KENT ELECTRONICS CORP, S-3/A, 1997-09-15

KENT ELECTRONICS CORP
S-3/A, 1997-09-15
ELECTRONIC PARTS & EQUIPMENT, NEC

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 15, 1997

REGISTRATION NO. 333-34045
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1

TO
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

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KENT ELECTRONICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

TEXAS 74-1763541

(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

7433 HARWIN DRIVE STEPHEN J. CHAPKO
HOUSTON, TEXAS 77036 7433 HARWIN DRIVE
(713) 780-7770 HOUSTON, TEXAS 77036
(ADDRESS, INCLUDING ZIP CODE, AND (713) 780-7770
TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE,
INCLUDING AREA CODE, OF REGISTRANT'S AND TELEPHONE NUMBER,
PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR
SERVICE)

COPIES TO:

GENE G. LEWIS JOE S. POFF
LIDDELL, SAPP, ZIVLEY, HILL & BAKER & BOTTS, L.L.P.
LABOON, L.L.P. ONE SHELL PLAZA
3400 TEXAS COMMERCE TOWER 910 LOUISIANA
600 TRAVIS HOUSTON, TEXAS 77002
HOUSTON, TEXAS 77002 (713) 229-1234
(713) 226-1200

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, 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, please 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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

********************************************************************************
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed with the *
* Securities and Exchange Commission. These securities may not be sold nor may *
* offers to buy be accepted prior to the time the registration statement *
* becomes effective. This prospectus shall not constitute an offer to sell or *
* the solicitation of an offer to buy nor shall there be any sale of these *
* securities in any State in which such offer, solicitation or sale would be *
* unlawful prior to registration or qualification under the securities laws of *
* any such State. *
********************************************************************************

SUBJECT TO COMPLETION, DATED SEPTEMBER 15, 1997
PROSPECTUS
$150,000,000

[LOGO OF KENT ELECTRONICS APPEARS HERE]
KENT ELECTRONICS CORPORATION

% CONVERTIBLE SUBORDINATED NOTES DUE 2004
INTEREST PAYABLE MARCH 1 AND SEPTEMBER 1

--------

The % Convertible Subordinated Notes due 2004 (the "Notes") offered hereby
(the "Offering") are convertible into common stock, without par value ("Common
Stock"), of Kent Electronics Corporation (the "Company") at any time at or
before maturity, unless previously redeemed, at a conversion price of $ per
share, subject to adjustment in certain events. The Common Stock is traded on
the New York Stock Exchange ("NYSE") under the symbol "KNT." On August 25,
1997, the last reported sale price of the Common Stock on the NYSE was $37.81
per share. The Notes have been approved for listing on the NYSE under the
symbol "KNT 04" subject to official notice of issuance.

Interest on the Notes is payable semi-annually on March 1 and September 1 of
each year, commencing on March 1, 1998. The Notes do not provide for a sinking
fund. The Notes are redeemable, at the option of the Company, in whole or in
part, at any time on or after September 6, 2000 at the redemption prices set
forth in this Prospectus, together with accrued interest. The Notes are subject
to purchase by the Company at the option of the holder upon the occurrence of a
Repurchase Event (as defined herein) at 100% of the principal amount thereof,
plus accrued interest. See "Description of Notes."

The Notes are unsecured obligations of the Company and are subordinated to
all present and future Senior Indebtedness (as defined herein) of the Company
and will be effectively subordinated to all indebtedness and other liabilities
of subsidiaries of the Company. At June 28, 1997, the Company did not have any
Senior Indebtedness. The Indenture (as defined herein) will not restrict the
incurrence of any other indebtedness or liabilities by the Company or its
subsidiaries. See "Description of Notes--Subordination."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN RISKS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES OFFERED
HEREBY.

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

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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
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<S> <C> <C> <C>
Per Note % % %
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Total (4) $ $ $
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</TABLE>
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(1) Plus accrued interest, if any, from the date of initial issuance.
(2) For information regarding indemnification of the Underwriters, see
"Underwriting."
(3) Before deducting expenses estimated at $500,000, payable by the Company.
(4) The Company has granted the Underwriters a 30-day option to purchase up to
$22,500,000 aggregate principal amount of additional Notes solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
and Proceeds to Company will be $ , $ , and $ , respectively.

--------

The Notes are being offered by the several Underwriters named herein, subject
to prior sale, when, as and if accepted by them and subject to certain
conditions. It is expected that delivery of the Notes will be made in book-
entry form through the facilities of The Depository Trust Company on or about
, 1997.

--------

SMITH BARNEY INC.

BT ALEX. BROWN

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.

, 1997

<PAGE>

[PHOTOGRAPH]

K*TEC contract manufacturing facility.

[Photograph] [Photograph] [Photograph]

Assorted electronic Automated, high Vertically integrated
interconnect technology manufacturing box build product.
assemblies. equipment.

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

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE MARKET PRICE OF THE NOTES,
THE COMMON STOCK, OR BOTH. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN
CONNECTION WITH THE OFFERING, MAY BID FOR, AND PURCHASE, THE NOTES, THE COMMON
STOCK, OR BOTH, IN THE OPEN MARKET AND MAY IMPOSE PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the Consolidated Financial
Statements, including the notes thereto, included elsewhere or incorporated by
reference in this Prospectus. The Company's fiscal year ends on the Saturday
closest to the end of March of each year resulting in either a 52- or 53-week
year. References to fiscal years refer to the fiscal year ending in that
calendar year; for example, "fiscal 1998" refers to the Company's fiscal year
ending March 28, 1998. Unless otherwise indicated, all information in this
Prospectus assumes that the over-allotment option granted to the Underwriters
is not exercised.

THE COMPANY

Kent Electronics Corporation is a national specialty distributor of
electronic products and a manufacturer of custom-made electronic products. In
fiscal 1997, the Company strategically aligned its operations into four
distinct, yet complementary, business units that seek to develop competitive
advantages within targeted markets.

. Kent Components distributes electronic connectors, electronic wire and
cable, and other passive and electromechanical products and interconnect
assemblies used in assembling and manufacturing electronic products.

. Kent Datacomm distributes a broad range of premise wiring products, such
as fiber optic cable, patch panels and enclosures, and local area network
("LAN") and wide area network ("WAN") equipment, such as modems, hubs,
switches and routers, directly to commercial end-users and professionals
who install and service voice and data communications networks.

. Futronix Systems is a redistributor of specialty wire and cable to
electrical distributors nationwide. Futronix Systems was formed to
conduct the businesses of Futronix Corporation and Wire & Cable
Specialties Corporation ("Wire & Cable") which were acquired by the
Company in January 1997.

. K*TEC is a manufacturer whose capabilities include custom-made electronic
interconnect assemblies, printed circuit board assemblies, sheet metal
fabrication, plastic injection molding, specially fabricated battery
power packs, other subassemblies that are built to customers'
specifications and final system integration (box build).

The Company focuses on providing its customers a continuum of products and
services that emphasizes technology-based materials management and
manufacturing solutions. To successfully execute its strategy, during the nine
fiscal quarters ended June 28, 1997, the Company invested approximately $81.7
million in capital expenditures. These expenditures were primarily for
construction of its recently completed state-of-the-art K*TEC facility in Sugar
Land, Texas, consisting of approximately 420,000 square feet for manufacturing
and warehousing operations and its adjacent state-of-the-art 220,000 square
foot distribution facility that is scheduled for completion in spring 1998.

Outsourcing is a rapidly growing trend in many industry sectors in the United
States as companies seek to reduce costs and improve operating efficiencies.
Electronics original equipment manufacturers ("OEMs") are increasingly
outsourcing materials management and manufacturing operations, ranging from
inventory management to complete box build combined with distribution to the
end customer. Manufacturers of electronic products are responding to this trend
by utilizing technology based materials management and logistical solutions
provided by distributors. In addition, the Company believes that there is an
emerging trend of OEMs to align with contract manufacturers who have
distribution capabilities and expertise. Because of its experience in both
distribution and manufacturing, the Company is particularly well-positioned to
capitalize on these trends. The potential benefits from outsourcing materials
management and manufacturing operations include: (i) focused resources; (ii)
improved inventory management and purchasing power; (iii) reduced time to
market; (iv) reduced costs and capital investment; and (v) access to leading
manufacturing technology.

To capitalize on current and emerging electronics industry trends, the
Company is: (i) providing a continuum of customer services; (ii) remaining a
key player in target markets; (iii) capitalizing on industry consolidation;
(iv) maximizing synergies between business units; and (v) focusing on customer
service.

3
<PAGE>

THE OFFERING

Securities Offered.......... $150,000,000 aggregate principal amount of %
Convertible Subordinated Notes due 2004 (the
"Notes").

Maturity.................... September 1, 2004.

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

Conversion.................. The Notes are convertible at any time prior to
maturity, unless previously redeemed or
repurchased, into Common Stock, at the option of
the holder, at a conversion price of $ per
share, subject to certain adjustments. See
"Description of Notes--Conversion Rights."

Optional Redemption......... The Notes are redeemable, in whole or in part, at
the option of the Company at any time on or after
September 6, 2000, at the redemption prices set
forth herein, plus accrued and unpaid interest,
if any, to the date of redemption. See
"Description of Notes-- Optional Redemption."

Repurchase Event............ Upon the occurrence of a Repurchase Event,
holders of the Notes will have the right, subject
to certain conditions and restrictions, to
require the Company to purchase all or part of
their Notes at 100% of the principal amount
thereof, plus accrued interest. See "Risk
Factors--Possible Limitations on Repurchase of
Notes" and "Description of Notes--Certain Rights
of Holders to Require Repurchase of Notes."

Subordination............... The Notes will be unsecured obligations of the
Company, subordinated in right of payment to all
existing and future Senior Indebtedness of the
Company. In addition, the Notes will be
effectively subordinated to all indebtedness and
other liabilities (including trade payables) of
all subsidiaries of the Company. The Indenture
will not restrict the incurrence of Senior
Indebtedness or other indebtedness by the Company
or its subsidiaries. At June 28, 1997, the
Company did not have any Senior Indebtedness. See
"Risk Factors--Subordination of Notes,"
"Capitalization" and "Description of Notes--
Subordination."

Use of Proceeds............. The Company currently intends to use the net
proceeds to pursue acquisition opportunities that
it believes will enhance its position as a
national distributor and contract manufacturer of
electronic products. In addition, the Company
intends to use the net proceeds for general
corporate purposes, including working capital and
capital expenditures. The Company has no current
agreement or understanding with respect to any
potential acquisition. See "Use of Proceeds."

Listing.....................
The Notes have been approved for listing on the
NYSE under the symbol "KNT 04" subject to
official notice of issuance.

Common Stock Trading........ The Common Stock is traded on the NYSE under the
symbol "KNT."

4
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIO)

<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEARS ENDED ENDED
---------------------------------------------- -----------------
APRIL 3, APRIL 2, APRIL 1, MARCH 30, MARCH 29, JUNE 29, JUNE 28,
1993 1994 1995 1996 1997(2) 1996 1997
-------- -------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA(1):
Net sales.............. $164,541 $206,784 $279,676 $425,810 $516,757 $125,144 $152,080
Gross profit........... 45,379 55,150 72,741 112,167 120,703 31,906 34,859
Earnings before income
taxes................. 12,632 15,902 23,511 49,095 45,100 15,556 14,497
Net earnings........... 8,193 10,058 14,601 29,792 27,621 9,431 8,775
Earnings per share..... $ 0.40 $ 0.48 $ 0.68 $ 1.21 $ 1.00 $ 0.34 $ 0.32
Weighted average
shares................ 20,393 20,804 21,475 24,696 27,551 27,592 27,762
Ratio of earnings to
fixed charges(3)...... 18.6x 21.3x 22.7x 27.4x 20.1x 28.4x 45.1x
</TABLE>

<TABLE>
<CAPTION>
JUNE 28, 1997
--------------------
AS
ACTUAL ADJUSTED(4)
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $155,480 $301,230
Total assets.............................................. 343,906 493,906
Long-term debt, less current portion...................... -- 150,000
Stockholders' equity...................................... $272,772 $272,772
</TABLE>
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(1) As a result of the acquisitions of Futronix Corporation and Wire & Cable in
January 1997, each accounted for as a pooling of interests, selected
consolidated financial data have been restated where appropriate to include
the results of Futronix Corporation and Wire & Cable.
(2) Includes non-recurring merger and integration charges of $5.5 million ($3.4
million, net of taxes, or $0.12 per share). Exclusive of such charges,
fiscal 1997 net earnings were $31.0 million, or $1.12 per share, and the
ratio of earnings to fixed charges was 22.4x.
(3) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of earnings before income taxes plus fixed charges.
"Fixed charges" consist of interest expense, amortization of deferred
financing costs and that portion of rental expense deemed representative of
the interest factor.
(4) As adjusted to give effect to the sale by the Company of the Notes offered
hereby and the application of the estimated net proceeds thereof after
deducting underwriting discounts and commissions and estimated expenses of
the Offering.

5
<PAGE>

RISK FACTORS

An investment in the Notes (and Common Stock into which the Notes are
convertible) involves various risks. Prospective investors should carefully
consider the following factors in conjunction with the other information
contained or incorporated by reference in this Prospectus before making a
decision to purchase the Notes. This Prospectus, including documents
incorporated by reference, contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors, among others, which may cause such a difference are set forth below.

CYCLES IN THE ELECTRONICS INDUSTRY; DEPENDENCE ON K*TEC CUSTOMERS

The Company's business depends on sustained demand for the products it
distributes and manufactures. Although the Company has enjoyed strong growth
in sales in recent years, the electronics industry is cyclical, and there can
be no assurance that such growth will continue. Any downturn in the
electronics industry could have a material adverse effect on the Company's
business, results of operations or financial condition, especially if a
downturn occurred in the Company's distribution and manufacturing businesses
simultaneously. In addition, for many years K*TEC has strategically developed
long-term relationships with a select group of OEMs resulting in a
concentrated customer base. The Company expects that sales to a relatively
small number of customers will continue to account for a significant portion
of K*TEC's sales in the future. The loss of, or a significant decline in
orders from, one of K*TEC's key customers could have a material adverse effect
on the Company's business, results of operations or financial condition.

MANAGEMENT OF GROWTH

In recent years, the Company has expanded its business through internal
growth and acquisitions, and the Company anticipates that it will continue
this expansion in the future. To effectively manage this expansion, the
Company will be required to attract and retain highly skilled managers and
personnel and to evaluate the adequacy of existing systems and procedures,
including, but not limited to, information management systems, financial and
internal control systems, and management structure. In addition, if the
Company enters new markets, it will be required to, among other things,
establish suitable distribution centers, hire personnel and establish
distribution channels. Moreover, the Company anticipates that in response to
the growing trend of OEMs to outsource manufacturing operations, the Company
will expand K*TEC's box build operations and increasingly combine those
operations with the Company's distribution capabilities. There can be no
assurance that management will adequately anticipate all of the changing
demands that growth and industry conditions and trends will impose on the
Company or that the Company will be able to adapt its pricing, costs, systems,
procedures and structure to such demands. Any failure to anticipate and
respond promptly and effectively to such changing demands and industry trends
could have a material adverse effect on the Company's business, results of
operations or financial condition.

RISKS ASSOCIATED WITH ACQUISITIONS

The Company will continue to evaluate opportunities to acquire complementary
businesses, assets or technologies, and the Company expects to pursue
acquisitions that it believes will enhance its position as a national
distributor and contract manufacturer of electronic products. There can be no
assurance, however, that the Company will be able to identify and acquire
complementary businesses, assets or technologies. Among other things, the
Company may not be able to identify acquisition candidates in desirable
geographic or product markets on terms that are satisfactory to the Company.
Moreover, acquisitions require the expenditure of large amounts of capital,
and the Company's competitors for acquisitions may have significantly greater
financial resources than the Company. Therefore, to finance acquisitions, the
Company may have to raise additional funds through either public or private
financings, including the issuance of additional Common Stock that would
result in dilution to the Company's shareholders or the incurrence of Senior
Indebtedness with respect to which the Notes would be subordinated.

6
<PAGE>

In addition, there can be no assurance that the Company will be able to
integrate successfully the operations, facilities and management of any
acquired business or realize any expected synergies, including cost
reductions, from any acquisition. Moreover, there can be no assurance that any
acquisition will not have an adverse effect on the Company's relationships
with customers or suppliers of an acquired business. Failure to integrate
successfully any acquisition made by the Company could have a material adverse
effect on the Company's business, results of operations or financial
condition.

DEPENDENCE ON SIGNIFICANT SUPPLIERS

As is customary in the electronics distribution industry, the Company
primarily operates under short-term contracts with its suppliers. In the
Company's past experience, such contracts have typically been renewed from
year to year. In the year ended March 29, 1997, the Company's purchases from
AMP Incorporated and Belden Inc. represented approximately 14% and 11%,
respectively, of the Company's total purchases. Although the Company believes
that it may be able to obtain competitive products of comparable quality from
other suppliers, the loss of such suppliers could have a material adverse
effect on the Company's business, results of operations or financial
condition.

COMPETITION

The markets for the Company's products and services are highly competitive.
The Company competes with a large number of distributors, suppliers and
domestic and foreign manufacturers. Foreign-manufactured products are often
sold at prices below the Company's prices for comparable products. The
Company's products are not protected from competition by any proprietary or
intellectual property rights such as trade secrets or patents. There can be no
assurance that the Company will continue to compete successfully against the
distributors, suppliers and manufacturers within its industry, some of which
are larger, have greater financial resources and broader name recognition, and
may, in some instances, have lower costs than the Company. In addition,
although the Company continues to focus on cost containment, there can be no
assurance that increasingly intense competition will not cause pricing or
marketing pressures that reduce gross profit margins or increase selling,
general and administrative expenses as a percentage of sales. Reduced gross
profit margins and increased selling, general and administrative expenses as a
percentage of sales, either alone or together, could have a material adverse
effect on the Company's business, results of operations or financial
condition.

SUBORDINATION OF NOTES

The Notes will be unsecured and subordinated in right of payment in full to
all existing and future Senior Indebtedness of the Company. As a result of
such subordination, in the event of bankruptcy, liquidation or reorganization
of the Company, or upon the acceleration of any Senior Indebtedness, the
assets of the Company will be available to pay obligations under the Notes
only after all Senior Indebtedness has been paid in full, and there can be no
assurance the Company will have sufficient assets remaining to pay amounts due
under the Notes. The Notes are also effectively subordinated in right of
payment to all indebtedness and other liabilities, including trade payables,
of the Company's subsidiaries. The Indenture does not prohibit or limit the
incurrence of Senior Indebtedness or any other indebtedness by the Company or
its subsidiaries. The incurrence of Senior Indebtedness or any other
indebtedness by the Company or its subsidiaries could adversely affect the
Company's ability to pay its obligations under the Notes. At June 28, 1997,
the Company did not have any Senior Indebtedness. See "Description of Notes--
Subordination."

In addition, the Notes are obligations exclusively of the Company and not of
any of its subsidiaries. The Company's cash flow and ability to service its
debt, including the Notes, may depend on, among other things, the earnings of
its subsidiaries and the distribution of those earnings to the Company, or on
other payments of funds by the subsidiaries to the Company. The subsidiaries
are separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due under the Notes or to make any funds
available

7
<PAGE>

therefor, whether by dividends, loans or other payments. In addition, the
payment of dividends and the making of loans and advances to the Company by
its subsidiaries may be subject to statutory, contractual or other
restrictions, will be dependent on the earnings of those subsidiaries and will
be subject to various business considerations. Any right of the Company to
receive the assets of one of its subsidiaries upon the liquidation or
reorganization of such subsidiary (and the consequent right of the holders of
the Notes to participate in these assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except
to the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company and would
be subject to judicial powers to subordinate the Company's claim against such
subsidiary to that of other creditors of such subsidiary in certain cases. See
"Description of Notes--Subordination."

POSSIBLE LIMITATIONS ON REPURCHASE OF NOTES

Upon a Repurchase Event, each holder of Notes will have the right, at the
holder's option, to require the Company to repurchase all or a portion of such
holder's Notes. If a Repurchase Event occurs, there can be no assurance that
the Company will have sufficient funds to pay the repurchase price for all
Notes tendered by the holders thereof. In addition, the right to require the
Company to repurchase Notes as a result of a Repurchase Event could create an
event of default under Senior Indebtedness of the Company as a result of which
any repurchase could, absent a waiver, be prohibited by the subordination
provisions of the Notes. See "Description of Notes--Certain Rights of Holders
to Require Repurchase of Notes."

ABSENCE OF EXISTING PUBLIC MARKET FOR THE NOTES

Prior to the Offering, there has been no public market for the Notes. The
Notes have been approved for listing on the NYSE under the symbol "KNT 04"
subject to official notice of issuance. There can be no assurance, however, as
to the liquidity of the trading market for the Notes or that an active trading
market for the Notes will develop or be sustained. The Company has been
advised by the Underwriters that they presently intend to make a market in the
Notes offered by this Prospectus; however, they are not obligated to do so,
and any market making may be discontinued at any time without notice.

8
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Notes offered hereby
are estimated to be $145,750,000 ($167,687,500 if the Underwriters' over-
allotment option is exercised in full), after deducting underwriting discounts
and commissions and estimated expenses of the Offering payable by the Company.
The Company currently intends to use the net proceeds to pursue acquisition
opportunities that it believes will enhance its position as a national
distributor and contract manufacturer of electronic products. In addition, the
Company intends to use the net proceeds for general corporate purposes,
including working capital and capital expenditures.

The Company evaluates opportunities to acquire complementary businesses,
assets or technologies on an ongoing basis. Although there is no current
agreement or understanding with respect to any such acquisition, the Company
desires to be able to respond to opportunities as they arise. Until a specific
plan for use of the net proceeds from the Offering is developed, the Company
intends to invest the net proceeds in low-risk short-term investments.

9
<PAGE>

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is listed and traded on the NYSE under the symbol
"KNT." The following table presents the high and low closing prices for the
Common Stock for each of the calendar periods indicated below, as reported by
the NYSE and as adjusted to reflect a three-for-two stock split to
shareholders of record on February 15, 1995 and a two-for-one stock split to
shareholders of record on February 15, 1996.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995
First Quarter.............................................. $15.38 $12.92
Second Quarter............................................. 18.88 14.06
Third Quarter.............................................. 22.38 18.75
Fourth Quarter............................................. 29.25 19.31
1996
First Quarter.............................................. $35.38 $26.00
Second Quarter............................................. 43.25 26.75
Third Quarter.............................................. 32.25 17.00
Fourth Quarter............................................. 28.13 21.63
1997
First Quarter.............................................. $33.00 $23.00
Second Quarter............................................. 36.69 22.13
Third Quarter (through August 20).......................... 41.06 35.94
</TABLE>

On August 25, 1997, the last reported sale price of the Common Stock on the
NYSE was $37.81 per share. At August 15, 1997, the Common Stock was held by
1,297 holders of record. The number of record holders may not be
representative of the number of beneficial holders because many shares are
held by depositaries, brokers or other nominees.

DIVIDEND POLICY

Historically, the Company has reinvested earnings available for distribution
to holders of Common Stock, and accordingly, the Company has not paid any cash
dividends on its Common Stock. Although the Company intends to continue to
invest future earnings in its business, it may determine at some future date
that payment of cash dividends on Common Stock would be desirable. The payment
of any such dividends would depend, among other things, upon the earnings and
financial condition of the Company.

10
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company at June 28,
1997 and as adjusted to reflect the sale by the Company of the Notes offered
hereby. This table should be read in conjunction with the Consolidated
Financial Statements, including the notes thereto, included elsewhere or
incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
JUNE 28, 1997
------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
% Convertible Subordinated Notes due 2004............... $ -- $150,000
Stockholders' equity:
Preferred Stock, $1 par value per share, authorized
2,000,000 shares, none issued............................ -- --
Common Stock, without par value, authorized 60,000,000
shares, 26,313,966 shares issued and 26,263,966 shares
outstanding(1)........................................... 42,852 42,852
Additional paid-in capital................................ 116,648 116,648
Retained earnings......................................... 114,249 114,249
-------- --------
273,749 273,749
Less Common Stock in treasury--at cost, 50,000 shares..... (977) (977)
-------- --------
Total stockholders' equity.............................. 272,772 272,772
-------- --------
Total capitalization.................................. $272,772 $422,772
======== ========
</TABLE>
- --------
(1) Does not include 3,526,438 shares of Common Stock reserved for issuance
upon exercise of outstanding stock options, 512,465 shares available for
future grants under the Company's stock option plans, or shares
initially issuable upon conversion of the Notes.

