parts which also provides inventory
procurement and management services primarily to the telecommunications
industry. In June 1998 the Company acquired D-Bolt Company Inc. ("D-Bolt"), a
distributor of fasteners and other small parts primarily to the fabrication,
construction and mining industries. In July 1998 the Company acquired Texas
International Aviation, Inc. ("TIA"), a distributor of fasteners and other
small parts which provides inventory procurement and management services
primarily to the aerospace industry. In September 1998 the Company acquired ASI
Aerospace Group, Inc. ("ASI"), a distributor of fasteners and other small
parts which provides inventory procurement and management services primarily to
the aerospace industry. The allocations of purchase price to the assets acquired
and liabilities assumed has been initially assigned and recorded based on
preliminary estimates of fair value and may be revised as additional information
concerning the valuation of such assets and liabilities becomes available. These
acquisitions and the Initial Acquisitions are collectively referred to as the
"Acquisitions."

The following Unaudited Pro Forma Consolidated Statements of Operations of
Pentacon, Inc. and Subsidiaries gives effect to the Acquisitions for the periods
prior to the consummation of the Acquisitions.

The Unaudited Pro Forma Consolidated Statement of Operations for the twelve
months ended September 30, 1998 is based upon:

(i) the audited historical consolidated statement of operations of
Pentacon, Inc. for the twelve months ended September 30, 1998;

(ii) the unaudited historical consolidated statements of operations
of AXS, Capitol, Maumee, SSL and Pentacon for the period October
1, 1997 through March 10, 1998 (the date of the Initial
Acquisitions);

(iii) the unaudited consolidated statements of operations of TIA for
the period October 1, 1997 through July 16, 1998 (the date of
the acquisition);

F-3
<PAGE>
(iv) the unaudited consolidated statements of operations of ASI for
the period October 1, 1997 through September 4, 1998 (the date of
the acquisition); and

(v) the unaudited statements of operations of Pace and D-Bolt include
results of operations from October 1, 1997 through the respective
acquisition date.

The Unaudited Pro Forma Consolidated Statement of Operations has been
prepared based upon certain assumptions and includes all adjustments as detailed
in the Notes to Unaudited Pro Forma Consolidated Statement of Operations. The
pro forma financial data does not purport to represent what the Company's
financial position or results of operations would actually have been if the
transactions had occurred on those dates or to project the Company's financial
position or results of operations for any future period.

F-4
<PAGE>
PENTACON, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS -- UNAUDITED
TWELVE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 1, 1997 TO MARCH 10, 1998
HISTORICAL -----------------------------------------------------------------
PENTACON, INC. PENTACON, INC. AXS CAPITAL MAUMEE SSL TIA
-------------- -------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ........................ $ 141,078 $ -- $ 13,521 $ 5,346 $ 20,061 $ 7,053 $ 23,682
Cost of Sales ................... 91,026 -- 9,002 3,652 14,316 4,625 16,955
-------------- -------------- --------- --------- --------- --------- ---------
Gross Profit ................ 50,052 -- 4,519 1,694 5,745 2,428 6,727
Operating Expenses .............. 36,524 4,900 3,149 1,636 3,868 2,204 4,046
Goodwill amortization ........... 1,111 -- 53 -- -- -- --
-------------- -------------- --------- --------- --------- --------- ---------
Operating Income ................ 12,417 (4,900) 1,317 58 1,877 224 2,681
Other (income) (expense) ........ (91) -- 33 (25) (13) -- (57)
Interest expense ................ 2,448 -- 53 13 349 46 793
-------------- -------------- --------- --------- --------- --------- ---------
Income before taxes ............. 10,060 (4,900) 1,231 70 1,541 178 1,945
Income taxes .................... 5,373 (95) 1 55 639 -- 871
-------------- -------------- --------- --------- --------- --------- ---------
Net Income ...................... $ 4,687 $ (4,805) $ 1,230 $ 15 $ 902 $ 178 $ 1,074
============== ============== ========= ========= ========= ========= =========
Diluted net income per share.......................................................................................................
Shares used in computing net income per share (Note 3(H))..........................................................................
<CAPTION>
OTHER MERGER PRO FORMA OFFERING AS
ASI ACQUISITIONS ADJUSTMENTS CONSOLIDATED ADJUSTMENTS ADJUSTED
--------- ------------ ----------- ------------ ----------- ---------
(NOTE 2) (NOTE 3)
<S> <C> <C> <C> <C> <C> <C>
Revenues .............................. $ 63,410 $ 9,643 $ -- $ 283,794 $ -- $ 283,794
Cost of Sales ......................... 43,103 6,134 -- 188,813 -- 188,813
--------- ------------ ----------- ------------ ----------- ---------
Gross Profit ...................... 20,307 3,509 -- 94,981 -- 94,981
Operating Expenses .................... 9,856 2,365 (2,322)(A) 66,226 (6,480)(E) 59,746
Goodwill amortization ................. 327 -- 1,909 (B) 3,400 -- 3,400
--------- ------------ ----------- ------------ ----------- ---------
Operating Income ...................... 10,124 1,144 413 25,355 6,480 31,835
Other (income) (expense) .............. 112 (3) -- (44) -- (44)
Interest expense ...................... 1,939 (1) 5,290 (C) 10,930 (463)(F) 10,467
--------- ------------ ----------- ------------ ----------- ---------
Income before taxes ................... 8,073 1,148 (4,877) 14,469 6,943 21,412
Income taxes .......................... 3,473 79 (413)(D) 9,983 189 (G) 10,172
--------- ------------ ----------- ------------ ----------- ---------
Net Income ............................ $ 4,600 $ 1,069 $ (4,464) $ 4,486 $ 6,754 $ 11,240
========= ============ =========== ============ =========== =========
Diluted net income per share.......................................................................................... $ 0.67
=========
Shares used in computing net income per share (Note 3(H))............................................................. 16,668
=========
</TABLE>
SEE ACCOMPANYING NOTES.

F-5
<PAGE>
PENTACON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

In May 1998 the Company acquired Pace, a distributor of fasteners and other
small parts which also provides inventory procurement and management services
primarily to the telecommunications industry. In June 1998 the Company acquired
D-Bolt, a distributor of fasteners and other small parts primarily to the
fabrication, construction and mining industries. In July 1998 the Company
acquired TIA, a distributor of fasteners and other small parts which provides
inventory procurement and management services primarily to the aerospace
industry. In September 1998 the Company acquired ASI, a distributor of fasteners
and other small parts which provides inventory procurement and management
services primarily to the aerospace industry. The allocations of purchase price
to the assets acquired and liabilities assumed has been initially assigned and
recorded based on preliminary estimates of fair value and may be revised as
additional information concerning the valuation of such assets and liabilities
becomes available.

1. HISTORICAL FINANCIAL STATEMENTS

The historical financial statements represent the results of operations of
Pentacon, the Founding Companies and acquisitions and were derived from their
respective financial statements. The Company had a fiscal year-end of September
30. Effective October 28, 1998, the Company changed its fiscal year end from
September 30 to December 31. The Founding Companies have been presented for the
period commencing with the initial public offering and ending on September 30,
1998. The historical financial statements of TIA, ASI and other acquisitions are
presented for the period commencing with their respective acquisition and ending
September 30, 1998.

2. UNAUDITED PRO FORMA CONSOLIDATED MERGER ADJUSTMENTS

(A) Adjusts salaries, bonuses, benefits, acquisition expenses and lease
expense amounts to reflect those established in contractual agreements
between the Company and certain owners and key employees of companies
acquired in the Acquisitions.

(B) Records pro forma goodwill amortization using a 40-year estimated
life.

(C) Reflects the increase in interest expense attributed to obligations
incurred to complete the acquisitions, reduced by reductions in
interest expense.

(D) Adjusts the provision for federal and state income taxes to the
effective tax rate for the Company.

3. UNAUDITED PRO FORMA CONSOLIDATED OFFERING ADJUSTMENTS

(E) Reflects the elimination of the non-recurring, non-cash compensation
charge of $4.7 million recorded by Pentacon, Inc. during the three
months ended December 31, 1997 related to common stock issued to
management of the Company. Contemporaneously with the initial public
offering, a non-cash, non-recurring charge of approximately $1.8
million was recorded to reflect compensation related to the
revaluation of 225,000 of the 450,000 shares of common stock issued to
management in November 1997.

(F) Reflects the decrease in interest expense attributed to obligations
retired with proceeds of the initial public offering.

(G) Adjusts the provision for federal and state income taxes to the
effective rate of the Company.

(H) Includes (i) 2,830,000 shares issued by Pentacon, Inc., prior to the
initial public offering (including 535,000 shares issued to management
and directors), (ii) 6,720,000 shares issued to the stockholders of
the Founding Companies in connection with the Initial Acquisitions,
(iii) 5,980,000 shares issued in connection with the initial public
offering (including the over-allotment), (iv) the effect of the 50,000
warrants outstanding with an assumed exercise price of $6.00 per share
using the treasury stock method, (v) 1,134,010 shares issued in
connection with the acquisitions of Pace, D-Bolt and TIA and (vi) the
dilutive effect of stock options in the twelve months ended September
30, 1998.

F-6
<PAGE>
PENTACON, INC.
HISTORICAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1998
------------- ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<S> <C> <C>
Cash and cash equivalents ................................ $ 835 $ 744
Accounts receivable ...................................... 40,670 34,610
Inventories .............................................. 112,392 116,390
Deferred income taxes .................................... 4,430 4,216
Other current assets ..................................... 923 897
------------- ------------
Total current assets ................................ 159,250 156,857
Property and equipment, net of accumulated depreciation .. 7,077 7,404
Goodwill, net of accumulated amortization ................ 135,381 134,528
Deferred income taxes .................................... 670 672
Other assets ............................................. 2,013 1,892
------------- ------------
Total assets ........................................ $ 304,391 $ 301,353
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ......................................... $ 30,314 $ 33,895
Accrued expenses ......................................... 7,281 8,875
Income taxes payable ..................................... 1,988 3,384
Current maturities of long-term debt ..................... 51,513 31,957
------------- ------------
Total current liabilities ........................... 91,096 78,111
Long-term debt, net of current maturities ................ 98,381 106,632
------------- ------------
Total liabilities ................................... 189,477 184,743
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding ........... -- --
Common stock, $.01 par value, 51,000,000 shares
authorized, 16,668,129 shares issued and
outstanding ............................................ 167 167
Additional paid in capital ............................... 100,436 100,501
Retained earnings ........................................ 14,311 15,942
------------- ------------
Total stockholders' equity .......................... 114,914 116,610
------------- ------------
Total liabilities and stockholders' equity .......... $ 304,391 $ 301,353
============= ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-7
<PAGE>
PENTACON, INC.
HISTORICAL CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED
------------------------
DECEMBER 31,
------------------------
1997 1998
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Revenues ......................................... $ 14,502 $ 66,720
Cost of sales .................................... 8,555 45,021
--------- ---------
Gross profit ................................ 5,947 21,699
Operating expenses ............................... 5,397 14,575
Goodwill amortization ............................ 20 853
--------- ---------
Operating income ............................ 530 6,271
Other (income) expense, net ...................... (13) (7)
Interest expense ................................. 295 3,102
--------- ---------
Income before taxes ......................... 248 3,176
Income taxes ..................................... 103 1,545
--------- ---------
Net income .................................. $ 145 $ 1,631
========= =========
Net income per share:
Basic ....................................... $ 0.05 $ 0.10
Diluted ..................................... $ 0.05 $ 0.10

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-8
<PAGE>
PENTACON, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED
-----------------------
DECEMBER 31,
-----------------------
1997 1998
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Revenues .......................................... $ 39,042 $ 66,720
Cost of sales ..................................... 25,367 45,021
--------- ---------
Gross profit ................................. 13,675 21,699
Operating expenses ................................ 10,799 14,575
Goodwill amortization ............................. 374 853
--------- ---------
Operating income ............................. 2,502 6,271
Other (income) expense, net ....................... 8 (7)
Interest expense .................................. 246 3,102
--------- ---------
Income before taxes .......................... 2,248 3,176
Income taxes ...................................... 1,075 1,590
--------- ---------
Net income ................................... $ 1,173 $ 1,586
--------- ---------
Net income per share:
Basic ........................................ $ 0.08 $ 0.10
Diluted ...................................... $ 0.08 $ 0.10

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-9
<PAGE>
PENTACON, INC.
HISTORICAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

THREE MONTHS ENDED
-------------------
DECEMBER 31,
-------------------
1997 1998
-------- --------
(IN THOUSANDS)
Cash Flows From Operating Activities:
Net income .......................................... $ 145 $ 1,631
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ....................... 45 1,487
Deferred income taxes ............................... 1 212
Loss on disposal of assets .......................... -- 5
Changes in operating assets and liabilities:
Accounts receivable ............................... (715) 6,060
Inventories ....................................... (1,852) (3,998)
Other current assets .............................. -- 26
Accounts payable and accrued expenses ............. 1,730 5,175
Income taxes payable .............................. (179) 1,396
Other assets and liabilities, net ................. -- (4)
-------- --------
Net cash provided by (used in) operating activities . (825) 11,990
Cash Flows From Investing Activities:
Capital expenditures ................................ (85) (795)
Other ............................................... (71) 1
-------- --------
Net cash used in investing activities ............. (156) (794)
Cash Flows From Financing Activities:
Principal payments on debt .......................... (52) (19,105)
Borrowings of debt .................................. 300 7,800
Debt issuance costs ................................. -- 18
-------- --------
Net cash provided by (used in) financing activities 248 (11,287)
Decrease in cash and cash equivalents .................... (733) (91)
Cash and cash equivalents, beginning of period ........... 733 835
-------- --------
Cash and cash equivalents, end of period ................. $ -- $ 744
======== ========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-10
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(UNAUDITED)

1. BASIS OF PRESENTATION

Pentacon, Inc. ("Pentacon" or the "Company") was incorporated in March
1997. On March 10, 1998, Pentacon and separate wholly-owned subsidiaries
acquired in separate transactions, simultaneously with the closing of its
initial public offering (the "Offering") of its common stock, five businesses
(the "Initial Acquisitions"): Alatec Products, Inc. (Alatec), AXS Solutions,
Inc. (AXS), Capitol Bolt & Supply, Inc. (Capitol), Maumee Industries, Inc.
(Maumee), and Sales Systems, Limited (SSL), collectively referred to as the
"Founding Companies." The consideration for the Initial Acquisitions consisted
of a combination of cash and common stock. Because (i) the stockholders of the
Founding Companies owned a majority of the outstanding shares of Pentacon common
stock following the Offering and the Initial Acquisitions, and (ii) the
stockholders of Alatec received the greatest number of shares of Pentacon common
stock among the stockholders of the Founding Companies, for financial statement
presentation purposes, Alatec has been identified as the accounting acquiror.
The acquisitions of the remaining Founding Companies have been accounted for
using the purchase method of accounting. Therefore Alatec's historical financial
statements for all periods prior to March 10, 1998 are presented as the
historical financial statements of the registrant. Unless the context otherwise
requires, all references herein to the Company include Pentacon and the Founding
Companies. The allocations of the purchase price to the assets acquired and
liabilities assumed of the Founding Companies has been initially assigned and
recorded based on preliminary estimates of fair value and may be revised as
additional information concerning the valuation of such assets and liabilities
becomes available.

In October 1998, the Company changed its year end from September 30 to
December 31. This Transition Report on Form 10-Q is filed for the three-month
transition period. The accompanying unaudited financial statements are prepared
pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly,
certain information and footnotes required by generally accepted accounting
principles for complete financial statements are not included herein. The
Company believes all adjustments necessary for a fair presentation of these
statements have been included and are of a normal and recurring nature. The
statements should be read in conjunction with the financial statements and
related notes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1998.

The pro forma financial information for the three months ended December 31,
1997 and 1998 includes the results of Pentacon combined with the Founding
Companies as if the Initial Acquisitions had occurred at the beginning of each
respective three-month period. The pro forma financial information includes the
effects of (i) the Initial Acquisitions (ii) the Offering (iii) certain
reductions in salaries and benefits to the former owners of the Founding
Companies to which they agreed prospectively (iv) certain reductions in lease
expense paid to the former owners of the Founding Companies to which they agreed
prospectively (v) elimination of non-recurring, non-cash compensation charges
related to common stock issued to management (vi) amortization of goodwill
resulting from the Initial Acquisitions and (vii) advances under the Credit
Facility (see Note 4) including decreases in interest expense resulting from the
repayment or refinancing of the Founding Companies' debt and (viii) adjustments
to the provisions for federal and state income taxes. Acquisitions subsequent to
the Offering ("Subsequent Acquisitions") are included in the Historical and
Pro Forma Consolidated Statements of Operations only for those periods
subsequent to the dates of acquisition. The pro forma financial information may
not be comparable to and may not be indicative of the Company's post-acquisition
results of operations because the Founding Companies were not under common
control or management.

F-11
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There has been no significant change in the accounting policies of the
Company during the periods presented. For a description of these policies, refer
to Note 1 of the Notes to Consolidated Financial Statements of Pentacon included
in the Company's Annual Report on Form 10-K for the fiscal year ended September
30, 1998.

3. ACQUISITIONS

During the year ended December 31, 1998, the Company completed four
acquisitions in addition to the acquisitions of the Founding Companies. In May
1998, the Company acquired Pace Products, Inc., a distributor of fasteners and
other small parts which also provides inventory procurement and management
services primarily to the telecommunications industry. In June 1998, the Company
acquired D-Bolt Company Inc., a distributor of fasteners and other small parts
primarily to the fabrication, construction and mining industries. In July 1998,
the Company acquired Texas International Aviation, Inc., a distributor of
fasteners and other small parts which provides inventory procurement and
management services primarily to the aerospace industry. In September 1998, the
Company acquired ASI Aerospace Group, Inc., a distributor of fasteners and other
small parts which provides inventory procurement and management services
primarily to the aerospace industry. The consideration paid consisted of an
aggregate of 1,134,010 shares of Common Stock and approximately $77.0 million in
cash. The acquisitions were accounted for using the purchase method of
accounting and the results of operations of the acquired companies are included
from the date of acquisition. The allocations of purchase price to the assets
acquired and liabilities assumed has been initially assigned and recorded based
on preliminary estimates of fair value and may be revised as additional
information concerning the valuation of such assets and liabilities becomes
available.

If all acquisitions completed during the year ended December 31, 1998,
including the Founding Companies, were effective on the first day of the period
being reported, the unaudited pro forma revenues, gross margin, operating income
and net income would have been:

THREE MONTHS ENDED
DECEMBER 31,
-----------------------
1997 1998
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
Revenues ........................................... $ 65,345 $ 66,720
Gross margin ....................................... 21,501 21,699
Operating income ................................... 5,487 6,271
Net income ......................................... 1,335 1,586
Net income per share:
Basic ......................................... $ 0.08 $ 0.10
Diluted ....................................... $ 0.08 $ 0.10

4. CREDIT FACILITY

The Company has a credit agreement with a group of banks (the "Credit
Facility"). The Credit Facility provides the Company with a revolving line of
credit of up to $110 million ($90 million on or after April 15, 1999), which may
be used for general corporate purposes, future acquisitions, capital
expenditures and working capital and a revolving term loan of $40 million. The
Credit Facility is secured by Company stock and assets. Advances under the
Credit Facility bear interest at the banks' designated variable rate plus a
margin of 100 basis points. At the Company's option, the loans may bear interest
based on a designated London interbank offering rate plus a margin of 300 basis
points. Commitment fees of 50 basis points per annum are payable on the unused
portion of the line of credit. The Credit Facility contains a provision for
standby letters of credit up to $5.0 million. The Credit Facility prohibits the
payment of dividends by the

F-12
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company, restricts the Company's incurring or assuming other indebtedness and
requires the Company to comply with certain financial covenants including a
minimum net worth and minimum fixed charge ratio. The Credit Facility will
terminate and all amounts outstanding thereunder, if any, will be due and
payable December 31, 2001. At December 31, 1998, the Company has approximately
$14.6 million available under the Credit Facility.

The Credit Facility also contains provisions for quarterly reductions in
the ratio of the Company's interest-bearing debt to its pro forma trailing
earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the previous four quarters. Based upon the Company's projections of the ensuing
year's pro forma trailing EBITDA, a portion of the borrowings under the Credit
Facility has been classified as current liabilities. Management is exploring
alternatives to obtain additional capital and/or debt, or refinance all or a
portion of its existing debt, in order to remain in compliance with these
covenants. Although management believes that it will be able to obtain such
additional capital or debt or will be able to refinance its existing debt, there
can be no assurances that sufficient funds will be available to the Company at
the time it is required or on terms acceptable to the Company. Failure of the
Company to obtain such additional capital or debt, or to refinance its existing
debt, would have a material and adverse effect on the Company.

5. CAPITAL STOCK

On March 10, 1998, the Company completed the Offering, which involved the
sale by the Company of 5,980,000 shares of common stock at a price to the public
of $10.00 per share, including 780,000 shares pursuant to an over-allotment
option granted by the Company to the underwriters in connection with the
Offering. The net proceeds to the Company from the Offering (after deducting
underwriting discounts, commissions and offering expenses) were approximately
$50.8 million. Of this amount, $21.9 million (net of cash acquired) was used to
pay the cash portion of the purchase price relating to the Initial Acquisitions
with the remainder being used to pay certain indebtedness of the Founding
Companies, make capital expenditures and fund working capital requirements.

On April 20, 1998, the Company's registration statement covering 3,350,000
additional shares of common stock for use in connection with future acquisitions
was declared effective.

6. EARNINGS PER SHARE

The historical period ended December 31, 1997 represents the results of
operations of Alatec under its historical capital and income tax structure.
Accordingly, the shares of common stock attributable to Alatec are presented to
calculate earnings per share for this period. Pro forma net income per share for
the period ended December 31, 1997 is computed based on the weighted average
shares of common stock outstanding assuming the Initial Acquisitions and
Offering occurred at the beginning of the period. The computation of historical
and pro forma net income per share for the three-month period ended December 31,
1998 is based on the weighted average shares of common stock outstanding, which
includes shares:

Issued in consideration for Initial Acquisitions ............... 6,720,000
Sold pursuant to the Offering and the over-allotment ........... 5,980,000
Issued to McFarland, Grossman Capital Ventures II, L.C ......... 2,295,000
Issued to management and directors ............................. 539,119
Issued in connection with Subsequent Acquisitions .............. 1,134,010
----------
16,668,129

F-13
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Basic and diluted historical net income per share is computed based on the
following information:

THREE MONTHS ENDED
-------------------
DECEMBER 31,
-------------------
1997 1998
-------- --------
(IN THOUSANDS)
BASIC:
Net income ............................................... $ 145 $ 1,631
======== ========
Average common shares .................................... 2,969 16,668
======== ========
DILUTED:
Net income ............................................... $ 145 $ 1,631
======== ========
Average common shares .................................... 2,969 16,668
Common share equivalents:
Warrants ............................................ -- --
Options ............................................. -- --
-------- --------
Total common share equivalents ................. -- --
-------- --------
Average common shares and common share equivalents ....... 2,969 16,668
======== ========

Basic and diluted pro forma net income per share is computed based on the
following information:

THREE MONTHS ENDED
-------------------
DECEMBER 31,
-------------------
1997 1998
-------- --------
(IN THOUSANDS)
BASIC:
Net income ............................................... $ 1,173 $ 1,586
======== ========
Average common shares .................................... 15,530 16,668
======== ========
DILUTED:
Net income ............................................... $ 1,173 $ 1,586
======== ========
Average common shares .................................... 15,530 16,668
Common share equivalents:
Warrants ............................................ 20 --
Options ............................................. -- --
-------- --------
Total common share equivalents ................. 20 --
-------- --------
Average common shares and common share equivalents ....... 15,550 16,668
======== ========

7. INCOME TAXES

The provision for income taxes included in the Historical Consolidated
Statement of Operations for the three-month period ended December 31, 1998
assumes the application of statutory federal and state income tax rates, the
non-deductibility of goodwill amortization and the non-deductibility of
compensation related to common stock sold to management. The provision for
income taxes included in the Historical Consolidated Statement of Operations for
the three-month period ended December 31, 1997 reflects the activity of the
accounting acquiror prior to the Initial Acquisitions. The provision for income
taxes included in the Pro Forma Consolidated Statements of Operations for the
three-month periods ended December 31, 1997 and 1998 assumes the application of
statutory federal and state income tax rates and the non-deductibility of
goodwill amortization.

F-14
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal proceedings that have arisen in
the ordinary course of business. While it is not possible to predict the outcome
of such proceedings with certainty, in the opinion of the Company, all such
proceedings are either adequately covered by insurance or, if not so covered,
should not ultimately result in any liability which would have a material
adverse effect on the financial position, liquidity or results of operations of
the Company.

F-15
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders:

We have audited the accompanying consolidated balance sheets of Pentacon,
Inc. as of September 30, 1998 and 1997, and the related consolidated statements
of operations, stockholders' equity and cash flows for the year ended September
30, 1998 and the nine months ended September 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pentacon, Inc.
at September 30, 1998 and 1997, and the consolidated results of its operations
and its cash flows for the year ended September 30, 1998 and the nine months
ended September 30, 1997 in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Houston, Texas
December 24, 1998

F-16
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Alatec Products, Inc.
Chatsworth, California

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Alatec Products, Inc., for the year ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Alatec Products, Inc., for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.

As discussed in Note 1 to the Pentacon, Inc. financial statements, on March
10, 1998 Alatec Products, Inc. was acquired by Pentacon, Inc. For financial
reporting purposes, Alatec Products, Inc. has been identified as the accounting
acquiror and, therefore, the 1996 financial statements of Pentacon, Inc.
represent the historical financial statements of Alatec Products, Inc.