11
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following table summarizes selected consolidated financial data of the
Company for each fiscal year of the five-year period ended March 29, 1997, and
the consolidated financial data for the thirteen weeks ended June 29, 1996 and
June 28, 1997 and at June 28, 1997. The selected consolidated financial data
for the interim periods are unaudited, but include all adjustments, consisting
of normal recurring accruals, which management of the Company considers
necessary for a fair presentation. Interim results are not necessarily
indicative of results for the full fiscal year. The following selected
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements, including the notes thereto, included
elsewhere or incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTEEN WEEKS ENDED
-------------------------------------------------- ---------------------
APRIL 3, APRIL 2, APRIL 1, MARCH 30, MARCH 29, JUNE 29, JUNE 28,
1993 1994 1995 1996 1997(2) 1996 1997
-------- -------- -------- --------- --------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIO)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA(1):
Net sales.............. $164,541 $206,784 $279,676 $425,810 $516,757 $125,144 $152,080
Cost of sales.......... 119,162 151,634 206,935 313,643 396,054 93,238 117,221
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 45,379 55,150 72,741 112,167 120,703 31,906 34,859
Selling, general and
administrative
expenses.............. 33,569 39,857 50,028 66,106 73,607 17,613 20,780
Merger and integration
costs................. -- -- -- -- 5,500 -- --
-------- -------- -------- -------- -------- -------- --------
Operating profit....... 11,810 15,293 22,713 46,061 41,596 14,293 14,079
Other income (expense):
Interest expense....... (79) (156) (340) (898) (1,192) (304) (7)
Other--net (principally
interest and dividend
income)............... 901 765 1,138 3,932 4,696 1,567 425
-------- -------- -------- -------- -------- -------- --------
Earnings before income
taxes................ 12,632 15,902 23,511 49,095 45,100 15,556 14,497
Income taxes........... 4,439 5,844 8,910 19,303 17,479 6,125 5,722
-------- -------- -------- -------- -------- -------- --------
Net earnings.......... $ 8,193 $ 10,058 $ 14,601 $ 29,792 $ 27,621 $ 9,431 $ 8,775
======== ======== ======== ======== ======== ======== ========
Earnings per share..... $ 0.40 $ 0.48 $ 0.68 $ 1.21 $ 1.00 $ 0.34 $ 0.32
======== ======== ======== ======== ======== ======== ========
Weighted average
shares................ 20,393 20,804 21,475 24,696 27,551 27,592 27,762
Ratio of earnings to
fixed charges(3)...... 18.6x 21.3x 22.7x 27.4x 20.1x 28.4x 45.1x
<CAPTION>
JUNE 28, 1997
---------------------
APRIL 3, APRIL 2, APRIL 1, MARCH 30, MARCH 29, AS
1993 1994 1995 1996 1997 ACTUAL ADJUSTED(4)
-------- -------- -------- --------- --------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Working capital........ $ 48,336 $ 57,243 $ 71,817 $172,758 $150,884 $155,480 $301,230
Total assets........... 102,755 120,970 148,276 305,174 325,594 343,906 493,906
Long-term debt, less
current portion....... 19 41 1,269 1,258 -- -- 150,000
Mandatorily redeemable
preferred stock ...... -- -- 2,200 2,200 -- -- --
Stockholders' equity... $ 83,888 $ 94,345 $112,224 $230,968 $262,367 $272,772 $272,772
</TABLE>
- -------
(1) As a result of the acquisitions of Futronix Corporation and Wire & Cable
in January 1997, each accounted for as a pooling of interests, selected
consolidated financial data have been restated where appropriate to
include the results of Futronix Corporation and Wire & Cable.
(2) Includes non-recurring merger and integration charges of $5.5 million
($3.4 million, net of taxes, or $0.12 per share). Exclusive of such
charges, fiscal 1997 net earnings were $31.0 million, or $1.12 per share,
and the ratio of earnings to fixed charges was 22.4x.
(3) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of earnings before income taxes plus fixed charges.
"Fixed charges" consist of interest expense, amortization of deferred
financing costs and that portion of rental expense deemed representative
of the interest factor.

(4) As adjusted to give effect to the sale by the Company of the Notes offered
hereby and the application of the estimated net proceeds thereof after
deducting underwriting discounts and commissions and estimated expenses of
the Offering.

12
<PAGE>

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

The following discussion should be read in conjunction with the Consolidated
Financial Statements, including the notes thereto, included elsewhere or
incorporated by reference in this Prospectus. As a result of the acquisitions
of Futronix Corporation and Wire & Cable in January 1997, each accounted for
as a pooling of interests, all financial information has been restated where
appropriate to include the results of Futronix Corporation and Wire & Cable.
In the following discussion, all dollars are stated in thousands.

CORPORATE OVERVIEW

In recent quarters, the Company has experienced downward pressure on its
gross profit margin primarily due to (i) an increase in distribution sales
relative to manufacturing sales, (ii) a lower percentage of certain high
margin sales within its manufacturing business, and, to a lesser extent, (iii)
a shift in its manufacturing business mix from building subassemblies to box
build. The Company's decrease in gross profit margin has been partially offset
by growth in sales and a reduction in selling, general and administrative
expenses ("SG&A") as a percentage of sales resulting from the Company's
continued focus on cost containment. The Company believes that these recent
margin trends will continue.

RESULTS OF OPERATIONS

The following table presents, as a percentage of net sales, certain selected
consolidated financial data for each of the periods indicated.

<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEARS ENDED ENDED
---------------------------- -----------------
APRIL 1, MARCH 30, MARCH 29, JUNE 29, JUNE 28,
1995 1996 1997 1996 1997
-------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Distribution.................... 65.6% 61.4% 65.6% 62.0% 65.1%
Manufacturing................... 34.4 38.6 34.4 38.0 34.9
----- ----- ----- ----- -----
Net sales..................... 100.0 100.0 100.0 100.0 100.0
Cost of sales................... 74.0 73.7 76.6 74.5 77.1
----- ----- ----- ----- -----
Gross profit.................. 26.0 26.3 23.4 25.5 22.9
Selling, general and
administrative expenses........ 17.9 15.5 14.2 14.1 13.7
Merger and integration costs.... 0.0 0.0 1.1 0.0 0.0
----- ----- ----- ----- -----
Operating profit.............. 8.1 10.8 8.1 11.4 9.2
Other income (expense)
Interest expense.............. (0.1) (0.2) (0.2) (0.2) 0.0
Other--net (principally
interest and dividend
income)...................... 0.4 0.9 0.9 1.2 0.3
----- ----- ----- ----- -----
Earnings before income
taxes...................... 8.4 11.5 8.8 12.4 9.5
Income taxes.................... 3.2 4.5 3.4 4.9 3.8
----- ----- ----- ----- -----
Net earnings................ 5.2% 7.0% 5.4% 7.5% 5.7%
===== ===== ===== ===== =====
</TABLE>

COMPARISON OF THIRTEEN WEEKS ENDED JUNE 28, 1997 WITH JUNE 29, 1996

Net sales for the thirteen weeks ended June 28, 1997 increased $26,936, or
21.5%, compared to the same period of the prior year. The increase in net
sales resulted primarily from increased demand from existing customers and an
expanded customer base. The Company's distribution businesses, which accounted
for 65.1% of first quarter net sales, benefited from increased customer demand
of materials management and logistical services and the December 1996
acquisition of the EMC Distribution Division of Electronics

13
<PAGE>

Marketing Corporation. The Company's contract manufacturing business increased
as a result of improving business conditions in markets served and as a result
of increased demand for the Company's recently expanded contract manufacturing
services.

Gross profit increased $2,953, or 9.3%, compared to the corresponding period
a year ago. Gross profit as a percentage of sales decreased to 22.9% from
25.5% for the period. The increase in gross profit was primarily due to
increased sales, offset by a decrease in the gross profit percentage primarily
due to pricing pressures and product mix, with a lower percentage of certain
higher margin contract manufacturing business.

SG&A expenses increased $3,167, or 18.0%, compared to the same period last
year. However, as a percentage of sales, SG&A declined to 13.7% from 14.1% in
the prior year period. The decline as a percentage of sales reflects the
Company's continued focus on cost containment to reduce such expenses as a
percentage of sales. The increase in SG&A expenses was primarily due to the
expenses necessary to support the growth in the Company's existing operations.

Interest expense decreased due to the retirement, in the fourth quarter of
fiscal 1997, of all outstanding debt of Futronix Corporation and Wire & Cable.

Other-net consists principally of interest and dividend income generated by
cash and cash equivalents. The decrease in interest and dividend income
resulted from a decrease in invested cash, cash equivalents and trading
securities, which were expended for capital expenditures, acquisitions and the
retirement of Futronix Corporation and Wire & Cable debt.

Net earnings decreased $656, or 7.0%, compared to the same period a year
ago. The decrease was primarily due to a decrease in the gross profit
percentage and a decrease in interest and dividend income, partially offset by
lower SG&A expenses as a percentage of sales.

COMPARISON OF FISCAL 1997 WITH FISCAL 1996

Net sales for the fiscal year ended March 29, 1997 were $516,757, an
increase of 21.4% over the $425,810 reported for fiscal 1996. The increase in
sales was primarily the result of continued gains in market share in the
Company's distribution operations, which had a 29.7% increase over fiscal
1996. Distribution sales also benefited from the December acquisition of the
EMC Distribution Division of Electronics Marketing Corporation and a full year
of operations in geographical markets entered during fiscal 1996 by Futronix
Corporation and Wire & Cable. The Company's contract manufacturing operations
posted an 8.2% increase over the prior year despite a significant downturn in
the semiconductor capital equipment sector during the September quarter of
fiscal 1997. The semiconductor capital equipment sector accounted for
approximately 26.7% of the manufacturing division revenue in fiscal 1997
compared to approximately 39.0% in fiscal 1996.

Gross profit increased $8,536, or 7.6%, from fiscal 1996 to fiscal 1997 due
to an increase in net sales. The decrease in gross profit margin from 26.3% to
23.4% reflects continued pricing pressures and the transitioning of new
business services by the Company's contract manufacturing division.

Excluding merger and integration charges associated with the acquisition of
Futronix Corporation and Wire & Cable, SG&A expenses increased $7,501, or
11.3%, compared to the prior year. This increase reflects the costs necessary
to support the continued growth in the Company's operations. As a percentage
of sales, however, expenses decreased to 14.2% from 15.5% in the prior year.
The decrease is the result of the Company's continued focus on cost
containment as well as specific cost reduction initiatives taken in response
to the difficult business conditions the Company experienced during the year.
SG&A expenses do not reflect the cost savings or synergies which may result
from the merger of Futronix Corporation and Wire & Cable.

Merger and integration charges of $5,500 include abandoned registration
costs associated with the planned business combination of Futronix Corporation
and Wire & Cable, professional expenses associated with the acquisition, an
employee bonus and integration costs incurred to consolidate operations.

14
<PAGE>

Interest expense increased due to higher short-term borrowings by Futronix
Corporation and Wire & Cable prior to acquisition by the Company. All
outstanding debt was retired in the fourth quarter of 1997.

Other-net consists principally of interest and dividend income generated by
cash, cash equivalents and trading securities. The increase in interest and
dividend income was primarily due to the net proceeds from the September 1995
public offering invested for approximately four months longer than the prior
year.

Net earnings for 1997 were $27,621 compared to $29,792 for 1996. Net
earnings for 1997 included pre-tax merger and integration charges of $5,500.
Excluding these charges, net earnings increased $1,198, or 4.0%, to $30,990.
The improved profitability was primarily due to the incremental profit
associated with the increase in sales volume, offset by lower gross profit
margins, combined with the Company's continued focus on cost containment.

COMPARISON OF FISCAL 1996 WITH FISCAL 1995

Net sales for the fiscal year ended March 30, 1996 increased $146,134, or
52.3%, to $425,810. The sales increase reflected internal growth primarily
from increased demand from existing customers, an expanded customer base and
expansion into new geographical markets by Futronix Corporation and Wire &
Cable.

Gross profit increased $39,426, or 54.2%, compared to the preceding year.
Gross profit as a percentage of sales increased to 26.3% from 26.0% in the
prior year. The increase in gross profit was primarily due to increased sales
and an increase in the gross profit percentage that benefited from the gains
in contract manufacturing as a percentage of total sales. The Company believes
that its profit margins from sales of manufactured products are generally
greater than its profit margins on sales of distributed products.

SG&A expenses increased $16,078, or 32.1%, compared to the prior fiscal
year. However, as a percentage of sales, expenses declined to 15.5% from 17.9%
in the preceding year. The decline as a percentage of sales reflects the
Company's continued focus on cost containment to reduce such expenses as a
percentage of sales. The increase in expenses was primarily due to the
expenses necessary to support the growth in the Company's existing operations
and expansion into new geographical markets by Futronix Corporation and Wire &
Cable.

Interest expense increased due to higher short-term borrowings by Futronix
Corporation and Wire & Cable prior to acquisition by the Company.

Other-net consists principally of interest and dividend income generated by
cash, cash equivalents and trading securities. The increase in interest and
dividend income was primarily due to the invested net proceeds from the
September 1995 public offering.

Net earnings increased $15,191 or 104.0%, when compared to the prior year.
The improved profitability was primarily due to the incremental profit
associated with the increase in sales volume, the increase in the gross profit
percentage and the Company's continued focus on cost containment.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at June 28, 1997 was $155,480, an increase of $4,596, or
3.0%, from March 29, 1997. Included in the Company's working capital at June
28, 1997 are investments of $26,502. The Company's investment strategy is low-
risk and short-term, keeping the funds readily available to meet capital
requirements as they arise in the normal course of business. At June 28, 1997,
funds were invested primarily in a reverse repurchase agreement and an
institutional money market fund consisting primarily of taxable, high quality
money market type instruments. Both are compatible with the Company's stated
investment strategy.

In June 1997, the Company obtained a $25,000 unsecured line of credit with a
bank. As of August 20, 1997, there was no indebtedness outstanding under the
line of credit.

15
<PAGE>

The Company intends to apply its capital resources to expand its business by
establishing or acquiring similar distribution and manufacturing operations in
geographic areas that are attractive to the Company, by acquiring new
facilities and by enlarging or improving existing facilities. In addition to
the capital required to purchase existing businesses or to fund start-up
operations, the expansion of the Company's operations at both new and existing
locations will require greater levels of capital to finance the purchase of
additional equipment, increased levels of inventory and greater accounts
receivable.

In connection with the completion of its new 220,000 square foot
distribution facility at its Sugar Land, Texas location, the Company has
authorized fiscal 1998 capital expenditures of approximately $10,000 for
facility construction and equipment, of which approximately $3,000 had been
spent as of June 28, 1997. In addition, the Company has authorized fiscal 1998
capital expenditures of approximately $10,000 for specialized manufacturing
equipment for K*TEC, none of which had been spent as of June 28, 1997. The
Company believes that current resources, along with funds generated from
operations, should be sufficient to meet its current capital requirements and
those anticipated in fiscal 1998. With completion of this Offering, the
Company believes that it will have adequate capital to meet working capital
needs, fund capital expenditures and respond to acquisition opportunities that
may arise. See "Use of Proceeds."

16
<PAGE>

BUSINESS

THE COMPANY

The Company is a national specialty distributor of electronic products and a
manufacturer of custom-made electronic products. In fiscal 1997, the Company
strategically aligned its operations into four distinct, yet complementary,
business units that seek to develop competitive advantages within targeted
markets.

. Kent Datacomm distributes a broad range of premise wiring products, such
as fiber optic cable, patch panels and enclosures, and LAN and WAN
equipment, such as modems, hubs, switches and routers, directly to
commercial end-users and professionals who install and service voice and
data communications networks.

. Futronix Systems is a redistributor of specialty wire and cable to
electrical distributors nationwide. Futronix Systems was formed to
conduct the businesses of Futronix Corporation and Wire & Cable which
were acquired by the Company in January 1997.

The Company focuses on providing its customers a continuum of products and
services that emphasizes technology-based materials management and
manufacturing solutions. To successfully execute its strategy, during the nine
fiscal quarters ended June 28, 1997, the Company invested approximately $81.7
million in capital expenditures. These expenditures were primarily for
construction of its recently completed state-of-the-art K*TEC facility in
Sugar Land, Texas, consisting of approximately 420,000 square feet for
manufacturing and warehousing operations and its adjacent state-of-the-art
220,000 square foot distribution facility that is scheduled for completion in
spring 1998.

INDUSTRY OVERVIEW

Outsourcing is a rapidly growing trend in many industry sectors in the
United States as companies seek to reduce costs and improve operating
efficiencies. Electronics OEMs are increasingly outsourcing materials
management and manufacturing operations, ranging from inventory management to
complete box build combined with distribution to the end customer.
Manufacturers of electronic products are responding to this trend by utilizing
technology-based materials management and logistical solutions provided by
distributors. In addition, the Company believes that there is an emerging
trend of OEMs to align with contract manufacturers who have distribution
capabilities and expertise. Because of its experience in both distribution and
manufacturing, the Company is particularly well-positioned to capitalize on
these trends. The potential benefits from outsourcing materials management and
manufacturing operations include:

FOCUSED RESOURCES. Because the electronics industry is experiencing
greater levels of competition and more rapid technological change, many
OEMs are focusing their resources on activities and technologies in which
they add the greatest value. By offering comprehensive materials management
solutions and integrated manufacturing services, the Company allows OEMs to
focus on their core competencies, such as product development and
marketing.

IMPROVED INVENTORY MANAGEMENT AND PURCHASING POWER. Electronics OEMs are
faced with increasing difficulties in efficiently planning, procuring and
managing their inventories due to frequent design changes, short product
life cycles, large investments in electronic components, component price
fluctuations and the need to achieve economies of scale in materials
procurement. By using the Company's volume purchasing capabilities and
expertise in inventory management, an OEM can reduce production and
inventory costs.

17
<PAGE>

REDUCED TIME TO MARKET. Due to intense competitive pressures and rapid
technological developments in the electronics industry, OEMs are faced with
increasingly shorter product life cycles and therefore have a growing need
to reduce the time required to bring a product to market. OEMs can reduce
their time to market by using the Company's expertise in providing
materials management, logistical and manufacturing solutions.

REDUCED COSTS AND CAPITAL INVESTMENT. As electronic products have become
more technologically advanced and shipped in greater volumes, the
distribution and manufacturing processes have become increasingly
automated, requiring greater investments in technology and capital
equipment on an ongoing basis. The Company's materials management services
allow manufacturers to operate more efficiently by relying on scheduled
deliveries of components at the time they are needed in the production
process, thereby reducing inventory levels. K*TEC's contract manufacturing
services enable an OEM to gain access to advanced, high-volume
manufacturing and distribution capabilities while reducing the OEM's
capital requirements.

ACCESS TO LEADING MANUFACTURING TECHNOLOGY. Electronic products and
electronics manufacturing technology have become increasingly sophisticated
and complex, making it more difficult and expensive for OEMs to maintain
the necessary technological expertise to manufacture products internally.
OEMs are motivated to work with a contract manufacturer in order to gain
access to specialized process expertise and manufacturing know-how.

COMPANY STRATEGY

The Company is pursuing the following strategies to capitalize on current
and emerging electronics industry trends.

PROVIDING A CONTINUUM OF CUSTOMER SERVICES. The Company provides a
continuum of services to its customers, ranging from order fulfillment to
box build combined with direct distribution to an OEM's customers. In
response to evolving customer needs, the Company continues to shift from
order fulfillment to technology-based materials management services. In
addition, the Company continues to expand its manufacturing relationships
from subassemblies to box build as OEMs increase their demand for
outsourced supply chain management solutions.

REMAINING A KEY PLAYER IN TARGET MARKETS. The Company has focused on
markets where it strives to maintain and enhance its position as a national
distributor of premier products. The Company believes it can strengthen its
position within these markets by expanding its supplier relationships,
capitalizing on OEMs' shift toward using distribution channels and
redistributing existing Company product offerings through Futronix Systems.

CAPITALIZING ON INDUSTRY CONSOLIDATION. The Company expects consolidation
within the distribution and contract manufacturing sectors of the
electronics industry to continue in response to increasing demands on
suppliers by OEMs to provide integrated, technology-based materials
management and manufacturing solutions. In addition, the Company
anticipates increased opportunities to acquire the production capacity of
OEMs following the trend toward outsourcing manufacturing operations. The
Company will continue to evaluate and pursue acquisition opportunities that
enhance its position as a national distributor and contract manufacturer of
electronic products.

MAXIMIZING SYNERGIES BETWEEN BUSINESS UNITS. The Company believes its
four business units will continue to enjoy revenue and cost synergies and
economies of scale. These benefits include: (i) greater product offerings
to the Company's customers across business units, (ii) purchasing and
volume procurement synergies, (iii) cost efficient opportunities to expand
into new geographic markets by utilizing existing facilities and personnel,
and (iv) shared warehousing and materials handling capabilities.

FOCUSING ON CUSTOMER SERVICE. The Company continues to emphasize customer
service as a competitive advantage. The Company's technology-based
materials management services enable the Company to offer value-added
solutions to its customers. Similarly, K*TEC customers have Internet access
to K*TEC's intranet in order to place and track orders, inform K*TEC of
demand forecasts and change

18
<PAGE>

product specifications. The Company believes that through these and other
customer service innovations it will continue to strengthen and develop
customer relationships.

DISTRIBUTION

KENT COMPONENTS. Kent Components focuses primarily on providing its
industrial and OEM customers with rapid and reliable deliveries of
interconnect, passive and electromechanical products as well as a wide variety
of materials management services. This division also provides value-added
services such as cable assembly, fan assembly, taping and reeling, and
component modification. Kent Components utilizes a computerized inventory
control system to assist in the marketing of its products and to coordinate
purchases from suppliers with sales to customers. The division's computer
system provides detailed on-line information regarding the availability of the
Company's entire stock of inventory located at its stocking facilities as well
as on-line access to the inventories of most of the Company's major suppliers.
Through its integrated real-time information system, the Company can readily
track customers' orders through the entire process of entering the order,
reserving products to fill the order, ordering components from suppliers, if
necessary, and shipping products to customers on scheduled dates. Kent
Components is thus able to provide the type of distributor service required by
its OEM customers that have adopted the "just-in-time" method of inventory
procurement. Kent Components serves numerous markets, including the computer,
instrumentation, medical, networking systems and telecommunications markets.

KENT DATACOMM. Kent Datacomm serves the voice and data communications after-
market by providing immediate off-the-shelf delivery of premise wiring
products and LAN and WAN equipment to commercial end-users and professionals
who install or service voice and data communications networks. Through a
focused sales effort, the Company believes it is able to participate directly
in the large and rapidly growing market for connection devices, reflecting the
increasing use of microcomputers in LANs and WANs and the continued growth in
networking and cabling needs of minicomputer and mainframe users. Kent
Datacomm serves numerous industries, including the aerospace, airline,
financial, food, government, manufacturing and medical industries.

FUTRONIX SYSTEMS. In January 1997, the Company acquired Futronix Corporation
and Wire & Cable, and the businesses of both Futronix Corporation and Wire &
Cable are now conducted through Futronix Systems. Futronix Systems is a
redistributor of specialty wire and cable, serving more than 1,000 electrical
distributors throughout the United States. Futronix Systems seeks to serve as
an efficient single source of supply and as the distributor of choice for
electrical distributors by maintaining for immediate delivery large quantities
of over 10,000 specialty wire and cable products purchased from more than 50
manufacturers worldwide, as well as limited quantities of complementary
products. As a redistributor, Futronix Systems enables electrical distributors
to purchase exact quantities, gain immediate access to products, obtain a
wider variety of products and lower overall materials acquisition costs. The
products of Futronix Systems typically are used in industrial applications,
including computer systems, factory automation, "intelligent" buildings and
telecommunication systems. Futronix Systems generally does not sell commodity
wire and cable, such as that used in commercial and residential construction.
The Company believes that there are opportunities for redistribution of
existing Company product offerings through Futronix Systems.

MANUFACTURING

K*TEC provides vertically integrated electronic manufacturing products and
services, including printed circuit board assembly and test, electronic
interconnect assemblies, specially fabricated battery power packs,
subassemblies, sheet metal fabrication, plastic injection molding and box
build. The Company has developed innovative material requirements planning
relationships with a select group of OEMs in the data processing, energy,
medical instrumentation and telecommunications industries. These relationships
are supported by sophisticated in-house product design and technical support
capabilities. K*TEC support teams work closely with K*TEC's customers through
all stages of product planning and production to apply advanced design and

19
<PAGE>

production technology. K*TEC's computer systems have a computer aided design
capability that allows its engineers to be on-line with an OEM's engineers
when developing and changing product designs. In addition, K*TEC customers
have Internet access to K*TEC's intranet in order to place and track orders,
inform K*TEC of demand forecasts and change product specifications.

K*TEC's quality control standards provide another means of serving the needs
of the Company's customers, since OEMs rely on suppliers to assure quality
control for subassemblies rather than providing such quality control
themselves. The Company believes that K*TEC's adherence to strict quality
control standards and investment in state-of-the-art production facilities and
equipment have attracted and retained important customers who have established
extremely rigid product quality standards.

MARKETING

Each of the Company's business units maintains its own direct sales force.
At June 28, 1997, the Company employed approximately 310 sales representatives
operating out of sales offices in 32 cities in 25 states. The Company's sales
representatives undergo continuous training and attend classes in order to
enhance both their technical expertise and sales techniques. Sales associates
are compensated primarily on a commission basis. In the marketing of its
products, the Company supplements the efforts of its direct sales force with
direct mailings of brochures and catalogs as well as advertisements in trade
journals. The Company concentrates its efforts in certain targeted markets in
which it only distributes the products of a select group of leading suppliers.
This facilitates sales personnel specialization within related product
groupings, and permits sales representatives to develop a high degree of
technical expertise.

EMPLOYEES

At June 28, 1997, the Company employed approximately 1,560 persons, all on a
full-time basis. The Company's employees are not subject to any collective
bargaining agreement. In addition to its employees, the Company uses other
workers on a contract basis, as its needs require.

20
<PAGE>

MANAGEMENT

The following table sets forth certain information regarding the directors
and executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Morrie K. Abramson........... 62 Chairman of the Board, Chief Executive Officer
and President
Randy J. Corporron........... 40 President of K*TEC Electronics
Terrence M. Hunt............. 49 President of Futronix Systems, Director
Larry D. Olson............... 40 President of Kent Components
Mark A. Zerbe................ 36 President of Kent Datacomm
Stephen J. Chapko............ 43 Executive Vice President and Chief Financial
Officer
Barbara A. Alberto........... 51 Vice President
Keith K. Ayers............... 59 Vice President
Frank M. Billone............. 52 Vice President
Rodney J. Corporron.......... 40 Vice President
Carolyn S. Davis............. 49 Vice President
William H. Fountain.......... 41 Vice President
Pamela P. Huffman............ 39 Vice President
David D. Johnson............. 33 Vice President
Cathy L. O'Leary............. 45 Vice President
Max S. Levit................. 62 Director
David Siegel................. 71 Director
Richard C. Webb.............. 64 Director
Alvin L. Zimmerman........... 54 Director
</TABLE>

Mr. Abramson, a co-founder of the Company, has served as Chief Executive
Officer and a director since 1973 and Chairman of the Board since 1977. He has
been in the electronics distribution business since 1956. Mr. Abramson has
also been Chairman of the Board of K*TEC, the Company's wholly-owned
manufacturing subsidiary, since its incorporation in 1983.

Mr. Randy Corporron has served as an Executive Vice President of the Company
since 1994 and became President of K*TEC in 1989. He previously served as Vice
President of the Company since 1987. He joined the Company in 1982 as General
Manager of K*TEC.

Mr. Hunt has served as an Executive Vice President of the Company, President
of Futronix Systems and as a director since January 1997. Mr. Hunt was elected
to serve as a director in connection with the Company's acquisition of
Futronix Corporation, which became effective January 17, 1997. Prior to
joining the Company, Mr. Hunt served as President of Futronix Corporation,
which he founded in 1991.

Mr. Olson has served as an Executive Vice President of the Company since
1994 and became President of Kent Components in January 1997. He previously
served as Vice President of the Company since 1992, after the Company's
acquisition of Shelley-Ragon, Inc. Since 1991, he had been President of
Shelley-Ragon, Inc.

Mr. Zerbe has served as an Executive Vice President of the Company since
1994 and became President of Kent Datacomm in January 1997. He previously
served as Vice President of the Company since 1988. Mr. Zerbe joined the
Company as a sales representative in 1985.

Mr. Chapko was appointed Executive Vice President, Chief Financial Officer
in January 1997. He served as Vice President and Treasurer of the Company
since 1989, and he was appointed Secretary in 1993. He joined the Company as
Assistant Treasurer in 1987.

21
<PAGE>

Ms. Alberto joined the Company's credit department in 1978. In 1987, she was
appointed Vice President and has responsibilities for credit administration.

Mr. Ayers joined the Company in 1976 as a purchasing agent. Since then, he
has served in various capacities, including manager of the management
information systems. Mr. Ayers currently serves as Vice President and has
responsibilities for training, special projects and administrative matters.

Mr. Billone was appointed Vice President, Chief Information Officer in June
1997 and previously served as Vice President of Information Services--
Distribution since joining the Company in January 1996. Prior to joining the
Company, he held various Information Systems positions with General Electric
since 1967.

Mr. Rodney Corporron directs and coordinates the multi-plant manufacturing
operations and was appointed Vice President of the Company and General Manager
of K*TEC in 1989. Prior to such time, he served the Company in a number of
capacities since 1974.

Ms. Davis joined the Company in February 1995 as Information Services
Manager for K*TEC. She was appointed Vice President of Information Services--
Manufacturing in January 1997. Prior to joining the Company, Ms. Davis served
as Director of Information Systems at Anderson Greenwood & Co. since 1992.

Mr. Fountain has been Vice President since 1987 and is responsible for
product management in the distribution operations. He joined the Company in
1980 as a purchasing agent.

Ms. Huffman joined the Company as K*TEC Human Resources Manager in 1988 and
in 1989 was appointed Corporate Human Resources Manager. In January 1997, she
was appointed Vice President of Human Resources.

Mr. Johnson was appointed Vice President, Corporate Controller in January
1996. He joined the Company in 1988 as Accounts Payable Supervisor.

Ms. O'Leary became a Vice President of the Company in 1993. She joined the
Company in 1986 as a purchasing manager for K*TEC.

Mr. Levit, President of Grocers Supply Company, Inc. since January 1992, has
served as a director of the Company since April 1995. Mr. Levit also serves on
the Board of M.D. Anderson Hospital and The University of Texas--Houston
Health Science Center.

Mr. Siegel has served as a director of the Company since September 1990, and
has been in the electronics distribution business since 1954. Mr. Siegel is
Vice President, director and the founder of Great American Electronics, a
distribution company serving industrial distributors. He is also a director of
Micronetics and Surge Components.

Mr. Webb, a founder of Harris Webb & Garrison, a Houston-based investment
banking and brokerage firm, has served as a director of the Company since June
1986. He has been involved in the investment banking business since 1960, and
was a founder of Lovett Underwood Neuhaus & Webb, Inc., a subsidiary of Kemper
Securities.

Mr. Zimmerman has served as a director of the Company since June 1986. As a
judge he presided over the 309th Family District Court and the 269th Civil
District Court of Harris County, Texas from 1980 to 1984. Since 1984, he has
been a shareholder, officer and director in the law firm of Zimmerman,
Axelrad, Meyer, Stern & Wise, P.C. and its predecessor firms.

22
<PAGE>

DESCRIPTION OF NOTES

The Notes will be issued under an indenture dated as of September , 1997
(the "Indenture") between the Company and Texas Commerce Bank National
Association, as trustee (the "Trustee"). The following summaries of certain
provisions of the Indenture and the Notes do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Indenture, including the definition therein of certain
terms. Whenever terms defined in the Indenture are referred to in this
Prospectus, the applicable definition for such terms is incorporated herein by
reference. A copy of the proposed form of Indenture is filed as an exhibit to
the Registration Statement of which this Prospectus is a part.

GENERAL

The Notes will be unsecured, subordinated obligations of the Company, will
be limited to $172,500,000 in aggregate principal amount (including the Notes
issuable under the Underwriters' over-allotment option) and will mature on
September 1, 2004. The Notes will bear interest at the rate per annum shown on
the front cover of this Prospectus from the date of original issuance of the
Notes pursuant to the Indenture, or from the most recent Interest Payment Date
to which interest has been paid or provided for, payable semi-annually on
March 1 and September 1 of each year, commencing March 1, 1998, to each person
in whose name a Note (or any predecessor Note) is registered at the close of
business on the preceding February 15 or August 15, as the case may be
(whether or not a Business Day). Interest on the Notes will be paid on the
basis of a 360-day year of twelve 30-day months. In addition, the Company will
pay interest on overdue principal at the rate borne by the Notes, and it will
pay interest on overdue installments of interest at the same rate to the
extent lawful.

Principal of and premium, if any, and interest on the Notes will be payable
(i) in same day funds on or prior to the payment dates with respect to such
amounts in the case of Notes held of record by The Depository Trust Company
("DTC") or its nominee and (ii) at the offices of the Trustee in New York, New
York, in the case of Notes held of record by holders other than DTC or its
nominee, and the Notes may be surrendered for registration of transfer,
exchange or conversion at the offices of the Trustee in New York, New York.
The Company may, at its option, pay interest on Notes held of record by
holders other than DTC or its nominee by check mailed to the address of the
persons entitled thereto as it appears in the Register for the Notes on the
Regular Record Date for that interest.

The Notes will be issued only in registered form, without coupons, and in
denominations of $1,000 or any integral multiple thereof. No service charge
will be made for any transfer or exchange of the Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge and any other expenses (including the fees and reasonable expenses of
the Trustee) payable in connection therewith. The Company is not required (i)
to issue, register the transfer of or exchange any Notes during a period
beginning at the opening of business 15 days before the day of the mailing of
a notice of redemption and ending at the close of business on the day of such
mailing, (ii) to register the transfer of or exchange of any Note selected for
redemption in whole or in part, except the unredeemed portion of Notes being
redeemed in part or (iii) to register the transfer or exchange of any Notes
surrendered for conversion or repurchase upon the occurrence of a Repurchase
Event (as defined below).

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

CONVERSION RIGHTS

The Notes will be convertible, in whole or from time to time in part (in
denominations of $1,000 or integral multiples thereof), into shares of Common
Stock of the Company, at any time prior to redemption or final maturity on
September 1, 2004 at the conversion price set forth on the cover page of this
Prospectus, adjusted as described in the following paragraphs, except that if
a Note or portion thereof is earlier called for redemption,

23
<PAGE>

the conversion right with respect thereto will terminate at the close of
business on the Business Day prior to the date fixed for redemption and will
be lost if not exercised prior to that time, unless the Company shall default
in payment of the redemption price.

Fractional shares of Common Stock will not be delivered upon conversion, but
a cash adjustment will be paid in respect of such fractional interests based
on the Closing Price of the Common Stock at the close of business on the day
of conversion (or, if such day is not a Trading Day, on the Trading Day
immediately preceding such day).

The initial conversion price will be subject to adjustment upon certain
events, including the following: (i) the issuance of Common Stock as a
dividend or distribution on capital stock, including the Common Stock; (ii) a
combination, subdivision or reclassification of Common Stock; (iii) the
issuance to all holders of Common Stock of rights, warrants or options
entitling them to subscribe for or purchase Common Stock (or securities
convertible into Common Stock) at a price per share less than the Current
Market Price; provided, however, that in the case of certain rights, warrants
or options that are not exercisable until the occurrence of a specified event
or events, the conversion price will not be adjusted until the occurrence of
the earliest such specified event; (iv) the distribution to all holders of
Common Stock of capital stock (other than Common Stock), evidences of
indebtedness of the Company, assets (excluding regular periodic cash dividends
paid from surplus), or rights, warrants or options to subscribe for or
purchase securities of the Company (excluding the dividends, distributions,
rights and warrants mentioned above); (v) a distribution consisting
exclusively of cash (excluding any cash distributions referred to in (iv)
above or made in connection with a merger or similar transaction) to all
holders of Common Stock in an aggregate amount that, together with (A) all
other cash distributions (excluding any cash distributions referred to in (iv)
above) made within the 12 months preceding such distribution and (B) any cash
and the fair market value of other consideration payable in respect of any
previous tender offer by the Company or a Subsidiary (as defined in the
Indenture) for the Common Stock consummated within the 12 months preceding
such distribution, exceeds 10% of the Company's market capitalization (being
the Current Market Price times the number of shares of Common Stock then
outstanding) on the date fixed for determining the shareholders entitled to
such distribution; and (vi) the completion of a tender offer made by the
Company or any Subsidiary for the Common Stock involving an aggregate
consideration that, together with (X) any cash and the fair market value of
any other consideration paid or payable in respect of any previous tender
offer by the Company or a Subsidiary for the Common Stock consummated within
the 12 months preceding the consummation of such tender offer and (Y) the
aggregate amount of all cash distributions (excluding any cash distributions
referred to in (iv) above) to all holders of Common Stock within the 12 months
preceding the consummation of such tender offer exceeds 10% of the Company's
market capitalization on the date of consummation of such tender offer.

The Company will be permitted to make such reductions in the conversion
price as it determines to be advisable in order that any stock dividend,
subdivision of shares, distribution of rights to purchase stock or securities
or distribution of securities convertible into or exchangeable for stock made
by the Company to its shareholders will not be taxable to the recipients.

Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock, or any securities convertible into or exchangeable
for Common Stock or carrying the right to purchase any of the foregoing, in
exchange for cash, property or services.

If at any time (a) the Company makes a distribution of property to its
shareholders or purchases Common Stock in a tender offer and such distribution
or purchase would be taxable to such shareholders as a dividend for federal
income tax purposes (e.g., distributions of evidences of indebtedness, or
assets, of the Company but generally not stock dividends or rights to
subscribe for capital stock) and, pursuant to the antidilution provisions of
the Indenture, the conversion price of the Notes is reduced or (b) the
conversion price is reduced at the discretion of the Company, such reduction
may be deemed to be the receipt of taxable income by holders of the Notes.
Holders of Notes therefore could have taxable income as a result of an event
in which they receive no cash or property. See "Certain Federal Income Tax
Considerations--Ownership by U.S. Persons--Constructive Dividend."

24
<PAGE>

Subject to any applicable right of the holders to cause the Company to
repurchase their Notes upon a Repurchase Event, in the case of certain
consolidations, mergers or statutory exchanges of securities with another
corporation to which the Company is a party, or the sale or conveyance of the
Company's assets substantially as an entirety, there will be no adjustment to
the conversion price, but each holder will have the right, at the holder's
option, to convert all or any portion of such holder's Notes into the kind and
amount of securities, cash or other property receivable upon the
consolidation, merger, statutory exchange or transfer by a holder of the
number of shares of Common Stock into which such Note might have been
converted immediately prior to such consolidation, merger, statutory exchange
or transfer (assuming such holder failed to exercise any rights of election
and received per share the kind and amount of consideration received per share
by a plurality of non-electing shares). In the case of a cash merger of the
Company into another corporation or any other cash transaction of the type
mentioned above, the effect of these provisions would be that thereafter the
Notes would be convertible at the conversion price in effect at such time into
the same amount of cash per share into which the Notes would have been
convertible had the Notes been converted into Common Stock immediately prior
to the effective date of such cash merger or transaction. Depending upon the
terms of such cash merger or transaction, the aggregate amount of cash into
which the Notes would be converted could be more or less than the principal
amount of the Notes.

Notes surrendered for conversion after the close of business on a record
date for payment of interest and before the close of business on the next
succeeding Interest Payment Date (unless there exists a default in the payment
of interest on such Notes or such Notes have been called for redemption) must
be accompanied by payment of an amount equal to the interest thereon that is
to be paid on such Interest Payment Date. Subject to the foregoing, no
payments or adjustments will be made upon conversion on account of accrued
interest on the Notes or for any dividends or distributions on any shares of
Common Stock delivered upon such conversion. No adjustment of the conversion
price will be required to be made in any case until cumulative adjustments
amount to at least 1% of the conversion price, as last adjusted. Any
adjustment that would otherwise be required to be made shall be carried
forward and taken into account in any subsequent adjustment.

SUBORDINATION

The payment of the principal of and premium, if any, and interest on the
Notes and any other payment obligations of the Company in respect of the
Notes, including any obligation to repurchase Notes at the option of a holder
upon the occurrence of a Repurchase Event, 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. Senior Indebtedness is defined as (a) the
principal of, premium, if any, and accrued and unpaid interest on (i)
indebtedness of the Company for money borrowed, whether outstanding on the
date of execution of the Indenture or thereafter created, incurred or assumed,
(ii) guarantees by the Company of indebtedness for money borrowed by any other
person, or reimbursement obligations under letters of credit, in either case,
whether outstanding on the date of execution of the Indenture or thereafter
created, incurred or assumed, (iii) indebtedness evidenced by notes (other
than the Notes), debentures, bonds or other instruments of indebtedness for
the payment of which the Company is responsible or liable, by guarantees or
otherwise, whether outstanding on the date of execution of the Indenture or
thereafter created, incurred or assumed, (iv) obligations of the Company under
interest rate and currency swaps, caps, floors, collars or similar agreements
or arrangements intended to protect the Company against fluctuations in
interest or currency rates, whether outstanding on the date of execution of
the Indenture or thereafter created, incurred or assumed, and (v) obligations
of the Company under any agreement to lease, or any lease of, any real or
personal property, which obligations, whether outstanding on the date of
execution of the Indenture or thereafter created, incurred or assumed, are
required to be capitalized on the books of the Company in accordance with
generally accepted accounting principles, or guarantees by the Company of
similar obligations of others, and (b) modifications, renewals, extensions and
refundings of any such indebtedness, obligations or guarantees; unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness, obligations or guarantees,
or such modification, renewal, extension or refunding thereof, is not superior
in right of payment to the Notes; provided, however, that Senior Indebtedness
will not be deemed to include, and the Notes will rank pari passu in right of
payment with, any obligation of the Company to any of its Subsidiaries.

25
<PAGE>

In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding,
relative to the Company or to its creditors, as such, or to its assets or (b)
any proceeding for the liquidation, dissolution or other winding-up of the
Company, whether total or partial, whether voluntary or involuntary and
whether involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshaling of assets and liabilities of the
Company, the holders of all Senior Indebtedness will first be entitled to
receive payment in full of all amounts due or to become due thereon or in
respect thereof before the holders of the Notes are entitled to receive any
payment on account of the principal of, or premium, if any, or interest on the
Notes (other than payment (a "Permitted Payment") consisting solely of shares
of stock, securities or indebtedness subordinated at least to the extent of
the Notes provided by a plan of reorganization or adjustment that does not
adversely alter the rights of holders of Senior Indebtedness). Following the
occurrence of any of the events described above, if the Trustee or any holder
of the Notes receives any payment or distribution of assets of the Company of
any kind or character before all Senior Indebtedness is paid in full, then
such payment or distribution (other than a Permitted Payment) will be required
to be paid over or delivered to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other person making payment
or distribution of the assets of the Company for application to the payment of
all amounts payable on or in respect of Senior Indebtedness remaining unpaid,
to the extent necessary to pay such amounts in full after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.

The Indenture also provides that in the event there shall have occurred and
be continuing (i) any default in the payment when due of principal of,
premium, if any, or interest on any Senior Indebtedness or (ii) any other
default with respect to any Senior Indebtedness, then no payment shall be made
by the Company on account of the principal of, premium, if any, or interest on
the Notes or on account of the purchase or redemption or other acquisition of
the Notes (x) in the case of any event of default described in clause (i)
above, unless and until the Senior Indebtedness to which such default relates
is discharged or such event of default shall have been cured or waived or
shall have ceased to exist or the holders of such Senior Indebtedness or their
agents shall have waived the benefits of this provision, and (y) in the case
of any event of default specified in clause (ii) above, from the date the
Company or the Trustee receives written notice of such default (a "Senior
Default Notice") from (a) the lenders under the Company's revolving credit
facility from time to time in effect or any replacement thereof or (b) the
holders of at least 25% in principal amount of any other kind or category of
Senior Indebtedness to which such default relates or any representative of
such holders until the earlier of (A) 180 days after such date or (B) the
date, if any, on which the Senior Indebtedness to which such default relates
is discharged or such default shall have been cured or waived or shall have
ceased to exist or the holders of such Senior Indebtedness or their agents
shall have waived the benefits of this provision; provided, however, that not
more than one Senior Default Notice is permitted to be given during any period
of 360 consecutive days, regardless of the number of defaults specified in
clause (ii) above with respect to Senior Indebtedness during such 360-day
period. Subject to the payment in full of all Senior Indebtedness, the holders
of the Notes will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to Senior Indebtedness until the Notes are paid in full.

Notwithstanding anything in the Indenture to the contrary, neither the
Trustee nor any holder of Notes may exercise any right either may have to
accelerate the maturity of the Notes at any time when payment of any amount
owing on the Notes is prohibited, in whole or in part, as described in the
preceding paragraphs; provided, however, that such right may nevertheless be
so exercised upon the earliest of the acceleration of the maturity of any
Senior Indebtedness, the exercise by any holder of Senior Indebtedness of any
remedies available to such holder upon a default or event of default with
respect to such Senior Indebtedness or the occurrence of an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization.

By reason of the subordination of the Notes, in the event of insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes. In addition, the right of the
Company, and, therefore, the right of creditors of the Company (including
Noteholders), to participate in any distribution of assets of any subsidiary
of the Company upon its liquidation or reorganization or otherwise is

26
<PAGE>

necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized.

The Indenture will not limit the amount of other indebtedness or securities
that may be issued by the Company or any of its subsidiaries.

OPTIONAL REDEMPTION

The Notes may not be redeemed by the Company prior to September 6, 2000.
Thereafter, the Notes may be redeemed at the option of the Company, in whole
or in part, at any time and from time to time, upon not less than 30 nor more
than 60 days' notice by mail at the applicable redemption prices (expressed in
percentages of principal amount) set forth below.

If redeemed during the twelve-month period beginning September 1 in the year
indicated (September 6 in the case of the year 2000), the redemption price
shall be:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000........................................................... %
2001...........................................................
2002...........................................................
2003...........................................................
</TABLE>

together with interest accrued and unpaid thereon to the date fixed for
redemption. If all accrued and payable interest on the Notes has not been
paid, the Notes may not be redeemed in part and the Company may not purchase
or acquire any Notes otherwise than pursuant to a purchase or exchange offer
made on the same terms to all holders of the Notes.

If less than all the Notes are to be redeemed, the Trustee will select those
to be redeemed by lot or such other method as the Trustee in its discretion
shall deem appropriate and fair. Notice of redemption will be given to holders
of the Notes to be redeemed by first class mail at their last address
appearing on the Register for the Notes.

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Company will not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an
entirety to any person, and the Company will not permit any person to
consolidate with or merge into the Company unless (a) if applicable, the
person formed by such consolidation or into which the Company is merged or the
person or corporation which acquires the properties and assets of the Company
substantially as an entirety is a corporation, partnership or trust organized
and validly existing under the laws of the United States or any state thereof
or the District of Columbia and expressly assumes payment of the principal of
and premium, if any, and interest on the Notes and performance and observance
of each obligation of the Company under the Indenture, (b) after consummating
such consolidation, merger, transfer or lease, no Event of Default or event
which, after notice or lapse of time or both, would become an Event of Default
will occur and be continuing, (c) such consolidation, merger, conveyance,
transfer or lease does not adversely affect the validity or enforceability of
the Notes and (d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease complies with the provisions of the
Indenture.

CERTAIN RIGHTS OF HOLDERS TO REQUIRE REPURCHASE OF NOTES

In the event of a Repurchase Event, each holder of Notes will have the
right, at the holder's option, subject to the terms and conditions of the
Indenture, to require the Company to repurchase all or any part (provided that
the principal amount must be $1,000 or an integral multiple thereof) of the
holder's Notes on the date that is 30

27
<PAGE>

days after the date the Company gives notice of the Repurchase Event (the
"Repurchase Date") for a repurchase price equal to 100% of the principal
amount thereof, plus interest accrued and unpaid thereon to the Repurchase
Date (the "Repurchase Price"). On or prior to the Repurchase Date, the Company
shall deposit with the Trustee or a Paying Agent an amount of money in same
day funds sufficient to pay the Repurchase Price of the Notes that are to be
repaid on or promptly following the Repurchase Date.

Failure by the Company to provide timely notice of a Repurchase Event, as
provided for below, or to repurchase the Notes when required under the
preceding paragraph, will result in an Event of Default under the Indenture
whether or not such repurchase is permitted by the subordination provisions of
the Indenture.

On or before the 15th day after the occurrence of a Repurchase Event, the
Company will be obligated to mail to the Trustee and to each holder a notice
of the occurrence of the Repurchase Event, setting forth, among other things,
the type of Repurchase Event, the Repurchase Date and the terms and conditions
of, and the procedures required for exercise of, the holder's right to require
the repurchase of such holder's Notes.