McGLADREY & PULLEN, LLP

Pasadena, California
November 21, 1997

F-17
<PAGE>
PENTACON, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1997 1998
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
Cash and cash equivalents ................................... $ 733 $ 835
Accounts receivable ......................................... 7,892 40,670
Inventories ................................................. 22,951 112,392
Deferred income taxes ....................................... 1,420 4,430
Other current assets ........................................ -- 923
--------- ---------
Total current assets ................................... 32,996 159,250
--------- ---------
Property and equipment, net of accumulated depreciation ..... 1,578 7,077
Goodwill, net of accumulated amortization ................... -- 135,381
Deferred income taxes ....................................... 65 670
Other assets ................................................ 272 2,013
--------- ---------
Total assets ........................................... $ 34,911 $ 304,391
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ............................................ $ 7,521 $ 30,314
Accrued expenses ............................................ 1,362 7,281
Income taxes payable ........................................ 3,594 1,988
Current maturities of long-term debt ........................ 364 51,513
--------- ---------
Total current liabilities .............................. 12,841 91,096

Long-term debt, net of current maturities ................... 13,686 98,381
--------- ---------
Total liabilities ...................................... 26,527 189,477
--------- ---------
Commitments and contingencies

Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding in 1998 ...... -- --
Common stock, $.01 par value, 2,500,000 shares authorized,
145,000 shares issued and outstanding in 1997, 51,000,000
shares authorized, 16,668,129 shares issued and outstanding
in 1998 and $10 par value ................................. 1,450 167
Treasury stock .............................................. (2,690) --
Additional paid in capital .................................. -- 100,436
Retained earnings ........................................... 9,624 14,311
--------- ---------
Total stockholders' equity ............................. 8,384 114,914
--------- ---------
Total liabilities and stockholders' equity ............. $ 34,911 $ 304,391
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-18
<PAGE>
PENTACON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
------------ ----------------- --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Revenues .......................... $ 44,726 $ 42,296 $ 141,078
Cost of sales ..................... 26,707 25,114 91,026
------------ ----------------- --------------
Gross profit ................. 18,019 17,182 50,052

Operating expenses ................ 12,818 11,664 36,524
Goodwill amortization ............. -- -- 1,111
------------ ----------------- --------------
Operating income ............. 5,201 5,518 12,417

Other (income) expense, net ....... (56) (26) (91)
Interest expense .................. 1,118 1,015 2,448
------------ ----------------- --------------
Income before taxes .......... 4,139 4,529 10,060
Income taxes ...................... 1,628 1,860 5,373
------------ ----------------- --------------
Net income ................... $ 2,511 $ 2,669 $ 4,687
============ ================= ==============
Net income per share:
Basic ........................ $ 0.85 $ 0.90 $ 0.45
Diluted ...................... $ 0.85 $ 0.90 $ 0.45
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-19
<PAGE>
PENTACON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
------------ ------------- -------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income ..................................... $ 2,511 $ 2,669 $ 4,687
Adjustments to reconcile net income to net cash
used in operating activities:(1)
Depreciation and amortization .................. 180 129 1,798
Deferred income taxes .......................... (372) 4 (107)
Compensation expense related to issuance of
management shares ............................ -- -- 1,800
Changes in operating assets and liabilities:
Accounts receivable .......................... 847 (2,588) (1,826)
Inventories .................................. (5,567) (3,336) (16,015)
Other current assets ......................... -- -- (265)
Accounts payable and accrued expenses ........ 2,023 3,176 (8,046)
Income taxes payable ......................... -- -- (3,420)
Other assets and liabilities, net ............ (31) -- 2,661
------------ ------------- -------------
Net cash used in operating activities .......... (409) 54 (18,733)

Cash Flows From Investing Activities:
Capital expenditures ........................... (114) (138) (3,097)
Cash paid for acquisitions, net of cash acquired -- -- (77,031)
Cash paid for Founding Companies, net of cash
acquired ..................................... -- -- (21,948)
Other .......................................... (209) 14 (52)
------------ ------------- -------------
Net cash used in investing activities ........ (323) (124) (102,128)

Cash Flows From Financing Activities:
Repayments of debt ............................. (192) (150) (99,928)
Proceeds from issuance of debt ................. 1,063 700 171,600
Proceeds from issuance of Common Stock, net
of offering costs ............................ -- -- 50,815
Debt issuance costs ............................ -- -- (1,524)
Other .......................................... -- (3) --
------------ ------------- -------------
Net cash provided by financing activities .... 871 547 120,963

Increase in cash and cash equivalents ............... 139 477 102

Cash and cash equivalents, beginning of period ...... 117 256 733
------------ ------------- -------------
Cash and cash equivalents, end of period ............ $ 256 $ 733 $ 835
============ ============= =============

</TABLE>
- ------------

(1) Net of the effects of acquisitions.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-20
<PAGE>
PENTACON, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL TOTAL
----------------------- ------------------ PAID IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
----------- ------- ------- ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 ................ 100 $ 1 -- $ -- $ 24 $ 5,094 $ 5,119
Net income .............................. -- -- -- -- -- 2,511 2,511
----------- ------- ------- ------- ---------- -------- -------------
Balance, December, 31, 1996 ............... 100 1 -- -- 24 7,605 7,630
Shares issued and shares repurchased .... 45 -- (51) (2,690) 776 -- (1,914)
Stock-split (1,000 to 1) ................ 144,855 1,449 (51,239) -- (800) (650) (1)
Net income .............................. -- -- -- -- -- 2,669 2,669
----------- ------- ------- ------- ---------- -------- -------------
Balance, September 30, 1997 ............... 145,000 1,450 (51,290) (2,690) -- 9,624 8,384
Elimination of Alatec shares ............ (145,000) (1,450) 51,290 2,690 -- -- 1,240
Issuance of common stock for Alatec
common stock .......................... 2,969,493 30 -- -- 23,726 -- 23,756
Initial public offering ................. 5,980,000 60 -- -- 50,755 -- 50,815
Issuance of common stock for acquisitions
of Founding Companies ................. 6,580,507 66 -- -- 14,293 -- 14,359
Issuance of common stock for acquisitions 1,134,010 11 -- -- 11,485 -- 11,496
Issuance of restricted stock grants ..... 4,119 -- -- -- -- -- --
Amortization of deferred compensation ... -- -- -- -- 177 -- 177
Net income .............................. -- -- -- -- -- 4,687 4,687
----------- ------- ------- ------- ---------- -------- -------------
Balance, September 30, 1998 ............... 16,668,129 $ 167 -- $ -- $ 100,436 $ 14,311 $ 114,914
=========== ======= ======= ======= ========== ======== =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-21
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION: Pentacon, Inc. ("Pentacon" or the "Company")
was incorporated in March 1997. On March 10, 1998, Pentacon and separate
wholly-owned subsidiaries acquired in separate transactions (the
"Acquisitions"), simultaneously with the closing of its initial public
offering (the "Offering") of its common stock (the "Common Stock"), five
businesses: Alatec Products, Inc. (Alatec), AXS Solutions, Inc. (AXS), Capitol
Bolt & Supply, Inc. (Capitol), Maumee Industries, Inc. (Maumee), and Sales
Systems, Limited (SSL), collectively referred to as the "Founding Companies."
The consideration for the Acquisitions of the Founding Companies consisted of a
combination of cash and Common Stock. Because (i) the stockholders of the
Founding Companies owned a majority of the outstanding shares of Common Stock
following the Offering and the Acquisitions, and (ii) the stockholders of Alatec
received the greatest number of shares of Common Stock among the stockholders of
the Founding Companies, for financial statement presentation purposes, Alatec
has been identified as the accounting acquiror. The Acquisitions of the
remaining Founding Companies have been accounted for using the purchase method
of accounting. Alatec's historical financial statements for all periods prior to
March 10, 1998 are presented as the historical financial statements of the
Company. Unless the context otherwise requires, all references herein to the
Company include Pentacon and the Founding Companies. The allocations of the
purchase price to the assets acquired and liabilities assumed of the Founding
Companies has been initially assigned and recorded based on preliminary
estimates of fair value and may be revised as additional information concerning
the valuation of such assets and liabilities becomes available.

Pentacon distributes fasteners and other small parts and provides related
inventory management services primarily to customers in the United States.

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Pentacon, Inc. and its majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

REVENUE RECOGNITION: Revenues are recognized upon shipment of products.

CASH EQUIVALENTS: Short-term investments purchased with original
maturities of three months or less are considered cash equivalents.

INVENTORIES: Inventories consist of products held for resale and are
stated at the lower of cost, determined using the first-in, first-out method, or
market.

INCOME TAXES: The Company recognizes deferred tax assets and liabilities
for expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Deferred tax assets and liabilities are
determined based on the differences between the financial statements carrying
amounts and the tax basis of assets and liabilities using enacted tax rates and
laws in effect in the years in which the differences are expected to reverse.

PROPERTY AND EQUIPMENT: Property and equipment is stated at cost.
Depreciation is provided over the estimated useful lives of the related assets
using primarily the straight-line method. The amortization expense on assets
acquired under capital leases is included with depreciation expense on owned
assets.

GOODWILL: Goodwill is amortized over a period of 40 years. The carrying
value of goodwill is reviewed if there are indications that the goodwill may be
impaired. If this review indicates that the goodwill will not be recoverable, as
determined based on undiscounted cash flows over the remaining amortization
periods, the carrying value of the goodwill will be reduced by the estimated
shortfall in discounted cash flow.

USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial

F-22
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CONCENTRATION OF CREDIT RISK: The Company performs credit evaluations of
its customers and generally does not require collateral. The Company maintains
an allowance for doubtful accounts based upon the expected collectibility of all
accounts receivable. The allowance for doubtful accounts and related activity
were not material at and for the periods ended September 30, 1998 and 1997 and
December 31, 1996. One customer accounted for approximately 12% of revenues for
the year ended September 30, 1998. Accounts receivable balances related to this
customer represented approximately 9% of total accounts receivable at September
30, 1998.

FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of accounts
receivable, prepaid expenses and accounts payable approximate fair values due to
the short-term maturities of these instruments. The carrying value of the
Company's debt facilities and capital lease obligations approximate fair value
since the rates on such facilities are variable, based on current market or are
at fixed rates currently available to the Company.

EXPORT SALES: The Company recorded export sales of $8,875,000, $9,434,000,
and $18,584,000 in the year ended December 31, 1996, the nine months ended
September 30, 1997 and the year ended September 30, 1998, respectively. The
Company has export sales through its foreign sales corporation to Europe, the
Far East, Canada, South America, Australia and Mexico, of which no country or
region is individually significant.

COMMON STOCK BASED COMPENSATION: The Company follows the intrinsic value
method of accounting for stock options and performance-based stock awards as
prescribed by Accounting Principles Board Opinion No. 25 (APB 25), ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES.

RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1997, the Financial
Accounting Standards Board issued Statements of Financial Accounting Standards
No. 130, REPORTING COMPREHENSIVE INCOME and Statement No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. These statements, which are
effective for fiscal years beginning after December 15, 1997, expand and modify
disclosures and, accordingly, will have no impact on the Company's net income or
financial position.

In March 1998, the AICPA issued SOP 98-1, ACCOUNTING FOR THE COSTS OF
COMPUTER SOFTWARE OBTAINED FOR INTERNAL USE. The SOP requires companies to
capitalize qualifying computer software costs incurred during the application
development stage. The SOP is effective for fiscal years beginning after
December 15, 1998 and permits early adoption. The Company adopted the SOP in the
quarter ended March 31, 1998. The adoption had no impact on net income as the
Company's policy was materially consistent with the requirements of the SOP.

In April 1998, the AICPA issued SOP 98-5, ACCOUNTING FOR THE COSTS OF
START-UP ACTIVITIES. The SOP requires that all costs of start-up activities be
expensed as incurred. The SOP is effective for fiscal years beginning after
December 15, 1998 and permits early adoption. The Company adopted this standard
in the quarter ended September 30, 1998. The adoption had no impact on net
income as the Company's policies were consistent with this standard.

In June 1998, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE FINANCIAL
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No. 133"). SFAS No. 133 requires
that all derivatives be recognized as assets and liabilities and measured at
fair value. The accounting for changes in the fair value of a derivative depends
on the intended use of the derivative and the resulting designation. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999 and early
adoption is permitted. Because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of SFAS No. 133 will have a
significant effect on net income or the financial position of the Company.

F-23
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. ACQUISITIONS

During the year ended September 30, 1998, the Company completed four
acquisitions in addition to the acquisitions of the Founding Companies. In May
1998, the Company acquired Pace Products, Inc., a distributor of fasteners and
other small parts which also provides inventory procurement and management
services primarily to the telecommunications industry. In June 1998, the Company
acquired D-Bolt Company Inc., a distributor of fasteners and other small parts
primarily to the fabrication, construction and mining industries. In July 1998,
the Company acquired Texas International Aviation, Inc., a distributor of
fasteners and other small parts which provides inventory procurement and
management services primarily to the aerospace industry. In September 1998, the
Company acquired ASI Aerospace Group, Inc., a distributor of fasteners and other
small parts which provides inventory procurement and management services
primarily to the aerospace industry. The consideration paid consisted of an
aggregate of 1,134,010 shares of Common Stock and approximately $77.0 million in
cash. The acquisitions were accounted for using the purchase method of
accounting and the results of operations of the acquired companies are included
from the date of acquisition. The allocations of purchase price to the assets
acquired and liabilities assumed has been initially assigned and recorded based
on preliminary estimates of fair value and may be revised as additional
information concerning the valuation of such assets and liabilities becomes
available.

If all acquisitions completed during the year ended September 30, 1998,
including the Founding Companies, were effective on the first day of the period
being reported, the unaudited pro forma revenues, gross margin, operating income
and net income would have been:

YEAR ENDED
SEPTEMBER 30,
-----------------------
1997 1998
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
Revenues ........................................... $ 223,673 $ 283,794
Gross margin ....................................... 73,021 94,981
Operating income ................................... 20,129 31,835
Net income ......................................... 4,450 11,240
Net income per share:
Basic ......................................... $ 0.27 $ 0.67
Diluted ....................................... $ 0.27 $ 0.67

F-24
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT AND GOODWILL

USEFUL SEPTEMBER 30,
LIVES IN --------------------
YEARS 1997 1998
--------- --------- ---------
(DOLLAR AMOUNTS
IN THOUSANDS)
Buildings............................ 10-40 $ 1,637 $ 2,476
Leasehold improvements............... 6-39 208 1,078
Equipment............................ 3-8 1,234 4,299
Furniture and fixtures............... 5-7 327 1,198
Construction in progress............. -- -- 402
--------- ---------
3,406 9,453
Less accumulated depreciation and
Amortization....................... (1,828) (2,376)
--------- ---------
$ 1,578 $ 7,077
========= =========

SEPTEMBER 30,
---------------------
1997 1998
--------- ----------
(DOLLAR AMOUNTS
IN THOUSANDS)
Goodwill............................. $ -- $ 136,492
Less accumulated amortization........ -- (1,111)
--------- ----------
$ -- $ 135,381
========= ==========

4. CREDIT FACILITY, LONG-TERM DEBT AND LEASES

SEPTEMBER 30,
---------------------
1997 1998
--------- ----------
(DOLLAR AMOUNTS IN
THOUSANDS)
Borrowings under Credit Facility:
Revolving credit loan with
interest payable quarterly at
LIBOR + 2 1/8% (7.8% at
September 30, 1998), maturing
September 2003................ $ -- $ 103,000

Revolver term loan with interest
payable quarterly at
LIBOR + 2 1/8% (7.8% at
September 30, 1998) and
principal and interest payable
quarterly commencing September
30, 1999, maturing September
2003.......................... -- 40,000

Line of credit borrowing with
interest payable monthly at a
variable rate (8.25% at
September 30, 1998) maturing
September 2003................ -- 3,300

Notes payable to a bank with interest
payable at 8.5%.................... 9,500 --

Capital leases....................... 1,526 2,792

Other notes payable (See Note 13).... 3,024 802
--------- ----------
14,050 149,894
Less current maturities.............. 364 51,513
--------- ----------
Long-term debt, net of current
maturities......................... $ 13,686 $ 98,381
========= ==========

F-25
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective September 3, 1998, the Company amended its credit agreement with
NationsBank of Texas, N.A. (the "Credit Facility"). The Credit Facility
provides the Company with a revolving line of credit of up to $175 million,
which may be used for general corporate purposes, future acquisitions, capital
expenditures and working capital. The Credit Facility is secured by Company
stock and assets. Advances under the Credit Facility bear interest at the bank's
designated variable rate plus margins ranging from 0 to 50 basis points,
depending on the ratio of the Company's interest-bearing debt to its pro forma
trailing earnings before interest, taxes, depreciation and amortization
("EBITDA") for the previous four quarters. At the Company's option, the loans
may bear interest based on a designated London interbank offering rate plus a
margin ranging from 75 to 212.5 basis points, depending on the same ratios.
Commitment fees of 20 to 37.5 basis points per annum are payable on the unused
portion of the line of credit, based on the same ratio. The Credit Facility
contains a provision for standby letters of credit up to $5.0 million. The
Credit Facility prohibits the payment of dividends by the Company, restricts the
Company's incurring or assuming other indebtedness and requires the Company to
comply with certain financial covenants including a minimum net worth and
minimum fixed charge ratio. The Credit Facility will terminate and all amounts
outstanding thereunder, if any, will be due and payable September 3, 2003. At
September 30, 1998, the Company has approximately $5.8 million available under
the Credit Facility.

The Credit Facility also contains provisions for quarterly reductions in
the ratio of the Company's interest-bearing debt to its pro forma trailing
EBITDA. Based upon the Company's projections of the ensuing year's pro forma
trailing EBITDA, a portion of the borrowings under the Credit Facility has been
classified as current liabilities.

In December 1998, the Company reached agreement in substance, subject to
execution of appropriate documentation, with the lenders under the Credit
Facility to amend certain provisions of the Credit Facility. The amendment
would, among other things, adjust the step down reductions in the ratio of the
Company's interest-bearing debt to pro forma EBITDA, reduce the line of credit
to $150 million and to $130 million on March 1, 1999, increase the amount of
subordinated debt permitted under the Credit Facility, shorten the term of the
facility to three years, and increase the interest rate on the Company's
LIBOR-based borrowings under the Credit Facility from LIBOR plus 212.5 basis
points to LIBOR plus 300 basis points.

As noted above, the Company's Credit Facility anticipates certain
reductions in the line of credit made available under the Credit Facility.
Management is exploring alternatives to obtain additional capital and/or debt,
or refinance all or a portion of its existing debt, in order to remain in
compliance with these covenants. Although management believes that it will be
able to obtain such additional capital or debt or will be able to refinance its
existing debt, there can be no assurances that sufficient funds will be
available to the Company at the time it is required or on terms acceptable to
the Company. Failure of the Company to obtain such additional capital or debt,
or to refinance its existing debt, would have a material and adverse effect on
the Company.

Maturities of long-term debt (excluding capital leases) for the five years
subsequent to September 30, 1998 are $51,326,000, $10,171,000, $10,171,000,
$10,122,000, and $65,222,000.

F-26
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company leases a portion of its buildings and equipment under
noncancelable capital and operating leases. Future minimum lease payments under
the capital and operating leases, together with the present value of the net
minimum lease payments, as of September 30, 1998 are as follows:

CAPITAL OPERATING
LEASES LEASES TOTAL
------- --------- -------
(DOLLAR AMOUNTS IN THOUSANDS)
FISCAL YEAR ENDING:
1999................................. $ 510 $ 2,985 $ 3,495
2000................................. 494 2,652 3,146
2001................................. 490 2,353 2,843
2002................................. 421 1,997 2,418
2003................................. 378 1,582 1,960
Thereafter........................... 2,375 6,365 8,740
------- --------- -------
Total minimum lease payments......... 4,668 17,934 22,602

Less amount representing Interest.... 1,876
-------

Present value of net minimum Lease
payments........................... 2,792
Current maturities................... 187
-------
Long-term portion.................... $ 2,605
=======

Total rental and interest expense under operating and capital leases for
the year ended December 31, 1996, the nine months ended September 30, 1997, and
the year ended September 30, 1998, was approximately $778,000, $640,000, and
$1,775,000, respectively, including amounts to related parties of $359,000,
$451,000, and $807,000, respectively. Total minimum lease payments include
payments due to stockholders of $2,401,000 for capital leases and $7,082,000 for
operating leases.

5. INCOME TAXES

The Company will file a consolidated federal income tax return which
includes the operations of the Founding Companies for periods subsequent to the
Acquisitions. The Founding Companies will file "short period" federal and
state income tax returns through the date of the Acquisitions.

Deferred income taxes as reflected on the historical financial statements
as of September 30, 1997 include the activity of the accounting acquiror only.
Although deferred income taxes on the September 30, 1998 historical financial
statements reflect the activity of the accounting acquiror for the entire year,
the remaining Founding Companies are included for all periods subsequent to
March 10, 1998, the date of the Acquisitions. Also reflected in deferred income
taxes on the September 30, 1998 historical financial statements are the deferred
income taxes acquired through various acquisitions during the year ended
September 30, 1998 which were unrelated to the original Acquisitions.

If it is more likely than not that some portion or all of the deferred tax
assets will not be realized, a valuation allowance to reduce the deferred tax
assets reported is required based on the weight of evidence. After consideration
of all the evidence, both positive and negative, no valuation allowance is
necessary to reduce the deferred tax assets at September 30, 1998 as the Company
believes it will realize the deferred tax assets principally through future
earnings.

F-27
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Components of income tax expense are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
------------ ------------- -------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Currently paid or payable:
Federal......................... $1,611 $ 1,496 $ 3,949
State........................... 389 360 1,531
------------ ------------- -------------
2,000 1,856 5,480
Deferred:
Federal......................... (357) 3 (77)
State........................... (15) 1 (30)
------------ ------------- -------------
(372) 4 (107)
------------ ------------- -------------
$1,628 $ 1,860 $ 5,373
============ ============= =============
</TABLE>
The net deferred tax assets (liabilities) consist of the following:

SEPTEMBER 30,
--------------------
1997 1998
--------- ---------
(DOLLAR AMOUNTS
IN THOUSANDS)
Deferred tax assets:
Receivables allowance........... $ 75 $ 276
Inventory allowance............. 632 2,002
Accrued expenses................ 243 1,011
Uniform cost capitalization..... 583 854
Property and equipment.......... 198 670
Other........................... -- 608
--------- ---------
1,731 5,421
--------- ---------
Deferred tax liabilities, other...... (246) (321)
--------- ---------
$ 1,485 $ 5,100
========= =========
Net deferred taxes consist of the
following:
Current assets.................. $ 1,420 $ 4,430
Noncurrent assets............... 65 670
--------- ---------
$ 1,485 $ 5,100
========= =========

F-28
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's effective tax rate varied from the federal statutory tax rate
during the year ended December 31, 1996, the nine months ended September 30,
1997 and the year ended September 30, 1998, as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Expected income tax rate............. 34.0% 34.0% 34.0%
International export sales partially
Exempt from federal income taxes
(FSC benefit)...................... (4.4) (2.6) (1.4)
State taxes, net of federal
benefit............................ 7.7 7.2 9.8
Nondeductible compensation........... -- -- 6.1
Adjustment to reflect IRS Audit
settlement......................... 6.0 0.2 --
Nondeductible goodwill............... -- -- 3.8
Other nondeductible expenses......... 2.1 1.0 1.1
Other................................ (6.1) 1.3 --
------------ ------------- -------------
Effective tax rate................... 39.3% 41.1% 53.4%
============ ============= =============
</TABLE>
6. COMMON STOCK

In March 1997, the Company granted stock purchase warrants that entitled
certain venture capital investors to purchase 50,000 shares of the Company's
common stock at a price of $6.00 per share through March 13, 2002. All of the
warrant shares were vested at issuance.

In May 1997, Alatec's Board of Directors (the "Board") authorized an
increase in the authorized shares of common stock from 2,500 shares to 2,500,000
shares. Concurrently, the Board approved a 1,000 for 1 stock-split.

On March 10, 1998, the Company completed the Offering, which involved the
sale by the Company of 5,980,000 shares of Common Stock at a price to the public
of $10.00 per share, including 780,000 shares pursuant to an over-allotment
option granted by the Company to the underwriters in connection with the
Offering. The net proceeds to the Company from the Offering (after deducting
underwriting discounts, commissions and offering expenses) were approximately
$50.8 million. Of this amount, $23.3 million was used to pay the cash portion of
the purchase price relating to the Acquisitions of the Founding Companies with
the remainder being used to pay certain indebtedness of the Founding Companies,
make capital expenditures and fund working capital requirements.

On April 20, 1998, the Company's registration statement covering 3,350,000
additional shares of Common Stock for use in connection with future acquisitions
was declared effective. During the year ended September 30, 1998, 1,134,010
shares of Common Stock were issued in connection with acquisitions (See Note 2).

F-29
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. EARNINGS PER SHARE

The periods ended prior to October 1, 1997 represent the results of
operations of Alatec under its historical capital and income tax structure.
Accordingly, the shares of Common Stock attributable to Alatec are presented to
calculate earnings per share for these periods. The computation of net income
per share for the year ended September 30, 1998 is based on the weighted average
shares of Common Stock outstanding as of September 30, 1998, which includes
shares:

Issued in consideration for
acquisition of Founding
Companies.......................... 6,720,000
Sold pursuant to the Offering and the
over-allotment..................... 5,980,000
Issued to McFarland, Grossman Capital
Ventures II, L.C................... 2,295,000
Issued to management and directors... 539,119
Issued in connection with
acquisitions....................... 1,134,010
------------
16,668,129
============

Basic and diluted net income per share is computed based on the following
information:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
------------ ------------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
BASIC:

Net income........................... $2,511 $ 2,669 $ 4,687
============ ============= =============
Average Common shares................ 2,969 2,969 10,335
============ ============= =============
DILUTED:

Net income........................... $2,511 $ 2,669 $ 4,687
============ ============= =============
Average Common shares................ 2,969 2,969 10,335

Common share equivalents:
Warrants........................ -- -- 12
Options......................... -- -- 27
------------ ------------- -------------
Total Common share
equivalents............. -- -- 39
------------ ------------- -------------

Average Common shares and Common
share equivalents.................. 2,969 2,969 10,374
============ ============= =============
</TABLE>

8. STOCK OPTION PLAN

The Board of Directors has adopted, and the stockholders of the Company
have approved, the Pentacon, Inc. 1998 Stock Plan (the "1998 Stock Plan"). The
aggregate amount of Common Stock with respect to which options or other awards
may be granted may not exceed 1,700,000 shares. As of September 30, 1998, the
Company had granted options and other awards for a total of 1,109,105 shares
under the 1998 Stock Plan.

The 1998 Stock Plan is administered by the Compensation Committee, which is
composed of non-employee directors (the "Committee"). Subject to the terms of
the 1998 Stock Plan, the Committee generally determines to whom options will be
granted and the terms and conditions of option grants. Options granted under the
1998 Stock Plan may be either non-qualified stock options, or may qualify as
incentive stock options ("ISOs"), provided that the aggregate fair market
value (determined at the time the

F-30
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ISO is granted) of the Common Stock with respect to which ISOs are exercisable
for the first time by any employee during any calendar year under all plans of
the company and any parent or subsidiary corporation shall not exceed $100,000.
No employee or consultant may receive an option in any year to purchase more
than 250,000 shares of Common Stock. The Committee determines the period over
which options become exercisable, provided that all options become immediately
exercisable upon death of the grantee or upon a change-in-control of the
Company.

The 1998 Stock Plan also provides for automatic option grants to directors
who are not otherwise employed by the Company or its subsidiaries. Upon
commencement of service, a non-employee director will receive a non-qualified
option to purchase 15,000 shares of Common Stock, and continuing non-employee
directors annually will receive options to purchase 5,000 shares of Common
Stock. Options granted to non-employee directors are immediately exercisable in
full and have a term of ten years.

Upon exercise of a non-qualified option, the optionee generally will
recognize ordinary income in the amount of the "option spread"(the difference
between the market value of the option shares at the time of exercise and the
exercise price), and the Company is generally entitled to a corresponding tax
deduction (subject to certain withholding requirements). When an optionee sells
shares issued upon the exercise of a non-qualified stock option, the optionee
realizes a short-term or long-term gain or loss, depending on the length of the
holding period, but the Company is not entitled to any tax deduction in
connection with such sale.

The Company applies APB 25 in accounting for the Plan. Accordingly, no
compensation cost has been recognized for its fixed stock option plan. Pro forma
information regarding net income and earnings per common share is required by
FAS 123 as if the Company had accounted for its employee stock options under the
fair value method of that statement. The fair value of these options was
estimated at the date of grant using a Black-Scholes option pricing
("Black-Scholes") model with the following weighted average assumptions for
1998: (i) risk-free interest rate of 6.5%, (ii) a dividend yield of 0.0%, (iii)
volatility factors of the historical market price of the Company's Common Stock
of 49.8% and (iv) a weighted average expected life of 10 years.

The Black-Scholes model was developed for use in estimating the fair value
of traded options that have no vesting restrictions and are fully transferable.
In addition, option valuation models require the input of highly subjective
assumptions, including the expected volatility. Because the Company's employee
stock options have characteristics significantly different from those of traded
options and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.