To exercise the repurchase right, a holder must deliver written notice of
such exercise to the Company and the Trustee prior to the close of business on
the Repurchase Date, specifying the Notes with respect to which the right of
repurchase is being exercised, together with the certificates evidencing the
Notes with respect to which the right is being exercised, duly endorsed for
transfer. Such notice of exercise may be withdrawn by the holder by a written
notice of withdrawal delivered to the Trustee at any time prior to the close
of business on the Repurchase Date. In addition, if the Repurchase Date falls
between any Regular Record Date and the next succeeding Interest Payment Date,
Notes to be repurchased must be accompanied by payment of an amount equal to
the interest thereon that is to be paid on such Interest Payment Date.

A "Repurchase Event" will occur upon the occurrence of a Change in Control
(as defined below) or a Termination of Trading (as defined below).

A "Change in Control" will occur when: (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving
corporation (other than a consolidation or merger with a wholly owned
subsidiary of the Company in which all shares of Common Stock outstanding
immediately prior to the effectiveness thereof are changed into or exchanged
for the same consideration) or (B) pursuant to which the Common Stock would be
converted into cash, securities or other property, in each case, other than a
consolidation or merger of the Company in which the holders of the Common
Stock immediately prior to the consolidation or merger have, directly or
indirectly, at least a majority of the total voting power of all classes of
capital stock entitled to vote generally in the election of directors of the
continuing or surviving corporation immediately after such consolidation or
merger in substantially the same proportion as their ownership of Common Stock
immediately before such transaction; (iii) any person, or any persons acting
together which would constitute a "group" for purposes of Section 13(d) of the
Exchange Act, together with any affiliates thereof, shall beneficially own (as
defined in Rule 13d-3 under the Exchange Act) at least 40% of the total voting
power of all classes of capital stock of the Company entitled to vote
generally in the election of directors of the Company; (iv) at any time during
any consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any
new directors whose election by such Board of Directors or whose nomination
for election by the shareholders of the Company was approved by a vote of 66
2/3% of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (v) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution.

A "Termination of Trading" will occur if the Common Stock (or other common
stock into which the Notes are then convertible) is neither listed for trading
on a national securities exchange in the United States nor approved for
trading on an established automated over-the-counter trading market in the
United States.

The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act which may then be
applicable, and will file Schedule 13E-4 or any other schedule

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required thereunder in connection with any offer by the Company to repurchase
Notes at the option of the holders upon a Repurchase Event.

The repurchase feature of the Notes may in certain circumstances make more
difficult or discourage a takeover of the Company and, thus, the removal of
incumbent management. In addition, the foregoing provision may not afford
holders of Notes protection in the event of highly leveraged or other
transactions involving the Company that may adversely affect such holders. The
Company believes that the Repurchase Event repurchase feature is a standard
term contained in other similar debt offerings, and the terms of such feature
result from negotiations between the Company and the Underwriters.

The right to require the Company to repurchase Notes as a result of a
Repurchase Event could create an event of default under Senior Indebtedness of
the Company as a result of which any repurchase could, absent a waiver, be
blocked by the subordination provisions of the Notes. The Company's Board of
Directors may not waive a Repurchase Event. Failure by the Company to
repurchase the Notes when required will result in an Event of Default with
respect to the Notes whether or not such a repurchase is permitted by the
subordination provisions.

If a Repurchase Event were to occur, there can be no assurance that the
Company would have sufficient funds to pay the Repurchase Price for all Notes
tendered by the holders thereof. The Company's ability to make such payments
may be limited by the terms of its then-existing borrowing and other
agreements.

EVENTS OF DEFAULT

Each of the following will be an Event of Default with respect to the Notes
under the Indenture: (i) default for 30 days in payment of any interest
installment of the Notes (even if such payment is prohibited by the
subordination provisions of the Indenture); (ii) default in payment of
principal of, or premium, if any, on the Notes either in connection with any
redemption or otherwise (even if such payment is prohibited by the
subordination provisions of the Indenture); (iii) default in the payment of
the Repurchase Price in respect of any Note on the Repurchase Date therefor
(even if such payment is prohibited by the subordination provisions of the
Indenture); (iv) failure to provide timely notice of a Repurchase Event as
required by the Indenture; (v) failure to observe or perform for 45 days after
notice thereof any other covenant in the Indenture; (vi) default under one or
more bonds, debentures, notes or other evidences of indebtedness for money
borrowed by the Company or any subsidiary of the Company or under one or more
mortgages, indentures or instruments under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed by
the Company or any subsidiary of the Company, whether such indebtedness is
outstanding as of the date of the Indenture or shall thereafter be created,
which default individually or in the aggregate constitutes a failure to pay
the principal of indebtedness in excess of $15,000,000 when due and payable
after the expiration of any applicable grace period with respect thereto or
results in indebtedness in excess of $15,000,000 becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within a period of 30 days
after there shall have been given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate principal
amount outstanding of the Notes a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or cause
such acceleration to be rescinded or annulled; (vii) entry of a final judgment
or judgments against the Company or any subsidiary of the Company in the
amount of at least $15,000,000 that remain undischarged and unstayed for a
period of 30 days; or (viii) certain events of bankruptcy, insolvency,
reorganization, receivership or liquidation involving the Company or any
subsidiary of the Company.

The Company will be required to file with the Trustee annually a written
statement as to the fulfillment of its obligations under the Indenture. The
Indenture will provide that the Trustee may withhold notice to the holders of
the Notes of any default (except in payment of principal of, premium, if any,
or interest on the Notes) if the Trustee considers it in the interest of the
holders of the Notes to do so. The Indenture will provide that, if an Event of
Default (other than an Event of Default resulting from bankruptcy, insolvency
or reorganization)

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<PAGE>

shall have occurred and be continuing, either the Trustee or the holders of
25% or more in aggregate principal amount of the Notes may declare the
principal of all the Notes and the interest accrued thereon to be due and
payable immediately, but if the Company cures all defaults (except the
nonpayment of principal of and premium, if any, and accrued interest on Notes
that shall have become due by acceleration) and certain other conditions are
met, such declaration may be annulled and past defaults may be waived by the
holders of a majority in aggregate principal amount of the Notes. Prior to a
declaration of acceleration, certain Events of Default and past defaults may
be waived by the holders of a majority in aggregate principal amount of the
Notes. In the case of an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization, all unpaid principal of and accrued
interest on the Notes then outstanding shall be due and payable immediately
without any declaration or other act on the part of the Trustee or the holders
of Notes.

Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Noteholders, unless such
Noteholders have offered to the Trustee security or indemnity satisfactory to
the Trustee. Subject to such provision for security or indemnification, the
holders of a majority in aggregate principal amount of the Notes will 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, provided that the Trustee will have the right to
decline to follow any such direction if the Trustee is advised by counsel that
the action or proceeding so directed may not lawfully be taken or the Trustee
determines that the action or proceeding so directed could involve the Trustee
in personal liability or would be unduly prejudicial to the rights of the
holders not joining in such directions or would conflict with the Indenture.

MODIFICATION OF THE INDENTURE

The Indenture will contain provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority of the
aggregate principal amount of the Notes then outstanding, to execute a
supplemental indenture to add provisions to, or change in any manner or
eliminate any provisions of, the Indenture or modify in any manner the rights
of the holders of the Notes, provided that no such supplemental indenture may,
among other things, (i) extend the time for payment of principal of or any
premium or interest on any Note or reduce the principal amount thereof or the
interest thereon or any premium payable upon the redemption thereof or impair
the right of any holder to institute suit for payment of the Notes, or make
the principal thereof or any premium or interest thereon payable in any coin
or currency other than that provided in the Indenture, or modify the
subordination provisions of the Indenture in a manner adverse to the holders
or impair the right to convert the Notes into Common Stock or to require the
Company to repurchase the Notes upon the occurrence of a Repurchase Event
without the consent of the holder of each outstanding Note so affected, or
(ii) reduce the aforesaid percentage of the aggregate principal amount of
Notes, the holders of which must consent to authorize any such supplemental
indenture, without the consent of the holders of all outstanding Notes.

GOVERNING LAW

The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York, without giving effect to such state's
conflicts of laws principles.

BOOK-ENTRY

The Notes will be issued in the form of a global note or notes (together,
the "Global Note") deposited with, or on behalf of, DTC and registered in the
name of Cede & Co. as DTC's nominee. Owners of beneficial interests in the
Notes represented by the Global Note will hold such interests pursuant to the
procedures and practices of DTC and must exercise any rights in respect of
their interests (including any right to convert or require repurchase of their
interests) in accordance with those procedures and practices. Such beneficial
owners will not be deemed holders of Notes, and will not be entitled to any
rights under the Global Note or the Indenture, with respect to the Global
Note, and the Company and the Trustee, and any of their respective agents, may
treat DTC as the sole holder and owner of the Global Note.

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<PAGE>

DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities that its
participants deposit with DTC. DTC also facilitates the settlement among
participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
direct participants and by the NYSE, the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
direct participant, either directly or indirectly. The rules applicable to DTC
and its participants are on file with the Securities and Exchange Commission.

Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form as set forth below, the Global Note may not be transferred
except as a whole by DTC to a nominee of DTC, or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any such nominee of DTC to a successor
depositary or nominee of such successor depositary.

The Notes represented by the Global Note will not be exchangeable for
certificated Notes, provided that if (i) DTC is at any time unwilling, unable
or ineligible to continue as depositary (unless the Company has approved a
successor depositary within 90 days) or (ii) there shall have occurred or be
continuing an Event of Default with respect to such Global Note, the Company
will issue individual Notes in definitive form in exchange for the Global
Note. In addition, the Company may at any time and in its sole discretion
determine not to have a Global Note, and, in such event, will issue individual
Notes in definitive form in exchange for the Global Note previously
representing all such Notes. In such instances, an owner of a beneficial
interest in a Global Note will be entitled to physical delivery of Notes in
definitive form equal in principal amount to such beneficial interest and to
have such Notes registered in its name. Individual Notes so issued in
definitive form will be issued in denominations of $1,000 and any larger
amount that is an integral multiple of $1,000 and will be issued in registered
form only, without coupons.

Payments of principal of and interest on the Notes will be made by the
Company through the Trustee to DTC or its nominee, as the case may be, as the
registered owner of the Global Note. Neither the Company nor the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests of the Global
Note or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. The Company expects that DTC, upon receipt of
any payment of principal or interest in respect of the Global Note, will
credit the accounts of the related participants with payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in the Global Note as shown on the records of DTC. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Note will be governed by standing customer instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants.

So long as the Notes are represented by a Global Note, DTC or its nominee
will be the only entity that can exercise a right to repayment pursuant to the
holder's option to elect repayment of its Notes or the right of conversion of
the Notes. Notice by participants or by owners of beneficial interests in a
Global Note held through such participants of the exercise of the option to
elect repayment, or the right of conversion, of beneficial interests in Notes
represented by the Global Note must be transmitted to DTC in accordance with
its procedures on a form required by DTC and provided to participants. In
order to ensure that DTC's nominee will timely exercise a right to repayment,
or the right of conversion, with respect to a particular Note, the beneficial
owner of such Notes must instruct the broker or other participant through
which it holds an interest in such Notes to notify

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<PAGE>

DTC of its desire to exercise a right to repayment, or the right of
conversion. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner
should consult the broker or other participant through which it holds an
interest in a Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to DTC.
The Company will not be liable for any delay in delivery of such notice to
DTC.

LISTING

The Notes have been approved for listing on the NYSE under the symbol "KNT
04" subject to official notice of issuance.

CONCERNING THE TRUSTEE

Texas Commerce Bank National Association will be the Trustee under the
Indenture. The Indenture permits the Trustee to become a creditor of the
Company and does not preclude the Trustee from enforcing its rights as a
creditor, including rights as a holder of Senior Indebtedness, subject,
however, to the provisions of the Trust Indenture Act regarding collection of
claims against the Company. The Trustee is the lender under the Company's
unsecured line of credit. As of August 20, 1997, there was no indebtedness
outstanding under the line of credit. In addition, the Company and certain of
its subsidiaries also maintain depository and other commercial banking and
fiduciary relationships with the Trustee.

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DESCRIPTION OF CAPITAL STOCK

The following summary of the material terms and provisions of the Common
Stock and the Preferred Stock (as defined below) is qualified in its entirety
by reference to the Amended and Restated Articles of Incorporation of the
Company, which expressly include the terms of the Common Stock and the
Preferred Stock. The Company's Amended and Restated Articles of Incorporation
are incorporated by reference as an exhibit to the Registration Statement of
which this Prospectus is a part.

COMMON STOCK

The Company is authorized to issue 60,000,000 shares of Common Stock.
Holders of Common Stock are entitled to one vote per share on all matters on
which they are entitled to vote. Because holders of Common Stock do not have
cumulative voting rights, holders of a majority of the shares voting for the
election of directors can elect all of the members of the Board of Directors.
Except as required by Texas law for certain extraordinary transactions and as
set forth below under "Charter and Bylaw Provisions," a majority vote is also
sufficient for other actions that require the vote or concurrence of
shareholders. The Common Stock is not redeemable and has no conversion or
preemptive rights. All of the outstanding shares of Common Stock are, and all
of the shares issuable upon conversion of the Notes will be, when issued in
accordance with the Indenture, fully paid and nonassessable. In the event of
the liquidation or dissolution of the Company, subject to the rights of the
holders of any outstanding shares of the Company's preferred stock, par value
$1.00 per share ("Preferred Stock"), the holders of Common Stock are entitled
to share pro rata in any balance of the corporate assets available for
distribution to them. The Company may pay dividends when and as declared by
the Board of Directors from funds legally available therefor. See "Dividend
Policy."

PREFERRED STOCK

The Company's Board of Directors is authorized to issue up to 2,000,000
shares of Preferred Stock. No shares of Preferred Stock are currently
outstanding. The Company's Board of Directors is authorized to divide the
Preferred Stock into series and, with respect to each series, to determine the
dividend rights, dividend rate, conversion rights, voting rights, redemption
rights and terms, liquidation preferences, sinking fund provisions, the number
of shares constituting the series and the designation of such series. The
Board of Directors could, without shareholder approval, issue Preferred Stock
with voting rights and other rights that could adversely affect the voting
power of holders of Common Stock and could be used to prevent a hostile
takeover of the Company. The Board has set the terms and conditions of a
series of Preferred Stock consisting of 200,000 shares designated as Series A
Preferred Stock in connection with the adoption of a shareholder rights plan.
See "--Shareholder Rights Plan." Except in connection with the possible
triggering of such plan, the Company has no present plans to issue any shares
of Preferred Stock.

CHARTER AND BYLAW PROVISIONS

The Company's charter has a "fair price" provision relating to certain
business combinations, including certain mergers, consolidations, asset and
stock conveyances, liquidations and reclassifications. The "fair price"
provision provides that, except in certain circumstances, any such business
combination between the Company and an interested shareholder (defined
generally as a person or entity that owns or has owned within the past two
years, directly or indirectly, 10% or more of the Company's outstanding voting
stock) must be approved by the affirmative vote of the holders of 80% of the
outstanding voting stock of the Company, unless certain pricing and procedural
requirements regarding the business combination are satisfied. For instance,
one such requirement is that the aggregate consideration to be paid for each
share of Common Stock must be at least equal to the highest per share price
paid by the interested shareholder to acquire any share of Common Stock during
a specified period. Additionally, the higher voting requirements do not apply
to transactions approved by a majority of the "continuing directors."
Generally, a director is deemed to be a continuing director if he was a
director on May 15, 1987, or was appointed by a majority of other continuing
directors or elected by the shareholders after

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<PAGE>

having been recommended by a majority of other continuing directors. The "fair
price" provision could make it more difficult for a third party to acquire
control of the Company.

The Board of Directors of the Company is classified into three classes of
directors who serve staggered three-year terms. Vacancies or newly created
directorships on the Board may be filled only by a majority vote of directors
then in office, and directors may be removed during their term only for cause
and only by the affirmative vote of two-thirds of all shares of voting stock.
The Bylaws also require that the provisions described above may not be further
amended, altered, changed or appealed, nor may the number of directors be
increased, without either the affirmative vote of 80% of the shares of voting
stock or the approval of a majority of directors in office. These provisions
may have the effect of discouraging hostile or unsolicited takeover attempts
or proxy contests or, alternatively, may encourage persons considering such
actions to negotiate with the existing Board.

SHAREHOLDER RIGHTS PLAN

The Board of Directors has created certain rights (the "Rights") and
authorized the issuance of one Right (subject to adjustment) for each
outstanding share of Common Stock to shareholders of record at the close of
business on May 24, 1990 (the "Record Date"). In addition, the related Rights
Agreement (as defined below) provides for the issuance of one Right for each
share of Common Stock issued after adoption of the Rights Agreement, which
would include shares of Common Stock issuable upon conversion of the Notes.
After adjustment for the Company's three-for-two stock split to shareholders
of record on February 15, 1995, and the Company's two-for-one stock split to
shareholders of record on February 15, 1996, there is currently one-third of a
Right associated with each share of Common Stock. Each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Preferred Stock, $1.00 par value per share, of the Company (the
"Series A Preferred Stock") at a price of $40.00 per one one-hundredth of a
share (subject to adjustment), payable in cash. The description and terms of
the Rights are set forth in a Rights Agreement between the Company and
Ameritrust Company National Association, as Rights Agent, dated as of May 14,
1990 (the "Rights Agreement").

Although the Rights are not intended to prevent a takeover of the Company at
a full and fair price, they have certain anti-takeover effects. They may deter
an attempt to acquire the Company in a manner which seeks to deprive the
Company's shareholders of the full and fair value of their investment and may
deter attempts by significant shareholders to take advantage of the Company
and its shareholders through certain self-dealing transactions. The Rights may
cause substantial dilution to a person or group that acquires or attempts to
acquire the Company without the rights being redeemed. Accordingly, the Rights
should encourage any potential acquiror to seek to negotiate with the
Company's Board of Directors. Unless the approval is first obtained from the
Board of Directors of the Company, or, in limited circumstances, the
shareholders of the Company, the Rights may deter transactions, including
tender offers, which the majority of shareholders may believe are beneficial
to them. Under the Rights Agreement, one-third of a Right (subject to
adjustment) will also be issued with each share of Common Stock issued upon
conversion of the Notes.

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<PAGE>

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following is a general discussion of certain material United States
federal income tax considerations relevant to initial holders of the Notes and
shares of Common Stock issuable upon conversion of the Notes. Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P. has issued to the Company and filed as an
exhibit to the Registration Statement, of which this Prospectus is a part, a
tax opinion that the following discussion of such tax considerations is
accurate and complete in all material respects and constitutes its opinion of
the material tax considerations to initial holders of the Notes and shares of
Common Stock issuable upon conversion of the Notes. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions
now in effect, all of which are subject to change (possibly with retroactive
effect) or different interpretations. This discussion does not purport to deal
with all aspects of federal income taxation that may be relevant to a
particular investor's decision to purchase the Notes or acquire shares of
Common Stock on conversion of Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, persons that will hold the Notes as a
position in a "straddle" or as part of a hedging or "conversion" transaction
for tax purposes, tax-exempt organizations and non-United States holders of
Notes, may be subject to special rules. In addition, this discussion is
limited to persons who purchase the Notes pursuant to this Prospectus, and who
hold the Notes or shares of Common Stock issued on conversion of the Notes as
a "capital asset" within the meaning of section 1221 of the Code.

ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE SHARES OF COMMON
STOCK ISSUABLE ON CONVERSION OF THE NOTES.

OWNERSHIP BY U.S. PERSONS

GENERAL. The following applies to a person (a "U.S. Holder") that is a
citizen or resident of the United States, a corporation or partnership created
or organized in the United States or any state thereof, an estate the income
of which is includible in income for United States federal income tax purposes
regardless of its source, or a trust as to which a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States fiduciaries have the authority to control
all substantial decisions of the trust.

PAYMENTS OF INTEREST. Interest on a Note generally will be taxable to a U.S.
Holder as ordinary income at the time it is paid or accrued in accordance with
the holder's method of accounting for tax purposes.

CONVERSION OF NOTES INTO COMMON STOCK. In general, a U.S. Holder will
recognize no gain or loss on a conversion of the Notes into shares of Common
Stock, except with respect to cash received in lieu of a fractional share. The
basis of the Common Stock received on conversion will be equal to the basis of
the Notes converted, reduced by the portion of such basis allocated to any
fractional share of Common Stock exchanged for cash. The holding period of a
U.S. Holder in the Common Stock received on conversion will include the period
during which the converted Notes were held.

CONSTRUCTIVE DIVIDEND. A distribution to holders of Common Stock may cause a
deemed distribution (which will be a dividend to the extent of the Company's
current or accumulated earnings and profits) to U.S. Holders of the Notes if
the conversion price or conversion ratio of the Notes is adjusted to reflect
that distribution.

MARKET DISCOUNT. Under the market discount rules of sections 1276 through
1278 of the Code, if a holder of a Note purchases the Note at market discount
(i.e., at a price below its stated redemption price at maturity) in excess of
a statutorily-defined de minimis amount and thereafter recognizes gain upon a
disposition or retirement of the Note, then the lesser of the gain recognized
or the portion of the market discount that accrued on a ratable

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<PAGE>

basis (or, if elected, on a constant interest rate basis) generally will be
treated as ordinary income at the time of the disposition. Moreover, any
market discount on a Note may be taxable to a U.S. Holder to the extent of
appreciation at the time of certain otherwise non-taxable transactions, such
as gifts. If a U.S. Holder converts a market discount Note into Common Stock,
the theretofore unrecognized accrued market discount on such Note will not, in
general, be recognized but will be treated as ordinary income on the later
disposition of the Common Stock to the extent of any gain recognized at that
time on the disposition of the Common Stock.

DISTRIBUTIONS ON COMMON STOCK. Distributions on the Common Stock into which
Notes have been converted will be taxable as dividends to the extent of the
Company's current and/or accumulated earnings and profits. Such dividends may
be eligible for the dividends-received deduction in the case of U.S. Holders
which are domestic corporations, subject to applicable limitations.

To the extent that the amount of any distribution exceeds the Company's
current and accumulated earnings and profits, the distribution first will be
treated as a tax-free return of capital until the U.S. Holder's adjusted basis
in the Common Stock is reduced to zero, and the balance in excess of adjusted
basis will be taxed as capital gain.

DISPOSITION OF NOTES OR COMMON STOCK. Each U.S. Holder of Notes generally
will recognize gain or loss upon the sale, redemption, repurchase, retirement
or other disposition of those Notes measured by the difference (if any)
between (i) the amount of cash and the fair market value of any property
received (except to the extent that such cash or other property is
attributable to the payment of accrued interest not previously included in
income, which amount will be taxable as ordinary income) and (ii) the holder's
adjusted tax basis in the Notes. Each U.S. Holder of Common Stock into which
the Notes are converted will, in general, recognize gain or loss upon the sale
or other disposition of the Common Stock measured under rules similar to those
described in the preceding sentence in connection with the sale or other
disposition of the Notes. Special rules may apply to redemptions of Common
Stock which may result in different treatment. Any such gain or loss should be
capital gain or loss (except as discussed under "--Market Discount" above),
and would be long-term capital gain or loss if the holding period of the Note
and/or the Common Stock was more than one year. Under the Taxpayer Relief Act
of 1997, the maximum capital gains rate for individuals on gain on certain
assets which are sold after July 28, 1997 and which are held for more than
eighteen months is reduced to 20%. Each U.S. Holder of the Notes who is an
individual should consult the holder's tax advisor to determine the
application of this legislation to the holder.

BACKUP WITHHOLDING. A U.S. Holder of Notes or Common Stock will be subject
to back-up withholding at a rate of 31% with respect to certain "reportable
payments," including interest payments, dividend payments and, under certain
circumstances, principal payments on the Notes unless the holder provides a
social security number or other taxpayer identification number in the manner
prescribed by the IRS or otherwise establishes an exemption. Any amount
withheld from a payment to a holder under the back-up withholding rules is
creditable against the holder's federal income tax liability, provided the
required information is furnished to the IRS.

The Company will report to the holders of Notes and Common Stock and to the
IRS the amount of any such reportable payments for each calendar year and the
amount of tax withheld, if any, with respect to such payments.