F-31
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the vesting period of the stock options.
Had compensation for the Company's stock-based compensation plan been determined
based on the fair value at the grant dates for awards under the Plan consistent
with the method of FAS 123, the Company's net income and earnings per common
share would have been adjusted to the pro forma amounts indicated below:

NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
(IN THOUSANDS, EXCEPT SHARE
DATA)
Net income
As reported..................... $ 2,669 $ 4,687
============= =============
Pro forma....................... $ 2,669 $ 3,101
============= =============
Income per share
As reported..................... $ 0.90 $ 0.45
============= =============
Pro forma....................... $ 0.90 $ 0.30
============= =============

A summary of the status of the Company's fixed stock option plans for
officers and employees as of September 30, 1998 and activity during the year is
presented below:

WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------------ ---------
Outstanding at beginning of year..... -- $ --
Granted.............................. 1,117,180 10.24
Canceled............................. (8,075) 10.00
------------
1,109,105 $ 10.24
============
Common shares authorized............. 1,700,000
Outstanding options.................. (1,109,105)
Outstanding stock grants............. (4,119)
------------
Options available for grant at end of
year............................... 586,776
============

Weighted average fair value of
options granted during the year.... $ 7.15
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ------------------------------------------------------------ OPTIONS EXERCISABLE
WEIGHTED --------------------------
SHARES AVERAGE WEIGHTED SHARES WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE AT CONTRACTUAL EXERCISE AT EXERCISE
PRICES 9/30/98 LIFE PRICE 9/30/98 PRICE
- ------------- ------------ ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$9.00-$12.44 1,109,105 9.5 $ 10.24 30,000 $ 10.00
</TABLE>
F-32
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information are as follows:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS)
Interest paid during the period...... $1,029 $ 829 $ 1,612
Income taxes paid during the
period............................. $ 404 $ 930 $ 10,817

Details of Founding Companies'
acquisition:
Fair value of assets............ $ -- -- $ 139,392
Liabilities..................... -- -- 62,354
------------ ------------- -------------
Total consideration............. -- -- 77,038
Less stock consideration........ -- -- 53,760
Less cash acquired.............. -- -- 1,330
------------ ------------- -------------
Net cash paid for Founding
Companies..................... $ -- -- $ 21,948
============ ============= =============

Details of acquisitions:
Fair value of assets............ $ -- $ -- $ 152,708
Liabilities..................... -- -- 63,692
------------ ------------- -------------
Total consideration............. -- -- 89,016
Less stock consideration........ -- -- 11,496
Less cash acquired.............. -- -- 489
------------ ------------- -------------
Net cash paid for
acquisitions.................. $ -- $ -- $ 77,031
============ ============= =============
</TABLE>

10. EMPLOYEE BENEFIT PLANS

The Company has a number of defined contribution plans which cover
substantially all of the Company's full-time employees. Under certain plans, the
Company may make discretionary contributions, match various percentages of
participants' contributions or both. The Company contributed $99,000, $80,000
and $411,000 in matching contributions to the plans for the year ended December
31, 1996, the nine months ended September 30, 1997 and the year ended September
30, 1998, respectively. Additionally, the Company made discretionary
contributions to certain plans of $300,000 and $10,000 for the nine months that
ended September 30, 1997 and the year ended September 30, 1998, respectively.

F-33
<PAGE>
PENTACON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. UNAUDITED QUARTERLY OPERATING RESULTS

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE DATA)
YEAR ENDED SEPTEMBER 30, 1997
Revenue......................... $11,458 $12,776 $14,334 $15,186
Gross profit.................... 4,488 5,004 5,536 6,642
Operating income................ 1,007 1,563 1,887 2,068
Net income...................... 476 726 917 1,026
Basic earnings per share........ 0.16 0.24 0.31 0.35
Diluted earnings per share...... 0.16 0.24 0.31 0.35
YEAR ENDED SEPTEMBER 30, 1998
Revenue......................... $14,502 $19,856 $46,428 $60,292
Gross profit.................... 5,947 7,469 16,048 20,588
Operating income................ 530 171 4,727 6,989
Net income (loss)............... 145 (91) 2,121 2,512
Basic earnings (loss) per
share......................... 0.05 (0.02) 0.13 0.15
Diluted earnings (loss) per
share......................... 0.05 (0.02) 0.13 0.15
</TABLE>
12. COMMITMENTS AND CONTINGENCIES

13. RELATED PARTY TRANSACTIONS

NOTES PAYABLE: The Company had notes payable to stockholders of $2,687,000
at September 30, 1997. During the year ended December 31, 1996, the nine months
ended September 30, 1997, and the year ended September 30, 1998, interest
expense of $69,000, $50,000 and $19,000, respectively, was incurred on these
notes (See Note 4).

RELATED PARTY PURCHASES: The Company purchased approximately $1,386,000,
$1,100,000 and $1,756,000, in the year ended December 31, 1996, the nine months
ended September 30, 1997 and the year ended September 30, 1998, respectively,
from a supplier which is 50% owned by a shareholder.

14. SUBSEQUENT EVENT (UNAUDITED)

On March 25, 1999, the Company completed a $100 million 12.25% ten year
senior subordinated notes offering. The notes are guaranteed by all of the
subsidiaries of the Company. Each of the subsidiaries are wholly-owned by the
Company, and the guarantees are full, unconditional, and joint and several.
Separate financial statements of the guarantors are not presented because
management has determined that they would not be material to investors.

F-34

<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
Pentacon, Inc.

We have audited the accompanying balance sheet of Pentacon, Inc. (the
"Company"), as of September 30, 1997 and the related statement of operations,
stockholders' deficit, and cash flows for the period from inception (March 20,
1997) through September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pentacon, Inc., as of
September 30, 1997, and the results of its operations and cash flows for the
period from inception (March 20, 1997) through September 30, 1997, in conformity
with generally accepted accounting principles.

ERNST & YOUNG LLP

Houston, Texas
October 16, 1997

F-35
<PAGE>
PENTACON, INC.
BALANCE SHEETS

SEPTEMBER 30, DECEMBER 31,
1997 1997
------------- -----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.......... $ 1,050 $ 5,550
Prepaid expenses and other current
assets............................ -- 2,243
------------- -----------
Total current assets.................... 1,050 7,793
Deferred offering costs................. 268,138 939,870
Property and equipment.................. 7,210 7,510
------------- -----------
Total assets............................ $ 276,398 $ 955,173
============= ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accrued expenses................... $ -- $ 180,200
Amounts due to stockholder......... 292,945 892,690
------------- -----------
Total current liabilities..... 292,945 1,072,890
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.01 par value,
10,000,000 shares authorized, -0-
outstanding....................... -- --
Common stock, $0.01 par value,
51,000,000 shares authorized,
2,380,000 and 2,830,000
outstanding at September 30, 1997,
and December 31, 1997,
respectively...................... 23,800 28,300
Paid-in capital.................... 50 4,680,050
Accumulated deficit, net of
subscriptions receivable.......... (40,397) (4,826,067)
------------- -----------
Total stockholders' deficit............. (16,547) (117,717)
------------- -----------
Total liabilities and stockholders'
deficit............................... $ 276,398 $ 955,173
============= ===========

SEE ACCOMPANYING NOTES.

F-36
<PAGE>
PENTACON, INC.
STATEMENTS OF OPERATIONS

PERIOD FROM
INCEPTION
(MARCH 20, 1997) THREE MONTHS
THROUGH ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1997
---------------- --------------
(UNAUDITED)
Net sales............................ $ -- $ --
Selling, general, and administrative
expenses........................... (17,597) (4,785,670)
---------------- --------------
Loss before income taxes............. (17,597) (4,785,670)
Income tax expense................... -- --
---------------- --------------
Net loss...................... $(17,597) $ (4,785,670)
================ ==============

SEE ACCOMPANYING NOTES.

F-37
<PAGE>
PENTACON, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------------- SUBSCRIPTIONS PAID-IN ACCUMULATED STOCKHOLDERS
SHARES AMOUNT RECEIVABLE CAPITAL DEFICIT DEFICIT
----------- --------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization............... 2,380,000 $ 23,800 $ (22,800) $ -- $ -- $ 1,000
Issuance of warrants................. -- -- -- 50 -- 50
Net loss............................. -- -- -- -- (17,597) (17,597)
----------- --------- ------------- ------------ ----------- -------------
Balance at September 30, 1997........ 2,380,000 23,800 (22,800) 50 (17,597) (16,547)
Sale of common stock to officers
(unaudited)........................ 450,000 4,500 -- 4,680,000 -- 4,684,500
Net loss (unaudited)................. -- -- -- -- (4,785,670) (4,785,670)
----------- --------- ------------- ------------ ----------- -------------
Balance at December 31, 1997
(unaudited)........................ 2,830,000 $ 28,300 $ (22,800) $ 4,680,050 $(4,803,267) $ 117,717
=========== ========= ============= ============ =========== =============
</TABLE>

SEE ACCOMPANYING NOTES.

F-38
<PAGE>
PENTACON, INC.
STATEMENTS OF CASH FLOWS

PERIOD FROM
INCEPTION
(MARCH 20, 1997) THREE MONTHS
THROUGH ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1997
---------------- --------------
(UNAUDITED)
OPERATING ACTIVITIES
Net loss........................... $ (17,597) $ (4,785,670)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and
amortization............... -- 395
Deferred offering costs....... (268,138) (671,732)
Stock compensation............ -- 4,680,000
Prepaid expenses and other
current assets............. -- (2,243)
Amounts due to stockholder.... 292,945 599,745
Accrued expenses.............. -- 180,200
---------------- --------------
Net cash provided by operating
activities....................... 7,210 695

INVESTING ACTIVITIES
Capital expenditures............... (7,210) (695)
---------------- --------------
Net cash used in investing
activities....................... (7,210) (695)

FINANCING ACTIVITIES
Proceeds from sale of common stock
and warrants..................... 1,050 4,500
---------------- --------------
Net cash provided by financing
activities....................... 1,050 4,500
---------------- --------------
Net increase in cash............... 1,050 4,500
Cash and cash equivalents at
beginning of period.............. -- 1,050
---------------- --------------
Cash and cash equivalents at end of
period........................... $ 1,050 $ 5,550
================ ==============

SEE ACCOMPANYING NOTES.

F-39
<PAGE>
PENTACON, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

1. BUSINESS AND ORGANIZATION

Pentacon, Inc., a Delaware corporation ("Pentacon" or the "Company"),
was organized on March 20, 1997 to (i) become a leading domestic and
international value-added distributor of fasteners and other small parts to
original equipment manufacturers ("OEMs"), (ii) provide related inventory
management services to OEMs and others, and (iii) pursue the consolidation of
the highly-fragmented fastener distribution industry. Pentacon intends to
acquire five businesses (the "Acquisitions") and contemporaneously complete an
initial public offering (the "Offering") of its common stock.

Pentacon has not conducted any operations, and all activities to date have
related to the Offering and the Acquisitions. Initial capitalization of the
Company by McFarland, Grossman Capital Ventures II, L.C. ("MGCV"), was $1,000.
All expenditures to date have been funded by MGCV, on behalf of the Company. As
of September 30, 1997, costs of approximately $268,138 have been paid by MGCV on
behalf of the Company in connection with the Offering. Pentacon has treated
these costs as deferred offering costs. Pentacon is dependent upon the Offering
to execute the pending Acquisitions and to repay MGCV. The Company has agreed to
pay Donald Luke, a manager of MGCV, a success fee of $100,000 upon consummation
of the Offering. There is no assurance that the pending Acquisitions discussed
below will be completed or that Pentacon will be able to generate future
operating revenues.

USE OF ESTIMATES

INCOME TAXES

The Company has incurred a net operating loss since inception of which a
100% valuation allowance has been established for financial reporting purposes.
Accordingly no deferred tax asset has been recorded.

UNAUDITED INTERIM INFORMATION

The financial information for the three months ended December 31, 1997 has
not been audited by independent accountants. Certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from the unaudited interim financial information. In the opinion of management
of the Company, the unaudited interim financial information includes all
adjustments, consisting only of normal recurring adjusments, necessary for a
fair presentation. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the respective full
years.

2. STOCKHOLDERS' EQUITY

COMMON STOCK

Pentacon has entered into agreements whereby the total shares and warrants
to purchase shares of common stock of Pentacon held by MGCV, certain consultants
to MGCV, and management of the Company, will represent approximately 30% of the
total shares outstanding immediately before completion of the Offering. Of these
shares, certain members of management will hold 4.7% of the total shares
outstanding immediately before completion of the Offering and MGCV will hold the
remaining shares. Based on these agreements and the estimated total shares to be
outstanding upon completion of the Offering, the shares presented herein have
been restated to effect a 2,380-for-one stock split and an increase in
authorized shares of common stock to 50,000,000 voting shares and 1,000,000
non-voting shares.

In connection with the organization and initial capitalization of Pentacon,
the Company issued 2,380,000 shares of common stock to MGCV. In November 1997,
management of the Company acquired

F-40
<PAGE>
PENTACON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

450,000 shares of common stock for $0.01 per share. As a result of the issuance
of the 450,000 shares, the Company will record a nonrecurring, non-cash
compensation charge in November 1997 of approximately $4.7 million, based on an
estimated Offering price to the public net of a 20% marketability discount.

RESTRICTED COMMON STOCK

In December 1997, MGCV exchanged 667,000 shares of Common Stock for an
equal number of shares of restricted voting common stock ("Restricted Common
Stock"). The holder of Restricted Common Stock is entitled to elect one member
of the Company's Board of Directors and to 0.25 of one vote for each share held
on all other matters on which such holder is entitled to vote.

Each share of Restricted Common Stock will automatically convert into
Common Stock on a share-for-share basis (a) in the event of a disposition of
such share of Restricted Common Stock by the holder thereof (other than a
disposition which is a distribution by a holder to its partners or beneficial
owners or a transfer to a related party of such holder (as defined)), (b) in the
event any person acquires beneficial ownership of 30% or more of the outstanding
shares of Common Stock of the Company, or (c) in the event any person acquires
30% or more of the total number of outstanding shares of Common Stock.

After January 1, 2003, the Corporation may elect to convert any outstanding
shares of Restricted Common Stock into shares of Common Stock.

WARRANTS

At the date of the Company's organization, warrants were issued for 50,000
shares of common stock with an exercise price equal to the lesser of $8 per
share or 60% of the initial public offering price. These warrants were issued to
legal and investment advisors for a total of $50. As the Company was subject to
significant uncertainties, the value of the warrants and their underlying shares
was de minimus at that date and no value beyond the consideration received has
been assigned to them. The warrants may be exercised up to four years after the
consummation of the Offering.

STOCK PLAN

The board of directors of the Company has adopted the Pentacon, Inc. 1998
Stock Plan (the "Plan"). The Company anticipates that upon or shortly after
the consummation of its Offering, it will have granted options to purchase up to
approximately 1.0 million shares of common stock. Subsequent to September 30,
1997, the Company has granted certain members of management options for 420,000
shares of common stock and intends to grant additional options for 600,000
shares of common stock with the exercise prices to be equal to the Offering
price. It is not expected that existing management team will be granted
additional options under the 1998 Stock Option Plan and, in any event, such
persons should not be issued additional options under the 1998 Stock Option Plan
for several years following the Offering. It is expected that substantially all
of the additional options available to be granted during this time period will
be awarded to various employees of the Founding Companies. The Company will
account for options issued to employees and nonemployee directors under the Plan
in accordance with APB Opinion No. 25 and, accordingly, no compensation cost
will be recognized to the extent that shares are issued at the fair market value
as of the date of grant. The Company will provide the pro forma disclosure of
net earnings per share in the notes to the financial statements as if the fair
value-based method of accounting has been applied to awards as required by
Statement of Financial Standard No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION.

3. NEW ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, EARNINGS PER SHARE. For the Company, SFAS No. 128 will be effective for the
first quarter ended December 31, 1997. SFAS No. 128 simplifies the standards
required under current accounting rules for computing earnings per share and
replaces the presentation of primary earnings per share and fully diluted
earnings per share with a

F-41
<PAGE>
PENTACON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

presentation of basic earnings per share ("basic EPS") and diluted earnings
per share ("diluted EPS"). Basic EPS excludes dilution and is determined by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding during the period. Diluted EPS reflects the
potential dilution that could occur if securities and other contracts to issue
common stock were exercised or converted into common stock. Diluted EPS is
computed similarly to fully diluted earnings per share under current accounting
rules. The implementation of SFAS No. 128 is not expected to have a material
effect on the Company's earnings per share as determined under current
accounting rules.

4. EVENT SUBSEQUENT TO THE DATE OF AUDITOR'S REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

Wholly-owned subsidiaries of Pentacon, Inc. have signed definitive
agreements to acquire by merger or share exchange five companies ("Founding
Companies") to be effective contemporaneously with the Offering. The companies
to be acquired are Alatec Products, Inc., AXS Solutions, Inc., Capitol Bolt &
Supply, Inc., Maumee Industries, Inc., and Sales Systems, Limited. The aggregate
consideration that will be paid by Pentacon to acquire the Founding Companies is
approximately $28.7 million in cash and 6,720,000 shares of Common Stock.

In December 1997, the Company filed a registration statement on Form S-1
for the sale of its common stock.

The Company has received a commitment from a bank for a credit facility of
$50 million. The bank has also committed to use its best efforts to form a
syndicate for an additional $25 million credit facility. The Company intends to
use such facilities for working capital, payoff of indebtedness of the Founding
Companies, and acquisitions. The credit facilities will be subject to customary
drawing conditions and the completion of negotiations with the lender and the
execution of appropriate loan documentation.

In January 1998, the Company has agreed to grant options for 80,000 shares
of Common Stock at the initial public offering price.

In January 1998, MGCV made a restricted stock grant of 65,000 shares to an
employee of the Company and agreed to make restricted stock grants of 20,000
shares in the aggregate to two non-employee directors. The total of 85,000
shares will vest ratably over three years. The Company will recognize
approximately $680,000 of compensation expense ratably over three years, based
on an estimated initial public offering price net of a twenty percent
marketability discount.

F-42

<PAGE>
REPORT OF INDEPENDENT AUDITORS

Pentacon, Inc.
and
Board of Directors
Alatec Products, Inc.

We have audited the accompanying consolidated balance sheet of Alatec
Products, Inc., as of September 30, 1997, and the related statements of income,
stockholders' equity, and cash flows for the year ended December 31, 1995 and
the period from January 1, 1997 through September 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Alatec
Products, Inc., as of September 30, 1997, and the results of its operations and
its cash flows for the year ended December 31, 1995 and the period from January
1, 1997 through September 30, 1997, in conformity with generally accepted
accounting principles.

ERNST & YOUNG LLP

Houston, Texas
November 21, 1997, except for Note 3,
as to which the date is November 26, 1997

F-43
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Alatec Products, Inc.
Chatsworth, California

We have audited the accompanying consolidated balance sheet of Alatec
Products, Inc., as of December 31, 1996, and the related statements of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Alatec
Products, Inc., as of December 31, 1996, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.

McGLADREY & PULLEN, LLP

Pasadena, California
November 21, 1997, except for Note 3,
as to which the date is November 26, 1997

F-44
<PAGE>
ALATEC PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1996 1997 1997
------------ ------------- ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash............................... $ 256,000 $ 733,000 $ --
Receivables, less allowance for
doubtful accounts of $118,000,
$173,000, and $290,536........... 5,304,000 7,892,000 8,607,000
Inventory.......................... 19,615,000 22,951,000 24,803,000
Deferred taxes..................... 1,457,000 1,420,000 1,419,000
------------ ------------- ------------
Total current assets.......... 26,632,000 32,996,000 34,829,000
Property under capital lease, leasehold
improvements and equipment, net....... 1,583,000 1,578,000 1,618,000
Other assets:
Deferred taxes..................... 32,000 65,000 65,000
Security deposits and other........ 272,000 272,000 343,000
------------ ------------- ------------
Total other assets............ 304,000 337,000 408,000
------------ ------------- ------------
Total assets.................. $ 28,519,000 $ 34,911,000 $ 36,855,000
============ ============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of note payable
to related party................. $ -- $ 158,000 $ 158,000
Current maturities of long-term
debt............................. 169,000 169,000 127,000
Current maturities of obligation
under capital lease.............. 32,000 37,000 37,000
Accounts payable................... 5,771,000 7,521,000 9,219,000
Income taxes payable............... 2,668,000 3,594,000 3,647,000
Accrued compensation and
commissions...................... 556,000 866,000 687,000
Other accrued expenses............. 306,000 496,000 475,000
------------ ------------- ------------
Total current liabilities..... 9,502,000 12,841,000 14,350,000
Subordinated note payable to related
party, less current maturities........ 776,000 2,529,000 2,528,000
Revolving line of credit................ 8,800,000 9,500,000 9,800,000
Long-term debt, less current
maturities............................ 294,000 168,000 168,000
Obligation under capital lease, less
current maturities.................... 1,517,000 1,489,000 1,480,000
------------ ------------- ------------
Total liabilities............. 20,889,000 26,527,000 28,326,000
Commitments and contingencies
Stockholders' equity:
Common stock, $10 par value;
authorized 2,500,000 shares;
issued 100 shares (pre
stock-split) in 1996 and 145,000
shares in 1997................... 1,000 1,450,000 1,450,000
Treasury stock, 51,290 shares at
cost............................. -- (2,690,000) (2,690,000)
Additional paid-in capital......... 24,000 -- --
Retained earnings.................. 7,605,000 9,624,000 9,769,000
------------ ------------- ------------
Total stockholders' equity.... 7,630,000 8,384,000 8,529,000
------------ ------------- ------------
Total liabilities and
stockholders' equity....... $ 28,519,000 $ 34,911,000 $ 36,855,000
============ ============= ============
</TABLE>

SEE ACCOMPANYING NOTES.

F-45
<PAGE>
ALATEC PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
JANUARY 1, THREE MONTHS ENDED DECEMBER
YEAR ENDED DECEMBER 31, 1997 THROUGH 31,
------------------------------ SEPTEMBER 30, ------------------------------
1995 1996 1997 1996 1997
-------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales............................... $ 41,204,000 $ 44,726,000 $ 42,296,000 $ 11,458,000 $ 14,502,000
Cost of goods sold...................... 26,196,000 26,707,000 25,114,000 6,970,000 8,554,000
-------------- -------------- ------------- -------------- --------------
Gross profit............................ 15,008,000 18,019,000 17,182,000 4,488,000 5,948,000
Selling, general and administrative
expenses.............................. 11,285,000 12,818,000 11,664,000 3,481,000 5,417,000
-------------- -------------- ------------- -------------- --------------
Operating income........................ 3,723,000 5,201,000 5,518,000 1,007,000 531,000
Interest expense........................ (1,235,000) (1,118,000) (1,015,000) (230,000) (295,000)
Interest income......................... 22,000 56,000 26,000 15,000 12,000
Other expense........................... (91,000) -- -- -- --
-------------- -------------- ------------- -------------- --------------
Income before income taxes.............. 2,419,000 4,139,000 4,529,000 792,000 248,000
Provision for income taxes.............. 995,000 1,628,000 1,860,000 317,000 103,000
-------------- -------------- ------------- -------------- --------------
Net income.............................. $ 1,424,000 $ 2,511,000 $ 2,669,000 $ 475,000 $ 145,000
============== ============== ============= ============== ==============
</TABLE>

SEE ACCOMPANYING NOTES.

F-46
<PAGE>
ALATEC PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK AT COST
----------------------- PAID-IN ------------------------- RETAINED
SHARES AMOUNT CAPITAL SHARES AMOUNT EARNINGS
--------- ------------ ---------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994............. 100 $ 1,000 $ 24,000 -- $ -- $ 3,670,000
Net income...................... -- -- -- -- -- 1,424,000
--------- ------------ ---------- --------- -------------- ------------
Balance, December 31, 1995........... 100 1,000 24,000 -- -- 5,094,000
Net income...................... -- -- -- -- -- 2,511,000
--------- ------------ ---------- --------- -------------- ------------
Balance, December 31, 1996........... 100 1,000 24,000 -- -- 7,605,000
Shares issued and shares
repurchased................... 45 -- 776,000 (51) (2,690,000) --
Stock-split (1,000 to 1)........ 144,855 1,449,000 (800,000) (51,239) -- (650,000)
Net income...................... -- -- -- -- -- 2,669,000
--------- ------------ ---------- --------- -------------- ------------
Balance, September 30, 1997.......... 145,000 1,450,000 -- (51,290) (2,690,000) 9,624,000
Net income (unaudited).......... -- -- -- -- -- 145,000
--------- ------------ ---------- --------- -------------- ------------
Balance, December 31, 1997
(unaudited)........................ 145,000 $ 1,450,000 $ -- (51,290) $ (2,690,000) $ 9,769,000
========= ============ ========== ========= ============== ============
</TABLE>

SEE ACCOMPANYING NOTES.

F-47
<PAGE>
ALATEC PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
JANUARY 1,
1997 THROUGH THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER DECEMBER 31,
-------------------------- 30, --------------------------
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income.......................... $ 1,424,000 $ 2,511,000 $2,669,000 $ 475,000 $ 145,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and
amortization................. 271,000 180,000 129,000 45,000 45,000
Deferred taxes................. (173,000) (372,000) 4,000 (378,000) 1,000
Loss on disposal of asset...... 14,000 -- -- -- --
Changes in operating assets and
liabilities:
Accounts receivable........ (612,000) 847,000 (2,588,000) 1,879,000 (715,000)
Inventory.................. (2,502,000) (5,567,000) (3,336,000) (1,671,000) (1,852,000)
Other receivables.......... -- (31,000) -- -- --
Accounts payable and
accrued expenses......... 501,000 2,023,000 3,176,000 (390,000) 1,551,000
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities.............. (1,077,000) (409,000) 54,000 (40,000) (825,000)
INVESTING ACTIVITIES
Collections of note receivable...... -- 42,000 -- -- --
(Investment in) return of security
deposits and other assets......... 6,000 (251,000) -- (239,000) (71,000)
Purchase of leasehold improvements
and equipment..................... (89,000) (114,000) (138,000) (48,000) (85,000)
Proceeds from sale of assets........ 13,000 -- 14,000 -- --
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities........................ (70,000) (323,000) (124,000) (287,000) (156,000)
FINANCING ACTIVITIES
Principal payments on long-term
debt.............................. (128,000) (169,000) (127,000) (42,000) (42,000)
Net advances on revolving line of
credit............................ 1,175,000 1,063,000 700,000 225,000 300,000
Principal payments on obligation
under capital lease............... (20,000) (23,000) (23,000) (8,000) (9,000)
Repayment on stockholder note....... -- -- (3,000) 1,000 (1,000)
------------ ------------ ------------ ------------ ------------
Net cash provided by financing
activities........................ 1,027,000 871,000 547,000 176,000 248,000
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash..... (120,000) 139,000 477,000 (151,000) (733,000)
Cash at beginning of period......... 237,000 117,000 256,000 407,000 733,000
------------ ------------ ------------ ------------ ------------
Cash at end of period............... $ 117,000 $ 256,000 $ 733,000 $ 256,000 $ --
============ ============ ============ ============ ============
Cash paid during the period for:
Interest....................... $ 899,000 $ 1,029,000 $ 829,000
============ ============ ============
Income taxes................... $ 715,000 $ 404,000 $ 930,000
============ ============ ============
</TABLE>

SEE ACCOMPANYING NOTES.

F-48
<PAGE>
ALATEC PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

1. DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE BUSINESS

Alatec Products, Inc. (the "Company") is a wholesale distributor of
industrial and aerospace fasteners throughout the United States, Canada, Europe,
South America, and the Far East. Sales to the aerospace and defense industries
represent a significant portion of the Company's total annual sales. The
Company's corporate headquarters are based in Chatsworth, California, and it has
regional sales offices in six states.

PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of the Company's wholly owned
subsidiaries, Trace Alatec Supply Company, Inc.; Alatec Race, Inc.; Alatec
Fastener and Component Group, Inc.; Alatec Cable Harness and Assembly Division,
Inc.; and Alatec International Sales, Inc., a foreign international sales
corporation. All significant intercompany accounts and transactions have been
eliminated.

CONCENTRATIONS OF CREDIT RISK

The Company distributes industrial and aerospace fasteners to manufacturers
in a wide variety of industries including the aerospace and defense industries.
Credit is extended based on an evaluation of the customer's financial condition
and collateral is typically not required. Credit losses are provided for in the
financial statements through a charge to operations. Credit losses have been
consistently within management's expectations. Provisions for bad debts and
accounts receivable write-offs have not been significant.

The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts. The Company believes it is not exposed to any significant
credit risk on cash maintained in bank deposit accounts.

USE OF ESTIMATES

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

INVENTORIES

Inventories consist primarily of industrial and aerospace fasteners and
related hardware held for sale and are valued at the lower of cost (first-in,
first-out method) or market.

PROPERTY UNDER CAPITAL LEASES, LEASEHOLD IMPROVEMENTS, AND EQUIPMENT

Leasehold improvements, buildings acquired under capital leases, and
equipment are recorded at cost. Depreciation is computed using straight-line and
primarily accelerated methods over useful lives ranging from 5 to 20 years.
Leasehold improvements and buildings acquired under capital leases are amortized
over the lesser of the life of the lease or the life of the improvements.

The amortization expense on assets acquired under capital leases is
included with depreciation expense on owned assets.

CASH EQUIVALENTS

For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of accounts receivable, prepaid expenses, and accounts
payable approximate fair values due to the short-term maturities of these
instruments. The carrying value of the Company's debt facilities and capital
lease agreements approximates fair value because the rates on such facilities
are

F-49
<PAGE>
ALATEC PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

variable, based on current market, or are at fixed rates currently available to
the Company. The rate of the subordinated note payable to stockholder (discussed
in Note 4 and Note 7) is less than the market rate currently available to the
Company; however, the difference between the carrying value of this note and the
fair value is not significant.

NET SALES RECOGNITION

Net sales are recognized upon shipment of the product to the customer.
Adjustments to arrive at net sales are primarily allowances for discounts and
returns.

EXPORT SALES

The Company recorded export sales of $8,847,000, $8,875,000, and $9,434,000
in the years ended December 31, 1995 and 1996 and the period from January 1,
1997 through September 30, 1997, respectively. The Company has export sales
through its foreign sales corporation to Canada, Europe, South America, and the
Far East of which no country or region is individually significant.

ACCOUNTING FOR LONG-LIVED ASSETS

In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted Statement No.
121 in the first quarter of 1996 and the effect of adoption had no impact on the
financial statements.

INCOME TAXES

Income taxes have been provided using the liability method in accordance
with FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES. Under this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.

FISCAL YEAR

In 1997, the Company changed its fiscal year-end from December 31 to
September 30.

UNAUDITED INTERIM INFORMATION

The financial information for the three months ended December 31, 1996 and
1997 has not been audited by independent accountants. Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted from the unaudited interim financial information. In the opinion of
management of the Company, the unaudited interim financial information includes
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the respective full
years.

In January 1998, the Company came to a final settlement agreement with the
Internal Revenue Service with regards to all outstanding items under audit
including the issues related to the inventory issues. The amount of the
settlement, which did not include any penalties, was within amounts accrued in
the financial statements at September 30, 1997. (See Note 8)

F-50
<PAGE>
ALATEC PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. PROPERTY AND EQUIPMENT

Property under capital leases, leasehold improvements, and equipment
consist of:

DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- --------------
Automobile equipment................. $ 181,000 $ 181,000
Leasehold improvements............... 201,000 208,000
Office equipment..................... 299,000 327,000
Warehouse equipment.................. 290,000 312,000
Computer equipment................... 674,000 741,000
Buildings acquired under capital
leases............................... 1,637,000 1,637,000
------------- --------------
3,282,000 3,406,000
Less accumulated depreciation,
including amortization of assets
acquired under capital leases...... 1,699,000 1,828,000
------------- --------------
$ 1,583,000 $1,578,000
============= ==============

3. REVOLVING LINE OF CREDIT

The revolving line of credit represents borrowings under a $13.3 million
line of credit with a bank. This facility expires in June 1999. At September 30,
1997, unused credit available under this facility was $3,000,000. The Company
has classified all borrowings outstanding under its line of credit as a
long-term liability as it intends to maintain borrowings of at least $9.5
million during 1998. The Company may borrow amounts against 80% of eligible
trade receivables and 50% of eligible inventory, up to $7,000,000. The note
provides for interest at the prime rate (8.5% at September 30, 1997) and is
collateralized by inventory, accounts receivable, equipment and the personal
guarantee of a stockholder. The credit agreement also provides for standby
letters of credit of up to $100,000. At September 30, 1997, there were no
amounts outstanding on the letters of credit. The credit agreement contains
certain restrictive financial covenants including, but not limited to, minimum
working capital requirements and dividend restrictions. As of September 30,
1997, the Company was in compliance with the financial covenants. However, at
September 30, 1997, the Company was not in compliance with certain nonfinancial
covenants relating to providing information and notice of defined transactions
and events to the bank. The bank has provided a written waiver for these
covenant violations and management believes that the Company will be in
compliance with these covenants in future periods.

F-51
<PAGE>
ALATEC PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM DEBT

Long-term debt consisted of the following:

DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
Note payable to a bank, secured by a
vehicle costing $32,850, with monthly
payments of $507, including interest
at 9.99%, maturing June 1999.......... $ 13,000 $ 9,000
Note payable to a bank, secured by
accounts receivable, inventory and
equipment, with monthly payments of
$13,646 plus interest at .75% over the
bank's prime rate (8.5% at September
30, 1997), maturing September 1999.... 450,000 328,000
Note payable to a stockholder,
unsecured, due February 1998, with
interest payable monthly at 9%,
subordinated to all senior bank
debt.................................. 776,000 --
Note payable to a former stockholder,
secured by assets of the corporation,
due November 2024, with interest
payable monthly at 5.64%, subordinated
to all senior bank debt............... -- 2,687,000
------------ -------------
1,239,000 3,024,000
Less current maturities................. 169,000 327,000
------------ -------------
$1,070,000 $ 2,697,000
============ =============

As discussed in Note 7, the $776,000 note payable to a stockholder was
cancelled in exchange for 45 shares (pre stock-split) of common stock.

The aggregate maturities required on long-term debt at September 30, 1997
(not including the revolving line of credit) are due in future years as follows:

Fiscal year ending:
1998............................... $ 327,000
1999............................... 334,000
2000............................... 174,000
2001............................... 182,000
2002............................... 191,000
Thereafter......................... 1,816,000
------------
$ 3,024,000
============

F-52
<PAGE>
ALATEC PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. LEASE COMMITMENTS

The Company leases a portion of its facilities, equipment, and vehicles
under noncancelable capital and operating lease agreements. In April 1992, the
Company entered into a capital lease with a stockholder for its Chatsworth
facilities with an original cost of $1,637,000. Monthly installments, subject to
Consumer Price Index adjustments and including interest at 11.6%, are required
through March 2012. Additionally, the Company leases a smaller facility from the
stockholder under an operating lease.

Future minimum lease payments under the capital and operating leases,
together with the present value of the net minimum lease payments, as of
September 30, 1997 are as follows:

<TABLE>
<CAPTION>
RELATED-PARTY
------------------------
CAPITAL OPERATING
LEASE LEASES OTHER TOTAL
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Fiscal year ending:
1998............................ $ 212,000 $ 457,000 $ 268,000 $ 937,000
1999............................ 212,000 352,000 246,000 810,000
2000............................ 212,000 352,000 220,000 784,000
2001............................ 212,000 352,000 173,000 737,000
2002............................ 215,000 349,000 43,000 607,000
Thereafter...................... 2,135,000 3,082,000 -- 5,217,000
---------- ---------- ---------- ------------
Total minimum lease payments.... 3,198,000 $4,944,000 $ 950,000 $ 9,092,000
========== ========== ============
Less amount representing interest.... 1,672,000
----------
Present value of net minimum lease
payments........................... 1,526,000
Current maturities................... 37,000
----------
Long-term portion.................... $1,489,000
==========
</TABLE>

Total rental and interest expense charged to operations for the nine months
ended September 30, 1997 and the years ended December 31, 1996 and 1995 was
approximately $640,000, $778,000, and $697,000, respectively, including amounts
to related parties of $451,000, $359,000, and $322,000, respectively.

6. 401(K) PLAN

The Company has a defined contribution 401(k) plan (the "Plan") for
substantially all of the Company's full-time employees. The Company may make
discretionary contributions and, in addition, may match participants'
contributions. The Company contributed $80,000, $99,000, and $80,000 in matching
contributions to the plan for the nine months ended September 30, 1997 and the
years ended December 31, 1996 and 1995, respectively. Additionally, in 1997, the
Board of Directors approved a $300,000 discretionary contribution to the Plan.
Accordingly, the contribution was accrued and expensed as of September 30, 1997.

7. RELATED-PARTY TRANSACTIONS

EQUITY TRANSACTIONS

At December 31, 1996, the Company was a closely held corporation and all of
the outstanding common stock was owned by immediate family members. During May
1997, certain equity transactions occurred simultaneously. The Company issued 45
shares (pre stock-split) of common stock in exchange for the cancellation of a
stockholder note payable of $776,000. Simultaneously, the Company purchased as
treasury stock 51.29 shares (pre stock split) of common stock representing all
of the shares of common

F-53
<PAGE>
ALATEC PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stock held by one of the family members in exchange for a note payable in the
original amount of $2,690,000. The terms of these notes payable are described
below.

NOTES PAYABLE AND RECEIVABLE

As discussed above, the Company had a 9%, $776,000 note payable to a
stockholder at December 31, 1996. At September 30, 1997, the Company had a
5.64%, $2,687,000 note payable to a former stockholder and current Director, due
November 2024. The note is subordinated to all senior bank debt and is
guaranteed by the President and sole remaining stockholder of the Company. The
note contains provisions that upon the death of the former stockholder, the note
will be terminated and the related debt will be cancelled. During the years
ended December 31, 1995 and 1996 and the nine months ended September 30, 1997,
interest expense of $70,000, $69,000, and $50,000, respectively, was incurred on
these notes.

In addition, the Company has a non-interest-bearing receivable from a
stockholder of $9,000 as of December 31, 1996 and accrued rents and interest due
to a stockholder of $88,000 as of December 31, 1996. These balances are included
in receivables and other accrued expenses, respectively.

DEBT GUARANTEE

The U.S. Small Business Administration ("SBA") has issued a Secured
Business Disaster Loan to a related party for earthquake repairs and
improvements to the Chatsworth facility, which is owned by a stockholder and
leased to the Company. The Company is identified as a co-borrower; however, the
Company has reflected this as a contingent liability similar to a debt
guarantee. The remaining balance on the SBA loan was $1,255,231 and $1,217,000
at December 31, 1996 and at September 30, 1997, respectively. The debt matures
in August 2024. No amount of this debt is recorded in the accompanying financial
statements.

RELATED PARTY PURCHASES

The Company purchased approximately $1,100,000, $1,386,000, and $1,100,000
in 1995, 1996, and during the period from January 1, 1997 through September 30,
1997, respectively, from a supplier which is 50% owned by the principal
stockholder. Additionally, the Company owed $136,000, $209,000, and $154,000 for
the respective periods related to goods purchased for resale classified as
accounts payable in the balance sheet.

8. CONTINGENCIES

INCOME TAX EXAMINATION

The Company's federal income tax returns for the year ended January 31,
1995 are currently being examined by the Internal Revenue Service (the "IRS").
No notices of deficiency have been issued. The Internal Revenue Service has
proposed the capitalization of certain repairs to the Company's Chatsworth
facilities, which sustained earthquake damage, rather than to treat them as
deductible expenses in the year incurred, capitalization of freight costs and
adjustments for certain other nondeductible accrued expenses. The Company has
recorded an adjustment of approximately $120,000 for these known deficiencies as
a result of the examination. $116,000 of this adjustment is reflected in the
1996 tax provision and approximately $4,000 in the 1997 tax provision. The
Company has reached an understanding that resolves all open issues on the audit;
however, this understanding is subject to final IRS approval. There can be no
assurance that there will be no additional assessments; however, management
believes that any additional assessment would not be material.

During 1997, the Company detected that it had erroneously omitted certain
amounts of inventory from its financial statements for federal and state income
tax purposes for tax years ending December 31, 1995 and 1996. The Company
anticipates filing amended returns for 1996 and certain prior periods and has
accrued the tax liability and related interest totaling approximately $2,568,000
and $2,225,000 in 1997 and

F-54
<PAGE>
ALATEC PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1996, respectively. No underpayment or late payment penalties have been accrued
in the financial statements based on preliminary discussions with the IRS
indicating that no penalties would be assessed. If assessed, these penalties
could be as much as $850,000. Based on management's discussion with the IRS, it
is their opinion that no significant penalties will be assessed, and management
believes it will be successful in settling this issue with the Internal Revenue
Service and state taxing authorities within the amounts accrued in the financial
statements.

9. INCOME TAXES

Components of income tax expense are as follows:

<TABLE>
<CAPTION>
JANUARY 1,
1997
YEAR ENDED DECEMBER 31, THROUGH
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ --------------
Currently paid or payable:
<S> <C> <C> <C>
Federal............................ $ 1,049,000 $ 1,611,000 $1,496,000
State.............................. 119,000 389,000 360,000
------------ ------------ --------------
1,168,000 2,000,000 1,856,000
Deferred:
Federal............................ (157,000) (357,000) 3,000
State.............................. (16,000) (15,000) 1,000
------------ ------------ --------------
(173,000) (372,000) 4,000
------------ ------------ --------------
$ 995,000 $ 1,628,000 $1,860,000
============ ============ ==============
</TABLE>

The net deferred tax assets (liabilities) consist of the following:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- --------------
Deferred tax assets:
<S> <C> <C>
Receivables allowance.............. $ 47,000 $ 75,000
Inventory allowance................ 562,000 632,000
Accrued expenses................... 239,000 243,000
Equipment.......................... 32,000 198,000
Uniform cost capitalization........ 618,000 583,000
------------- --------------
1,498,000 1,731,000
------------- --------------
Deferred tax liabilities, other...... (9,000) (246,000)
------------- --------------
$ 1,489,000 $1,485,000
============= ==============
Net deferred taxes consist of the
following:
Current assets....................... $ 1,457,000 $1,420,000
Noncurrent assets.................... 32,000 65,000
------------- --------------
$ 1,489,000 $1,485,000
============= ==============
</TABLE>

F-55
<PAGE>
ALATEC PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's effective tax rate varied from the federal statutory tax rate
during the nine months ended September 30, 1997 and the years ended December 31,
1996 and 1995 for the following reasons:

JANUARY 1,
YEAR ENDED DECEMBER 31, 1997 THROUGH
---------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
Expected income tax rate................ 34.0% 34.0% 34.0%
International export sales partially
exempt from federal income taxes (FSC
benefit).............................. (9.2) (4.4) (2.6)
State taxes, net of federal benefit..... 7.3 7.7 7.2
Adjustment to reflect proposed IRS audit
settlement............................ -- 6.0 0.2
Nondeductible expenses.................. 4.3 2.1 1.0
Other................................... 4.7 (6.1) 1.3
---------- ---------- -------------
Effective tax rate...................... 41.1% 39.3% 41.1%
========== ========== =============

10. STOCKHOLDERS' EQUITY

In May 1997, the Company's Board of Directors (the "Board") authorized an
increase in the authorized shares of common stock from 2,500 shares to 2,500,000
shares. Concurrently, the Board approved a 1,000 for 1 stock-split.

11. SUBSEQUENT EVENT (UNAUDITED)

In December 1997, the Company and its stockholder entered into a definitive
agreement with a wholly owned subsidiary of Pentacon, Inc., which among other
things calls for the merger of the Company with the Pentacon, Inc. subsidiary.

F-56

<PAGE>
REPORT OF INDEPENDENT AUDITORS

Pentacon, Inc. and
The Board of Directors
AXS Solutions, Inc.

We have audited the accompanying balance sheets of AXS Solutions, Inc. as
of December 31, 1996 and September 30, 1997, and the related statements of
income, shareholders' equity, and cash flows for each of the two years in the
period ended December 31, 1996 and the period from January 1, 1997 through
September 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AXS Solutions, Inc. at
December 31, 1996 and September 30, 1997, and the results of its operations and
its cash flows for each of the two years in the period ended December 31, 1996
and the period from January 1, 1997 through September 30, 1997, in conformity
with generally accepted accounting principles.

ERNST & YOUNG LLP

Houston, Texas
November 7, 1997

F-57
<PAGE>
AXS SOLUTIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1996 1997 1997
------------ ------------- ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.......... $ 3,487,371 $ 2,777,160 $ 1,748,814
Accounts receivable -- net of
allowance for doubtful accounts
of $91,500, $105,000, and
$90,000.......................... 3,710,420 3,160,537 2,822,241
Inventory.......................... 4,952,648 5,323,516 5,448,850
Prepaid expenses and other current
assets........................... 66,839 27,737 18,644
Receivable from shareholder........ 169,476 169,476 --
------------ ------------- ------------
Total current assets.................... 12,386,754 11,458,426 10,038,549
Property and equipment:
Building and improvements.......... 192,763 212,437 195,997
Machinery and equipment............ 2,162,291 2,220,002 2,241,162
Assets under capital lease......... 1,058,589 1,058,589 1,058,589
------------ ------------- ------------
Total cost.............................. 3,413,643 3,491,028 3,495,748
Less: accumulated depreciation and
amortization..................... (1,719,540) (1,890,382) (1,964,839)
------------ ------------- ------------
1,694,103 1,600,646 1,530,909
Goodwill................................ 3,118,414 3,058,310 3,038,275
Non-compete agreement................... 537,050 457,805 431,390
Cash surrender value of life
insurance............................. 617,196 654,198 660,802
Other................................... 336,832 454,867 450,295
------------ ------------- ------------
Total assets............................ $ 18,690,349 $ 17,684,252 $ 16,150,220
============ ============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Demand note payable................ $ 3,300,000 $ 1,939,000 $ 300,000
Accounts payable................... 1,878,235 1,919,913 1,790,449
Accrued expenses and other current
liabilities...................... 713,010 467,432 368,307
Shareholder distribution payable... -- 2,713,162 3,076,152
Current portion of long-term debt
to former shareholder............ 70,199 76,451 88,301
Current portion of capital lease
obligation....................... 53,215 76,420 78,055
------------ ------------- ------------
Total current liabilities............... 6,014,659 7,192,378 5,701,264
Long-term debt to former shareholder,
less current portion.................. 423,715 347,264 324,483
Capital lease obligation, less current
portion............................... 988,375 911,955 891,818
Commitments and contingencies
Shareholders' equity:
Common stock:
AXS Solutions, Inc. class A
voting common stock, no par
value, authorized 1,000
shares, issued and
outstanding, 100 shares.... 55,785 55,785 55,785
AXS Solutions, Inc. class B
nonvoting common stock, no
par value, authorized
99,000 shares, issued and
outstanding, 9,900
shares..................... 5,522,687 5,650,187 5,650,187
Retained earnings.................. 5,685,128 3,526,683 3,526,683
------------ ------------- ------------
Total shareholders' equity.............. 11,263,600 9,232,655 9,232,655
------------ ------------- ------------
Total liabilities and shareholders'
equity................................ $ 18,690,349 $ 17,684,252 $ 16,150,220
============ ============= ============
</TABLE>
SEE ACCOMPANYING NOTES.

F-58
<PAGE>
AXS SOLUTIONS, INC.
STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE-MONTHS THREE MONTHS ENDED
YEAR ENDED YEAR ENDED ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, --------------------------
1995 1996 1997 1996 1997
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales............................... $ 20,227,664 $ 23,176,615 $ 22,002,438 $ 8,566,214 $ 7,412,348
Cost of goods sold...................... 12,993,622 15,052,732 15,275,990 5,606,715 4,986,304
------------ ------------ ------------- ------------ ------------
Gross profit............................ 7,234,042 8,123,883 6,726,448 2,959,499 2,426,044
Selling, general and administrative
expenses.............................. 4,709,974 5,647,019 4,979,848 1,896,068 1,797,575
------------ ------------ ------------- ------------ ------------
Operating income........................ 2,524,068 2,476,864 1,746,600 1,063,431 628,469
Interest expense........................ (289,310) (326,785) (207,766) (70,482) (35,873)
Other income (expense).................. 232,747 19,619 7,513 (109,897) (38,007)
------------ ------------ ------------- ------------ ------------
Net income.............................. $ 2,467,505 $ 2,169,698 $ 1,546,347 $ 883,052 $ 554,589
============ ============ ============= ============ ============
</TABLE>

SEE ACCOMPANYING NOTES.

F-59
<PAGE>
AXS SOLUTIONS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------
AXS SOLUTIONS, INC.
---------------------- CHAMPION RETAINED
CLASS A CLASS B BOLT CORP. EARNINGS TOTAL
------- ------------ ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995.............. $ -- $ -- $ 378,472 $ 5,350,075 $ 5,728,547
Net income.............................. -- -- -- 2,467,505 2,467,505
Shareholder distributions............... -- -- -- (3,294,756) (3,294,756)
------- ------------ ----------- -------------- --------------
Balance at December 31, 1995............ -- -- 378,472 4,522,824 4,901,296
Net income.............................. -- -- -- 2,169,698 2,169,698
Issuance of AXS Solutions, Inc. Common
Stock (80 Shares Voting Common and
7,920 Nonvoting Common) in exchange
for all of Champion Bolt Corp. Common
Stock................................. 3,785 374,687 (378,472) -- --
Purchase of Hoyt Fastener Corp. in
exchange for AXS Solutions, Inc.
Common Stock (20 Shares Voting Common
and 1,980 Shares Nonvoting Common).... 52,000 5,148,000 -- -- 5,200,000
Shareholder distributions............... -- -- -- (1,007,394) (1,007,394)
------- ------------ ----------- -------------- --------------
Balance at December 31, 1996............ 55,785 5,522,687 -- 5,685,128 11,263,600
Net income.............................. -- -- -- 1,546,347 1,546,347
Transfer of 75 Nonvoting Common Shares
from existing shareholders in exchange
for acquired customers................ -- 127,500 -- -- 127,500
Shareholder distributions............... -- -- -- (991,630) (991,630)
Distribution of cumulative S-Corporation
earnings.............................. -- -- -- (2,713,162) (2,713,162)
------- ------------ ----------- -------------- --------------
Balance at September 30, 1997........... 55,785 5,650,187 -- 3,526,683 9,232,655
Net income (unaudited).................. -- -- -- 554,589 554,589
Distributions of cumulative
S-Corporation earnings (unaudited).... -- -- -- (554,589) (554,589)
------- ------------ ----------- -------------- --------------
Balance at December 31, 1997
(unaudited)........................... $55,785 $ 5,650,187 $ -- $ 3,526,683 $ 9,232,655
======= ============ =========== ============== ==============
</TABLE>

SEE ACCOMPANYING NOTES.

F-60
<PAGE>
AXS SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE-MONTHS THREE MONTHS ENDED
YEAR ENDED YEAR ENDED ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, -------------------------
1995 1996 1997 1996 1997
------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income........................... $ 2,467,505 $ 2,169,698 $ 1,546,347 $ 883,052 $ 554,589
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization.... 250,887 326,550 373,095 124,539 120,907
Loss on disposal of fixed
assets......................... 50,371 6,299 -- -- --
Gain on sale of fixed assets..... (232,747) -- -- -- --
Increase in cash surrender value
of officers' life insurance.... (59,529) (58,393) (37,002) (14,599) (6,604)
Changes in operating assets and
liabilities:
Accounts receivable......... 284,696 (712,179) 549,883 46,347 338,296
Inventory................... 1,237,850 759,041 (370,868) (193,660) (125,334)
Prepaid expenses and other
current assets............ (38,803) (16,531) 39,102 (70,717) 9,093
Receivable from
shareholder............... -- (169,476) -- 78,127 169,476
Other....................... (82,856) 611 6,714 -- 4,572
Accounts payable............ (450,351) 150,587 41,678 45,908 (129,464)
Accrued expenses and other
current liabilities....... (50,335) 1,511 (245,578) (296,930) (99,125)
------------ ------------ ------------- ----------- ------------
Net cash provided by operating
activities......................... 3,376,688 2,457,718 1,903,371 602,067 836,406
INVESTING ACTIVITIES
Purchases of property and
equipment............................ (210,567) (152,223) (137,538) (10,381) (4,720)
Proceeds from sale of fixed assets... -- 25,300 -- -- --
Cash acquired during acquisition of
Hoyt Fastener Corp. ............... -- 416,743 -- -- --
------------ ------------ ------------- ----------- ------------
Net cash (used in) provided by
investing activities............... (210,567) 289,820 (137,538) (10,381) (4,720)
FINANCING ACTIVITIES
Proceeds from demand note payable.... 19,850,000 23,500,000 12,589,000 -- 1,044,000
Payments on demand note payable...... (18,950,000) (23,300,000) (13,950,000) (200,000) (2,683,000)
Payments on long-term debt to former
shareholder........................ (58,487) (84,541) (70,199) (19,231) (10,931)
Payments on capital lease
obligation......................... -- (16,999) (53,215) (11,373) (18,502)
Shareholder distributions............ (3,294,756) (1,007,394) (991,630) -- (191,599)
------------ ------------ ------------- ----------- ------------
Net cash used in financing
activities......................... (2,453,243) (908,934) (2,476,044) (230,604) (1,860,032)
------------ ------------ ------------- ----------- ------------
Net increase (decrease) in cash and
cash equivalents................... 712,878 1,838,604 (710,211) 361,082 (1,028,346)
Cash and cash equivalents at
beginning of period................ 935,889 1,648,767 3,487,371 3,126,289 2,777,160
------------ ------------ ------------- ----------- ------------
Cash and cash equivalents at end of
period............................. $ 1,648,767 $ 3,487,371 $ 2,777,160 $ 3,487,371 $ 1,748,814
============ ============ ============= =========== ============
SUPPLEMENTARY CASH FLOW DATA:
- -------------------------------------
Interest paid........................ $ 284,796 $ 323,753 $ 217,305
============ ============ =============
</TABLE>
SIGNIFICANT NON-CASH TRANSACTIONS
- -------------------------------------
1995: Sale of fixed assets in
exchange for note
receivable of $250,000
1996: Incurred capital lease
obligation for $1,058,589
Acquisition of Hoyt
Fastener Corp. in exchange
for $5,200,000 of AXS
Solutions, Inc. common
stock (net assets of
$1,638,130, net of cash
acquired of $416,743)
1997: Transferred 75 nonvoting
common shares ($127,500)
from existing shareholder
in exchange for acquired
customers
Accrual of S-Corporation
distribution of $2,713,162
Three Months Ended December 31, 1997
(unaudited):
Accrual of S-Corporation
distribution of $362,990

SEE ACCOMPANYING NOTES.