OWNERSHIP BY NON-U.S. HOLDERS

GENERAL. The following discussion applies to a person (a "Non-U.S. Holder")
that is not a U.S. Holder, as above defined, and is limited to items of income
with respect to the Notes and Common Stock, such as interest, dividends, and
gain or loss on disposition, which are not effectively connected with the
conduct by such Non-U.S. Holder of a trade or business within the United
States. Any effectively connected items of income will be subject to the
United States federal income tax that applies to U.S. Holders generally, and
in the case of such a Non-U.S. Holder which is a foreign corporation, such
items will also be subject to branch profits tax at 30% or such lower rate as
may be specified by an applicable income tax treaty. The tax treatment of Non-
U.S. Holders

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<PAGE>

may vary depending upon their particular situations. Prospective investors
that will be Non-U.S. Holders are urged to consult their tax advisors
regarding the United States federal tax consequences of acquiring, holding and
disposing of Notes and Common Stock, as well as any tax consequences that may
arise under the laws of any foreign, state, local or other taxing
jurisdiction.

INTEREST ON NOTES. Interest paid by the Company to a Non-U.S. Holder will
not be subject to United States federal income or withholding tax if (i) the
Non-U.S. Holder does not actually or constructively own 10% or more of the
total voting power of all voting stock of the Company and is not a controlled
foreign corporation with respect to which the Company is a "related person"
within the meaning of the Code and (ii) the beneficial owner of the Notes (or,
in certain cases, a specified financial institution) certifies, under
penalties of perjury, that the beneficial owner is not a United States person
and provides the beneficial owner's name and address.

GAIN ON DISPOSITION OF NOTES OR COMMON STOCK. A Non-U.S. Holder generally
will not be subject to United States federal income tax on any gain recognized
on a sale, redemption or other disposition of a Note or on a sale or other
disposition of Common Stock unless (i) the Non-U.S. Holder is an individual
who is present in the United States for 183 days or more in the taxable year
of the disposition and certain other requirements are met or (ii) under
certain circumstances which the Company does not expect to apply, the Note or
Common Stock is a "United States real property interest," within the meaning
of section 897 of the Code.

DIVIDENDS ON COMMON STOCK. Dividends paid on shares of Common Stock
generally will be subject to withholding of United States federal income tax
at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty. Under current United States Treasury Regulations and practice,
dividends paid to a shareholder having an address outside the United States
are presumed to be paid to a resident of such country for purposes of
determining the applicability of a tax treaty rate. Under proposed United
States Treasury Regulations, however, which are presently expected to take
effect beginning in 1999, a Non-U.S. Holder of Common Stock that wishes to
claim the benefit of a treaty rate would be required to satisfy applicable
certification and other requirements. A Non-U.S. Holder of Common Stock that
is eligible for a reduced rate of United States withholding tax pursuant to a
tax treaty may obtain a refund of any excess amounts currently withheld by
filing an appropriate claim for refund with the IRS.

FEDERAL ESTATE TAXES. If, at the time of death of a holder who is a
nonresident alien individual, interest on the Notes is not effectively
connected income to such holder and is otherwise exempt from withholding of
United States federal income tax under the rules described above, the Notes
will not be included in the estate of such holder for United States federal
estate tax purposes. Common Stock owned, or treated as owned, by a nonresident
alien individual at the time of death will be included in such holder's gross
estate for United States federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise. The rules for determining whether an
individual is a nonresident alien for federal estate tax purposes are
different from those for determining whether such individual is a nonresident
alien for federal income tax purposes.

INFORMATION REPORTING AND BACK-UP WITHHOLDING. The Company must report
annually to the IRS and to each Non-U.S. Holder the amount of interest and
dividends paid to such holder and the amount of any tax withheld, if any.
These information reporting requirements apply regardless of whether
withholding is required. Copies of the information returns reporting such
interest and dividends and withholding may also be made available to the tax
authorities in the country in which the Non-U.S. Holder resides under the
provisions of an applicable income tax treaty.

Interest on a Note which is paid to a Non-U.S. Holder will be exempt from
back-up withholding if the Non-U.S. Holder has provided a certificate in the
form necessary to establish an exemption from withholding tax. See "--Interest
on Notes." Under current United States Treasury Regulations, dividends which
are paid to a Non-U.S. Holder at an address outside the United States are not
subject to back-up withholding. The payment of proceeds of a sale by a Non-
U.S. Holder of Notes or Common Stock will be subject to back-up withholding if
the sale is made through a United States office of a broker unless the holder
certifies that the holder is not a United States person or otherwise
establishes an exemption. In addition, in certain circumstances the payment of

37
<PAGE>

proceeds of a sale by a Non-U.S. Holder of Notes or Common Stock will be
subject to information reporting if the sale is made through a foreign office
of a broker.

Back-up withholding is not an additional tax. Any amounts withheld under the
back-up withholding rules may be refunded or credited against the Non-U.S.
Holder's United States federal income tax liability, provided that the
required information is furnished to the IRS.

On April 15, 1996, the IRS issued proposed Treasury Regulations concerning
the withholding of tax and information reporting as to certain amounts paid to
nonresident individuals and foreign corporations. The proposed Treasury
Regulations would, among other changes, eliminate the presumption under
current regulations with respect to dividends paid to shareholders having
addresses outside the United States. See "--Dividends on Common Stock." It is
presently expected that the proposed Treasury Regulations will take effect
beginning in 1999. Prospective Note purchasers should consult their tax
advisors concerning the potential effect of such regulations to them with
respect to their ownership of the Notes and the Common Stock.

38
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), each of the
underwriters named below (the "Underwriters"), has severally agreed to
purchase from the Company the principal amount of Notes set forth opposite the
name of such Underwriter below:

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITERS NOTES
------------ ------------
<S> <C>
Smith Barney Inc............................................ $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................
BT Alex. Brown Incorporated.................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
------------
Total..................................................... $150,000,000
============
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes offered hereby are
subject to the approval of certain legal matters by counsel and to certain
other conditions. The Underwriters will be obligated to take and pay for all
of the Notes offered hereby (other than those covered by the over-allotment
option described below) if any of such Notes are purchased.

The Underwriters initially propose to offer part of the Notes offered hereby
directly to the public at the public offering price set forth on the cover
page of this Prospectus and part of the Notes offered hereby to certain
dealers at a price which represents a concession not in excess of % of the
principal amount per Note under the price to public. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of % of the
principal amount per Note to certain other dealers. After the Offering, the
public offering price and such concessions may be changed by the Underwriters.

The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to $22,500,000 principal
amount of additional Notes at the public offering price set forth on the cover
page hereof less underwriting discounts and commissions. The Underwriters may
exercise such option to purchase additional Notes solely for the purpose of
covering over-allotments, if any, incurred in connection with the sales of the
Notes offered hereby. To the extent such option is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional Notes as the principal
amount of Notes set forth opposite such Underwriter's name in the preceding
Underwriters table bears to the total principal amount of Notes in such table.

The Company and its directors and executive officers have agreed that, for a
period of 90 days from the date of this Prospectus, they will not, without the
prior written consent of Smith Barney Inc., offer, sell, contract to sell, or
otherwise dispose of, any shares of Common Stock (or any securities
convertible into or exercisable or exchangeable for, Common Stock), or grant
any options or warrants to purchase Common Stock, except in certain
circumstances.

In connection with the Offering and in compliance with applicable law, the
Underwriters may engage in transactions which stabilize or maintain the market
price of the Notes, the Common Stock, or both at levels above those which
might otherwise prevail in the open market. Specifically, the Underwriters may
over-allot in connection with the Offering creating a short position in the
Notes for their own account. For the purposes of covering a syndicate short
position or stabilizing the price of the Notes, the Underwriters may place
bids for the Notes, the Common Stock, or both or effect purchases of the
Notes, the Common Stock, or both in the open market. A syndicate short
position may also be covered by exercise of the over-allotment option
described above. Finally, the Underwriters may impose a penalty bid on certain
Underwriters and dealers. This means that the

39
<PAGE>

underwriting syndicate may reclaim selling concessions allowed to an
Underwriter or a dealer for distributing the Notes in the Offering if the
syndicate repurchases previously distributed Notes in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. The
Underwriters are not required to engage in any of these activities and any
such activities, if commenced, may be discontinued at any time.

Smith Barney Inc. has from time to time performed various investment banking
services for the Company and has received customary fees in respect of such
services.

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.

The Company will apply for listing of the Notes on the NYSE. The Company has
been advised by the Underwriters that they currently intend to make a market
in the Notes. However, such entities are not obligated to do so, and any
market making may be discontinued at any time without any notice. There can be
no assurance as to whether an active trading market for the Notes will
develop.

LEGAL MATTERS

The validity of the Notes offered hereby will be passed upon for the Company
by Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., Houston, Texas. Certain
matters relating to United States federal income tax considerations will also
be passed upon for the Company by Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
Certain legal matters will be passed upon for the Underwriters by Baker &
Botts, L.L.P., Houston, Texas.

EXPERTS

The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K, as amended by Form 10-K/A, for the
fiscal year ended March 29, 1997 have been audited by Grant Thornton LLP,
independent certified public accountants, as indicated in its report thereto
and are included herein in reliance upon the authority of such firm as experts
in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith, files reports, proxy statements, and other
information with the Securities and Exchange Commission ("SEC"). The reports,
proxy statements, and other information filed by the Company with the SEC can
be inspected and copied at the public reference facilities maintained by the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the SEC: New York Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048, and
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may be obtained from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The SEC also maintains an Internet web site
(http://www.sec.gov) that contains reports, proxy statements, and other
information filed electronically by the Company with the SEC. In addition, the
Company's Common Stock is listed on the NYSE and reports, proxy statements and
other information concerning the Company described above may be inspected at
the offices of the NYSE at 20 Broad Street, New York, New York 10005.

The Company has filed with the SEC a registration statement on Form S-3 (the
"Registration Statement") under the Securities Act with respect to the Notes
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Notes, reference is
made to the Registration Statement and the exhibits and schedules filed as a
part thereof. Statements made in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and,
in each instance, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified

40
<PAGE>

in all respects by such reference to such exhibit. The Registration Statement,
including exhibits and schedules thereto, may be inspected without charge at
the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the SEC's New York
Regional Office, Seven World Trade Center, Suite 1300, New York, New York
10048, and at the SEC's Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60621. Copies of the Registration Statement and
the exhibits and schedules thereto may be obtained from the SEC at such
offices upon payment of the charges prescribed by the SEC.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, filed by the Company with the SEC under the
Exchange Act, are incorporated in this Prospectus by reference:

(a) The Company's Annual Report on Form 10-K, as amended by Form 10-K/A,
for the fiscal year ended March 29, 1997;

(b) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 28, 1997;

(c) The description of the Company's Common Stock contained in a
registration statement on Form 8-A filed on May 20, 1986 under Section 12
of the Exchange Act; and

(d) The description of the Rights contained in a registration statement
on Form 8-A filed on June 18, 1990 under Section 12 of the Exchange Act.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the Offering will be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein will be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents which are not
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Mr. Stephen J. Chapko, Secretary, at the
Company's principal executive offices located at 7433 Harwin Drive, Houston,
Texas 77036; telephone number (713) 780-7770.

41
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants....................... F-2
Consolidated Balance Sheets--March 30, 1996, March 29, 1997 and June 28,
1997.................................................................... F-3
Consolidated Statements of Earnings for the Fiscal Years Ended April 1,
1995, March 30, 1996 and March 29, 1997 and for the Thirteen Weeks Ended
June 29, 1996 and June 28, 1997......................................... F-4
Consolidated Statements of Cash Flows for the Fiscal Years Ended April 1,
1995, March 30, 1996 and March 29, 1997 and for the Thirteen Weeks Ended
June 29, 1996 and June 28, 1997......................................... F-5
Consolidated Statement of Stockholders' Equity for the Fiscal Years Ended
April 1, 1995, March 30, 1996 and March 29, 1997 and for the Thirteen
Weeks Ended June 28, 1997............................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Kent Electronics Corporation

We have audited the consolidated balance sheets of Kent Electronics
Corporation and Subsidiaries as of March 29, 1997 and March 30, 1996, and the
related consolidated statements of earnings, cash flows and stockholders'
equity for each of the three years in the period ended March 29, 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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kent
Electronics Corporation and Subsidiaries as of March 29, 1997 and March 30,
1996, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended March 29, 1997, in conformity
with generally accepted accounting principles.

GRANT THORNTON LLP

Houston, Texas
May 5, 1997

F-2
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 30, MARCH 29, JUNE 28,
ASSETS 1996 1997 1997
------ --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (including
temporary investments of $75,552 at March
30, 1996, $28,728 at March 29, 1997 and
$26,502 at June 28, 1997).................... $ 73,431 $ 25,050 $ 21,035
Trading securities, net....................... 38,747 -- --
Accounts receivable, net...................... 60,210 88,835 92,476
Inventories
Materials and purchased products............ 62,177 91,100 101,868
Work in process............................. 3,414 3,394 5,268
-------- -------- --------
65,591 94,494 107,136
Other......................................... 4,551 4,023 3,974
-------- -------- --------
Total current assets........................ 242,530 212,402 224,621
PROPERTY AND EQUIPMENT
Land.......................................... 7,422 7,439 7,439
Buildings..................................... 18,590 38,176 41,543
Equipment, furniture and fixtures............. 36,837 68,247 73,646
Leasehold improvements........................ 2,392 2,543 2,574
-------- -------- --------
65,241 116,405 125,202
Less accumulated depreciation and
amortization............................... (18,358) (25,515) (28,030)
-------- -------- --------
46,883 90,890 97,172
DEFERRED INCOME TAXES.......................... 1,315 1,280 1,255
OTHER ASSETS................................... 1,644 4,618 4,603
COST IN EXCESS OF NET ASSETS ACQUIRED, less
accumulated amortization of $1,994 at March
30, 1996, $2,359 at March 29, 1997 and $2,508
at June 28, 1997.............................. 12,802 16,404 16,255
-------- -------- --------
$305,174 $325,594 $343,906
======== ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Notes payable and current portion of long-
term debt.................................... $ 9,740 $ -- $ --
Accounts payable.............................. 38,650 42,317 46,664
Accrued compensation.......................... 10,342 8,123 6,941
Other accrued liabilities..................... 5,750 8,051 9,696
Income taxes.................................. 5,290 3,027 5,840
-------- -------- --------
Total current liabilities................... 69,772 61,518 69,141
LONG-TERM DEBT, less current portion........... 1,258 -- --
LONG-TERM LIABILITIES.......................... 976 1,709 1,993
MANDATORILY REDEEMABLE PREFERRED STOCK......... 2,200 -- --
COMMITMENTS AND CONTINGENCIES.................. -- -- --
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value per share;
authorized 2,000 shares; none issued......... -- -- --
Common stock, no par value; authorized 60,000
shares; 26,027 shares issued and outstanding
at March 30, 1996; 26,302 shares issued and
26,252 shares outstanding at March 29, 1997;
26,314 shares issued and 26,264 shares
outstanding at June 28, 1997................. 38,357 41,348 42,852
Additional paid-in capital.................... 112,702 116,522 116,648
Retained earnings............................. 79,909 105,474 114,249
-------- -------- --------
230,968 263,344 273,749
Less common stock in treasury--at cost, 50
shares at March 29, 1997 and June 28, 1997... -- (977) (977)
-------- -------- --------
230,968 262,367 272,772
-------- -------- --------
$305,174 $325,594 $343,906
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEARS ENDED ENDED
------------------------------ ------------------
APRIL 1, MARCH 30, MARCH 29, JUNE 29, JUNE 28,
1995 1996 1997 1996 1997
-------- --------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net earnings................ $ 14,601 $ 29,792 $ 27,621 $ 9,431 $ 8,775
Adjustments to reconcile net
earnings to net cash
provided by operating
activities
Depreciation and
amortization.............. 4,070 4,619 7,529 1,547 2,671
Provision for losses on
accounts receivable....... 171 249 409 38 81
(Gain) loss on sale of
property and equipment.... 27 40 (2) -- 4
Stock option expense....... 871 1,116 540 152 126
(Gain) loss on sale of
trading securities........ 225 (45) (169) 50 --
Net sales (purchases) of
trading securities........ (1,873) (21,869) 38,916 11,870 --
Change in assets and
liabilities, net of
effects from the
acquisition accounted for
as a purchase
Increase in accounts
receivable................ (10,180) (22,474) (26,828) (10,259) (3,722)
Increase in inventories.... (14,878) (23,758) (23,904) (4,254) (12,642)
(Increase) decrease in
other..................... (748) (1,635) 507 (82) 49
(Increase) decrease in
deferred income taxes..... 459 (504) 89 79 25
(Increase) decrease in
other assets.............. (467) (585) (3,013) 22 15
Increase (decrease) in
accounts payable.......... 1,623 19,709 699 (2,957) 4,347
Increase (decrease) in
accrued compensation...... 2,184 5,534 (2,238) (5,838) (1,182)
Increase in other accrued
liabilities............... 1,444 2,136 2,419 1,646 1,645
Increase (decrease) in
income taxes.............. 685 3,549 (2,230) 1,187 2,813
Increase in long-term
liabilities............... 281 695 733 539 284
-------- -------- -------- -------- --------
Net cash provided (used)
by operating activities.. (1,505) (3,431) 21,078 3,171 3,289
Cash flows from investing
activities
Capital expenditures........ (11,135) (22,125) (50,816) (14,658) (8,813)
Acquisition accounted for as
a purchase................. -- -- (7,000) -- --
Proceeds from related party
receivable of pooled
company.................... 124 -- -- -- --
Proceeds from sale of
property and equipment..... 33 68 32 -- 5
-------- -------- -------- -------- --------
Net cash used by investing
activities............... (10,978) (22,057) (57,784) (14,658) (8,808)
Cash flows from financing
activities
Net (payments) borrowings
under line of credit
agreements of pooled
companies.................. (147) 6,606 (11,550) 3,427 --
Proceeds from issuance of
long-term debt of pooled
company.................... 1,243 -- -- -- --
Payment of long-term debt of
pooled companies........... (19) (15) (1,254) (5) --
Net payments to shareholder
of pooled company.......... (69) (61) -- -- --
(Redemption of) proceeds
from issuance of
mandatorily redeemable
preferred stock of pooled
company.................... 2,200 -- (2,200) -- --
Proceeds from issuance of
convertible preferred stock
of pooled company.......... -- 1,000 -- -- --
Proceeds from sale of stock
warrants of pooled company. 7 -- -- -- --
Issuance of common stock.... 2,497 86,281 3,458 106 114
Payment for fractional
shares..................... (16) -- -- -- --
Purchase of treasury stock.. -- -- (977) -- --
Tax effect of common stock
issued upon exercise of
employee stock options..... 514 1,137 1,154 1,406 1,390
Distribution to shareholder
of pooled company.......... (594) (582) (650) (345) --
-------- -------- -------- -------- --------
Net cash (used) provided
by financing activities.. 5,616 94,366 (12,019) 4,589 1,504
-------- -------- -------- -------- --------
Net (decrease) increase in
cash........................ (6,867) 68,878 (48,725) (6,898) (4,015)
Adjustment for change in
pooled companies' fiscal
year ends................... -- -- 344 344 --
Cash and cash equivalents at
beginning of year........... 11,420 4,553 73,431 73,431 25,050
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of year................. $ 4,553 $ 73,431 $ 25,050 $ 66,877 $ 21,035
======== ======== ======== ======== ========
Supplemental disclosures of
cash flow information:
Cash paid during the year
for:
Interest................... $ 302 $ 893 $ 1,285 $ 296 $ --
Income taxes............... $ 7,864 $ 16,537 $ 15,054 $ 3,582 $ 1,675
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK
------ ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at April 2, 1994, as
previously reported............. 19,375 $32,703 $ 24,359 $ 35,457 $ --
Adjustment for pooling of
interests....................... 1,042 10 581 1,235 --
------ ------- -------- -------- -----
As restated...................... 20,417 32,713 24,940 36,692 --
Issuance of common stock and
warrants of pooled company...... 657 7 970 -- --
Common stock issued upon exercise
of employee stock options,
including tax effect............ 235 2,040 -- -- --
Common stock split for fractional
shares.......................... (1) -- (16) -- --
Amortization of unearned
compensation related to stock
option plans.................... -- -- 871 -- --
Distribution to shareholder of
pooled company.................. -- -- -- (594) --
Net earnings for the year........ -- -- -- 14,601 --
------ ------- -------- -------- -----
Balance at April 1, 1995......... 21,308 34,760 26,765 50,699 --
Net proceeds from public stock
offering........................ 4,000 20 83,826 -- --
Issuance of common stock of
pooled company.................. 391 4 996 -- --
Common stock issued upon exercise
of employee stock options,
including tax effect............ 328 3,572 -- -- --
Common stock split for fractional
shares.......................... -- 1 (1) -- --
Amortization of unearned
compensation related to stock
option plans.................... -- -- 1,116 -- --
Distribution to shareholder of
pooled company.................. -- -- -- (582) --
Net earnings for the year........ -- -- -- 29,792 --
------ ------- -------- -------- -----
Balance at March 30, 1996........ 26,027 38,357 112,702 79,909 --
Issuance of common stock of
pooled company.................. 19 -- 47 -- --
Common stock issued under
employee bonus and upon exercise
of employee stock options,
including tax effect............ 256 2,991 1,574 -- --
Amortization of unearned
compensation related to stock
option plans.................... -- -- 540 -- --
Purchase of treasury stock....... (50) -- -- -- (977)
Reclassification of undistributed
subchapter "S" earnings of
pooled company.................. -- -- 1,659 (1,659) --
Adjustment for change in fiscal
year of pooled company.......... -- -- -- 253 --
Distribution to shareholder of
pooled company.................. -- -- -- (650) --
Net earnings for the year........ -- -- -- 27,621 --
------ ------- -------- -------- -----
Balance at March 29, 1997........ 26,252 41,348 116,522 105,474 (977)
Common stock issued upon exercise
of employee stock options,
including tax effect
(unaudited)..................... 12 1,504 -- -- --
Amortization of unearned
compensation related to stock
option plans (unaudited)........ -- -- 126 -- --
Net earnings for the period
(unaudited)..................... -- -- -- 8,775 --
------ ------- -------- -------- -----
Balance at June 28, 1997
(unaudited)..................... 26,264 $42,852 $116,648 $114,249 $(977)
====== ======= ======== ======== =====
</TABLE>

The accompanying notes are an integral part of this statement.

F-6
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS)

DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Kent Electronics Corporation (the "Company") is a national specialty
distributor of electronic products and a manufacturer of custom-made
electronic assemblies. The Company distributes electronic connectors,
electronic wire and cable, premise wiring products used in local area networks
and wide area networks, and other passive and electromechanical products and
interconnect assemblies used in assembling and manufacturing electronic
equipment. The Company's contract manufacturing services include printed
circuit board assembly, cable and harness assembly, sheet metal fabrication,
plastic injection, battery power packs and final system integration. The
Company's customers are primarily industrial users and original equipment
manufacturers.

BASIS OF PRESENTATION

In 1997, the Company acquired Futronix Corporation ("Futronix") and Wire &
Cable Specialties Corporation ("Wire & Cable") in a transaction accounted for
as a pooling of interests. Accordingly, the consolidated financial statements
for 1996 and 1995 have been restated to include the operations of Futronix and
Wire & Cable.

PRINCIPLES OF CONSOLIDATION

Kent Electronics Corporation consolidates its accounts with those of its
wholly owned subsidiaries. All material intercompany transactions have been
eliminated.

FISCAL YEAR

The Company's fiscal year ends on the Saturday closest to the end of March.
The fiscal years ended April 1, 1995, March 30, 1996 and March 29, 1997 all
consisted of 52 weeks.

USE OF ESTIMATES

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

CASH AND CASH EQUIVALENTS

The Company's presentation of cash includes cash equivalents. Cash
equivalents are defined as short-term investments with maturity dates at
purchase of ninety days or less.

Securities purchased under agreements to resell (reverse repurchase
agreements) result from transactions that are collateralized by negotiable
securities and are carried at the amounts at which the securities will
subsequently be resold. It is the policy of the Company not to take possession
of securities purchased under agreements to resell. At March 29, 1997 and June
28, 1997, agreements to resell securities in the amount of $7,365 and $18,220,
respectively, with a two-day maturity were outstanding.

F-7
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS)

Temporary investments may be greater than the cash and cash equivalents
balance because they may be offset by individual bank accounts with a book
overdraft position within the same bank where multiple accounts are
maintained.