F-61
<PAGE>
AXS SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

1. BUSINESS AND BASIS OF PRESENTATION

AXS Solutions, Inc. ("AXS Solutions") is a wholesaler and distributor of
threaded fastener products, including nuts, bolts, washers and screws, to
customers located predominantly in the Northeastern and Midwestern United
States. AXS Solutions was incorporated on August 19, 1996. On August 31, 1996,
the shareholders of Champion Bolt Corp. ("Champion Bolt") surrendered all of
their shares of common stock of Champion Bolt in exchange for shares of both
voting and non-voting common stock of AXS Solutions. There was deemed to be no
change of control as a result of this transaction. Subsequently, the Champion
Bolt shares were cancelled for no consideration.

AXS Solutions then acquired all of the common stock of Hoyt Fastener Corp.
("Hoyt Fastener") in exchange for shares of both voting and non-voting common
stock of AXS Solutions. This acquisition was accounted for using the purchase
method of accounting and, accordingly, the purchase price (approximately $5.2
million based on an independent valuation) has been allocated to the assets
purchased and the liabilities assumed based upon the fair values at the date of
acquisition. Goodwill of approximately $3,145,000 was recorded as a result of
this acquisition. The Hoyt Fastener shares were also subsequently cancelled. The
operating results of the acquired business, Hoyt Fastener, have been included in
the income statement from the date of the acquisition.

The financial statements presented herein represent the operating results
of Champion Bolt for the period from January 1, 1995 through August 31, 1996 and
the operating results of AXS Solutions for the period from September 1, 1996
through September 30, 1997. The reference to "Company" in these financial
statements includes such presentation.

The following unaudited results of operations have been prepared assuming
the acquisition had occurred on January 1, 1995. These results are not
necessarily indicative of results of future operations nor of results that would
have occurred had the acquisitions been consummated as of January 1, 1995:

1995 1996
-------------- --------------
Net sales............................... $ 27,332,285 $ 28,044,941
Net income.............................. $ 2,803,676 $ 2,428,068

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORY

Inventory consists of product held for resale and is stated at the lower of
cost or market, with cost determined using the first-in, first-out (FIFO) method
of inventory valuation.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is provided on the
straight-line method over the respective estimated useful lives of the assets
ranging from 5 to 40 years. The capital lease is amortized over the estimated
useful life of the asset or lease term, as appropriate, using the straight-line
method. Depreciation expense includes amortization of assets recorded under the
capital lease. Accumulated amortization for the capital lease was $35,288 and
$114,686 at December 31, 1996 and September 30, 1997, respectively.

NON-COMPETE AGREEMENT

The cost of the non-compete agreement is being amortized over 10 years, the
term of the covenant. Accumulated amortization amounted to $519,495 and $598,740
at December 31, 1996 and September 30, 1997, respectively.

F-62
<PAGE>
AXS SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

GOODWILL

Goodwill is being amortized over a period of 40 years. Accumulated
amortization amounted to $26,713 and $86,817 at December 31, 1996 and September
30, 1997, respectively.

CASH EQUIVALENTS

The Company considers all investments purchased with a maturity of three
months or less to be cash equivalents.

INCOME TAXES

The Company is a Subchapter S Corporation and as such, its stockholders are
taxed directly on all income.

NET SALES RECOGNITION

Net sales are recognized upon shipment of the product to the customer.
Adjustments to arrive at net sales are primarily related to discounts.

USE OF ESTIMATES

CONCENTRATION OF CREDIT RISK

The Company performs credit evaluations of its customers and generally does
not require collateral. The Company maintains an allowance for doubtful accounts
based upon the expected collectibility of all accounts receivable. One customer
accounted for approximately 55%, 50% and 45% of revenues for 1995, 1996 and the
period from January 1, 1997 through September 30, 1997, respectively. At
December 31, 1996 and September 30, 1997, accounts receivable balances related
to this customer represented approximately 34% and 28% of total accounts
receivable, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of accounts receivable, prepaid expenses, and accounts
payable approximate fair values due to the short-term maturities of these
instruments. The carrying value of the Company's debt facilities and capital
lease agreements approximate fair value because the rates on such facilities are
variable, based on current market or are at fixed rates currently available to
the Company.

ACCOUNTING FOR LONG-LIVED ASSETS

In March 1995, the FASB issued Statement No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted Statement No.
121 in the first quarter of 1996 and the effect of adoption had no impact on the
financial statements.

FISCAL YEAR

In 1997, the Company changed its fiscal year end from December 31 to
September 30.

UNAUDITED INTERIM INFORMATION

The financial information for the three months ended December 31, 1996 and
1997 has not been audited by independent accountants. Certain information and
footnote disclosures normally included in the

F-63
<PAGE>
AXS SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the unaudited interim financial
information. In the opinion of management of the Company, the unaudited interim
financial information includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation. Results of operations
for the interim periods are not necessarily indicative of the results of
operations for the respective full years.

3. DEBT

Long-term debt consists of the following:

DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
Non-interest bearing obligation payable
to a former shareholder for
non-compete agreement, payable in
monthly payments of $10,000 through
January 15, 2002. Implicit interest of
8.5%.................................. $493,914 $ 423,715
Less current portion.................... 70,199 76,451
------------ -------------
$423,715 $ 347,264
============ =============

Scheduled maturities on long-term debt for each of the next five years as
of September 30, 1997 are as follows:

Year ending September 30, 1998.......... $ 76,451
1999....... 94,092
2000....... 102,409
2001....... 111,461
2002....... 39,302
----------
$ 423,715
==========

The Company has a demand note payable with a bank up to a maximum of
$3,000,000, with interest payable at the prime rate. The demand note payable is
guaranteed by separate balances with this bank of two of the four voting
shareholders of the Company. At December 31, 1996, the Company had exceeded its
borrowing limit by $300,000 as a result of making a year end tax payment. The
excess borrowings were repaid in early January 1997.

In addition, at September 30, 1997 the Company has an available letter of
credit of approximately $50,000 for inventory purchases.

4. LEASES

The Company is obligated under a noncancelable lease with a related party
which expires August 31, 2006. Under this lease, the lessor of warehouse and
office space in Erie, Pennsylvania is a partnership composed of two of the four
voting shareholders of the Company. The Company is also obligated under
noncancelable operating leases for certain automobiles and warehouse equipment.
Future minimum annual operating lease payments under all noncancelable leases as
of September 30, 1997 are as follows:

Year ending September 30, 1998....... $ 264,177
1999.... 253,180
2000.... 241,818
2001.... 240,285
2002.... 240,000
Thereafter........................... 940,000

F-64
<PAGE>
AXS SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Rent expense was approximately $288,000, $258,000 and $188,000 for 1995,
1996 and the period from January 1, 1997 through September 30, 1997,
respectively.

The Company is also obligated under a capital lease with a related party
which expires August 31, 2006. Under this lease, the lessor of warehouse and
office space in Niles, Illinois includes family residual trusts which represent
two of the four voting shareholders of the Company.

Future minimum annual capital lease payments as of September 30, 1997 are
as follows:

TOTAL
------------
Year ending September 30, 1998....... $ 157,500
1999.... 157,500
2000.... 157,500
2001.... 157,500
2002.... 157,500
Thereafter......................... 630,000
------------
Total minimum lease payments......... 1,417,500
Amount representing interest......... 429,125
------------
Present value of minimum lease
payments............................. 988,375
Current maturities................... 76,420
------------
Long-term portion.................... $ 911,955
============

5. EMPLOYEE BENEFIT PLANS

The Company maintains a non-contributory defined-benefit pension plan
covering all of its employees. The benefits are based on years of service and
the employee's compensation during the entire period of employment. The
Company's funding policy is to contribute annually the amount necessary to meet
minimum funding standards of ERISA. Plan assets are invested primarily in
corporate stocks and government securities.

The following table sets forth the plan's funded status and amounts
recognized in the Company's respective balance sheets:

DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
Actuarial present value of benefit
obligations:
Vested............................. $ (352,039) $(406,538)
Non-vested......................... (37,690) (34,920)
------------ -------------
Accumulated benefit obligations......... $ (389,729) $(441,458)
============ =============
Projected benefit obligation............ $ (503,184) $(559,125)
Plan assets at fair value............... 714,701 806,946
------------ -------------
Plan assets in excess of projected
benefit obligation.................... 211,517 247,821
Unrecognized net transition
obligation............................ 2,005 1,671
Unrecognized net gain from past
experience different from that assumed
and effects of changes in
assumptions........................... (108,110) (156,660)
------------ -------------
Prepaid pension cost.................... $ 105,412 $ 92,832
============ =============

F-65
<PAGE>
AXS SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The prepaid pension costs are recorded in other noncurrent assets on each
of the respective balance sheets.

Net pension expense was comprised of the following:

<TABLE>
<CAPTION>
PERIOD FROM
YEARS ENDED JANUARY 1, 1997
DECEMBER 31, TO SEPTEMBER 30,
---------------------- ----------------
1995 1996 1997
---------- ---------- ----------------
<S> <C> <C> <C>
Service cost............................ $ 43,376 $ 43,219 $ 39,305
Interest cost on projected benefit
obligation............................ 31,594 34,419 37,739
Actual return on plan assets............ (86,202) (46,590) (114,545)
Net amortization and deferral........... 52,751 (2,978) 18,921
---------- ---------- ----------------
$ 41,519 $ 28,070 $ (18,580)
========== ========== ================
</TABLE>

The assumptions used in these calculations were as follows for each of the
periods presented:

Weighted average discount rate.......... 7.5%
Rate of increase in compensation
levels................................ 3%
Expected long-term rate of return on
assets................................ 8%
Employee turnover....................... None
Mortality Table......................... 1983 GAM

The Company also sponsors two defined contribution plans under Section
401(k) of the Code. The first plan covers all eligible Pennsylvania employees of
the Company, and participants are permitted to make elective pretax deferrals up
to 20% of their compensation. Under this plan, the Company has the ability to
make additional discretionary contributions allocated to the participants as a
flat dollar amount or in proportion to their compensation. The second plan
covers all eligible Illinois employees of the Company, and participants are
permitted to make elective pretax deferrals up to a set percentage of their
compensation (to be determined by the Company) as well as post-tax contributions
subject to IRS limitations. Under this plan, the Company has the ability to make
additional discretionary contributions allocated to the participants in
proportion to their compensation. The Company contributed approximately $0,
$19,200, and $9,600 to these plans for 1995, 1996, and the period January 1,
1997 through September 30, 1997, respectively.

6. RELATED PARTIES

The Company has a receivable from a shareholder which represents an excess
S Corporation distribution which is expected to be paid back to the Company by
December 31, 1997.

The shareholder distribution payable is a result of the Company declaring a
dividend in 1997 in the amount equal to the total undistributed S Corporation
accumulated earnings of the Company as of September 30, 1997.

7. COMMITMENTS AND CONTINGENCIES

Under terms of the Shareholders Agreement, upon the death or withdrawal of
a shareholder, the Company has the option to purchase that shareholder's
non-voting shares at the purchase price as defined in the Shareholders
Agreement. The remaining shareholders then have the option to purchase the
remaining decedent/withdrawn shareholder's non-voting shares at the purchase
price as defined in the Shareholders Agreement. If any of the decedent/withdrawn
shareholder's non-voting shares remain, the decedent/withdrawn shareholder's
estate has the option to require the Company to redeem such non-voting shares at
the purchase price as defined in the Shareholders Agreement.

F-66
<PAGE>
AXS SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Upon the death or withdrawal of a shareholder, the Company is required to
redeem the voting shares of the decedent/withdrawn shareholder at the purchase
price as defined in the Shareholders Agreement.

8. SUBSEQUENT EVENT (UNAUDITED)

In December 1997, the Company and its shareholders entered into a
definitive agreement with a wholly-owned subsidiary of Pentacon, Inc. which
among other things calls for the merger of the Company with the Pentacon, Inc.
subsidiary.

F-67

<PAGE>
REPORT OF INDEPENDENT AUDITORS

Pentacon, Inc.
and
Board of Directors
Maumee Industries, Inc.

We have audited the accompanying balance sheets of Maumee Industries, Inc.
(the "Company"), as of December 31, 1996 and September 30, 1997, and the
related statements of operations, stockholders' deficit, and cash flows for each
of the two years in the period ended December 31, 1996 and the period from
January 1, 1997 through September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Maumee Industries, Inc., at
December 31, 1996 and September 30, 1997, and the results of its operations and
its cash flows for each of the two years in the period ended December 31, 1996
and the period from January 1, 1997 through September 30, 1997, in conformity
with generally accepted accounting principles.

ERNST & YOUNG LLP

Houston, Texas
October 15, 1997

F-68
<PAGE>
MAUMEE INDUSTRIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER
DECEMBER 31, SEPTEMBER 30, 31,
1996 1997 1997
------------ ------------- -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Accounts receivable, less allowance
of $45,000, $70,000, and
$70,000.......................... $ 3,421,509 $ 5,200,253 $ 4,927,013
Inventories........................ 4,265,628 6,524,717 6,555,095
Prepaid expenses and other
assets........................... 26,562 24,362 42,083
Deferred income taxes.............. 165,000 139,000 137,680
------------ ------------- -----------
Total current assets.................... 7,878,699 11,888,332 11,661,871
Deferred income taxes................... 329,000 284,000 284,000
Property and equipment, at cost:
Machinery and equipment............ 2,367,139 2,781,709 2,888,083
Leasehold improvements............. 399,301 440,516 477,991
------------ ------------- -----------
2,766,440 3,222,225 3,366,074
Less accumulated depreciation and
amortization.......................... 1,994,219 2,247,242 (2,336,394)
------------ ------------- -----------
772,221 974,983 1,029,680
------------ ------------- -----------
Total assets............................ $ 8,979,920 $ 13,147,315 $12,975,551
============ ============= ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Bank overdraft..................... $ 403,811 $ 1,001,999 $ 1,187,087
Accounts payable................... 2,800,950 3,965,264 3,356,178
Income taxes payable............... 513,744 708,744 1,086,768
Accrued expenses................... 505,634 1,141,654 1,064,320
Notes payable...................... 5,605,357 5,855,550 5,419,595
Notes payable to principal
stockholder...................... 997,181 997,181 997,181
Current portion of capital lease
obligations...................... 39,412 154,291 107,765
------------ ------------- -----------
Total current liabilities............... 10,866,089 13,824,683 13,218,894
Long-term portion of capital lease
obligations........................... 146,496 270,984 255,708
------------ ------------- -----------
Total liabilities....................... 11,012,585 14,095,667 13,474,602
Commitments and contingencies
Stockholders' deficit:
Common stock, no par value:
Authorized shares -- 2,830
Issued shares -- 318
Outstanding shares -- 103.5 in
1996 and 318 in 1997....... 41,000 691,000 691,000
Accumulated deficit..................... (1,503,115) (1,068,802) (619,501)
------------ ------------- -----------
(1,462,115) (377,802) 71,499
Less treasury stock -- 77 shares in 1996
and 218 shares in 1997, at cost....... 570,550 570,550 570,550
------------ ------------- -----------
Total stockholders' deficit............. (2,032,665) (948,352) (499,051)
------------ ------------- -----------
Total liabilities and stockholders'
deficit............................... $ 8,979,920 $ 13,147,315 $12,975,551
============ ============= ===========
</TABLE>
SEE ACCOMPANYING NOTES.

F-69
<PAGE>
MAUMEE INDUSTRIES, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEARS ENDED 1997 THREE MONTHS ENDED
DECEMBER 31, THROUGH DECEMBER 31,
-------------------------- SEPTEMBER 30, -------------------------
1995 1996 1997 1996 1997
------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales............................... $ 20,582,200 $ 26,234,653 $27,472,902 $ 7,071,763 $ 10,541,994
Cost of sales........................... 16,099,808 19,712,909 19,557,148 5,522,964 7,432,716
------------ ------------ ------------- ----------- ------------
Gross profit............................ 4,482,392 6,521,744 7,915,754 1,548,799 3,109,278
Selling and administrative expenses..... 4,626,153 5,277,107 6,628,643 1,510,586 2,145,830
------------ ------------ ------------- ----------- ------------
Operating income (loss)................. (143,761) 1,244,637 1,287,111 38,213 963,448
Interest expense........................ (572,387) (585,090) (547,274) (201,277) (200,071)
Other income (expense).................. 2,578 (23,680) 10,476 (28,748) 10,814
------------ ------------ ------------- ----------- ------------
Income (loss) before taxes.............. (713,570) 635,867 750,313 (191,812) 774,191
Income tax expense (benefit)............ (250,000) 304,000 316,000 (84,397) 324,890
------------ ------------ ------------- ----------- ------------
Net income (loss)....................... $ (463,570) $ 331,867 $ 434,313 $ (107,415) $ 449,301
============ ============ ============= =========== ============
</TABLE>

SEE ACCOMPANYING NOTES.

F-70
<PAGE>
MAUMEE INDUSTRIES, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK TOTAL
------------------- --------------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT DEFICIT DEFICIT
------ ---------- ------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994......... 103.5 $ 41,000 (77) $ (570,550) $(1,371,412) $ (1,900,962)
Net loss............................. -- -- -- -- (463,570) (463,570)
------ ---------- ------ ------------ ----------- -------------
Balance at December 31, 1995......... 103.5 41,000 (77) (570,550) (1,834,982) (2,364,532)
Net income........................... -- -- -- -- 331,867 331,867
------ ---------- ------ ------------ ----------- -------------
Balance at December 31, 1996......... 103.5 41,000 (77) (570,550) (1,503,115) (2,032,665)
Stock split (2.83 for 1)............. 189.5 -- (141) -- -- --
Net income........................... -- -- -- -- 434,313 434,313
Issuance of common stock............. 25 650,000 -- -- -- 650,000
------ ---------- ------ ------------ ----------- -------------
Balance at September 30, 1997........ 318 691,000 (218) (570,550) (1,068,802) (948,352)
Net income (unaudited)............... -- -- -- -- 449,301 449,301
------ ---------- ------ ------------ ----------- -------------
Balance at December 31, 1997
(unaudited)........................ 318 $ 691,000 (218) $ (570,550) $ (619,501) $ (499,051)
====== ========== ====== ============ =========== =============
</TABLE>

SEE ACCOMPANYING NOTES.

F-71
<PAGE>
MAUMEE INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1997 THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, THROUGH DECEMBER 31,
------------------------------- SEPTEMBER 30, ----------------------------
1995 1996 1997 1996 1997
-------------- --------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income (loss).................. $ (463,570) $ 331,867 $ 434,313 $ (107,415) $ 449,301
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation and
amortization............... 358,681 327,945 316,823 20,060 89,152
Issuance of common stock for
compensation............... -- -- 650,000 -- --
(Gain) or loss on disposal of
equipment.................. (1,283) 28,290 (8,980) -- --
Deferred income taxes......... (22,000) (448,000) 71,000 (491,132) 1,320
Changes in operating assets
and liabilities:
Accounts receivable...... (453,257) (725,349) (1,778,744) (159,116) 273,240
Inventories.............. (480,392) (1,328,228) (2,259,089) (1,040,258) (30,378)
Prepaid expenses and
other assets.......... (23,164) 12,912 2,200 41,496 (17,721)
Income tax receivable.... (239,150) 239,150 -- -- --
Accounts payable......... 762,714 866,783 1,164,314 1,436,806 (609,086)
Income taxes payable..... (36,653) 501,700 195,000 367,616 378,024
Accrued expenses......... (27,593) 160,410 636,020 279,845 (77,334)
-------------- --------------- -------------- -------------- ------------
Net cash (used in) provided by
operating activities............. (625,667) (32,520) (577,143) 347,902 456,518
INVESTING ACTIVITIES
Capital expenditures............... (204,581) (133,704) (210,968) (2,327) (143,849)
Proceeds from sale of equipment.... 2,367 1,342 59,200 -- --
-------------- --------------- -------------- -------------- ------------
Net cash used in investing
activities....................... (202,214) (132,362) (151,768) (2,327) (143,849)
FINANCING ACTIVITIES
Bank overdraft..................... (548,755) (100,295) 598,188 (232,696) 185,088
Payments on capital leases......... (26,475) (48,764) (119,472) (12,000) (61,802)
Proceeds from revolving line of
credit........................... 6,000,200 10,042,100 20,464,195 2,510,879 6,821,955
Payments on revolving line of
credit........................... (4,396,709) (10,003,263) (20,504,163) (2,554,008) (7,200,160)
Proceeds from notes payable........ 50,000 467,796 424,000 -- --
Payments on notes payable.......... (250,380) (192,692) (133,837) (57,750) (57,750)
-------------- --------------- -------------- -------------- ------------
Net cash provided by (used in)
financing activities............. 827,881 164,882 728,911 (345,575) (312,669)
Net increase (decrease) in cash.... -- -- -- -- --
Cash at beginning of period........ -- -- -- -- --
-------------- --------------- -------------- -------------- ------------
Cash at end of period.............. $ -- $ -- $ -- $ -- $ --
============== =============== ============== ============== ============
</TABLE>

SEE ACCOMPANYING NOTES.

F-72
<PAGE>
MAUMEE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Maumee Industries, Inc. (the "Company") is engaged in the wholesale
distribution of fasteners and nonfastener small parts primarily to
Midwestern-based manufacturers in the automotive industry. For the years ended
December 31, 1995, 1996, and the period from January 1, 1997 through September
30, 1997, net sales to two customers approximated $18,000,000, $23,100,000, and
$21,800,000, respectively. In relation to these customers, approximately
$4,300,000 was included in accounts receivable at September 30, 1997.

NET SALE RECOGNITION

Net sales are recognized upon shipment of the product to the customer.
Adjustments to arrive at net sales are primarily related to discounts.

INVENTORIES

Inventories consist of goods held for resale and are valued at the lower of
cost (first-in, first-out method) or market.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements are stated on the cost basis.
Equipment is depreciated using accelerated depreciation methods based on
estimated useful lives ranging from three to ten years. Leasehold improvements
are amortized using the straight-line method over the lesser of the estimated
useful lives of the assets or the term of the related lease.

USE OF ESTIMATES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of accounts receivable, prepaid expenses, and accounts
payable approximate fair value due to the short-term maturities of these
instruments. The carrying value of the Company's debt facilities and capital
lease agreements approximates fair value because the rates on such facilities
are variable, based on current market, or are at fixed rates currently available
to the Company.

ACCOUNTING FOR LONG-LIVED ASSETS

INCOME TAXES

Income taxes have been provided using the liability method in accordance
with FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES.

F-73
<PAGE>
MAUMEE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

FISCAL YEAR

In 1997, the Company changed its fiscal year end from December 31 to
September 30.

UNAUDITED INTERIM INFORMATION

2. NOTES PAYABLE

At September 30, 1997, the Company has a bank line of credit under which
the Company may borrow up to $7,700,000. At September 30, 1997, the unused
portion of the line of credit was $2,194,032. Borrowings under this line of
credit bear interest at 1.5% over the bank's base rate (10% at September 30,
1997) and expire on May 31, 2000. The line of credit is collateralized by
substantially all of the Company's assets, including equipment, general
intangibles, inventory, receivables, and any balance in the collateral account.
The Company's principal stockholder has guaranteed the line of credit. The line
of credit agreement includes provisions for maintenance of minimum net worth and
restrictions on capital expenditures. The Company was in compliance with these
financial covenants at September 30, 1997.

At September 30, 1997, the Company has a special accommodation/over advance
note payable to a bank. The note is payable on demand and accrues interest at
the bank's base rate plus 2.5% (11% at September 30, 1997). If no demand is
made, the note is payable in 18 monthly installments of $16,667 plus interest,
beginning June 1, 1997. There was $233,332 outstanding on this note at September
30, 1997.

At September 30, 1997, the Company has an equipment loan payable to a bank.
The loan is payable on demand and accrues interest at the bank's base rate plus
1.5% (10% at September 30, 1997). If demand is not made, the note is payable in
48 monthly installments of $2,583, plus interest. There was $116,250 outstanding
on this note at September 30, 1997.

Equipment purchased from the proceeds of the installment notes is pledged
as collateral on the respective loans.

The Company made interest payments of approximately $453,000, $531,000 and
$529,000 for the years ended December 31, 1995 and 1996 and for the period from
January 1, 1997 through September 30, 1997, respectively.

3. NOTE PAYABLE TO STOCKHOLDER

At September 30, 1997, the Company has notes payable to the principal
stockholder. The notes payable represent amounts advanced to the Company by the
principal stockholder. The notes require monthly interest payments at rates
ranging from 6.5% to 13.8% with principal payable upon demand. Interest payments
for the years ended December 31, 1995 and 1996 and for the period from January
1, 1997 through September 30, 1997 was approximately $45,377, $0, and $56,000,
respectively.

F-74
<PAGE>
MAUMEE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. CAPITAL LEASE OBLIGATIONS

The Company has entered into capital lease arrangements to finance the
purchase of machinery and equipment. Future minimum payments under these
agreements as of September 30, 1997 are as follows:

1998................................. $ 189,251
1999................................. 134,959
2000................................. 91,196
2001................................. 53,532
2002................................. 39,237
----------
Total minimum lease payments......... 508,175
Amount representing interest......... 82,900
----------
Present value of minimum lease
payments............................. 425,275
Current maturities................... 154,291
----------
Long-term portion.................... $ 270,984
==========

The cost of assets held under capital leases as of September 30, 1997 and
December 31, 1996 was $619,987 and $261,149, respectively. Amortization of
equipment acquired under capital lease arrangements is included in depreciation
and amortization expense.

5. COMMITMENTS

The Company leases certain of its facilities and equipment under
noncancelable operating leases. Rent expense for the years ended December 31,
1995 and 1996 and the period from January 1, 1997 through September 30, 1997 was
$138,000, $174,000, and $120,000, respectively. Lease commitments at September
30, 1997 for long-term noncancelable operating leases are as follows:

1998................................. $ 278,299
1999................................. 82,486
2000................................. 43,040
----------
$ 403,825
==========

6. INCOME TAXES

Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1997
YEARS ENDED DECEMBER 31, THROUGH
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
Current:
Federal......................... $ (183,000) $ 591,000 $ 192,000
State........................... (45,000) 161,000 53,000
------------ ------------ -------------
(228,000) 752,000 245,000
Deferred:
Federal......................... (22,000) (448,000) 71,000
------------ ------------ -------------
$ (250,000) $ 304,000 $ 316,000
============ ============ =============
</TABLE>

F-75
<PAGE>
MAUMEE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The reconciliation of the income tax expense computed at U.S. federal
statutory tax rates to the reported tax expense is as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1997
YEARS ENDED DECEMBER 31, THROUGH
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
Expected income tax expense (benefit)
at 34%............................. $ (242,615) $ 216,194 $ 255,106
State income taxes, net of federal
benefit............................ (36,099) 36,444 43,428
Non-deductible expenses.............. 2,662 26,050 17,466
Other................................ 26,052 25,312 --
------------ ------------ -------------
Reported total income tax expense
(benefit).......................... $ (250,000) $ 304,000 $ 316,000
============ ============ =============
</TABLE>

The Company paid $59,076, $-0- and $50,000 of income taxes for the years
ended December 31, 1995 and 1996 and the period from January 1, 1997 through
September 30, 1997, respectively.

Deferred income taxes reflect the net effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. The components of the
deferred tax assets are as follows:

DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
Deferred tax assets:
Change in inventory estimate....... $378,834 $ 284,125
Nondeductible accruals:
Accrued interest.............. 21,496 21,496
Pension....................... 53,986 53,558
Other.............................. 39,684 63,821
------------ -------------
Total deferred tax assets............... $494,000 $ 423,000
============ =============

7. EMPLOYEE RETIREMENT PLANS

The Company maintains a defined contribution pension plan for all eligible
full-time employees. All contributions to the plan are made by the Company at an
amount equal to 7% of each participant's annual salary. The plan provides for
100% vesting of values accumulated for the employee after six years of service.

The Company also sponsors an employee savings plan under Section 401(k) of
the Internal Revenue Code which covers substantially all full-time employees.
The plan allows for both employee and Company contributions. The Company
contribution consists of a matching contribution of 50% of employee
contributions, up to 6% of eligible employee compensation.

Employees vest immediately in their contribution and vest in the Company
contribution over a six-year period of service.

F-76
<PAGE>
MAUMEE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of employee retirement plan expense for the
years ended December 31, 1995 and 1996 and the period from January 1, 1997
through September 30, 1997.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
Defined contribution pension plan....... $106,917 $104,819 $ 103,520
401(k) matching contribution............ 26,694 33,183 32,690
------------ ------------ -------------
Total................................... $133,611 $138,002 $ 136,210
============ ============ =============
</TABLE>

8. RELATED PARTY TRANSACTIONS

The Company leases its main building facility from Maumee Properties, which
is owned by the primary shareholder and president. Annual rental expense under
the lease amounted to $312,000 for the years ended December 31, 1995 and 1996,
respectively, and $234,000 for the period from January 1, 1997 through September
30, 1997.

The Company rents an airplane from Summit Transportation, which is owned by
the primary shareholder and president. The related expense for use of the
airplane amounted to $-0- and $46,028 for the years ended December 31, 1995 and
1996, respectively, and $4,171 for the nine months ended September 30, 1997.

9. COMMON STOCK

On September 30, 1997, the Company executed a share split of 2.83 ordinary
shares for each authorized ordinary share.

On September 30, 1997, pursuant to an agreement in July 1997 and subsequent
to the aforementioned share split, 25 shares of common stock were issued to the
chief executive officer. The issuance of the common stock resulted in a
compensation charge to the Company of $650,000 based on an independent valuation
of the Company.

10. SUBSEQUENT EVENTS (UNAUDITED)

In December 1997, Maumee Industries, Inc., and its shareholders entered
into a definitive agreement with a wholly owned subsidiary of Pentacon, Inc.,
which among other things calls for the merger of Maumee Industries, Inc., with
the Pentacon, Inc., subsidiary.

F-77

<PAGE>
REPORT OF INDEPENDENT AUDITORS

Pentacon, Inc.
and
Board of Directors
Sales Systems, Limited

We have audited the balance sheets of Sales Systems, Limited (the
"Company"), as of December 31, 1996 and September 30, 1997, and the related
statements of income and retained earnings and cash flows for the year ended
December 31, 1996 and the period from January 1, 1997 through September 30,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sales Systems, Limited, at
December 31, 1996 and September 30, 1997, and the results of its operations and
its cash flows for the year ended December 31, 1996 and the period from January
1, 1997 through September 30, 1997, in conformity with generally accepted
accounting principles.

ERNST & YOUNG LLP

Houston, Texas
October 20, 1997

F-78
<PAGE>
SALES SYSTEMS, LIMITED
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1996 1997 1997
------------ ------------- ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash............................... $ 63,755 $ -- $ 101,749
Trade accounts receivable, less
allowance for doubtful accounts
of $38,000 at December 31, 1996,
September 30, 1997, and December
31, 1997......................... 1,129,433 1,090,628 1,148,344
Inventories........................ 2,723,660 2,255,465 2,346,057
Prepaid expenses and other current
assets........................... -- 6,589 18,632
------------ ------------- ------------
Total current assets.................... 3,916,848 3,352,682 3,614,782
Property, plant, and equipment:
Fixtures and equipment............. 1,030,403 1,123,795 1,151,546
Automotive equipment............... 82,151 82,151 82,151
------------ ------------- ------------
1,112,554 1,205,946 1,233,697
Less accumulated depreciation........... (778,625) (859,976) (901,574)
------------ ------------- ------------
333,929 345,970 332,123
Other assets............................ 8,477 27,109 8,478
------------ ------------- ------------
Total assets............................ $4,259,254 $ 3,725,761 $ 3,955,383
============ ============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Note payable....................... $1,250,000 $ 342,347 $ 645,592
Note payable to former
shareholders..................... -- -- 5,000,000
Trade accounts payable and accrued
expenses......................... 943,109 980,922 1,048,561
Accrued salaries, wages, payroll
expenses, and commissions........ 138,804 60,484 39,819
Advances payable................... 40,000 -- --
Current maturities of unsecured
notes to officers................ 22,670 23,890 20,139
Current maturities of long-term
debt............................. 78,823 77,850 75,336
------------ ------------- ------------
Total current liabilities............... 2,473,406 1,485,493 6,829,447
Long-term debt, less current
maturities............................ 257,176 199,967 182,567
Unsecured notes to officers, less
current maturities.................... 194,228 176,154 174,088
------------ ------------- ------------
Total liabilities....................... 2,924,810 1,861,614 7,186,102
Shareholders' equity:
Common stock, $100 par value:
Authorized shares -- 100
Issued and outstanding
shares -- 64............... 6,400 6,400 6,400
Retained earnings.................. 1,375,242 1,904,945 1,810,079
------------ ------------- ------------
1,381,642 1,911,345 1,816,479
Less 14 shares at September 30, 1997 and
47 shares at
December 31, 1997 shares of treasury
stock at cost......................... (47,198) (47,198) (5,047,198)
------------ ------------- ------------
Total shareholders' equity (deficit).... 1,334,444 1,864,147 (3,230,719)
------------ ------------- ------------
Total liabilities and shareholders'
equity................................ $4,259,254 $ 3,725,761 $ 3,955,383
============ ============= ============
</TABLE>

SEE ACCOMPANYING NOTES.

F-79
<PAGE>
SALES SYSTEMS, LIMITED
STATEMENTS OF INCOME AND RETAINED EARNINGS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1997 THREE MONTHS ENDED
YEAR ENDED THROUGH DECEMBER 31
DECEMBER 31, SEPTEMBER 30, --------------------------
1996 1997 1996 1997
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Net sales............................... $ 15,663,326 $11,987,479 $ 3,724,591 $ 3,746,387
Cost of goods sold...................... 10,495,123 8,056,780 2,532,158 2,452,853
------------ --------------- ------------ ------------
Gross profit............................ 5,168,203 3,930,699 1,192,433 1,293,534
Selling, general, and administrative
expenses.............................. 4,598,895 3,096,934 1,561,310 1,367,336
------------ --------------- ------------ ------------
Operating income (loss)................. 569,308 833,765 (368,877) (73,802)
Interest expense........................ (106,799) (95,162) (28,167) (21,064)
Other income............................ 17,912 -- 17,912 --
------------ --------------- ------------ ------------
Net income (loss)....................... 480,421 738,603 (379,132) (94,866)
Retained earnings at beginning of
period................................ 1,114,575 1,375,242 1,790,848 1,904,945
Distributions to shareholders........... (219,754) (208,900) (36,474) --
------------ --------------- ------------ ------------
Retained earnings at end of period...... $ 1,375,242 $ 1,904,945 $ 1,375,242 $ 1,810,079
============ =============== ============ ============
</TABLE>

SEE ACCOMPANYING NOTES.

F-80
<PAGE>
SALES SYSTEMS, LIMITED
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1997 THREE MONTHS ENDED
YEAR ENDED THROUGH DECEMBER 31,
DECEMBER 31, SEPTEMBER 30, --------------------------
1996 1997 1996 1997
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income (loss)....................... $ 480,421 $ 738,603 $ (379,132) $ (94,866)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation....................... 94,668 81,351 48,137 41,598
Loss on sale of equipment.......... 1,052 -- -- --
Change in operating assets and
liabilities:
Trade accounts receivable..... (343,571) 38,805 372,465 (57,716)
Inventories................... (518,271) 468,195 (201,941) (90,592)
Prepaid expenses and other
current assets............. -- (6,589) -- (12,043)
Other assets.................. -- (18,632) (891) 18,631
Trade accounts payable and
accrued expenses........... 28,375 37,813 (456,914) 67,639
Accrued salaries, wages, and
payroll withholdings....... 102,289 (78,320) 105,216 (20,665)
Advances payable.............. 40,000 (40,000) 40,000 --
------------ --------------- ------------ ------------
Net cash provided by (used in) operating
activities............................ (115,037) 1,221,226 (473,060) (148,014)
INVESTING ACTIVITIES
Capital expenditures.................... (216,869) (93,392) (146,502) (27,751)
------------ --------------- ------------ ------------
Net cash used in investing activities... (216,869) (93,392) (146,502) (27,751)
FINANCING ACTIVITIES
Distributions paid to shareholders...... (219,754) (208,900) (36,474) --
Borrowings on term loans................ 61,582 -- 40,328 --
Payments on term loans.................. (91,523) (75,036) (10,537) (25,731)
Net borrowings (repayments) on line of
credit................................ 525,555 (907,653) 690,000 303,245
Other................................... (992) -- -- --
------------ --------------- ------------ ------------
Net cash provided by (used in) financing
activities............................ 274,868 (1,191,589) 683,317 277,514
------------ --------------- ------------ ------------
Increase (decrease) in cash............. (57,038) (63,755) 63,755 101,749
Cash at beginning of period............. 120,793 63,755 -- --
------------ --------------- ------------ ------------
Cash at end of period................... $ 63,755 $ -- $ 63,755 $ 101,749
============ =============== ============ ============
</TABLE>

SEE ACCOMPANYING NOTES.

F-81
<PAGE>
SALES SYSTEMS, LIMITED
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

COMPANY DESCRIPTION

Sales Systems, Limited (the "Company") is a wholesaler and distributor of
industrial fasteners, primarily to manufacturers in the eastern United States.

INVENTORIES

Inventories consist of goods held for resale and are stated at the lower of
cost or market using the first-in, first-out method.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are recorded at cost. Depreciation and
amortization expense, including amounts related to capital leases, is calculated
by accelerated methods over the estimated useful lives of the assets, which vary
from three to eight years.

NET SALES RECOGNITION

Net sales are recognized upon shipment of the product to the customer.
Adjustments to arrive at net sales are primarily for discounts.

INCOME TAXES

Effective January 1, 1995, the Company made an election to be taxed as an S
corporation for federal purposes and for the majority of states in which the
Company operates. Accordingly, tax liabilities subsequent to this date related
to the Company's ongoing operations will generally be the responsibility of the
individual shareholders.

STATEMENT OF CASH FLOWS

Cash paid for interest during the year ended December 31, 1996 and the
period from January 1, 1997 through September 30, 1997 was $106,799 and $95,167,
respectively.

USE OF ESTIMATES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of accounts receivable, prepaid expenses, and accounts
payable approximate fair values due to the short-term maturities of these
instruments. The carrying value of the Company's debt facilities approximates
fair value because the rates on such facilities are variable, based on current
market, or are at fixed rates currently available to the Company.

ACCOUNTING FOR LONG-LIVED ASSETS

F-82
<PAGE>
SALES SYSTEMS, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

FISCAL YEAR

In 1997, the Company changed its fiscal year end from December 31 to
September 30.

UNAUDITED INTERIM INFORMATION

2. CONCENTRATION OF CREDIT RISK AND SALES TO LARGEST CUSTOMERS

Sales to the Company's two largest customers were approximately $9,500,000,
or 60.6% of net sales, for the year ended December 31, 1996. Sales to the
Company's four largest customers were approximately $9,400,000, or 78.7% of net
sales, for the period January 1, 1997 through September 30, 1997.

The related accounts receivable balances were $442,545 and $538,940 as of
December 31, 1996 and September 30, 1997, respectively.

3. FINANCING ARRANGEMENTS

NOTE PAYABLE

The Company has a $1,250,000 line of credit agreement with a bank. The line
of credit matures on June 1, 1998, subject to automatic renewals thereof on an
annual basis unless a contrary notice is delivered by either party within a
prescribed period. The line of credit is secured by accounts receivable and
inventory, and is guaranteed by the Company's shareholders. The line of credit
bears interest at the New York prime rate (8.5% at September 30, 1997). At
September 30, 1997, there were available amounts of $907,626 to be borrowed
under the line of credit.

The agreement includes certain restrictive covenants with respect to, among
other matters, distributions paid to shareholders, purchase or redemption of the
Company's stock, mergers or consolidated transactions, asset dispositions, and
the incurrence of additional debt. It also includes additional financial
covenants related to the maintenance of net worth, working capital, and net
income levels along with a limitation on annual capital expenditures. At
September 30, 1997 the Company was in compliance with these covenants.

F-83
<PAGE>
SALES SYSTEMS, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

LONG-TERM DEBT

DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- --------------
Note payable to bank requiring
monthly principal payments of
$4,167 plus interest at a variable
rate (9.25% at September 30, 1997);
due January 2003, secured by
equipment, furniture and fixtures,
accounts receivable, and
inventory.......................... $ 254,167 $ 216,667
Notes payable to bank requiring
monthly payments totaling $2,462
including interest at 8.2% -- 8.5%;
maturing January 2002, secured by
equipment.......................... 71,176 53,715
Notes payable to bank requiring
monthly payments totaling $418
including interest at 7.75%;
maturing March 1999; secured by a
vehicle............................ 10,656 7,435
------------- --------------
335,999 277,817
Less current portion................. 78,823 77,850
------------- --------------
Long-term debt, net of current
portion............................ $ 257,176 $ 199,967
============= ==============

The aggregate annual principal maturities of long-term debt for each of the
next five years are as follows:

1998................................. $ 77,850
1999................................. 60,782
2000................................. 59,313
2001................................. 58,616
2002................................. 21,256
----------
$ 277,817
==========

4. LEASES AND TRANSACTIONS WITH RELATED PARTIES

The Company leases an Allentown warehouse and office facility under an
informal lease arrangement, presently requiring monthly payments of $6,631.

The Company leases a South Carolina warehouse and office facility under an
informal lease arrangement with a partnership whose partners are the
shareholders of the Company. This partnership advanced $40,000 to the Company
during 1996, which was repaid during 1997.

Rent expense for these facilities for the year ended December 31, 1996 and
the period from January 1, 1997 through September 30, 1997 was $165,500 and
$144,000, respectively.

5. PENSION PLAN

The Company has a qualified profit sharing plan covering substantially all
employees with at least one year of service. Employee 401(k) contributions are
permitted and the Company is committed to contribute $1 for each $1 of employee
contributions, up to 6% of the employee's salary. The matching contributions
were $134,772 and $95,971 for the year ended December 31, 1996 and the period
from January 1, 1997 through September 30, 1997, respectively.

There were no discretionary contributions made by the Company for the year
ended December 31, 1996 and the period from January 1, 1997 through September
30, 1997.

F-84
<PAGE>
SALES SYSTEMS, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. RELATED PARTY TRANSACTIONS

The Company has 10% unsecured subordinated notes to certain officers
totaling $174,087 as of September 30, 1997. The Company also has an unsecured
note payable to an officer requiring monthly payments of $2,079, including
interest at 7% through October 1998, totaling $25,957 as of September 30, 1997.

7. SUBSEQUENT EVENT (UNAUDITED)

In December 1997, Sales Systems, Limited, and its shareholders entered into
a definitive agreement with a wholly owned subsidiary of Pentacon, Inc., which
among other things calls for the merger of the Company with the Pentacon, Inc.,
subsidiary.

In October 1997, the Company entered into an agreement whereby the Company
purchased 30 shares of common stock from two shareholders for two promissory
notes totaling $5.0 million. The purchase price was based on an offer received
by the Company to purchase all of the common stock of the Company for cash.
Payment of the promissory notes are conditioned upon the occurrence of the
above-named acquisition and resulting initial public offering and if not
completed by March 15, 1998 the notes will be void and the shares will revert
back to the original owners.

F-85

<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Texas International Aviation, Inc.

We have audited the accompanying consolidated balance sheet of Texas
International Aviation, Inc. and Subsidiary (a Texas corporation) as of December
31, 1997 and March 31, 1997, and the related consolidated statements of
earnings, stockholders' equity and cash flows for the nine months ended December
31, 1997 and the year ended March 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Texas
International Aviation, Inc. and Subsidiary as of December 31, 1997 and March
31, 1997, and the consolidated results of their operations and their
consolidated cash flows for the nine months ended December 31, 1997 and the year
ended March 31, 1997, in conformity with generally accepted accounting
principles.

GRANT THORNTON LLP

Dallas Texas
April 3, 1998

F-86
<PAGE>
TEXAS INTERNATIONAL AVIATION, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, JUNE 30,
1997 1997 1998
----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 8,593 $ 20,093 $ 20,467
Trade accounts receivable, net
of allowance for doubtful
accounts of $15,259 at March
31, 1997 and December 31, 1997
and $946 at June 30, 1998..... 2,716,444 4,533,895 4,626,526
Inventories..................... 9,393,408 15,885,605 20,861,277
Prepaid expenses................ 43,254 43,014 25,443
Deferred income taxes........... -- 15,358 15,358
----------- ------------ -----------
Total current assets.. 12,161,699 20,497,965 25,549,071
Property, plant and equipment - at cost
Property, plant and equipment... 635,723 883,561 930,605
Less accumulated
depreciation............ 434,542 565,018 660,571
----------- ------------ -----------
201,181 318,543 270,034
Other Assets
Receivables from stockholders... 362,334 486,599 565,852
Other........................... 9,500 9,500 9,500
----------- ------------ -----------
$12,734,714 $ 21,312,607 $26,394,457
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdrafts................. $ -- $ -- $ 1,088,561
Current maturities of long-term
debt.......................... 153,992 141,235 146,743
Accounts payable -- trade....... 2,512,800 4,763,771 4,126,764
Accrued liabilities............. 207,208 352,467 325,209
Line of credit.................. 4,755,505 10,035,345 13,729,698
Income taxes payable............ 18,977 323,019 93,164
----------- ------------ -----------
Total current
liabilities........ 7,648,482 15,615,837 19,510,139
Long-term debt, less current
maturities......................... 347,137 241,680 172,620
Stockholders' Equity
Common stock $.10 par value;
authorized 1,000,000 shares;
issued and outstanding 65,763
shares........................ 6,576 6,576 6,576
Additional paid-in capital...... 2,515,908 2,515,908 2,515,908
Retained earnings............... 2,216,611 2,932,606 4,189,214
----------- ------------ -----------
Total stockholders'
equity............. 4,739,095 5,455,090 6,711,698
----------- ------------ -----------
$12,734,714 $ 21,312,607 $26,394,457
=========== ============ ===========
</TABLE>
F-87
<PAGE>
TEXAS INTERNATIONAL AVIATION, INC.
CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED SIX MONTHS ENDED JUNE 30,
MARCH 31, DECEMBER 31, ----------------------------
1997 1997 1997 1998
----------- ------------ ------------ --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales............................ $11,823,132 $ 17,721,766 $ 9,070,866 $ 14,945,051
Cost of sales........................ 8,091,140 12,894,231 6,805,210 10,271,146
----------- ------------ ------------ --------------
3,731,992 4,827,535 2,265,656 4,673,905
Operating costs and expenses
Selling expenses................ 409,481 353,469 250,551 447,579
General and administrative
expenses...................... 2,465,861 2,929,298 1,741,692 1,799,306
----------- ------------ ------------ --------------
2,875,342 3,282,767 1,992,243 2,246,885
----------- ------------ ------------ --------------
Operating profit........... 856,650 1,544,768 273,413 2,427,020
Other income (expenses)
Interest expense................ (325,318) (530,882) (271,173) (534,774)
Other income.................... 1,674 70,202 9,632 11,705
----------- ------------ ------------ --------------
Earnings before income
taxes................... 533,006 1,084,088 11,872 1,903,951
Income tax expense................... 135,655 368,093 4,031 647,343
----------- ------------ ------------ --------------
Net earnings............... $ 397,351 $ 715,995 $ 7,841 $ 1,256,608
=========== ============ ============ ==============
</TABLE>

F-88
<PAGE>
TEXAS INTERNATIONAL AVIATION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE TWO FISCAL YEARS IN THE PERIOD ENDED DECEMBER 31,
1997 AND THE SIX MONTHS ENDED JUNE 30, 1998

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1996............. 65,763 $6,576 $2,515,908 $ 1,819,260 $ 4,341,744
Net earnings......................... -- -- -- 397,351 397,351
------ ------ ---------- ------------ ------------
Balance at March 31, 1997............ 65,763 6,576 2,515,908 2,216,611 4,739,095
Net earnings......................... -- -- -- 715,995 715,995
------ ------ ---------- ------------ ------------
Balance at December 31, 1997......... 65,763 6,576 2,515,908 2,932,606 5,455,090
Net earnings (unaudited)............. -- -- -- 1,256,608 1,256,608
------ ------ ---------- ------------ ------------
Balance at June 30, 1998
(unaudited)........................ 65,763 $6,576 $2,515,908 $ 4,189,214 $ 6,711,698
====== ====== ========== ============ ============
</TABLE>

F-89
<PAGE>
TEXAS INTERNATIONAL AVIATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR NINE MONTHS SIX MONTHS
ENDED ENDED ENDED
MARCH 31, DECEMBER 31, JUNE 30,
1997 1997 1998
----------- ------------- -----------
<S> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings.................... $ 397,351 $ 715,995 $ 1,256,608
Adjustments to reconcile net
earnings to net cash used in
operating activities
Depreciation............... 112,421 130,476 95,553
Deferred income taxes...... -- (15,358) --
Inventory obsolescence..... 400,000 431,206 307,536
Changes in operating assets
and liabilities Accounts
receivable -- trade..... (1,159,669) (1,817,451) (92,631)
Inventories........... (4,021,498) (6,923,403) (5,283,208)
Income taxes
payable............ -- 304,042 (229,855)
Prepaid expenses...... (16,417) 240 17,571
Other assets.......... (1,000) -- --
Liability for bank
overdraft.......... -- -- 1,088,561
Accounts
payable -- trade... 1,052,036 2,250,971 (637,007)
Accrued liabilities... 125,261 145,259 (27,258)
----------- ------------- -----------
Net cash used in
operating
activities.... (3,111,515) (4,778,023) (3,504,130)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and
equipment..................... (197,518) (247,838) (47,044)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable and
line of credit................ 5,011,172 5,280,149 3,694,353
Repayments of notes payable and
line of credit................ (1,573,323) (118,523) (63,552)
Change in receivables from
stockholders.................. (132,690) (124,265) (79,253)
----------- ------------- -----------
Net cash
provided by
financing
activities.... 3,305,159 5,037,361 3,551,548
----------- ------------- -----------
NET INCREASE
(DECREASE) IN
CASH AND CASH
EQUIVALENTS... (3,874) 11,500 374
Cash and cash equivalents at
beginning of period................ 12,467 8,593 20,093
----------- ------------- -----------
Cash and cash equivalents at end of
period............................. $ 8,593 $ 20,093 $ 20,467
=========== ============= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during period for
Interest................... $ 325,318 $ 458,660 $ 502,116
Income taxes............... 80,000 $ 65,000 $ 892,555
</TABLE>

F-90
<PAGE>
TEXAS INTERNATIONAL AVIATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND MARCH 31, 1997

NOTE A -- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows.

NATURE OF OPERATIONS

Texas International Aviation, Inc. and its wholly-owned subsidiary TIA
International (collectively, the Company) are engaged in wholesale distribution
of aircraft hardware products. Sales of the Company's products are worldwide.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiary. All significant intercompany balances and
transactions have been eliminated in consolidation.

REVENUE RECOGNITION

Revenue is recognized at the time of shipment.

CASH EQUIVALENTS

The Company considers highly liquid investments with original maturities of
three months or less to be cash equivalents.

INVENTORIES

Inventories are comprised of goods held for resale, which are valued at the
lower of cost (specific identification) or market.

DEPRECIATION

Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives ranging from
5 to 7 years on an accelerated method. Computer software is depreciated using
the straight-line method over three years.

USE OF ESTIMATES

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

INCOME TAXES

Deferred income taxes are determined using the liability method, under
which deferred tax assets and liabilities are determined based on differences
between financial and tax bases of assets and liabilities at the rate expected
to be in effect when taxes become payable.

INTERIM FINANCIAL STATEMENTS

In the opinion of management, the unaudited interim financial statements as
of June 30, 1998 and for the six months ended June 30, 1997 and 1998 include all
adjustments, consisting only of those of a normal recurring nature, necessary to
present fairly the Company's financial position as of June 30, 1998 and the
results of its operations and cash flows for the six months ended June 30, 1997
and 1998. The results of operations for the six months ended June 30, 1997 and
1998 are not necessarily indicative of the results to be expected for the full
year.

F-91
<PAGE>
TEXAS INTERNATIONAL AVIATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE B -- LINE OF CREDIT

The Company has a $12.5 million line of credit with a bank expiring on July
1, 1998. The Company may borrow up to $10 million for operations and up to $5
million on eligible inventory buyback contracts, with total borrowings not to
exceed $12.5 million. Borrowings under the line of credit bear interest at the
lesser of prime or a maximum rate, as defined, (8.5% at December 31, 1997).
Borrowings are collateralized by substantially all assets of the Company. The
Company had $2,464,655 and $7,744,495 available for borrowings under the line of
credit at December 31, 1997 and March 31, 1997, respectively. The line of credit
includes certain restrictive covenants which include, among others, working
capital requirements, interest coverage, and tangible net worth.

NOTE C -- LONG-TERM DEBT

DECEMBER 31, MARCH 31,
1997 1997
------------ ---------
Notes payable to stockholders, in 60
monthly installments, of principal
of $5,705 through January 2001,
plus interest at 7%................ $187,263 $ 237,945
Note payable to a bank bearing
interest at a rate equal to the
lesser of prime or a maximum rate,
as defined, (8.5% at December 31,
1997) due in 36 monthly
installments of principal ($6,945)
plus interest through May 1,
2000............................... 194,440 250,000
Other................................ 1,212 13,184
------------ ---------
382,915 501,129
Less current maturities......... 141,235 153,992
------------ ---------
$241,680 $ 347,137
============ =========

The following are scheduled future maturities of long-term debt at December
31, 1997:

YEAR ENDING
DECEMBER 31,
- -------------------------------------
1998............................... $ 141,235
1999............................... 144,120
2000............................... 91,049
2001............................... 6,511
----------
$ 382,915
==========

F-92
<PAGE>
TEXAS INTERNATIONAL AVIATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE D -- INCOME TAXES

The income tax provision is comprised of the following components:

NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
1997 1997
------------- ----------
Current
Federal......................... $ 347,855 $131,155
State........................... 35,596 4,500
------------- ----------
383,451 135,655
Deferred
Federal......................... (14,113) --
State........................... (1,245) --
------------- ----------
(15,358) --
------------- ----------
Total...................... $ 368,093 $135,655
============= ==========

The income tax provision reconciled to the tax computed at the statutory
Federal rate is as follows:

NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
1997 1997
------------- ----------
Tax at statutory rate................ $ 368,590 $181,222
State income taxes, net of Federal
benefit............................ 23,493 2,970
Impact of foreign sales
corporation........................ (27,517) (43,822)
Other................................ 3,527 (4,715)
------------- ----------
$ 368,093 $135,655
============= ==========

Deferred tax assets consist of the following at December 31, 1997:

Allowance for doubtful accounts...... $ 5,645
Accrued vacation..................... 9,713
---------
$ 15,358
=========

NOTE E -- BENEFIT PLAN

The Company sponsors the Texas International Aviation, Inc. 401(k) Plan
(the Plan). Under the Plan, eligible employees are permitted to contribute to
the Plan up to 20% of gross compensation and the Company matches 50% of the
employees' contributions up to 3% of the employees' gross compensation. Matching
contributions begin vesting after three years of employment at a rate of 20% per
year and fully vest after seven years. The Company made approximately $14,300
and $14,000 of matching contributions during the nine months and year ended
December 31, 1997 and March 31, 1997, respectively.