TRADING SECURITIES

The Company has classified all investment securities as trading securities
which are measured at fair value in the financial statements with unrealized
gains and losses included in earnings. Realized and unrealized gains and
losses are reflected in the following table:

<TABLE>
<CAPTION>
FISCAL
YEARS
ENDED
-----------
1996 1997
---- -----
<S> <C> <C>
Net unrealized loss on trading securities at beginning of
year....................................................... $302 $ 257
Decrease in unrealized loss included in earnings during the
year....................................................... (45) (169)
Realized loss from sale of trading securities............... -- (88)
---- -----
Net unrealized loss on trading securities at end of year.... $257 $ --
==== =====
</TABLE>

ACCOUNTS RECEIVABLE

The Company's allowance for doubtful accounts was $1,048 at March 30, 1996,
$1,256 at March 29, 1997 and $1,337 at June 28, 1997.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out) or market.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
related assets. Leasehold improvements are amortized over the life of the
lease or the service life of the improvements, whichever is shorter.

OTHER ASSETS

Other assets at March 29, 1997 and June 28, 1997 include $1,804 and $1,834,
respectively, of receivables from certain officers and directors of the
Company.

COSTS IN EXCESS OF NET ASSETS ACQUIRED

Costs in excess of net assets acquired represents the excess of the purchase
price over the value of net assets acquired and is being amortized on a
straight-line basis over 40 years. Management evaluates these costs for
impairment whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable. Impairment would be recognized if the
carrying amounts of such costs cannot be recovered by the net cash flows they
will generate.

F-8
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS)

REVENUE RECOGNITION

Revenue is recognized upon shipment of merchandise to customers.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable, accrued expenses and amounts included in other assets and
liabilities meeting the definition of a financial instrument approximates fair
value.

NEW PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," which is
effective for financial statements issued after December 15, 1997. Early
adoption of the new standard is not permitted. The new standard eliminates
primary and fully diluted earnings per share and requires presentation of
basic and diluted earnings per share together with disclosure of how the per
share amounts were computed. The effect of adopting this new standard has not
been determined.

INTERIM FINANCIAL INFORMATION

Financial information as of June 28, 1997 and for the thirteen weeks ended
June 29, 1996 and June 28, 1997, included herein, is unaudited. Such
information includes all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of the financial information for the interim periods. The results of
operations for the thirteen weeks ended June 28, 1997 are not necessarily
indicative of the results for the full fiscal year.

BUSINESS ACQUISITIONS

FUTRONIX AND WIRE & CABLE

In January 1997, the Company acquired all the outstanding equity instruments
of Futronix and Wire & Cable, both privately owned distributors of specialty
wire and cable, in exchange for 2,109 shares of the Company's common stock in
a merger transaction accounted for as a pooling of interests.

Prior to the merger, Futronix and Wire & Cable used a calendar year end for
financial reporting purposes. The Futronix and Wire & Cable balance sheets and
results of operations for the years ended December 31, 1994 and 1995 have been
combined with those of the Company for the years ended April 1, 1995 and March
30, 1996, respectively. The Futronix and Wire & Cable balance sheet and
results of operations for the 52 weeks ending March 29, 1997 have been
included in the consolidated financial statements for fiscal 1997. During the
three-month period ended March 30, 1996, Futronix and Wire & Cable had net
sales of $16,177, net earnings of $372 and shareholder distributions of $119.
In order to reflect the change in fiscal year-ends, retained earnings for
these amounts has been increased by combined net earnings and decreased by
shareholder distributions.

F-9
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Combined and separate results of Kent, Futronix and Wire & Cable during the
periods preceding the merger were as follows:

<TABLE>
<CAPTION>
FISCAL FISCAL
YEAR YEAR THIRTY-NINE
ENDED ENDED WEEKS ENDED
APRIL 1, MARCH DECEMBER 28,
1995 30, 1996 1996
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Net sales
Kent........................................... $253,484 $372,019 $314,906
Futronix....................................... 5,950 29,280 40,679
Wire & Cable................................... 20,242 24,511 20,000
-------- -------- --------
Combined..................................... $279,676 $425,810 $375,585
======== ======== ========
Net earnings
Kent........................................... $ 13,386 $ 27,975 $ 22,136
Futronix....................................... 301 614 278
Wire & Cable................................... 914 1,203 806
-------- -------- --------
Combined..................................... $ 14,601 $ 29,792 $ 23,220
======== ======== ========
</TABLE>

In the fourth quarter of 1997, the Company recorded costs of $5,500
associated with the merger and integration of Futronix and Wire & Cable.

OBLIGATIONS OF FUTRONIX AND WIRE & CABLE

Included in the accompanying balance sheet at March 30, 1996, are notes
payable to banks of $9,728 with interest rates approximating prime plus 1/2%
and long-term debt payable to shareholders of $1,270 with interest at 7%.

MANDATORILY REDEEMABLE PREFERRED STOCK OF FUTRONIX

Included in the accompanying balance sheet at March 30, 1996, are 2,200
shares of issued and outstanding Futronix non-dividend paying mandatorily
redeemable preferred stock having a $1 par value and redemption value per
share. The stock was redeemed in 1997 in connection with the merger.

EMC DISTRIBUTION DIVISION OF ELECTRONICS MARKETING CORPORATION

In December 1996, the Company acquired certain assets of the EMC
Distribution Division of Electronics Marketing Corporation, a privately owned
Ohio-based specialty distributor of connectors, passive and electromechanical
components, for $7,000 and the assumption of certain liabilities. The
acquisition has been accounted for as a purchase and, accordingly, the
acquired assets and liabilities have been recorded at their estimated fair
values at the date of acquisition. The operating results arising from the
acquisition are included in the consolidated statements of earnings from the
acquisition date. The excess of the purchase price over the value of the
assets acquired is classified in the accompanying balance sheet as cost in
excess of net assets acquired and is being amortized on a straight-line basis
over 40 years. Pro forma financial information is not presented, as the effect
of the acquisition was not significant to the financial statements.

F-10
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS)

INCOME TAXES

The Company accounts for income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in effect when
these differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities.

The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEARS ENDED ENDED
------------------------ -----------------
JUNE 29, JUNE 28,
1995 1996 1997 1996 1997
------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Current............................. $8,510 $19,934 $16,316 $4,694 $4,307
Tax reduction for exercise of stock
options credited to stockholders'
equity............................. 514 1,137 1,154 1,406 1,390
Deferred............................ (114) (1,768) 9 25 25
------ ------- ------- ------ ------
$8,910 $19,303 $17,479 $6,125 $5,722
====== ======= ======= ====== ======
</TABLE>

A reconciliation of income taxes computed at the statutory federal income
tax rate and income taxes reported in the consolidated statements of earnings
follows:

<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEARS ENDED ENDED
------------------------ -----------------
JUNE 29, JUNE 28,
1995 1996 1997 1996 1997
------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Tax at statutory rate.............. $8,214 $17,161 $15,785 $5,445 $5,074
Increases (reductions)
State income taxes, net of
federal tax effect.............. 748 1,687 1,377 700 550
Pre-acquisition earnings of
acquired S corporation.......... (311) (409) (217) (81) --
Non-deductible merger and
integration costs............... -- -- 291 -- --
Other-net........................ 259 864 243 61 98
------ ------- ------- ------ ------
Income taxes as reported........... $8,910 $19,303 $17,479 $6,125 $5,722
====== ======= ======= ====== ======
</TABLE>

F-11
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS)

Net deferred tax assets at March 30, 1996 and March 29, 1997 consist of the
following:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Current deferred asset
Allowance for doubtful accounts...................... $ 405 $ 493
Capitalization of additional inventory costs......... 870 805
Accrued expenses not currently deductible, net of
reversals........................................... 522 641
Net operating losses................................. 320 314
Deferred compensation................................ 616 --
Other................................................ 562 399
------- -------
$ 3,295 $ 2,652
======= =======
Long-term deferred asset
Depreciation......................................... $(2,061) $(2,766)
Fixed asset bases differences........................ 630 450
Stock compensation................................... 1,291 1,495
Net operating losses................................. 770 457
Deferred compensation................................ 685 1,644
------- -------
$ 1,315 $ 1,280
======= =======
</TABLE>

Acquired net operating losses of approximately $2,201 at March 29, 1997,
expire in various amounts through 2003 and are subject to annual usage
limitations.

The current deferred asset is included in other current assets in the
accompanying balance sheets.

COMMITMENTS AND CONTINGENCIES

The Company conducts a portion of its operations in leased office,
warehouse, and manufacturing facilities and also leases transportation
equipment. Rent expense for 1995, 1996, and 1997 was approximately $2,234,
$2,877 and $3,512, respectively. For the thirteen weeks ended June 29, 1996
and June 28, 1997, rent expense was approximately $791 and $966, respectively.

As of March 29, 1997, the Company's minimum rental commitments under
noncancelable operating leases were $3,336 in 1998; $2,581 in 1999; $1,805 in
2000; $1,114 in 2001; $744 in 2002; and $748 thereafter.

In June 1997, the Company obtained a $25,000 unsecured line of credit with a
bank. At June 28, 1997, there was no indebtedness outstanding under the line
of credit.

The Company has instituted a self-insurance program for employees' major
medical coverages. Claims under the self-insurance program are insured for
amounts greater than $50 per employee. The aggregate annual self-insured
amount varies based on participant levels and was limited to approximately
$3,000 as of March 29, 1997. Claims are accrued as incurred and the total
expense under the program was approximately $2,121, $2,103 and $2,809 in 1995,
1996 and 1997, respectively. For the thirteen weeks ended June 29, 1996 and
June 28, 1997, total expense under the program was approximately $841 and
$916, respectively.

The Company is engaged in litigation occurring in the normal course of
business. In the opinion of management, based upon advice of counsel, the
ultimate outcome of these lawsuits will not have a material impact on the
Company's consolidated financial statements.

F-12
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS, EXCEPT PER SHARE DATA)

SALES TO MAJOR CUSTOMERS

Sales to Compaq Computer Corporation represented 10.1% and 10.6% of net
sales in 1995 and 1996, respectively. Sales to Applied Materials, Inc.
represented 11.3% of net sales in 1995. No customer constituted 10% or more of
net sales in 1997 and in the thirteen weeks ended June 29, 1996 and June 28,
1997.

STOCKHOLDERS' EQUITY

FAIR PRICE PROVISION

The Company has adopted a fair price provision relating to certain business
combinations. The fair price provision provides that, except in certain
circumstances, a business combination between the Company and an interested
shareholder must be approved by the affirmative vote of the holders of 80% of
the outstanding voting stock, unless certain pricing and procedural
requirements regarding the business combination are satisfied.

STOCKHOLDER RIGHTS PLAN

The Company has adopted a stockholder rights plan, declaring a distribution
of one equity purchase right on each outstanding share of the Company's common
stock. Upon the occurrence of certain events, each right would entitle the
holder to purchase, at a price of $40, one one-hundredth of a share of the
Company's Series A Preferred Stock. Additionally, under certain circumstances,
the holder of rights may be entitled to purchase either the Company's common
stock or securities of an acquiring entity at half of market value.

STOCK SPLIT

The Company's common stock was split three-for-two to stockholders of record
on February 15, 1995, and was effected as a 50% stock dividend. The Company's
common stock was split two-for-one to stockholders of record on February 15,
1996, and was effected as a 100% stock dividend. All issued and outstanding
shares, stock option data and earnings per share amounts in the consolidated
financial statements have been restated to give effect to the stock splits.

F-13
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS, EXCEPT PER SHARE DATA)

BENEFIT PLANS

STOCK OPTIONS

At March 29, 1997 and June 28, 1997, the Company had nonqualified stock
option plans which allow for the grant of 4,060 and 4,039 common shares for
options, respectively, of which 621 and 512, respectively, are available for
future grants. Options granted under the plans have a maximum term of 15 years
and are exercisable under the terms of the respective option agreements. Under
some plans, options may be granted with exercise prices of less than the
stock's market value at the date of grant. Options on 358, 450 and 1,553
shares were exercisable at April 1, 1995, March 30, 1996 and March 29, 1997
with a weighted average exercise price of $7.27, $7.51 and $7.68,
respectively. A summary of the Company's stock option activity, and related
information follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------------------
1995 1996 1997
---------------- ---------------- ----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year....................... 2,316 $ 5.30 2,181 $ 5.25 2,570 $ 8.44
Granted..................... 143 7.75 803 17.58 1,144 19.72
Exercised................... (235) 6.96 (328) 7.58 (208) 8.49
Lapsed/forfeited............ (43) 6.96 (86) 16.09 (71) 17.84
----- ------ ----- ------ ----- ------
Outstanding at end of year.. 2,181 $ 5.25 2,570 $ 8.44 3,435 $12.00
===== ====== ===== ====== ===== ======
</TABLE>

The following table summarizes the weighted average fair value per share of
options granted during the year:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------
1996 1997
----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
FAIR EXERCISE FAIR EXERCISE
VALUE PRICE VALUE PRICE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Exercise price equals market price.......... $ 4.44 $20.73 $ 5.00 $19.73
Exercise price is below market price........ 9.67 7.25 26.11 19.31
</TABLE>

The following table summarizes significant ranges of outstanding and
exercisable options at March 29, 1997:

<TABLE>
<CAPTION>
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
-------------------------- ----------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
LIFE (IN EXERCISE EXERCISE
RANGE OF EXERCISE PRICES OPTIONS YEARS) PRICE OPTIONS PRICE
- ------------------------ ------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$3.63-$5.45........................ 1,155 10.76 $ 3.63 855 $ 3.63
$5.46-$6.96........................ 467 1.24 6.96 429 6.96
$7.25-$10.88....................... 210 12.49 7.56 23 10.17
$17.00-$25.63...................... 1,520 4.51 19.55 176 20.18
$28.75-$32.50...................... 83 4.45 29.86 70 29.36
</TABLE>

F-14
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS, EXCEPT PER SHARE DATA)

The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS
123). The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its plans and does
not recognize compensation expense for its stock-based compensation plans
other than for options granted with exercise prices of less than the stock's
market value at the date of grant.

The fair value of options at the date of grant was estimated using the
Black-Scholes option pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------
1996 1997
---------- ----------
<S> <C> <C>
Expected life............................................. 3.1 years 2.3 years
Interest rate............................................. 6.0% 6.3%
Volatility................................................ 26.5% 34.6%
Dividend yield............................................ 0.0% 0.0%
</TABLE>

Stock-based compensation costs would have reduced net earnings by
approximately $488 and $1,434 in 1996 and 1997 and $0.02 and $0.05 per share
if the fair values of the options granted in those years had been recognized
as compensation expense over the vesting period of the grant. The pro forma
disclosures only include the effects of options granted in the fiscal years
ended 1996 and 1997.

TAX-DEFERRED SAVINGS AND RETIREMENT PLAN AND TRUST

The Company sponsors a Tax-Deferred Savings and Retirement Plan (the Plan)
covering substantially all employees. Under the Plan, a participating employee
may allocate up to 12% of salary, and the Company makes matching contributions
of up to 3% thereof. Additionally, the Company may elect to make additional
contributions at its option. Such contributions accrue to employee accounts
regardless of whether they have elected to participate in the salary deferral
option of the Plan. The Company contributed approximately $639, $618 and $870
to the Plan in fiscal years ended April 1, 1995, March 30, 1996 and March 29,
1997, respectively. The Company contributed approximately $252 and $331 to the
Plan for the thirteen weeks ended June 29, 1996 and June 28, 1997,
respectively.

The Company has deferred compensation plans for management and highly
compensated associates of the Company. Under one plan, a participant may elect
to defer a minimum of 3% of their compensation. The Company has agreed to
match the participant's compensation amount, limited to 50% of the first 6% of
compensation deferred. Participants become vested in the Company matching
contributions at the rate of 10% per plan year or vest fully at age 60. Under
another deferred benefit plan, the participant will receive minimum annual
payments subsequent to retirement of the participant for the greater of 15
years or life.

Under the first plan, the Company has accrued at March 30, 1996, March 29,
1997 and June 28, 1997, approximately $976, $1,703 and $1,987, respectively,
for participant and Company contributions which are recorded as long term
liabilities on the balance sheet. Under the second plan, annual expense will
range from $1,200 to $1,600 through March 31, 2001, based on accruing the
present value of the minimum benefits through the date the participant vests
in the payments.

F-15
<PAGE>

KENT ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INFORMATION AS OF JUNE 28, 1997 AND RELATING TO THE THIRTEEN
WEEKS ENDED JUNE 29, 1996 AND JUNE 28, 1997 IS UNAUDITED

(IN THOUSANDS, EXCEPT PER SHARE DATA)

EARNINGS PER SHARE

Earnings per share are based upon the weighted average number of common
shares outstanding during each year. Options are included in periods where
they have a dilutive effect.

QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly financial data for fiscal
years 1995, 1996 and 1997:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Year ended April 1, 1995
Net sales................................. $ 61,516 $ 66,117 $ 71,563 $ 80,480
Gross profit.............................. 16,004 17,204 18,564 20,969
Net earnings.............................. 3,164 3,439 3,774 4,224
Earnings per share........................ .15 .16 .18 .19
Year ended March 30, 1996
Net sales................................. $ 87,255 $102,776 $116,064 $119,715
Gross profit.............................. 22,940 27,035 30,673 31,519
Net earnings.............................. 5,254 6,346 8,652 9,540
Earnings per share........................ .24 .28 .32 .35
Year ended March 29, 1997
Net sales................................. $125,144 $124,034 $126,407 $141,172
Gross profit.............................. 31,906 28,018 28,840 31,939
Net earnings.............................. 9,431 6,852 6,937 4,401
Earnings per share........................ .34 .25 .25 .16
</TABLE>

F-16
<PAGE>

INSIDE BACK COVER
OF PROSPECTUS

[PHOTOGRAPH]

Houston distribution center.

[PHOTOGRAPH] [PHOTOGRAPH] [PHOTOGRAPH]
Kent Datacomm technical Futronix Systems' Kent sales
support center provides specialized inventories representatives undergo
troubleshooting supplied by leading continuous training.
assistance. manufacturers.
<PAGE>

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

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE NOTES OF-
FERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAW-
FUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 9
Price Range of Common Stock............................................... 10
Dividend Policy........................................................... 10
Capitalization............................................................ 11
Selected Consolidated Financial Data...................................... 12
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 13
Business.................................................................. 17
Management................................................................ 21
Description of Notes...................................................... 23
Description of Capital Stock.............................................. 33
Certain Federal Income Tax Considerations................................. 35
Underwriting.............................................................. 39
Legal Matters............................................................. 40
Experts................................................................... 40
Available Information..................................................... 40
Incorporation of Certain Documents by Reference .......................... 41
Index to Consolidated Financial Statements................................ F-1
</TABLE>

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

$150,000,000

KENT ELECTRONICS CORPORATION

% CONVERTIBLE SUBORDINATED
NOTES DUE 2004

[LOGO OF KENT ELECTRONICS APPEARS HERE]

-------

PROSPECTUS

, 1997

-------

SMITH BARNEY INC.

BT ALEX. BROWN

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MERRILL LYNCH & CO.

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INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses payable by the Company in connection with the
offering described in this Registration Statement are as follows:

<TABLE>
<S> <C>
SEC registration fee........................................... $ 52,273
NASD fee....................................................... 17,750
Printing expenses.............................................. 75,000
Accounting fees and expenses................................... 45,000
Legal fees and expenses........................................ 235,000
Trustee fees and expenses...................................... 7,000
Rating agency fees............................................. 48,750
Miscellaneous expenses......................................... 19,227
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Total...................................................... $500,000
========
</TABLE>
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* To be filed by amendment

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 6.10 of the Amended and Restated Bylaws of the Company provides for
indemnification of present and former officers and directors of the Company to
the maximum extent permissible under applicable provisions of the Texas
Business Corporation Act and expressly authorizes the Company to purchase
insurance on behalf of its directors, officers and employees. The Company has
purchased a directors and officers liability insurance policy which provides
for insurance of the directors and officers of the Company against certain
liabilities they may incur in their capacities as such.

ITEM 16. EXHIBITS.

<TABLE>
<C> <S>
1.1* --Form of Underwriting Agreement.
4.1 --Amended and Restated Articles of Incorporation of Kent Electronics
Corporation. Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-3 (Registration No. 333-20265) filed
with the Securities and Exchange Commission ("SEC") on January 23, 1997.
4.2 --Certificate of Designation, Preferences and Rights of Series A
Preferred Stock. Incorporated by reference to Exhibit 3.3 to the
Company's Annual Report on Form 10-K for the Fiscal Year Ended March 30,
1991.
4.3 --Amended and Restated Bylaws of Kent Electronics Corporation.
Incorporated by reference to Exhibit 3.5 to the Company's Annual Report
on Form 10-K for the Fiscal Year Ended March 30, 1996.
4.4* --Form of Indenture between Kent Electronics Corporation, as issuer, and
Texas Commerce Bank National Association, as Trustee, including the form
of Note.
4.5 --Specimen stock certificate for the Common Stock of Kent Electronics
Corporation. Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-2 (Registration No. 33-40066) filed
with the SEC on April 19, 1991.
4.6 --Rights Agreement dated as of May 14, 1990 between Kent Electronics
Corporation and Ameritrust Company National Association. Incorporated by
reference to Exhibit 4 to the Company's Current Report on Form 8-K dated
May 14, 1990.
</TABLE>

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<PAGE>

<TABLE>
<C> <S>
4.7 --First Amendment to Rights Agreement dated as of May 14, 1990 between
Kent Electronics Corporation and Ameritrust Company National
Association. Incorporated by reference to Exhibit 4.3 to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended March 28, 1992.
5.1* --Opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
8.1* --Opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
12.1** --Statement of Computation of Ratio of Earnings to Fixed Charges.
23.1* --Consent of Grant Thornton LLP.
23.2* --Consents of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. (included as
part of Exhibits 5.1 and 8.1).
24.1 --Powers of Attorney (included on signature page of this Registration
Statement).
25.1* --Statement of Eligibility of Trustee on Form T-1.
27.1** --Financial Data Schedule.
</TABLE>
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* Filed herewith.

** Previously filed.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Company's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
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.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.

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SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HOUSTON, THE STATE OF TEXAS, ON SEPTEMBER 15, 1997.

KENT ELECTRONICS CORPORATION

/s/ Morrie K. Abramson
By: _________________________________
Morrie K. Abramson
(Chairman of the Board, Chief
Executive Officer
and President)

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
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<S> <C> <C>
/s/ Morrie K. Abramson Chairman of the Board, Chief September 15, 1997
____________________________________ Executive Officer, President
Morrie K. Abramson and Director (Principal
Executive Officer)

/s/ Stephen J. Chapko Executive Vice President, September 15, 1997
____________________________________ Chief Financial Officer,
Stephen J. Chapko Treasurer and Secretary
(Principal Financial Officer)

* Vice President, Corporate September 15, 1997
____________________________________ Controller (Principal
David D. Johnson Accounting Officer)
</TABLE>

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<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
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<S> <C> <C>
* Director September 15, 1997
____________________________________
Terrence M. Hunt

* Director September 15, 1997
____________________________________
Max S. Levit

* Director September 15, 1997
____________________________________
David Siegel

* Director September 15, 1997
____________________________________
Richard C. Webb

* Director September 15, 1997
____________________________________
Alvin L. Zimmerman
</TABLE>

*By: /s/ Morrie K. Abramson

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Morrie K. Abramson,

Attorney-in-Fact

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<PAGE>

$_____________

KENT ELECTRONICS CORPORATION

____% Convertible Subordinated Notes due 2004

UNDERWRITING AGREEMENT
----------------------

September __, 1997

SMITH BARNEY INC.
BT ALEX. BROWN INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013

Dear Sirs:

Kent Electronics Corporation, a Texas corporation (the "Company"),
proposes, upon the terms and subject to the conditions set forth herein, to
issue and sell $___________ aggregate principal amount of its ___% Convertible
Subordinated Notes due 2004 (the "Firm Notes"), to the several Underwriters
named in Schedule I hereto (the "Underwriters"). The Company also proposes,
upon the terms and subject to the conditions set forth herein, to sell to the
several Underwriters up to an additional $__________ aggregate principal amount
of its ___% Convertible Subordinated Notes due 2004 (the "Additional Notes").
The Firm Notes and the Additional Notes are hereinafter sometimes collectively
referred to as the "Notes." The Notes will be issued pursuant to the provisions
of an Indenture to be dated as of September __, 1997 (the "Indenture"), between
the Company and Texas Commerce Bank National Association, as Trustee (the
"Trustee"). The Company's common stock, without par value, is hereinafter
referred to as the "Common Stock."

The Company wishes to confirm as follows its agreement with you in
connection with the several purchases of the Notes by the Underwriters.