NOTE F -- CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

A significant portion of the Company's sales are to customers whose
activities are related to the aviation industry, including some who are located
in foreign countries. The Company generally extends credit to these customers
and, therefore, collection of receivables is affected by the economy of the
aviation industry. Also, with respect to foreign sales, collection may be more
difficult in the event of a default.

F-93
<PAGE>
TEXAS INTERNATIONAL AVIATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

However, the Company closely monitors extensions of credit and has not
experienced significant credit losses. Most foreign sales are made to large,
well-established companies.

During the nine months ended December 31, 1997, sales to three customers
were approximately 12% each (total 36%) of the Company's total sales. The loss
of any one of these customers could have a severe impact on the operations of
the Company.

Some product purchases are denominated in foreign currencies. The Company
had foreign currency transaction gains of approximately $65,000 and $1,000 for
the nine months and year ended December 31, 1997 and March 31, 1997,
respectively.

NOTE G -- COMMITMENTS

The Company leases office and warehouse facilities in Grand Prairie, Texas
from a partnership owned by the stockholders. The lease expires December 31,
1997 and rental payments of $7,500 are due monthly. Rent expense for these
facilities was $82,065 and $82,500 for the period ended December 31, 1997 and
March 31, 1997, respectively.

The Company leases office facilities in California, under a lease agreement
classified as an operating lease. Total rent expense for this facility during
1997 was approximately $10,700 and $3,000 for the periods ended December 31,
1997 and March 31, 1997, respectively. The lease expires August 31, 1999 and
rental payments of $1,425 are due monthly.

The Company leases office facilities in Washington under a lease agreement
classified as an operating lease. Total rent expense for this facility for the
period ended December 31, 1997 was approximately $1,900. The lease expires July
16, 1998, and rental payments of $345 are due monthly.

Future minimum rentals on these leases at December 31, 1997 are as follows:

YEAR ENDING
DECEMBER 31,
- -------------------------------------
1998............................... $ 21,341
1999............................... 13,399
---------
$ 34,740
=========

F-94

<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
ASI Aerospace Group, Inc.
San Diego, California

We have audited the accompanying consolidated balance sheets of ASI
Aerospace Group, Inc. and subsidiary as of December 31, 1996 and 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ASI
Aerospace Group, Inc. and subsidiary as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.

McGladrey & Pullen, LLP

San Diego, California
February 20, 1998, except for
Note 13 as to which the date is
August 14, 1998

F-95
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ JUNE 30,
1996 1997 1998
-------------- -------------- -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS (NOTES 6 AND 7)
Current Assets
Cash............................ $ 13,418 $ 12,882 $ 176,249
Trade receivables, net of
allowance for doubtful
accounts of 1996, $78,000;
1997 $54,000;
1998 $59,000 (Note 2)......... 3,443,912 7,644,842 10,210,006
Inventory....................... 11,570,026 25,649,166 29,969,641
Prepaid expenses and other...... 45,905 233,009 344,132
Deferred tax assets (Note 12)... 349,300 1,256,000 1,256,000
-------------- -------------- -----------
TOTAL CURRENT ASSETS....... 15,422,561 34,795,899 41,956,028
-------------- -------------- -----------
Property, Equipment and Leasehold
Improvements, net (Note 4)......... 572,048 1,087,752 1,151,600
-------------- -------------- -----------
Intangibles and Other Assets (Note
5)................................. 1,764,287 4,899,430 4,637,356
-------------- -------------- -----------
$ 17,758,896 $ 40,783,081 $47,744,984
============== ============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Checks outstanding in excess of
bank balances................. $ 159,222 $ 580,982 $ --
Note payable, bank (Note 6)..... -- 13,312,073 17,592,302
Current maturities of long-term
debt (Note 7):
Related parties............ 2,286,697 2,286,697 2,286,697
Other...................... 835,044 1,084,812 1,259,738
Accounts payable, trade......... 4,473,462 7,331,940 8,499,131
Accrued expenses and other (Note
7)............................ 561,910 1,035,726 1,272,583
Income taxes payable............ 11,500 683,000 78,768
-------------- -------------- -----------
Total current
liabilities............. 8,327,835 26,315,230 30,989,219
-------------- -------------- -----------
Long-Term Debt
Note payable, bank (Note 6)..... 3,725,000 -- --
Long-term debt, less current
maturities (Note 7)........... 1,984,415 4,800,233 4,269,151
-------------- -------------- -----------
5,709,415 4,800,233 4,269,151
-------------- -------------- -----------
Commitments (Notes 3, 8, 10 and 11)
Redeemable Preferred Stock,
redemption value $1,000
per share (Note 10)................ 1,800,000 1,800,000 1,800,000
-------------- -------------- -----------
Stockholders' Equity (Note 6)
Common stock, $.01 par value;
authorized 1,000 shares;
issued and outstanding 113
shares........................ 1 1 1
Additional paid-in capital...... 833,975 2,886,975 2,886,975
Retained earnings............... 1,087,670 4,980,642 7,799,638
-------------- -------------- -----------
1,921,646 7,867,618 10,686,614
-------------- -------------- -----------
$ 17,758,896 $ 40,783,081 $47,744,984
============== ============== ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-96
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1996 1997
------------ -------------- --------------
Net sales (Note 2)................... $ 8,525,062 $ 24,587,196 $ 53,551,932
<S> <C> <C> <C>
Cost of goods sold................... 7,167,319 17,663,851 37,479,851
------------ -------------- --------------
Gross profit............... 1,357,743 6,923,345 16,072,081
General and administrative
expenses........................... 1,646,829 4,483,990 8,294,754
------------ -------------- --------------
Operating income (loss).... (289,086) 2,439,355 7,777,327
------------ -------------- --------------
Nonoperating (income) expense:
Interest expense (Note 7)....... 189,231 700,223 1,388,836
Other (income) expense (Note
3)............................ (30,135) 82,998 98,519
------------ -------------- --------------
159,096 783,221 1,487,355
------------ -------------- --------------
Income (loss) before
taxes................... (448,182) 1,656,134 6,289,972
Provision for income taxes (Note
12)................................ 1,600 49,700 2,181,000
------------ -------------- --------------
Net income (loss).......... $ (449,782) $ 1,606,434 $ 4,108,972
============ ============== ==============
Basic and diluted income (loss) per
share.............................. $ (4,223) $ 14,216 $ 34,451
============ ============== ==============
Weighted average common shares
outstanding........................ 106.5 113 113
============ ============== ==============
</TABLE>

SIX MONTHS ENDED JUNE 30,
------------------------------
1997 1998
-------------- --------------
(UNAUDITED)
Net sales (Note 2)................... $ 21,935,091 $ 36,458,662
Cost of goods sold................... 15,567,862 24,969,097
-------------- --------------
Gross profit............... 6,367,229 11,489,565
General and administrative
expenses........................... 3,277,871 5,316,138
-------------- --------------
Operating income........... 3,089,358 6,173,427
-------------- --------------
Nonoperating expense:
Interest expense (Note 7)....... 492,448 1,041,431
Other expense................... 3,768 --
-------------- --------------
496,216 1,041,431
-------------- --------------
Income before income
taxes................... 2,593,142 5,131,996
Provision for income taxes (Note
12)................................ 964,000 2,097,000
-------------- --------------
Net income................. $ 1,629,142 $ 3,034,996
============== ==============
Basic and diluted income per share... $ 13,461 $ 25,903
============== ==============
Weighted average common shares
outstanding........................ 113 113
============== ==============

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-97
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)

<TABLE>
<CAPTION>
COMMON STOCK
$.01 PAR VALUE, 1,000
SHARES AUTHORIZED
--------------------- RETAINED
ISSUED AND ADDITIONAL EARNINGS/
OUTSTANDING PAID-IN (ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT) TOTAL
----------- ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994........... 100 $ 1 $ 446,684 $ (68,982) $ 377,703
Issuance of 13 shares of common
stock......................... 13 -- 591 -- 591
Net (loss)...................... -- -- -- (449,782) (449,782)
--- ------ ---------- ------------ -----------
Balance, December 31, 1995........... 113 1 447,275 (518,764) (71,488)
Effects of intercorporate tax
allocations (Note 12)......... -- -- 386,700 -- 386,700
Net income...................... -- -- -- 1,606,434 1,606,434
--- ------ ---------- ------------ -----------
Balance, December 31, 1996........... 113 1 833,975 1,087,670 1,921,646
Effects of intercorporate tax
allocations (Note 12)......... -- -- 2,053,000 -- 2,053,000
Dividends (Note 10)............. -- -- -- (216,000) (216,000)
Net income...................... -- -- -- 4,108,972 4,108,972
--- ------ ---------- ------------ -----------
Balance, December 31, 1997........... 113 1 2,886,975 4,980,642 7,867,618
UNAUDITED INFORMATION:
Dividends (Note 10)............. -- -- -- (216,000) (216,000)
Net income for the six months
ended June 30, 1998........... -- -- -- 3,034,996 3,034,996
--- ------ ---------- ------------ -----------
Balance, June 30, 1998 (Unaudited)... 113 $ 1 $2,886,975 $7,799,638 $10,686,614
=== ====== ========== ============ ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-98
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------- --------------------------
1995 1996 1997 1997 1998
---------- ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................. $ (449,782) $ 1,606,434 $ 4,108,972 $ 1,629,142 $ 3,034,996
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and
amortization................ 64,027 202,084 410,769 158,718 328,667
Inventory reserve.............. 646,939 -- -- -- 270,000
Loss on disposal of
equipment................... -- 3,521 -- -- 6,716
Deferred income taxes.......... -- 37,400 1,146,000 514,765 --
Change in working capital components,
net of effects of business
combinations:
(Increase) decrease in:
Trade receivables.............. (153,288) (1,116,618) (2,045,504) (3,118,037) (2,565,164)
Inventory...................... 197,003 (4,294,249) (10,470,184) (4,158,416) (4,590,475)
Prepaid expenses and other..... (32,886) 3,827 (163,739) (23,281) (111,123)
Increase (decrease) in:
Accounts payable, trade........ 212,043 2,984,852 827,981 1,757,278 1,167,191
Accrued expenses and other..... (19,921) 379,686 473,816 100,266 236,857
Income taxes payable........... -- 11,500 671,500 449,440 (604,232)
---------- ------------ ------------ ----------- -----------
Net cash provided by (used
in) operating activities.. 464,135 (181,563) (5,040,389) (2,690,125) (2,826,567)
---------- ------------ ------------ ----------- -----------
Cash Flows from Investing Activities
Payments for purchase of
businesses..................... (236,029) (6,434,840) (5,017,475) -- --
Purchase of equipment............ (24,269) (59,081) (472,660) (282,559) (392,360)
Increase in deposits and other
assets, net.................... (17,794) (32,290) (209,357) (679,257) 83,268
Proceeds from sales of property
and equipment.................. -- 45,000 -- -- 171,935
Proceeds from stockholder
receivable..................... -- 10,500 -- -- --
---------- ------------ ------------ ----------- -----------
Net cash (used in) investing
activities................ (278,092) (6,470,711) (5,699,492) (961,816) (137,157)
---------- ------------ ------------ ----------- -----------
Cash Flows from Financing Activities
Checks outstanding in excess of
bank balances.................. -- 159,222 421,760 822,113 (580,982)
Net borrowings on note payable,
bank........................... -- 3,725,000 9,587,073 3,332,146 4,280,229
Principal payments on long-term
debt........................... (25,680) (571,273) (990,984) (424,097) (556,156)
Borrowings on long-term debt..... (5,892) 3,004,870 1,937,496 152,329 200,000
Cash dividends paid.............. -- -- (216,000) (216,000) (216,000)
Proceeds from issuance of common
stock.......................... 591 -- -- -- --
---------- ------------ ------------ ----------- -----------
Net cash provided by (used
in) financing activities.. (30,981) 6,317,819 10,739,345 3,666,491 3,127,091
---------- ------------ ------------ ----------- -----------
Net increase (decrease) in
cash...................... 155,062 (334,455) (536) 14,550 163,367
Cash, beginning...................... 192,811 347,873 13,418 13,418 12,882
---------- ------------ ------------ ----------- -----------
Cash, ending......................... $ 347,873 $ 13,418 $ 12,882 $ 27,968 $ 176,249
========== ============ ============ =========== ===========
</TABLE>

F-99
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------- --------------------------
1995 1996 1997 1997 1998
---------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Supplemental Disclosures of Cash Flow
Information
Cash payments for:
Interest...................... $ 173,736 $ 584,425 $ 1,303,577 $ 426,128 $ 974,114
========== ============ ============ =========== ===========
Income taxes.................. $ 3,200 $ 800 $ 433,706 $ 14,600 $ 2,652,000
========== ============ ============ =========== ===========
Supplemental Schedule of Noncash
Financing Activities:
Capital lease obligations
incurred for use of
equipment..................... $ 28,211 $ 135,692 $ 152,329
========== ============ ============
Effects of intercorporate tax
allocation.................... $ -- $ 386,700 $ 2,053,000
========== ============ ============
Acquisition of Businesses (Note 9):
Purchase Price:
Cash paid..................... $ 236,029 $ 6,434,840 $ 5,017,475
Debt to sellers............... 253,044 -- 1,876,678
---------- ------------ ------------
$ 489,073 $ 6,434,840 $ 6,894,153
========== ============ ============
Assets Acquired:
Working capital acquired........ $ 469,073 $ 4,585,391 $ 3,757,249
Fair value of other assets
acquired, principally
equipment..................... 20,000 424,594 128,835
Costs in excess of net assets of
businesses acquired........... -- 1,424,855 3,098,133
Long-term liabilities assumed... -- -- (90,064)
---------- ------------ ------------
$ 489,073 $ 6,434,840 $ 6,894,153
========== ============ ============
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-100
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

ASI Aerospace Group, Inc. (an eighty-eight percent owned subsidiary of West
Coast Aero Products Holding Company (WCAPHC)) and subsidiary (individually or
collectively, the "Company") is a distributor of specialty fasteners,
primarily for the aircraft and aerospace industry. The Company grants credit in
the form of accounts receivable to its customers which are located primarily
throughout the United States and internationally. Sales to international
customers during the year ended December 31, 1997 were approximately 5%. All
sales are transacted in U.S. dollars.

A summary of the Company's significant accounting policies follows:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Pollard Aviation, Inc. All material
intercompany balances and transactions have been eliminated in consolidation.

USE OF ESTIMATES

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

FINANCIAL INSTRUMENTS

The carrying amounts reported in the consolidated balance sheets for cash,
accounts receivable, accounts payable and short-term debt approximate fair value
due to the immediate short-term maturity of these financial instruments.

Based on the borrowing rates currently available to the Company for bank
loans with similar maturities and similar collateral requirements, the fair
value of notes payable and long-term debt approximates the carrying amount.

CASH

The Company maintains its cash accounts primarily in one commercial bank
located in California. Accounts at this bank are insured by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000. The Company's accounts at this
institution, at times, may exceed the federally insured limit. The Company has
not experienced any losses in such accounts.

INVENTORY

Inventory is stated at lower of cost (weighted average method) or market
and consists entirely of products for resale. The Company periodically reviews
the age and turnover of its inventory to determine whether any inventory has
become obsolete or has declined in value and incurs a charge to operations for
known and estimated inventory obsolescence. Inventory quantities in excess of a
four-year supply based on projected and historical sales levels have been
reduced to their net realizable value. It is reasonably possible that additional
adjustments to reduce inventory to market value will be required in the future.

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements are recorded at cost.
Depreciation on property and equipment is computed utilizing the straight-line
method over the estimated useful lives ranging from 5 to 7 years. Leasehold
improvements are amortized utilizing the straight-line method over the lesser of
the term of the leases or the estimated useful lives of the improvements.
Amortization of equipment acquired under capital leases is included with
depreciation expense on owned assets.

F-101
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTANGIBLE ASSETS

The Company's intangible asset "costs in excess of net assets of
businesses acquired" is amortized utilizing the straight-line method over 15
years.

Non-competition agreements with former owners of businesses acquired are
expensed on a straight-line basis over the lives of the respective agreements.
Organization costs are being amortized over 3 years.

IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS

In accordance with FASB Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
records impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. The Company continually evaluates the
recovery of its intangible assets by assessing whether the amortization of the
balance over its estimated remaining life can be recovered based upon operating
income, cash flows and business prospects.

The Company does not believe an impairment of its long-lived assets used in
operations or its intangible assets has occurred.

INCOME TAXES

The Company recognizes deferred tax assets for deductible temporary
differences and deferred tax liabilities for taxable temporary differences.
Temporary differences are the differences between the reported amount of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.

ADVERTISING AND PROMOTION

Costs associated with advertising and promotion are expensed in the year
incurred.

EARNINGS PER SHARE

The Company follows the provisions of Statement of Financial Accounting
Standards No. 128 (SFAS 128), Earnings per Share. In computing earnings per
share for the year ended December 31, 1997 and unaudited earnings per share for
the six month periods ended June 30, 1997 and 1998, dividends on preferred stock
were deducted from net income in calculating basic earnings per share. The
Company has no dilutive potential common shares. Accordingly, the Company's
presentation of diluted earnings (loss) per share is the same as that of basic
earnings (loss) per share for the years ended December 31, 1995, 1996 and 1997.

INTERIM FINANCIAL INFORMATION (UNAUDITED)

The accompanying balance sheet as of June 30, 1998 and the statements of
operations and cash flows for the six month periods ended June 30, 1997 and
1998, respectively, have not been audited. However, these financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In management's opinion, the accompanying
interim financial statements reflect all material adjustments (consisting only
of normal recurring accruals) necessary for a fair statement of the results for
the interim periods presented. The results for the interim periods are not
necessarily indicative of the results which will be reported for the entire
year.

F-102
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2. CONCENTRATIONS

The Company performs ongoing credit evaluation of its customers and
generally does not require collateral. Provisions are made for estimated
uncollectible trade receivables as considered necessary. To date, losses on
trade receivables have been minimal in relation to the volume of sales and have
been within management's expectations.

Net sales and accounts receivable include sales to and accounts receivable
from the following major customers.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------------
1995 1996 1997
-------------------------- -------------------------- ---------------------------
NET NET NET NET NET NET
SALES RECEIVABLES SALES RECEIVABLES SALES RECEIVABLES
---------- ------------ ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Customer A........................... $1,156,297 $ 55,593 $5,799,826 $636,404 $16,260,993 $ 1,996,032
Customer B........................... -- -- 2,638,029 168,307 -- --
---------- ------------ ---------- ------------ ----------- ------------
$1,156,297 $ 55,593 $8,437,855 $804,711 $16,260,993 $ 1,996,032
========== ============ ========== ============ =========== ============
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, (UNAUDITED)
---------------------------------------------------------
1997 1998
-------------------------- ---------------------------
NET NET NET NET
SALES RECEIVABLES SALES RECEIVABLES
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Customer A........................... $6,636,950 $ 1,408,298 $11,083,781 $ 2,721,049
========== ============ =========== ============
</TABLE>

The net sales to Customer B did not exceed 10% of net sales for the years
ended December 31, 1995 and 1997.

NOTE 3. INVESTMENT IN JITCO, LLC

The Company is a 50% member in JITCO, LLC (JITCO) at December 31, 1997. The
Company may be required to make additional capital contributions to JITCO at
such time as additional working capital is needed for the operation of the
business. Members' contributions are pro rata based on their respective
ownership percentages. The Company is accounting for its investment in JITCO by
the equity method of accounting and the net investment of approximately $11,500
and $20,000 is included in deposits and other assets as of December 31, 1996 and
1997, respectively.

The following are the approximate reported assets, liabilities, revenues,
and expenses of JITCO as of and for the years ended December 31:

1996 1997
---------- ------------
Assets............................... $ 334,100 $ 1,924,000
Liabilities.......................... $ 216,400 $ 1,876,000
Revenues............................. $ 22,200 $ 2,045,000
Expenses............................. $ 114,500 $ 2,258,000

The Company's share in the net loss of JITCO was approximately $18,500 and
$106,000 for the years ended December 31, 1996 and 1997, respectively, and is
included in other expense in the Company's consolidated statements of
operations.

At December 31, 1997, the Company has guaranteed the payment of up to
$120,000 of certain notes payable to a bank by JITCO.

F-103
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:

DECEMBER 31, JUNE 30,
------------------------ 1998
1996 1997 (UNAUDITED)
---------- ------------ -----------
Office furniture and equipment....... $ 500,786 $ 939,456 $ 1,153,990
Leasehold improvements............... 81,875 121,800 242,468
Building............................. 93,000 93,000 --
---------- ------------ -----------
675,661 1,154,256 1,396,458
Less accumulated depreciation and
amortization....................... 160,613 343,806 369,855
---------- ------------ -----------
515,048 810,450 1,026,603
Construction in progress............. -- 220,302 124,997
Land................................. 57,000 57,000 --
---------- ------------ -----------
$ 572,048 $ 1,087,752 $ 1,151,600
========== ============ ===========

NOTE 5. INTANGIBLE AND OTHER ASSETS

Intangible and other assets consist of the following:

DECEMBER 31,
-------------------------- 1998
1996 1997 (UNAUDITED)
------------ ------------ -----------
Costs in excess of net assets of
businesses acquired, less
accumulated amortization of 1996
$137,426; 1997 $336,325; 1998
$483,493........................... $ 1,663,081 $ 4,579,745 $ 4,420,087
Organization costs, net of
accumulated amortization of 1996
$20,926; 1997 $34,882; 1998
$41,860............................ 48,532 34,576 27,598
Covenant not to compete, less
accumulated amortization of 1997
$13,333; 1998 $25,833.............. -- 111,667 99,167
Deposits and other assets (Note 3)... 52,674 173,442 90,504
------------ ------------ -----------
$ 1,764,287 $ 4,899,430 $ 4,637,356
============ ============ ===========

NOTE 6. NOTE PAYABLE, BANK

The Company has a revolving line of credit agreement with a commercial
bank. The agreement allows for advances up to a maximum of $19,000,000, of which
approximately $13,300,000 was outstanding and approximately $1,500,000 was
available for borrowing at December 31, 1997. Borrowings are limited to 80% of
the Company's eligible domestic trade receivables plus 70% of eligible foreign
accounts and 50% of eligible inventory up to $9,000,000, as defined by the
agreement. The line of credit bears interest at LIBOR (5.69% at December 31,
1997) plus 3%. The Company may elect to fix the rate under this line of credit
at the bank's prime rate (8.5% at December 31, 1997) plus an applicable margin
ranging from 2.25% to 3% based on the Company's total liabilities to tangible
net worth at the time, as defined by the agreement. Advances are collateralized
by substantially all of the Company's assets and the line of credit agreement
expires in August 1998. As of December 31, 1996, the balance outstanding on this
agreement of $3,725,000 was classified as long-term based on an expiration date
greater than one year in the future. The Company had an adequate borrowing base
to support this balance and did not intend to pay down the balance within a
twelve-month period.

F-104
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with this credit agreement as well as other obligations (Note
7), the Company has agreed, among other things, to maintain certain consolidated
financial ratios and consolidated amounts, including:

o a current ratio of not less than 1.20 to 1.0

o a minimum tangible net worth, as defined, of $6,500,000 at December 31,
1997

o a total debt to tangible net worth ratio not to exceed 4.25 to 1.0

o minimum profitability of $1,000,000

o a minimum debt service ratio of 1.35 to 1.0

o annual limit on capital expenditures of $700,000

The agreement also provides for certain covenants including restrictions on
new indebtedness or loans other than trade debt or loans incurred in the normal
course of business, paying dividends on Company stock other than the 12%
cumulative preferred stock dividends, purchasing or retiring any Company stock,
or amending or altering the Company's capital structure. The agreement requires
the bank's preapproval for any and all business acquisitions.

NOTE 7. LONG-TERM DEBT

Long-term debt consists of the following:

DECEMBER 31,
--------------------------
1996 1997
------------ ------------
Note payable to a bank, due in
monthly installments of $62,500,
plus interest at 1.5% above the
bank's prime rate through November
2002 (a) (c)....................... $ 2,500,000 $ 3,687,500
Unsecured subordinated note payable
to a related party, due on demand,
monthly interest only payments at
11.2%.............................. 1,600,000 1,600,000
Unsecured subordinated notes payable
to various related parties, due on
demand, monthly interest only
payments at 12.0%.................. 686,697 686,697
Unsecured subordinated note payable
to former owner of acquired
business, due July 2002, annual
interest only payments at 10%...... -- 500,000
Unsecured notes payable to former
owners of acquired businesses, due
in aggregate monthly installments
of $24,371 including interest at
10% through August 2007............ -- 1,298,924
Note payable to former owner of
acquired business, due in monthly
payments of $5,027 including
interest at 7.0% through May 2000
(b)................................ 185,507 136,451
Other................................ 133,952 262,170
------------ ------------
5,106,156 8,171,742
Less current maturities.............. 3,121,741 3,371,509
------------ ------------
$ 1,984,415 $ 4,800,233
============ ============

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

(a) Subject to the loan agreement covenants on the revolving line of credit
(Note 6) and collateralized by substantially all assets of the Company.

(b) These amounts are collateralized by certain inventory and trade receivables.

(c) Interest under this note may be fixed by the Company for terms of not less
than 30 days at the then current LIBOR rate plus 3.5%. At December 31, 1997
the Company had elected to fix the rate on the entire outstanding balance at
the LIBOR rate option.

F-105
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Approximate aggregate annual maturities on long-term debt at December 31,
1997 are as follows:

YEARS ENDING DECEMBER 31,
- -------------------------------------
1998............................ $ 3,372,000
1999............................ 1,068,000
2000............................ 1,042,000
2001............................ 996,000
2002............................ 1,366,000
Thereafter...................... 328,000
------------
$ 8,172,000
============

During the years ended December 31, 1995, 1996 and 1997, the Company
incurred approximately $188,000, $263,000 and $310,000, respectively, in
interest expense to related parties of which approximately $83,000 and $187,000
are included in accrued expenses and other at December 31, 1996 and 1997,
respectively.

During the six-month periods ended June 30, 1997 and 1998, the Company
incurred approximately $137,000 and $145,000 in interest expense, respectively,
to related parties, of which approximately $42,000 and $73,000 are included in
accrued expenses and other at June 30, 1997 and 1998, respectively.

NOTE 8. LEASE COMMITMENTS

OPERATING LEASES

The Company leases its office and warehouse facilities under noncancelable
operating lease agreements expiring through July 2002. The leases provide for
aggregate monthly payments of approximately $41,000. The Company also leases
certain equipment under noncancelable operating lease agreements expiring
through August 2000. The equipment leases provide for aggregate monthly payments
of approximately $3,200. Total rental expense included in the consolidated
statements of operations for the years ended December 31, 1995, 1996 and 1997
was approximately $108,000, $212,000 and $396,000, respectively.

Rent expense for the six months ended June 30, 1997 and 1998 totaled
$147,000 and $113,000, respectively.

At December 31, 1997, the approximate aggregate future annual minimum lease
commitments due under noncancelable operating leases are as follows:

YEARS ENDING DECEMBER 31,
- -------------------------------------
1998............................ $ 406,000
1999............................ 373,000
2000............................ 313,000
2001............................ 306,000
2002............................ 116,000
------------
Total minimum lease
payments................ $ 1,514,000
============

F-106
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. BUSINESS ACQUISITIONS

In July 1997 the Company acquired the net assets of Adams Supply Company
(Adams), a distributor of specialty fasteners, located in Torrance, California.
The purchase price of approximately $5,920,000 consisted of cash of
approximately $4,567,000 and notes payable to the sellers of $1,352,000.

In June 1997 the Company acquired the net assets of Paschall International
(Paschall), a distributor of commercial airline internal components, located in
Pasadena, California. The purchase price of approximately $974,000 consisted of
cash of approximately $450,000 and a note payable to the former owner of
$525,000.

In March 1996 the Company acquired the net assets of Barco Aviation, Inc.,
(Barco) a distributor of specialty fasteners to the aerospace industry located
in Santa Monica, California. The purchase price of $6,434,840 was paid in cash.

In June 1995 the Company acquired the net assets of Pollard, a distributor
of specialty fasteners, located in Dallas, Texas. The purchase price consisted
of $236,029 in cash and a promissory note payable to the former owner of
$253,044.

Each of these acquisitions were accounted for as purchase business
combinations with the operations of the acquired business included in the
Company's consolidated financial statements subsequent to the acquisition date.
Barco, Paschall and Adams are operating as divisions of the Company.

The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and the acquired divisions as
if the acquisitions had occurred January 1, 1996.

1996 1997
-------------- --------------
Net sales............................ $ 39,949,000 $ 61,931,000
Net income........................... 2,283,000 6,690,000
Earnings per common share............ 20,204 57,292

These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as additional amortization
expense as a result of goodwill and other intangible assets, and an increased
interest expense on acquisition debt. They do not purport to be indicative of
the results of operations which actually would have resulted had the
combinations been in effect on January 1, 1996, or of the results of operations
of the consolidated entities.

NOTE 10. REDEEMABLE PREFERRED STOCK

The Company has 1,800 shares of mandatory redeemable preferred stock
authorized, issued and outstanding which is redeemable by the holder on April 1,
2001 at $1,000 per share.

During the year ended December 31, 1995, the Company, with the approval of
the preferred stockholders, amended the articles of incorporation to waive the
preferred stock 12% accrued dividends and any future dividends on preferred
stock until May 1, 1996. Payments on the dividends resumed in May 1997 and will
continue annually thereafter. The majority of WCAPHC's common stockholders are
also preferred stockholders. The Company declared and paid dividends of $216,000
($120 per share) to stockholders of record during the year ended December 31,
1997.

NOTE 11. BENEFIT PLAN

The Company has a 401(k) plan for those employees who meet the eligibility
requirements set forth in the Plan. The Company is required to match a minimum
of 50% of the employees' elective deferral contributions up to 10% of
compensation. The Company contributed $57,906 and $117,341 to the Plan for the
years ended December 31, 1996 and 1997, respectively. During the six month
periods ended June 30, 1997 and 1998, the Company contributed $49,669 and
$79,875 to the Plan.

F-107
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and tax purposes. Significant components of the Company's net deferred tax
assets at December 31, 1995, 1996 and 1997 are as follows:

1995 1996 1997
------------ ------------ ------------
Deferred tax assets:
Inventory....................... $ 552,300 $ 670,500 $ 1,038,300
Accounts receivable............. 2,100 31,000 21,600
Accrued expenses and other...... 61,800 31,200 62,400
State income taxes.............. 500 -- 210,400
Net operating loss
carryforwards................. 329,000 24,900 --
------------ ------------ ------------
945,700 757,600 1,332,700
Less valuation allowance........ (944,700) (334,900) --
------------ ------------ ------------
1,000 422,700 1,332,700
------------ ------------ ------------
Deferred tax liabilities, other...... (1,000) (73,400) (76,700)
------------ ------------ ------------
Net deferred tax assets.... $ -- $ 349,300 $ 1,256,000
============ ============ ============

The provision for income taxes consists of the following for the years
ended December 31, 1995, 1996 and 1997:

1995 1996 1997
--------- ---------- ------------
Current:
Federal income tax.............. $ -- $ 386,700 $ 2,469,000
State income tax................ 1,600 12,300 618,700
Deferred:
Federal deferred tax
(benefit)..................... -- (174,600) (674,700)
State deferred tax (benefit).... -- 129,400 (207,100)
Benefit of utilization of net
operating losses.............. -- (304,100) (24,900)
--------- ---------- ------------
$ 1,600 $ 49,700 $ 2,181,000
========= ========== ============

The provisions for income taxes for the six-month periods ended June 30,
1997 and 1998 were calculated using the Company's effective tax rate expected to
be applicable for the full year.

Realization of deferred tax assets is dependent upon sufficient future
taxable income during the period that deductible temporary differences and
carryforwards are expected to be available to reduce taxable income. Based upon
the Company's current level of profitability, management is reasonably certain
the Company will generate taxable income in future years sufficient to realize
the full benefit of its deferred taxes. Accordingly, no valuation allowance was
recorded as of December 31, 1997. In the event the Company does not generate
sufficient future taxable income, the amount of deferred tax assets will be
reduced.

The Company is a member of a group that files consolidated federal and
unitary state tax returns. Accordingly, income taxes payable to the tax
authorities is recognized on the financial statements of the parent company who
is the taxpayer for income tax purposes. The members of the consolidated group
generally record a benefit (expense) for any member of the group for the income
tax reductions (additions) resulting from the members' inclusion in the
consolidated return. This allocation approximates the amounts that would be
reported if the Company was separately filing its tax returns. The parent
company, WCAPHC, and affiliate have unequivocally and irrevocably foregone their
rights to receive payments from

F-108
<PAGE>
ASI AEROSPACE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company for such benefits. Accordingly, the results of these intercorporate
tax allocations is reported on the accompanying consolidated statements of
stockholders' equity as a credit to additional paid-in capital for the years
ended December 31, 1996 and 1997.

A reconciliation of the effective tax rates with the federal statutory rate
is as follows:

DECEMBER 31,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
Income tax at 34% statutory rate..... $ (152,900) $ 563,100 $ 2,138,600
Nondeductible expenses............... 3,800 19,800 30,600
State income taxes, net of federal
tax benefit........................ (25,400) 103,300 354,300
Effect of operating loss with no
current year tax benefit........... 171,000 -- --
Change in valuation allowance,
including effect of net
operating loss carryover........... -- (609,800) (334,900)
Other................................ 5,100 (26,700) (7,600)
------------ ------------ ------------
$ 1,600 $ 49,700 $ 2,181,000
============ ============ ============

NOTE 13. SUBSEQUENT EVENT

On August 14, 1998, Pentacon, Inc. (Pentacon) and the stockholders of the
Company signed a definitive agreement for the acquisition of all of the
outstanding shares of the Company. All rights and obligations of the parties are
subject to obtaining all required corporate and regulatory approvals.

F-109

<PAGE>
==============================================================================

WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THE PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL OR
BUY ANY SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN
THIS PROSPECTUS IS CURRENT AS OF MAY 11, 1999.

-----------------------------
TABLE OF CONTENTS
-----------------------------

PAGE
----
Available Information................ i
Summary.............................. 1
Risk Factors......................... 11
The Exchange Offer................... 17
Use of Proceeds...................... 26
Capitalization....................... 27
Selected Financial Data.............. 28
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 30
Business............................. 39
Management........................... 48
Certain Transactions................. 53
Principal Stockholders............... 55
Description of Bank Credit
Facility........................... 56
Description of the Notes............. 58
Book Entry; Delivery and Form........ 89
Registration Rights.................. 90
Plan of Distribution................. 91
Certain United States Federal Income
Tax Considerations................. 91
Legal Matters........................ 94
Experts.............................. 94
Incorporation of Certain Documents
by Reference ...................... 94
Index to Financial Statements........ F-1

[PENTACON LOGO]

OFFER TO EXCHANGE 12 1/4% SENIOR
SUBORDINATED NOTES
DUE 2009, SERIES B

FOR ALL OUTSTANDING 12 1/4% SENIOR
SUBORDINATED NOTES
DUE 2009, SERIES A

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

May 11 , 1999

================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware empowers a corporation 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, whether civil, criminal, administrative or
investigative (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, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.

Subsection (b) of Section 145 empowers a corporation 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, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, 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, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or 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 the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.

Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
in the 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; that indemnification provided for by Section 145
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.

Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit.

Article 7 of the Company's Amended and Restated Certificate of
Incorporation states that:

No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or

II-1
<PAGE>
(iv) for any transaction from which the director derived an improper personal
benefit. If the DGCL is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the DGCL, as so amended. Any repeal or modification of this
Section by the stockholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.

The Company has entered into indemnification agreements with each of its
executive officers and directors.

In November 1997, Messrs. Grossman and Pugh, each principals in MGCV,
became officers of Alatec in order to assist in, facilitate and expedite the
audit process in connection with the Offering. Alatec and Mr. List, its sole
stockholder, have agreed to indemnify Messrs. Grossman and Pugh against various
claims, damages, costs and expenses that might be incurred by them as officers
of Alatec, including their execution of representation letters to Alatec's
accountants.

These limitations on liability would apply to violations of the federal
securities laws. However, the registrant has been advised that in the opinion of
the SEC, indemnification for liabilities under the Securities Act of 1933 is
against public policy and therefore unenforceable.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

II-2
<PAGE>
10.4 -- Form of Waiver and Schedule of
Signatories (incorporated herein by
reference to Exhibit 10.12 to Company's
Registration Statement on Form S-1/A
(No. 333-41383)).
10.5 -- Form of Recontribution Agreement and
Schedule of Signatories (incorporated
herein by reference to Exhibit 10.13 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.6 -- Employment Agreement with James Jackson
(incorporated herein by reference to
Exhibit 10.14 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.7 -- Agreement and Plan of Organization
respecting AXS Solutions, Inc. dated as
of December 1, 1997 (incorporated herein
by reference to Exhibit 10.2 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.8 -- Agreement and Plan or Organization
respecting Capitol Bolt & Supply, Inc.
dated as of December 1, 1997
(incorporated herein by reference to
Exhibit 10.3 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.9 -- Agreement and Plan of Organization
respecting Maumee Industries, Inc. dated
as of December 1, 1997 (incorporated
herein by reference to Exhibit 10.4 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.10 -- Agreement and Plan of Organization
respecting Sales Systems, Limited dated
as of December 1, 1997 (incorporated
herein by reference to Exhibit 10.5 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.11 -- Employment Agreement with Mark Baldwin
(incorporated herein by reference to
Exhibit 10.6 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.12 -- Employment Agreement with Bruce Taten
(incorporated herein by reference to
Exhibit 10.7 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.13 -- Employment Agreement with Brian Fontana
(incorporated herein by reference to
Exhibit 10.8 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.14 -- Form of Officer and Director
Indemnification Agreement (incorporated
herein by reference to Exhibit 10.9 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.15 -- Amended and Restated Credit Agreement
with NationsBank (incorporated herein by
reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K405
for the year ended September 30, 1998).
10.16 -- First Amendment to Amended and Restated
Credit Agreement (incorporated herein by
reference to Exhibit 10.17 to the
Company's Quarterly Report on Form 10-Q
for the quarter ended December 31,
1998).
10.17 -- Second Amendment to Amended and Restated
Credit Agreement (incorporated herein by
reference to Exhibit 10.18 to the
Company's Quarterly Report on Form 10-Q
for the quarter ended December 31,
1998).
10.18+ -- Third Amendment to Amended and Restated
Credit Agreement.
10.19+ -- Fourth Amendment to Amended and Restated
Credit Agreement.
12.1+ -- Computation of Ratio of Earnings to
Fixed Charges.
21.1+ -- Subsidiaries of the Registrant.
23.1* -- Consent of Ernst & Young LLP.
23.2* -- Consent of McGladrey & Pullen, LLP.
23.3* -- Consent of Grant Thornton LLP.
23.4+ -- Consent of Andrews & Kurth L.L.P.
(Included in Exhibit 5.1).
24.1+ -- Powers of Attorney. (Included in the
signature pages hereto).
25.1+ -- Statement of Eligibility of State Street
Bank and Trust Company, Trustee on Form
T-1.
99.1 -- Press Release, dated August 17, 1998
(incorporated herein by reference to
Exhibit 99.1 to the Company's Form 8-K
filed August 24, 1998).

II-3
<PAGE>
99.2 -- Press Release, dated May 26, 1998
(incorporated herein by reference to
Exhibit 99.1 to the Company's Form 8-K
filed June 11, 1998).
99.3+ -- Form of Letter of Transmittal.
99.4+ -- Form of Notice of Guaranteed Delivery.
99.5+ -- Form of Letter to Clients.
99.6+ -- Form of Letter to Nominees.
99.7+ -- Form of Instruction to Registered
Holders from Beneficial Owner.
- ------------
* Filed herewith.
+ Filed previously.

ITEM 22. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the 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 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 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 registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the 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 registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and

(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 registration
statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.

(3) To remove from registration by means of a 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 Items 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

II-4
<PAGE>
includes information contained in documents filed subsequent to the
effective date of the 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 registration statement when
it became effective.

II-5
<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 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on May 7, 1999.

PENTACON, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President,
Chief Administrative Officer,
Corporate Secretary and General Counsel

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* Chairman of the Board and Chief Executive Officer
Mark E. Baldwin (Principal Executive Officer)

* Senior Vice President and Chief Financial Officer
Brian Fontana (Principal Financial and Accounting Officer)

* Director
Jack L. Fatica

II-6

<PAGE>
SIGNATURE TITLE
--------- -----

* Director
Robert M. Chiste

* Director
Cary M. Grossman

* Director
Donald B. List

* Director
Mary E. McClure

* Director
Michael W. Peters

* Director
Benjamin E. Spence, Jr.

Director
Clayton K. Trier

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-7

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrants set forth below have duly caused this Amendment No. 1 to the
Registration Statement to be signed on their behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas, on May 7,
1999.

EACH OF THE GUARANTORS
NAMED ON SCHEDULE A-1
HERETO (THE "GUARANTORS")

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary
of each of the Guarantors

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* Chairman, President, Chief Financial
Donald B. List Officer and Director of each of the
Guarantors (Principal Executive,
Financial and Accounting Officer)

/s/ BRUCE M. TATEN Director of each of the Guarantors
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-8

<PAGE>

SCHEDULE A-1

Alatec Cable Harness & Assembly Division, Inc.

Alatec Fastener and Component Group, Inc.

Alatec Race, Inc.

Trace Alatec Supply Company, Inc.

II-9

<PAGE>

SIGNATURES

EACH OF THE GUARANTORS
NAMED ON SCHEDULE A-2
HERETO (THE "GUARANTORS")

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary
of each of the Guarantors

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President and Director of
Donald B. List each of the Guarantors (Principal
Executive Officer)

* Vice President & Treasurer of
Steve Greene each of the Guarantors (Principal
Financial and Accounting Officer)

/s/ BRUCE M. TATEN Director of each of the Guarantors
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-10

<PAGE>

SCHEDULE A-2

ASI Aerospace Group, Inc.

Pollard Acquisition Corp.

II-11

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant set forth below have duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, State of Texas, on May 7, 1999.

ALATEC INTERNATIONAL SALES, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Vice President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President, Chief Financial Officer
Donald B. List and Director (Principal Executive,
Financial and Accounting Officer)

* Director
Ruth List Perl

* Director
Ronald I. Branch

* Director
Gabi S. Rivera

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-12

<PAGE>
SIGNATURES

ALATEC PRODUCTS, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President and Director
Donald B. List (Principal Executive Officer)

* Vice President
Brian Fontana (Principal Financial
and Accounting Officer)

/s/ BRUCE M. TATEN Director
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-13

<PAGE>

SIGNATURES

AXS SOLUTIONS, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* Chief Executive Officer and Director
Jack L. Fatica (Principal Executive Officer)

* Vice President
Brian Fontana (Principal Financial
and Accounting Officer)

* Director
Robert Hoyt

* Director
Jeff Fatica

/s/ BRUCE M. TATEN Director
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-14

<PAGE>
SIGNATURES

CAPITOL BOLT & SUPPLY, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President and Director
Mary E. McClure (Principal Executive Officer)

* Vice President
Brian Fontana (Principal Financial
and Accounting Officer)

/s/ BRUCE M. TATEN Director
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-15

<PAGE>
SIGNATURES

MAUMEE INDUSTRIES, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President, Chief Executive Officer
Michael W. Peters and Director (Principal Executive Officer)

* Vice President & Chief Financial Officer
Badie A. Badie (Principal Financial Officer)

* Vice President & Treasurer
Brian Fontana (Principal Accounting Officer)

/s/ BRUCE M. TATEN Director
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-16

<PAGE>

SIGNATURES

PACE PRODUCTS, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President
Larry Lee Land (Principal Executive Officer)

* Vice President
Brian Fontana (Principal Financial
and Accounting Officer)

/s/ BRUCE M. TATEN Director
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-17

<PAGE>

SIGNATURES

PENTACON AEROSPACE GROUP, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President and Director
Donald B. List (Principal Executive Officer)

* Vice President of Finance
Steve Greene (Principal Financial
and Accounting Officer)

/s/ BRUCE M. TATEN Director
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-18

<PAGE>

SIGNATURES

PENTACON INDUSTRIAL GROUP, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President and Director
Michael W. Peters (Principal Executive Officer)

* Vice President & Treasurer
Brian Fontana (Principal Financial
and Accounting Officer)

/s/ BRUCE M. TATEN Director
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-19

<PAGE>

SIGNATURES

SALES SYSTEMS, LIMITED

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President and Director
Benjamin E. Spence, Jr. (Principal Executive Officer)

* Vice President
Brian Fontana (Principal Financial Officer)

* Vice President, Treasurer,
Richard D. Knorr Assistant Secretary and Director
(Principal Accounting Officer)

/s/ BRUCE M. TATEN Director
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-20

<PAGE>
SIGNATURES

TEXAS INTERNATIONAL AVIATION, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Senior Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* Chairman and Director
Donald B. List (Principal Executive Officer)

* Vice President & Treasurer
Brian Fontana (Principal Financial
and Accounting Officer)

/s/ BRUCE M. TATEN Director
Bruce M. Taten

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-21

<PAGE>

SIGNATURES

TIA INTERNATIONAL, INC.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
Vice President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

* President and Director
James B. Cassels (Principal Executive, Financial
and Accounting Officer)

Director
Gregory S. Cassels

* Director
Mary M. Busenburg

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-22

<PAGE>

SIGNATURES

WEST COAST AERO PRODUCTS
HOLDING CORP.

By: /s/ BRUCE M. TATEN

Bruce M. Taten
President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on May 7, 1999.

SIGNATURE TITLE
--------- -----

/s/ BRUCE M. TATEN President, Secretary and Director
Bruce M. Taten (Principal Executive, Financial
and Accounting Officer)

* Director
Donald B. List

* By: /s/ BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact

II-23

<PAGE>
EXHIBIT INDEX

(a) Exhibits

2.1 -- Plan of Merger and Stock Purchase
Agreement dated as of August 14, 1998
among Pentacon, Inc., Pentacon Aerospace
Acquisition, Inc., West Coast Aero
Products Holding Corp. and the common
stockholders of West Coast and Steve
Riggs and Joel Jacks (incorporated
herein by reference to Exhibit 2.1 to
the Company's Form 8-K filed September
18, 1998).
2.2 -- Agreement and Plan of Merger dated as of
July 17, 1998 among Pentacon, Inc., TIA
Acquisition Corp., Texas International
Aviation, Inc. and James B. Cassels,
James W. Cassels, Frances Cassels,
Gregory S. Cassels, the James Boyakin
Cassels Trust, The Gregory Scott Cassels
Trust, and Merritt B. Horrell
(incorporated herein by reference to
Exhibit 2.1 to the Company's Form 8-K
filed July 31, 1998).
3.1 -- Second Amended and Restated Certificate
of Incorporation (incorporated herein by
reference to Exhibit 3.1 to Company's
Registration Statement on Form S-1/A
(No. 333-41383)).
3.2 -- Bylaws (incorporated herein by reference
to Exhibit 3.2 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
4.1+ -- Indenture, dated March 30, 1999, by and
among Pentacon, Inc. and the
subsidiaries named therein and State
Street Bank and Trust Company covering
up to $100,000,000 12 1/4% Senior
Subordinated Notes due 2009.
4.2+ -- Registration Rights Agreement dated
March 30, 1999 by and among Pentacon,
Inc., the Guarantors named therein,
Bear, Stearns & Co. Inc., NationsBanc
Montgomery Securities LLC and Sanders
Morris Mundy Inc.
4.3+ -- Form of Pentacon, Inc. 12 1/4% Senior
Subordinated Note due 2009. (Included in
Exhibit 4.1).
5.1+ -- Opinion of Andrews & Kurth L.L.P.
10.1 -- Agreement and Plan of Organization
respecting Alatec Products, Inc. dated
as of December 1, 1997 (incorporated
herein by reference to Exhibit 10.1 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.2 -- Pentacon, Inc. 1998 Stock Plan
(incorporated herein by reference to
Exhibit 10.10 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.3 -- Form of Waiver of Termination Rights and
Schedule of Signatories (incorporated
herein by reference to Exhibit 10.11 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.4 -- Form of Waiver and Schedule of
Signatories (incorporated herein by
reference to Exhibit 10.12 to Company's
Registration Statement on Form S-1/A
(No. 333-41383)).
10.5 -- Form of Recontribution Agreement and
Schedule of Signatories (incorporated
herein by reference to Exhibit 10.13 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.6 -- Employment Agreement with James Jackson
(incorporated herein by reference to
Exhibit 10.14 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.7 -- Agreement and Plan of Organization
respecting AXS Solutions, Inc. dated as
of December 1, 1997 (incorporated herein
by reference to Exhibit 10.2 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.8 -- Agreement and Plan or Organization
respecting Capitol Bolt & Supply, Inc.
dated as of December 1, 1997
(incorporated herein by reference to
Exhibit 10.3 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.9 -- Agreement and Plan of Organization
respecting Maumee Industries, Inc. dated
as of December 1, 1997 (incorporated
herein by reference to Exhibit 10.4 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.10 -- Agreement and Plan of Organization
respecting Sales Systems, Limited dated
as of December 1, 1997 (incorporated
herein by reference to Exhibit 10.5 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
<PAGE>
10.11 -- Employment Agreement with Mark Baldwin
(incorporated herein by reference to
Exhibit 10.6 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.12 -- Employment Agreement with Bruce Taten
(incorporated herein by reference to
Exhibit 10.7 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.13 -- Employment Agreement with Brian Fontana
(incorporated herein by reference to
Exhibit 10.8 to Company's Registration
Statement on Form S-1/A (No.
333-41383)).
10.14 -- Form of Officer and Director
Indemnification Agreement (incorporated
herein by reference to Exhibit 10.9 to
Company's Registration Statement on Form
S-1/A (No. 333-41383)).
10.15 -- Amended and Restated Credit Agreement
with NationsBank (incorporated herein by
reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K405
for the year ended September 30, 1998).
10.16 -- First Amendment to Amended and Restated
Credit Agreement (incorporated herein by
reference to Exhibit 10.17 to the
Company's Quarterly Report on Form 10-Q
for the quarter ended December 31,
1998).
10.17 -- Second Amendment to Amended and Restated
Credit Agreement (incorporated herein by
reference to Exhibit 10.18 to the
Company's Quarterly Report on Form 10-Q
for the quarter ended December 31,
1998).
10.18+ -- Third Amendment to Amended and Restated
Credit Agreement.
10.19+ -- Fourth Amendment to Amended and Restated
Credit Agreement.
12.1+ -- Computation of Ratio of Earnings to
Fixed Charges.
21.1+ -- Subsidiaries of the Registrant.
23.1* -- Consent of Ernst & Young LLP.
23.2* -- Consent of McGladrey & Pullen, LLP.
23.3* -- Consent of Grant Thornton LLP.
23.4+ -- Consent of Andrews & Kurth L.L.P.
(Included in Exhibit 5.1).
24.1+ -- Powers of Attorney. (Included in the
signature pages hereto).
25.1* -- Statement of Eligibility of State Street
Bank and Trust Company, Trustee on Form
T-1.
99.1 -- Press Release, dated August 17, 1998
(incorporated herein by reference to
Exhibit 99.1 to the Company's Form 8-K
filed August 24, 1998).
99.2 -- Press Release, dated May 26, 1998
(incorporated herein by reference to
Exhibit 99.1 to the Company's Form 8-K
filed June 11, 1998).
99.3+ -- Form of Letter of Transmittal.
99.4+ -- Form of Notice of Guaranteed Delivery.
99.5+ -- Form of Letter to Clients.
99.6+ -- Form of Letter to Nominees.
99.7+ -- Form of Instruction to Registered
Holders from Beneficial Owner.
- ------------
* Filed herewith.
+ Filed previously.

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated December 24, 1998 and October 16, 1997, with
respect to the financial statements of Pentacon, Inc.; dated November 21, 1997
(except for Note 3, as to which the date is November 26, 1997) with respect to
the financial statements of Alatec Products, Inc.; dated November 7, 1997 with
respect to the financial statements of AXS Solutions, Inc.; dated October 15,
1997 with respect to the financial statements of Maumee Industries, Inc.; and
dated October 20, 1997 with respect to the financial statements of Sales
Systems, Limited included in the Amendment No. 1 to the Registration Statement
(Form S-4) and related prospectus of Pentacon, Inc. We also consent to the
incorporation by reference therein of our report dated December 24, 1998, with
respect to the consolidated financial statements of Pentacon, Inc. included in
its Annual Report (Form 10-K) for the year ended September 30, 1998, filed with
the Securities and Exchange Commission.

/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP

Houston, Texas
May 7, 1999

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in this Registration Statement and related
prospectus on Amendment No. 1 to Form S-4 (No. 333-77081) and incorporation by
reference from the Annual Report on Form 10-K of Pentacon, Inc. for the year
ended September 30, 1998 of our report, dated November 21, 1997, relating to the
consolidated financial statements of Alatec Products, Inc. as of December 31,
1996 and for the year then ended, and consent to use in this Registration
Statement and related prospectus referred to above of our report dated February
20, 1998 (except for Note 13, as to which the date is August 14, 1998), relating
to the consolidated financial statements of ASI Aerospace Group, Inc. as of
December 31, 1996 and 1997 and for the years ended December 31, 1995, 1996 and
1997. We also consent to the reference to our Firm under the caption "Experts"
appearing in the prospectus.

/s/ McGLADREY & PULLEN, LLP

Pasadena, California
May 7, 1999

EXHIBIT 23.3

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated April 3, 1998, accompanying the
consolidated financial statements of Texas International Aviation, Inc.
contained in the Registration Statement on Form S-4 and Prospectus of Pentacon,
Inc. We consent to the use of the aforementioned report in this Registration
Statement on Form S-4 and Prospectus, and to the use of our name as it appears
under the caption "Experts".

/s/ GRANT THORNTON LLP

Dallas, Texas
May 7, 1999