1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions
<PAGE>

of the Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration statement on
Form S-3 (Registration No. 333-34045) under the Act (the "registration
statement"), including a prospectus subject to completion relating to the Notes
and the shares of Common Stock issuable on conversion of the Notes. The term
"Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective, or, if the registration statement became effective
prior to the execution of this Agreement, as supplemented or amended prior to
the execution of this Agreement. If it is contemplated, at the time this
Agreement is executed, that a post-effective amendment to the registration
statement will be filed and must be declared effective before the offering of
the Notes may commence, the term "Registration Statement" as used in this
Agreement means the registration statement as amended by said post-effective
amendment. If it is contemplated, at the time this Agreement is executed, that a
registration statement will be filed pursuant to Rule 462(b) under the Act
before the offering of the Notes may commence, the term "Registration Statement"
as used in this Agreement includes such registration statement. The term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus. Any reference in this Agreement to the registration statement,
the Registration Statement, any Prepricing Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of the
registration statement, the Registration Statement, such Prepricing Prospectus
or the Prospectus, as the case may be, and any reference to any amendment or
supplement to the registration statement, the Registration Statement, any
Prepricing Prospectus or the Prospectus shall be deemed to refer to and include
any documents filed after such date under the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Exchange Act"), which, upon filing, are incorporated by
reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used
herein, the term "Incorporated Documents" means the documents which at the time
are incorporated by reference in the registration statement, the Registration
Statement, any Prepricing Prospectus, the Prospectus, or any amendment or
supplement thereto.

2. Agreements to Sell and Purchase. The Company hereby agrees, upon the
terms and subject to all the conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company herein contained and upon the terms and subject to all
the conditions set forth herein, each Underwriter agrees,

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severally and not jointly, to purchase from the Company, at a purchase price of
___% of the principal amount thereof, the principal amount of the Firm Notes set
forth opposite the name of such Underwriter in Schedule I hereto (or such
principal amount of Firm Notes increased as set forth in Section 10 hereof).

The Company also hereby agrees, upon the terms and subject to all the
conditions set forth herein, to sell to the Underwriters, and, upon the basis of
the representations, warranties and agreements of the Company herein contained
and subject to all the terms and conditions set forth herein, the Underwriters
shall have the right to purchase from the Company, pursuant to an option (the
"over-allotment option") which may be exercised at any time and from time to
time prior to 9:00 P.M., New York City time, on the 30th day after the date of
the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday,
on the next business day thereafter when the New York Stock Exchange is open for
trading), up to $__________ aggregate principal amount of Additional Notes. The
purchase price of any Additional Notes which the Underwriters may elect to
purchase shall be the same as the purchase price of the Firm Notes, plus accrued
interest, if any, from the date of issuance of the Firm Notes to the date of
delivery of and payment for the Additional Notes. Additional Notes may be
purchased only for the purpose of covering over-allotments made in connection
with the offering of the Firm Notes. Upon any exercise of the over-allotment
option, each Underwriter, severally and not jointly, agrees to purchase from the
Company the principal amount of Additional Notes which bears the same proportion
to the aggregate principal amount of Additional Notes to be purchased by the
Underwriters as the principal amount of Firm Notes set forth opposite the name
of such Underwriter in Schedule I hereto (or such principal amount of Firm Notes
increased as set forth in Section 10 hereof) bears to the aggregate principal
amount of the Firm Notes.

3. Terms of Public Offering. The Company has been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Notes as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Notes upon the terms set forth in the Prospectus.

4. Delivery of the Notes and Payment Therefor. The Notes to be purchased
hereunder will be represented by one or more definitive global Notes in book-
entry form which will be deposited by or on behalf of the Company with The
Depository Trust Company ("DTC") or its designated custodian.

Delivery to the Underwriters of the Firm Notes, against payment of the
purchase price therefor in Federal (same day) funds, shall be made by causing
DTC to credit the Firm Notes to the account or accounts designated by Smith
Barney on behalf of the Underwriters at DTC. The time and date of such delivery
shall be 10:00 A.M., New York City time, on September __, 1997 (the "Closing
Date"). The other documents to be delivered at the Closing Date by or on behalf
of the parties hereto shall be delivered at such time and date at the offices

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of Baker & Botts, L.L.P., 910 Louisiana, Houston, Texas 77002. The place of
closing for the Firm Notes and the Closing Date may be varied by agreement
between you and the Company.

Delivery to the Underwriters of the Additional Notes to be purchased
by the Underwriters, against payment of the purchase price therefor in Federal
(same day) funds, shall be made by causing DTC to credit the Additional Notes to
the account or accounts designated by Smith Barney on behalf of the Underwriters
at DTC at such time on such date (the "Option Closing Date"), which may be the
same as the Closing Date but shall in no event be earlier than the Closing Date
nor earlier than two nor later than ten business days after the giving of the
notice hereinafter referred to, as shall be specified in a written notice from
you on behalf of the Underwriters to the Company of the Underwriters'
determination to purchase a principal amount, specified in such notice, of
Additional Notes. The other documents to be delivered at the Option Closing
Date by or on behalf of the parties hereto shall be delivered at such time and
date at the offices of Baker & Botts, L.L.P., 910 Louisiana, Houston, Texas
77002. The place of closing for any Additional Notes and the Option Closing
Date for such Notes may be varied by agreement between you and the Company.

The global certificates representing the Notes to be delivered to the
Underwriters shall be made available to you at the office of DTC or its
custodian for inspection not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be.

5. Agreements of the Company. The Company agrees with the several
Underwriters as follows:

(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Notes may commence, the
Company will endeavor to cause the Registration Statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.

(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Notes for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event, which makes any statement of a material fact made in the
Registration Statement or the Prospectus (as then amended or supplemented)
untrue or which

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<PAGE>

requires the making of any additions to or changes in the Registration Statement
or the Prospectus (as then amended or supplemented) in order to state a material
fact required by the Act to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.

(c) The Company will furnish to you, without charge (i) five EDGAR
versions of the registration statement as originally filed with the Commission
and of each amendment thereto, including financial statements and all exhibits
to the registration statement, (ii) five manually signed copies of the
registration statement corresponding to the EDGAR version filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits to the registration statement, (iii) such number of conformed copies of
the registration statement as originally filed and of each amendment thereto,
but without exhibits, as you may request, (iv) such number of copies of the
Indenture and of the Incorporated Documents, without exhibits, as you may
reasonably request, and (v) five copies of the exhibits to the Incorporated
Documents.

(d) The Company will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus or, prior to the
end of the period of time referred to in the first sentence in paragraph (f)
below, file any document which, upon filing becomes an Incorporated Document, of
which you shall not previously have been advised or to which, after you shall
have received a copy of the document proposed to be filed, you shall reasonably
object.

(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you have
requested, copies of each form of the Prepricing Prospectus. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Notes are offered
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Company.

(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer, the Company will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may request. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the Notes
are offered by the several Underwriters and by all dealers to whom Notes may be
sold, both in connection with the offering and sale of the Notes

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<PAGE>

and for such period of time thereafter as the Prospectus is required by the Act
to be delivered in connection with sales by any Underwriter or dealer. If during
such period of time any event shall occur that in the judgment of the Company or
in the opinion of counsel for the Underwriters is required to be set forth in
the Prospectus (as then amended or supplemented) or should be set forth therein
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Prospectus (or to file under the Exchange Act any document which, upon
filing, becomes an Incorporated Document) in order to comply with the Act or any
other law, the Company will forthwith prepare and, subject to the provisions of
paragraph (d) above, file with the Commission an appropriate supplement or
amendment thereto (or to such document), and will expeditiously furnish to the
Underwriters and dealers a reasonable number of copies thereof. In the event
that the Company and you agree that the Prospectus should be amended or
supplemented, the Company, if requested by you, will promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement. Each Underwriter agrees that upon the receipt of any
supplement or amendment to a Prospectus, it will not deliver a Prospectus other
than as supplemented or amended.

(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Notes
and the shares of Common Stock issuable upon conversion of the Notes for
offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Notes, in any jurisdiction where it is not now so
subject.

(h) The Company will make generally available to its security holders
a consolidated earnings statement (in form complying with the provisions of Rule
158 under the Act), which need not be audited, covering a twelve-month period
commencing after the effective date of the Registration Statement and ending not
later than 15 months thereafter, as soon as practicable after the end of such
period, which consolidated earnings statement shall satisfy the provisions of
Section 11(a) of the Act.

(i) So long as any of the Notes are outstanding, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to stockholders or filed with the Commission, and (ii) from time to time
such other information concerning the Company as you may reasonably request.

(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provision hereof (otherwise than pursuant to the
second paragraph of Section 10 hereof or by notice given by you terminating this
Agreement pursuant to Section 10 or Section

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11 hereof) or if this Agreement shall be terminated by the Underwriters because
of any failure or refusal on the part of the Company to comply with the terms or
fulfill any condition of this Agreement, the Company agrees to reimburse you for
all out-of-pocket expenses (including fees and expenses of counsel for the
Underwriters) reasonably incurred by you in connection herewith.

(k) The Company will apply the net proceeds from the sale of the
Notes substantially in accordance with the description set forth in the
Prospectus.

(l) If Rule 430A of the Act is employed, the Company will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.

(m) Except as provided in this Agreement, the Company will not (i)
offer, sell, contract to sell or otherwise dispose of any shares of Common Stock
or any securities convertible into or exercisable or exchangeable for Common
Stock, except pursuant to outstanding options to purchase Common Stock under the
Amended and Restated 1987 Kent Electronics Corporation Stock Option Plan, the
Kent Electronics Corporation 1996 Employee Incentive Plan or the Stock Option
Plan and Agreement dated as of February 14, 1996 by and between the Company and
Dr. Stanley Zimmerman, (ii) file or effect a registration statement under the
Act (other than in connection with the registration of securities pursuant to an
employee stock option, stock purchase, dividend reinvestment plan or similar
plan or pursuant to a merger, exchange offer or a transaction of the type
specified in Rule 145(a) under the Act) registering shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
or (iii) grant any options or warrants to purchase Common Stock, except for the
grant of options to purchase Common Stock under the Amended and Restated 1987
Kent Electronics Corporation Stock Option Plan or the Kent Electronics
Corporation 1996 Employee Incentive Plan, for a period of 90 days after the date
of the Prospectus, without the prior written consent of Smith Barney Inc.

(n) The Company has furnished to you agreements signed by each of its
current executive officers and directors, whereby each executive officer and
director has agreed that he or she will not sell, offer to sell, solicit an
offer to buy, contract to sell, grant any option to purchase, or otherwise
transfer or dispose of, any shares of Common Stock, or any securities
convertible into or exercisable or exchangeable for Common Stock, for a period
of 90 days after the date of the Prospectus, without the prior written consent
of Smith Barney Inc.

(o) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, the Company has not taken, nor will it take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock or Notes to facilitate the sale or resale of the Notes.

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<PAGE>

(p) The Company will use its best efforts: (i) to have the Notes
listed on the New York Stock Exchange concurrently with the effectiveness of the
Registration Statement; and (ii) to have the shares of Common Stock issuable
upon conversion of the Notes listed, subject to notice of issuance, on the New
York Stock Exchange prior to the Closing Date.

6. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter that:

(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the provisions of the Act and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Commission has
not issued any order preventing or suspending the use of any Prepricing
Prospectus.

(b) The Company and the offering of the Notes contemplated by this
Agreement meet the requirements for using Form S-3 under the Act. The
registration statement in the form in which it became or becomes effective and
also in such form as it may be when any post-effective amendment thereto shall
become effective and the Prospectus and any supplement or amendment thereto,
when filed with the Commission under Rule 424(b) under the Act, complied or will
comply in all material respects with the provisions of the Act and did not or
will not at any such times contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, except that this representation and
warranty does not apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity with (i)
information relating to any Underwriter furnished to the Company in writing by
or on behalf of any Underwriter through you expressly for use therein, or (ii)
the Trustee's Statement of Eligibility and Qualification (Form T-1) under the
Trust Indenture Act of 1939, as amended (the "1939 Act").

(c) The Incorporated Documents heretofore filed, when they were filed
(or, if any amendment with respect to any such document was filed, when such
amendment was filed), conformed in all material respects with the requirements
of the Exchange Act, any further Incorporated Documents so filed will, when they
are filed, conform in all material respects with the requirements of the
Exchange Act; no such document when it was filed (or, if an amendment with
respect to any such document was filed, when such amendment was filed),
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading; and no such further document, when it is filed, will
contain an untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading.

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(d) The Indenture has been duly and validly authorized and, upon its
execution and delivery by the Company and assuming due execution and delivery by
the Trustee, will be a valid and binding agreement of the Company, enforceable
in accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and general principles of equity, and has been (or will have been)
duly qualified under the 1939 Act and conforms to the description thereof in the
Registration Statement and the Prospectus.

(e) The Notes have been duly authorized and, when executed by the
Company and authenticated by the Trustee in accordance with the Indenture and
delivered to you against payment therefor in accordance with the terms hereof,
will have been validly issued and delivered, and will constitute valid and
binding obligations of the Company entitled to the benefits of the Indenture and
enforceable in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity, and
the Notes will conform to the description thereof in the Registration Statement
and the Prospectus.

(f) All the outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable and are free of
any preemptive or similar rights; the shares of Common Stock issuable upon
conversion of the Notes have been duly authorized and reserved for issuance and,
when delivered upon conversion of the Notes in accordance with the terms of the
Indenture, will have been validly issued and fully paid and will be
nonassessable and free of any preemptive or similar rights; and the capital
stock of the Company conforms to the description thereof in the Registration
Statement and the Prospectus.

(g) The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Texas with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus, and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries (as hereinafter defined) taken as
a whole (a "Material Adverse Effect").

(h) All of the Company's subsidiaries that are "significant
subsidiaries" (as defined in Regulation S-X) (collectively, the "Subsidiaries")
are listed in an exhibit to the Company's Annual Report on Form 10-K, as
amended, which is incorporated by reference into the Registration Statement.
Each Subsidiary is a corporation duly organized, validly existing and in good
standing in the jurisdiction of its incorporation, with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Registration

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<PAGE>

Statement and the Prospectus, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a Material Adverse Effect; all the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned by the Company directly,
or indirectly through one of the other Subsidiaries, free and clear of any lien,
adverse claim, security interest, equity or other encumbrance.

(i) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or to which
any of their respective properties is subject, that are required to be described
in the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as required by the Act or
the Exchange Act.

(j) Neither the Company nor any of the Subsidiaries is in violation
of its certificate or articles of incorporation or by-laws, or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, or in default in any
material respect in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any material agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound, which violation or default would,
singly or in the aggregate, have a Material Adverse Effect.

(k) Neither the issuance and sale of the Notes, the issuance of the
Common Stock upon conversion of the Notes, the execution, delivery or
performance of this Agreement and the Indenture by the Company nor the
consummation by the Company of the transactions contemplated hereby and thereby
(i) requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency or official (except such as may be required
for the registration of the Notes under the Act and the Exchange Act,
registration under the Act of the shares of Common Stock issuable upon
conversion of the Notes, qualification of the Indenture under the 1939 Act, and
compliance with the securities or Blue Sky laws of various jurisdictions, all of
which have been or will be effected in accordance with this Agreement and except
for consents, approvals, authorizations, orders, registrations or filings
outside the United States which are required under the securities laws of any
such foreign jurisdiction) or conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, the certificate or articles of
incorporation or by-laws, or other organizational documents, of the Company or
any of the Subsidiaries (ii) conflicts

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<PAGE>

or will conflict with or constitutes or will constitute a breach of, or a
default under, any agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound, which conflict, breach or default
would, singly or in the aggregate, have a Material Adverse Effect, (iii)
violates or will violate any statute, law, regulation or filing or judgment,
injunction, order or decree applicable to the Company or any of the Subsidiaries
or any of their respective properties, which violation would, singly or in the
aggregate, have a Material Adverse Effect, or (iv) will result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of the Subsidiaries pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may be bound
or to which any of the property or assets of any of them is subject, which lien,
charge or encumbrance would, singly or in the aggregate, have a Material Adverse
Effect.

(l) The accountants, Grant Thornton LLP, who have certified or shall
certify the financial statements included or incorporated by reference in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), are independent public accountants as required by the Act.

(m) The financial statements, together with related schedules and
notes, included or incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and the Subsidiaries on the basis stated in the
Registration Statement at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data included
or incorporated by reference in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) are accurately presented and prepared
on a basis consistent with such financial statements and the books and records
of the Company and the Subsidiaries.

(n) The execution and delivery of, and the performance by the Company
of its obligations under, this Agreement have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as (i)
rights to indemnity and contribution hereunder may be limited by federal or
state securities laws and (ii) enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).

(o) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such

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<PAGE>

information is given in the Registration Statement and the Prospectus (or any
amendment or supplement thereto), neither the Company nor any of the
Subsidiaries has incurred any liability or obligation, direct or contingent, or
entered into any transaction, not in the ordinary course of business, that is
material to the Company and the Subsidiaries taken as a whole, and there has not
been any change in the capital stock (other than any change in capital stock
relating to the exercise of outstanding options), or material increase in the
short-term debt or long-term debt, of the Company or any of the Subsidiaries, or
any Material Adverse Effect, or any development involving or which may
reasonably be expected to involve, a prospective Material Adverse Effect.

(p) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Prospectus as being
owned by it, free and clear of all liens, claims, security interests or other
encumbrances except such as are described in the Registration Statement and the
Prospectus or in a document filed as an exhibit to the Registration Statement
and all the property described in the Prospectus as being held under lease by
each of the Company and the Subsidiaries is held by it under valid, subsisting
and enforceable leases.

(q) The Company has not distributed and, prior to the later to occur
of (i) the Closing Date and (ii) completion of the distribution of the Notes,
will not distribute any offering material in connection with the offering and
sale of the Notes other than the Registration Statement, any Prepricing
Prospectus, the Prospectus or other materials, if any, permitted by the Act.

(r) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its respective properties and to
conduct its business in the manner described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus; the Company and each of
the Subsidiaries has fulfilled and performed all its material obligations with
respect to such permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such permit,
subject in each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, none of such permits
contains any restriction that is materially burdensome to the Company or any of
the Subsidiaries.

(s) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

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<PAGE>

(t) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any employee or agent of the Company or any Subsidiary has made
any payment of funds of the Company or any Subsidiary or received or retained
any funds in violation of any law, rule or regulation, which payment, receipt or
retention of funds is of a character required to be disclosed in the Prospectus.

(u) The Company and each of the Subsidiaries have filed all tax
returns required to be filed, which returns, to the Company's knowledge, are
complete and correct, and neither the Company nor any Subsidiary is in default
in the payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.

(v) No holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the Company
because of the filing of the registration statement or consummation of the
transactions contemplated by this Agreement.

(w) The Company and the Subsidiaries own or possess all patents,
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, and the Company is not aware of
any claim to the contrary or any challenge by any other person to the rights of
the Company and the Subsidiaries with respect to the foregoing.

(x) None of the transactions by the Company or its Subsidiaries
contemplated by this Agreement (including, without limitation, the use of
proceeds from the sale of the Notes) will violate or result in a violation of
Section 7 of the Exchange Act, or any regulation promulgated thereunder,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System.

(y) The Company is not and, as a result of placing the proceeds from
the sale of the Notes contemplated hereby in the short-term investments
contemplated under the caption "Use of Proceeds" in the Prospectus, will not be,
an "investment company" as that term is defined in the Investment Company Act of
1940, as amended (the "Investment Company Act"), or subject to regulation under
the Investment Company Act.

7. Indemnification and Contribution.

(a) The Company agrees to indemnify and hold harmless each of you and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prepricing Prospectus or in
the Registration Statement or the Prospectus or in any amendment or supplement
thereto, or

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<PAGE>

arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to such Underwriter furnished in writing to the Company by or on behalf
of any Underwriter through you expressly for use in connection therewith;
provided, however, that the indemnification contained in this paragraph (a) with
respect to any Prepricing Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) on
account of any such loss, claim, damage, liability or expense arising from the
sale of the Notes by such Underwriter to any person if a copy of the Prospectus
shall not have been delivered or sent to such person within the time required by
the Act, and the untrue statement or alleged untrue statement or omission or
alleged omission of a material fact contained in such Prepricing Prospectus was
corrected in the Prospectus, provided that the Company has delivered the
Prospectus to the several Underwriters in requisite quantity on a timely basis
to permit such delivery or sending. The foregoing indemnity agreement shall be
in addition to any liability which the Company may otherwise have.

(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the Company and the Company shall
assume the defense thereof, including the employment of counsel and payment of
all reasonable fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the Company has agreed in writing to pay such fees
and expenses, (ii) the Company has failed to assume the defense and employ
counsel, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both such Underwriter or such
controlling person and the Company and such Underwriter or such controlling
person shall have been advised by its counsel that representation of such
indemnified party and the Company by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the Company shall not have the
right to assume the defense of such action, suit or proceeding on behalf of such
Underwriter or such controlling person). It is understood, however, that the
Company shall, in connection with any one such action, suit or proceeding or
separate but substantially similar or related actions, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by Smith Barney Inc., and that all such reasonable fees and expenses
shall be reimbursed as they are incurred. The Company

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<PAGE>

shall not be liable for any settlement of any such action, suit or proceeding
effected without its written consent, but if settled with such written consent,
or if there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company agrees to indemnify and hold harmless any Underwriter
and any such controlling person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment, to the extent
provided in paragraph (a) above.

(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to each Underwriter, but only
with respect to information relating to such Underwriter furnished in writing by
or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer, or any such
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
(c), such Underwriter shall have the rights and duties given to the Company by
paragraph (b) above (except that if the Company shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officer, and any such controlling person shall
have the rights and duties given to the Underwriters by paragraph (b) above.
The foregoing indemnity agreement shall be in addition to any liability which
the Underwriters may otherwise have.

(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Notes, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus; provided

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<PAGE>

that, in the event that the Underwriters shall have purchased any Additional
Notes hereunder, any determination of the relative benefits received by the
Company or the Underwriters from the offering of the Notes shall include the net
proceeds (before deducting expenses) received by the Company and the
underwriting discounts and commissions received by the Underwriters, from the
sale of such Additional Notes, in each case computed on the basis of the
respective amounts set forth in the notes to the table on the cover page of the
Prospectus. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or by the Underwriters on the other hand
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

(e) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by a
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Notes underwritten by it and distributed to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective principal amounts of Firm Notes set forth opposite their names
in Schedule I hereto (or such principal amounts of Firm Notes increased as set
forth in Section 10 hereof) and not joint.

(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.

(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or

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<PAGE>

expenses are incurred. The indemnity and contribution agreements contained in
this Section 7 and the representations and warranties of the Company set forth
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers,
or any person controlling the Company, (ii) acceptance of any Notes and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter or any person controlling any Underwriter, or to the Company,
its directors or officers, or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 7.

8. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase the Firm Notes hereunder are subject to the
following conditions:

(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Notes may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the effectiveness of the registration
statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the registration statement or the prospectus or
otherwise) shall have been complied with to your satisfaction.

(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company or the
Subsidiaries not disclosed in the Prospectus, which in your opinion, would
materially and adversely affect the market for the Notes, or (ii) any event or
development relating to or involving the Company or any officer or director of
the Company which makes any statement made in the Prospectus untrue or which, in
the opinion of the Company and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in the Prospectus in
order to state a material fact required by the Act or any other law to be stated
therein or necessary in order to make the statements therein not misleading, if
amending or supplementing the Prospectus to reflect such event or development
would, in your opinion, materially and adversely affect the market for the
Notes.

(c) You shall have received on the Closing Date, an opinion of
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel for the Company, dated the
Closing Date and addressed to you, to the effect that:

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<PAGE>

(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Texas with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify does not have a Material Adverse Effect;

(ii) Each of the Subsidiaries is a corporation duly organized and
validly existing in good standing under the laws of the jurisdiction of its
organization, with full corporate power and authority to own, lease, and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement thereto); and all
the outstanding shares of capital stock of each of the Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable, and are
owned by the Company directly, or indirectly through one of the other
Subsidiaries, free and clear of any perfected security interest, or, to the best
knowledge of such counsel after reasonable inquiry, any other security interest,
lien, adverse claim, equity or other encumbrance;

(iii) The authorized and outstanding capital stock of the Company is
as set forth under the caption "Capitalization" in the Prospectus; and the
authorized capital stock of the Company conforms in all material respects as to
legal matters to the description thereof contained in the Prospectus under the
caption "Description of Capital Stock";

(iv) All the shares of capital stock of the Company outstanding
prior to the issuance of the Notes have been duly authorized and validly issued,
and, to the best knowledge of such counsel, are fully paid and nonassessable;

(v) To the best knowledge of such counsel after reasonable
inquiry, except as set forth in the Registration Statement or the Incorporated
Documents, there are no outstanding options, warrants or other rights calling
for the issuance of, nor any commitment, plan or arrangement to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company;

(vi) To the best knowledge of such counsel after reasonable
inquiry, except as described in the Prospectus, there is no holder of any
security of the Company or any other person who has the right, contractual or
otherwise, to cause the Company to sell or otherwise issue to them, or to permit
them to underwrite the sale of, the Notes or the shares of Common Stock issuable
upon conversion of the Notes or the right to have any Common Stock or other
securities of the Company included in the registration statement or the right,
as a result of the filing of the registration statement, to require registration
under the Act of any shares of Common Stock or other securities of the Company.

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<PAGE>

(vii) The Registration Statement and all post-effective amendments,
if any, have become effective under the Act and, to the best knowledge of such
counsel after reasonable inquiry, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
are pending before or contemplated by the Commission; and any required filing of
the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule
424(b);

(viii) The Company has corporate power and authority to enter into
this Agreement and to issue, sell and deliver the Notes to the Underwriters as
provided herein, and this Agreement has been duly authorized, executed and
delivered by the Company and, assuming due execution and delivery by the
Underwriters, is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as enforcement of
rights to indemnity and contribution hereunder may be limited by Federal or
state securities laws or principles of public policy and subject to the
qualification that the enforceability of the Company's obligations hereunder may
be limited by bankruptcy, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights generally, and by general equitable
principles;

(ix) The Indenture has been duly authorized, executed and delivered
by the Company and, assuming due execution and delivery by the Trustee, is a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally and by general equitable principles,
and has been duly qualified under the 1939 Act;

(x) The Notes have been duly authorized and executed by the
Company and, assuming due authentication of the Notes by the Trustee, upon
delivery to the Underwriters against payment therefor in accordance with the
terms hereof and the Indenture, will have been validly issued and delivered, and
will constitute valid and binding obligations of the Company entitled to the
benefits of, and subject to the restrictions in, the Indenture;

(xi) The shares of Common Stock issuable upon conversion of the
Notes have been duly authorized and reserved for issuance and, when delivered
upon conversion of the Notes in accordance with the terms of the Indenture, will
have been validly issued and fully paid and will be non-assessable and free of
preemptive, or to the best knowledge of such counsel after reasonable inquiry,
similar rights that entitle or will entitle any person to acquire any shares of
Common Stock upon the issuance thereof by the Company;

(xii) Neither the Company nor any of the Subsidiaries is in
violation of its respective certificate or articles of incorporation or by-laws,
or other organizational documents, or to the best knowledge of such counsel
after reasonable inquiry, is in default in the performance

-19-
<PAGE>

of any material obligation, agreement or condition contained in any bond,
debenture, note or other evidence of indebtedness, except as may be disclosed in
the Prospectus;

(xiii) Neither the offer, sale or delivery of the Notes, the issuance
of Common Stock upon conversion of the Notes, the execution, delivery or
performance of this Agreement and the Indenture, compliance by the Company with
the provisions hereof and thereof nor consummation by the Company of the
transactions contemplated hereby or thereby (a) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation or by-laws, or other organizational
documents, of the Company or any of the Subsidiaries or any agreement,
indenture, lease or other instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or any of their respective
properties is bound that is an exhibit to the Registration Statement or to any
Incorporated Document, or is known to such counsel after reasonable inquiry, or
(b) will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the Subsidiaries, which
lien, charge or encumbrance would, singly or in the aggregate, have a Material
Adverse Effect, nor will any such action result in any violation of any existing
law, regulation, ruling (assuming compliance with all applicable state and
foreign securities and Blue Sky laws), judgment, injunction, order or decree
known to such counsel after reasonable inquiry, applicable to the Company, the
Subsidiaries or any of their respective properties, which violation would,
singly or in the aggregate, have a Material Adverse Effect;

(xiv) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency, or official is required on the part of the
Company (except as have been obtained under the Act, the Exchange Act, the 1939
Act, and such as may be required under state and foreign securities or Blue Sky
laws governing the purchase and distribution of the Notes and the shares of
Common Stock issuable upon conversion of the Notes) for the valid issuance and
sale of the Notes to the Underwriters as contemplated by this Agreement;

(xv) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements and the
notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion) comply
as to form in all material respects with the requirements of the Act; and each
of the Incorporated Documents (except for the financial statements and the notes
thereto and the schedules and other financial and statistical data included
therein, as to which counsel need not express any opinion) complies as to form
in all material respects with the Exchange Act and the rules and regulations of
the Commission thereunder;

(xvi) To the best knowledge of such counsel after reasonable
inquiry, (A) other than as described or contemplated in the Prospectus (or any
supplement thereto), there are no legal or governmental proceedings pending or
threatened against the Company or any of the Subsidiaries, or to which the
Company or any of the Subsidiaries, or any of their property, is

-20-
<PAGE>

subject, which are required to be described in the Registration Statement or
Prospectus (or any amendment or supplement thereto) and (B) there are no
agreements, contracts, indentures, leases or other instruments, that are
required to be described in the Registration Statement or the Prospectus (or any
amendment or supplement thereto) or to be filed as an exhibit to the
Registration Statement or any Incorporated Document that are not described or
filed as required, as the case may be;

(xvii) To the best knowledge of such counsel after reasonable
inquiry, neither the Company nor any of the Subsidiaries is in violation of any
law, ordinance, administrative or governmental rule or regulation applicable to
the Company or any of the Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any of the
Subsidiaries;

(xviii) The statements in the Registration Statement and Prospectus,
insofar as they are descriptions of contracts, agreements or other legal
documents, or refer to statements of law or legal conclusions, are accurate and
present fairly the information required to be shown;

(xix) The Company is not and, as a result of placing the proceeds
from the sale of the Notes contemplated hereby in the short-term investments
contemplated under the caption "Use of Proceeds" in the Prospectus, will not be,
an "investment company" as such term is defined in the Investment Company Act;

(xx) None of the transactions by the Company or its Subsidiaries
contemplated by this Agreement (including, without limitation, the use of
proceeds from the sale of the Notes) will violate Section 7 of the Exchange Act,
or any regulation promulgated thereunder, including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System;

(xxi) A Texas state court, or a federal court applying Texas choice
of law principles, would give effect to the provisions of this Agreement and the
Indenture selecting the law of the State of New York as the governing law for
those documents.

(xxii) Although counsel has not undertaken, except as otherwise
indicated in their opinion, to determine independently, and does not assume any
responsibility for, the accuracy or completeness of the statements in the
Registration Statement, such counsel has participated in the preparation of the
Registration Statement and the Prospectus, including review and discussion of
the contents thereof (including review and discussion of the contents of all
Incorporated Documents), and nothing has come to the attention of such counsel
that has caused them to believe that the Registration Statement (including the
Incorporated Documents) at the time the Registration Statement became effective,
or the Prospectus, as of its date and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements

-21-
<PAGE>

therein not misleading or that any amendment or supplement to the Prospectus, as
of its respective date, and as of the Closing Date or the Option Closing Date,
as the case may be, contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no opinion with respect to the
financial statements and the notes thereto and the schedules and other financial
and statistical data included in the Registration Statement or the Prospectus or
any Incorporated Document).

In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
or the State of Texas, provided that (1) each such local counsel is acceptable
to you, (2) such reliance is expressly authorized by each opinion so relied upon
and a copy of each such opinion is delivered to you and is in form and substance
satisfactory to you and your counsel, and (3) counsel shall state in their
opinion that they believe that they and the Underwriters are justified in
relying thereon.

(d) You shall have received on the Closing Date an opinion of Baker &
Botts, L.L.P., counsel for the Underwriters, dated the Closing Date and
addressed to you with respect to the matters referred to in clauses (vii), (ix),
(x), (xi), (xv), and (xxii) of the foregoing paragraph (c) and such other
related matters as you may request.

(e) You shall have received letters addressed to you, and dated the
date hereof and the Closing Date from Grant Thornton LLP, independent certified
public accountants, substantially in the forms heretofore approved by you.

(f) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the short-term or long-term debt of the Company (other than in the
ordinary course of business) from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or supplement thereto),
any material adverse change in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole; (iv) the Company and the Subsidiaries shall not
have any liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company and the
Subsidiaries, taken as a whole, other than those reflected in the Registration
Statement or the Prospectus (or any amendment or supplement thereto); and (v)
all the representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the date hereof and on and as

-22-
<PAGE>

of the Closing Date as if made on and as of the Closing Date, and you shall have
received a certificate, dated the Closing Date and signed by the chief executive
officer and the chief financial officer of the Company (or such other officers
as are acceptable to you), to the effect set forth in this Section 8(f) and in
Section 8(g) hereof.

(g) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.

(h) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to the
Notes, or (ii) it is reviewing its rating assigned to the Notes with a view to
possible downgrading, or with negative implications, or direction not
determined.

(i) The Notes shall have been listed, subject to notice of issuance,
on the New York Stock Exchange and the shares of Common Stock issuable upon
conversion of the Notes shall have been listed, subject to notice of issuance,
on the New York Stock Exchange.

(j) The Notes shall have been registered under the Exchange Act.

(k) The Company shall have furnished or caused to be furnished to you
such further certificates and documents as you shall have reasonably requested.

All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to you and your counsel.

Any certificate or document signed by any officer of the Company and
delivered to you or to counsel for the Underwriters, shall be deemed a
representation and warranty by the Company to each Underwriter as to the
statements made therein.

The several obligations of the Underwriters to purchase Additional
Notes hereunder are subject to the satisfaction on and as of any Option Closing
Date of the conditions set forth in this Section 8, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (c) through (f) shall be dated the Option
Closing Date in question and the opinions called for by paragraphs (c) and (d)
shall be revised to reflect the sale of Additional Notes.

9. Expenses. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the registration statement

-23-
<PAGE>

(including financial statements and exhibits thereto), each Prepricing
Prospectus, the Prospectus, and each amendment or supplement to any of them, and
the Statement of Eligibility and Qualification of the Trustee; (ii) the printing
(or reproduction) and delivery (including postage, air freight charges and
charges for counting and packaging) of such copies of the registration
statement, each Prepricing Prospectus, the Prospectus, the Incorporated
Documents, and all amendments or supplements to any of them, as may be
reasonably requested for use in connection with the offering and sale of the
Notes; (iii) the preparation, printing, authentication, issuance and delivery of
the Notes, including any stamp taxes in connection with the original issuance
and sale of the Notes; (iv) the printing (or reproduction) and delivery of this
Agreement, the Indenture and all other agreements or documents printed (or
reproduced) and delivered in connection with the offering of the Notes; (v) the
registration of the Notes under the Exchange Act and the listing of the Notes
and the shares of Common Stock issuable upon conversion of the Notes on the New
York Stock Exchange; (vi) the registration or qualification of the Notes and the
shares of Common Stock issuable upon conversion of the Notes for offer and sale
under the securities or Blue Sky laws of the several states as provided in
Section 5(g) hereof (including the reasonable fees, expenses and disbursements
of counsel for the Underwriters relating to such registration and
qualification); (vii) the filing fees and the fees and expenses of counsel for
the Underwriters in connection with any filings required to be made with the
National Association of Securities Dealers, Inc.; (viii) the fees and expenses
of the Trustee; (ix) the fees and expenses associated with obtaining ratings for
the Notes from nationally recognized statistical rating organizations; (x) the
transportation and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective purchasers of
the Notes; and (xi) the fees and expenses of the Company's accountants and the
fees and expenses of counsel (including local and special counsel) for the
Company.

10. Effective Date of Agreement. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Notes may commence, when notification of
the effectiveness of the registration statement or such post-effective amendment
has been given by the Commission. Until such time as this Agreement shall have
become effective, it may be terminated by the Company, by notifying you, or by
you, by notifying the Company.

If any one or more of the Underwriters shall fail or refuse to
purchase Notes which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate principal amount of Notes which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate principal amount of Notes which the
Underwriters are obligated to purchase on the Closing Date, each non-defaulting
Underwriter shall be obligated, severally, in the proportion which the principal
amount of Firm Notes set forth opposite its name in Schedule I hereto bears to
the aggregate principal amount of Firm Notes set forth opposite the names of all
non-defaulting Underwriters or in such other proportion as you may specify in
accordance with Section 20 of the Master Agreement Among Underwriters of

-24-
<PAGE>

Smith Barney Inc., to purchase the Notes which such defaulting Underwriter or
Underwriters are obligated, but fail or refuse, to purchase. If any one or more
of the Underwriters shall fail or refuse to purchase Notes which it or they are
obligated to purchase on the Closing Date and the aggregate principal amount of
Notes with respect to which such default occurs is more than one-tenth of the
aggregate principal amount of Notes which the Underwriters are obligated to
purchase on the Closing Date and arrangements satisfactory to you and the
Company for the purchase of such Notes by one or more non-defaulting
Underwriters or other party or parties approved by you and the Company are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case which does not result in termination of this Agreement, either you or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto who, with your approval and the approval of the Company,
purchases Notes which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.

Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.

11. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Notes), as the case may be, (i) trading in the Common
Stock shall be suspended or subject to any restriction or limitation not in
effect on the date of this Agreement; (ii) trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market shall have been suspended or materially limited; (iii) a general
moratorium on commercial banking activities in New York or Texas shall have been
declared by either federal or state authorities; or (iv) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it, in your judgment, impracticable or inadvisable to commence
or continue the offering of the Notes on the terms set forth on the cover page
of the Prospectus or to enforce contracts for the resale of the Notes by the
Underwriters. Notice of such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.

12. Information Furnished by the Underwriters. The statements set forth
in the last paragraph on the cover page, the stabilization legend on the inside
front cover, and the statements in the first, third and sixth paragraphs under
the caption "Underwriting" in any Prepricing

-25-
<PAGE>

Prospectus and in the Prospectus, constitute the only information furnished by
or on behalf of the Underwriters through you as such information is referred to
in Sections 6(b) and 7 hereof.

13. Miscellaneous. Except as otherwise provided in Sections 5, 10 and 11
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 1111 Gillingham Lane, Sugar Land, Texas 77478, Attention: Mr. Morrie
K. Abramson, Chairman of the Board, Chief Executive Officer and President; or
(ii) if to you, care of Smith Barney Inc., 388 Greenwich Street, New York, New
York 10013, Attention: Manager, Investment Banking Division.

This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the
term "successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Notes in his status
as such purchaser.

14. Applicable Law; Counterparts. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.

This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.

-26-
<PAGE>

Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.

Very truly yours,

KENT ELECTRONICS CORPORATION

By: ____________________________
Morrie K. Abramson
Chairman of the Board, Chief Executive
Officer and President

Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.

SMITH BARNEY INC.
BT ALEX. BROWN INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By: SMITH BARNEY INC.

By: _________________________________
Name:
Title:

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<PAGE>

SCHEDULE I

KENT ELECTRONICS CORPORATION

Principal Amount
Underwriter of Firm Notes
----------- -------------

Smith Barney Inc. .............................................. $
BT Alex. Brown Incorporated ...................................
Donaldson, Lufkin & Jenrette Securities Corporation ...........
Merrill Lynch, Pierce, Fenner & Smith Incorporated ............
____________
Total... $

-28-

<PAGE>

================================================================================

KENT ELECTRONICS CORPORATION

AS ISSUER

TEXAS COMMERCE BANK
NATIONAL ASSOCIATION

AS TRUSTEE

INDENTURE

Dated as of September ___, 1997

$___________
(including $__________ issuable upon exercise of an over-allotment option
granted by the Issuer to certain underwriters)

____% Convertible Subordinated Notes Due 2004

================================================================================
<PAGE>

Certain Sections of this Indenture relating to

Sections 310 through 318 of the

Trust Indenture Act of 1939:

Section 310(a)(1) ............................. 609
(a)(2) ............................. 609
(a)(3) ............................. Not Applicable
(a)(4) ............................. Not Applicable
(a)(5) ............................. 609
(b) ............................. 608
(c) ............................. Not Applicable
Section 311(a) ............................. 613
(b) ............................. 613
(c) ............................. Not Applicable
Section 312(a) ............................. 701
............................. 702(a)
(b) ............................. 702(b)
(c) ............................. 702(c)
Section 313(a) ............................. 703(a)
(b)(1) ............................. Not Applicable
(b)(2) ............................. 703(a)
(c) ............................. 703(a)
(d) ............................. 703(b)
Section 314(a) ............................. 704
(a)(4) ............................. 1004
(b) ............................. Not Applicable
(c)(1) ............................. 102
(c)(2) ............................. 102
(c)(3) ............................. Not Applicable
(d) ............................. Not Applicable
(e) ............................. 102
(f) ............................. Not Applicable
Section 315(a) ............................. 601
(b) ............................. 602
(c) ............................. 601
(d) ............................. 601
(e) ............................. 514
Section 316(a)(1)(A) ............................. 502
............................. 512
(a)(1)(B) ............................. 513
(a)(2) ............................. Not Required
(a) (last sentence) ............................. definition of
Outstanding
(b) ............................. 508
(c) ............................. 104(c)
<PAGE>

Section 317(a)(1) ............................. 503
(a)(2) ............................. 504
(b) ............................. 1003
Section 318(a) ............................. 107

______________

Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE>

TABLE OF CONTENTS*

Page
ARTICLE 1.
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 101. Definitions................................................. 1
Act......................................................... 2
Affiliate................................................... 2
Agent Member................................................ 2
Applicable Procedures....................................... 2
Authenticating Agent........................................ 2
Beneficial Owner............................................ 2
Board of Directors.......................................... 2
Board Resolution............................................ 2
Business Day................................................ 3
Change in Control........................................... 3
Close of Business........................................... 3
Commission.................................................. 3
Common Stock................................................ 3
Company..................................................... 3
Company Request............................................. 3
Company Order............................................... 3
Corporate Trust Office...................................... 3
Corporation................................................. 4
Credit Facility............................................. 4
Current Market Price........................................ 4
Daily Market Price.......................................... 4
Defaulted Interest.......................................... 5
Depositary.................................................. 5
DTC......................................................... 5
Event of Default............................................ 5
Exchange Act................................................ 5
Global Security............................................. 5
Holder...................................................... 5
Indenture................................................... 5
Interest Payment Date....................................... 5
Maturity.................................................... 5

_______________
*Note: This Table of Contents shall not, for any purposes, be deemed to be a
part of the Indenture.

-i-
<PAGE>

Officers' Certificate........................................ 6
Opinion of Counsel........................................... 6
Outstanding.................................................. 6
Paying Agent................................................. 6
Person....................................................... 6
Predecessor Security......................................... 7
Record Date.................................................. 7
Redemption Date.............................................. 7
Redemption Price............................................. 7
Regular Record Date.......................................... 7
Repurchase Date.............................................. 7
Repurchase Event............................................. 7
Repurchase Price............................................. 7
Security Register............................................ 7
Security Registrar........................................... 7
Senior Indebtedness.......................................... 7
Special Record Date.......................................... 8
Stated Maturity.............................................. 8
Subsidiary................................................... 8
Termination of Trading....................................... 8
Time of Determination........................................ 8
Trust Indenture Act.......................................... 8
Trustee...................................................... 8
Vice President............................................... 9
Section 102. Compliance Certificates and Opinions......................... 9
Section 103. Form of Documents Delivered to Trustee....................... 9
Section 104. Acts of Holders; Record Dates................................ 10
Section 105. Notices, Etc., to Trustee and Company........................ 11
Section 106. Notice to Holders; Waiver.................................... 11
Section 107. Conflict With Trust Indenture Act............................ 12
Section 108. Effect of Headings and Table of Contents..................... 12
Section 109. Successors and Assigns....................................... 12
Section 110. Separability Clause.......................................... 12
Section 111. Benefits of Indenture........................................ 13
Section 112. Governing Law................................................ 13
Section 113. Legal Holidays............................................... 13
Section 114. No Security Interest Created................................. 13
Section 115. Limitation on Individual Liability........................... 13

-ii-
<PAGE>

ARTICLE 2.
SECURITY FORMS

Section 201. Forms Generally.............................................. 14
Section 202. Form of Face of Security..................................... 14
Section 203. Form of Reverse of Security.................................. 16
Section 204. Form of Trustee's Certificate of Authentication.............. 22

ARTICLE 3.
THE SECURITIES

Section 301. Title and Terms.............................................. 23
Section 302. Denominations................................................ 24
Section 303. Execution, Authentication, Delivery and Dating............... 24
Section 304. Temporary Securities......................................... 25
Section 305. Registration, Registration of Transfer and Exchange.......... 25
Section 306. Mutilated, Destroyed, Lost and Stolen Securities............. 27
Section 307. Payment of Interest; Interest Rights Preserved............... 28
Section 308. Persons Deemed Owners........................................ 30
Section 309. Cancellation................................................. 30
Section 310. Computation of Interest...................................... 30
Section 311. CUSIP Number................................................. 30

ARTICLE 4.
SATISFACTION AND DISCHARGE

Section 401. Satisfaction and Discharge of Indenture...................... 30
Section 402. Application of Trust Money................................... 32
Section 403. Reinstatement................................................ 32

ARTICLE 5.
REMEDIES

Section 501. Events of Default............................................ 32
Section 502. Acceleration of Maturity; Rescission and Annulment........... 34
Section 503. Collection of Indebtedness and Suits for Enforcement
by Trustee.................................................. 36
Section 504. Trustee May File Proofs of Claim............................. 36
Section 505. Trustee May Enforce Claims Without Possession
of Securities............................................... 37
Section 506. Application of Money Collected............................... 37

-iii-
<PAGE>

Section 507. Limitation on Suits.......................................... 37
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert......................... 38
Section 509. Restoration of Rights and Remedies........................... 38
Section 510. Rights and Remedies Cumulative............................... 38
Section 511. Delay or Omission Not Waiver................................. 39
Section 512. Control by Holders........................................... 39
Section 513. Waiver of Past Defaults...................................... 39
Section 514. Undertaking for Costs........................................ 40
Section 515. Waiver of Stay or Extension Laws............................. 40

ARTICLE 6.
THE TRUSTEE

Section 601. Certain Duties and Responsibilities.......................... 40
Section 602. Notice of Defaults........................................... 41
Section 603. Certain Rights of Trustee.................................... 41
Section 604. Not Responsible for Recitals or Issuance of Securities....... 42
Section 605. May Hold Securities.......................................... 42
Section 606. Money Held in Trust.......................................... 42
Section 607. Compensation and Reimbursement............................... 43
Section 608. Disqualification; Conflicting Interests...................... 43
Section 609. Corporate Trustee Required; Eligibility...................... 43
Section 610. Resignation and Removal; Appointment of Successor............ 44
Section 611. Acceptance of Appointment by Successor....................... 45
Section 612. Merger, Conversion, Consolidation or Succession to Business.. 45
Section 613. Preferential Collection of Claims Against Company............ 46
Section 614. Appointment of Authenticating Agent.......................... 46

ARTICLE 7.
HOLDERS' LIST AND REPORTS BY TRUSTEE AND COMPANY

Section 701. Company to Furnish Trustee Names and Addresses of Holders.... 48
Section 702. Preservation of Information; Communication to Holders........ 48
Section 703. Reports by Trustee........................................... 48
Section 704. Reports by Company........................................... 49

-iv-
<PAGE>

ARTICLE 8.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER or LEASE

Section 801. Company May Consolidate, Etc., Only on Certain Terms........ 49
Section 802. Successor Substituted....................................... 50

ARTICLE 9.
SUPPLEMENTAL INDENTURES

Section 901. Supplemental Indentures Without Consent of Holders........... 50
Section 902. Supplemental Indentures with Consent of Holders.............. 51
Section 903. Execution of Supplemental Indentures......................... 52
Section 904. Effect of Supplemental Indentures............................ 52
Section 905. Conformity with Trust Indenture Act.......................... 52
Section 906. Reference in Securities to Supplemental Indentures........... 52
Section 907. Notice of Supplemental Indenture............................. 53

ARTICLE 10.
COVENANTS

Section 1001. Payment of Principal, Premium and Interest................... 53
Section 1002. Maintenance of Office or Agency.............................. 53
Section 1003. Money for Security Payments to Be Held in Trust.............. 53
Section 1004. Statement by Officers as to Default.......................... 55
Section 1005. Existence.................................................... 55
Section 1006. Waiver of Certain Covenants.................................. 55

ARTICLE 11.
REDEMPTION OF SECURITIES

Section 1101. Right of Redemption.......................................... 55
Section 1102. Applicability of Article..................................... 56
Section 1103. Election to Redeem; Notice to Trustee........................ 56
Section 1104. Selection by Trustee of Securities to Be Redeemed............ 56
Section 1105. Notice of Redemption......................................... 56
Section 1106. Deposit of Redemption Price.................................. 57
Section 1107. Securities Payable on Redemption Date........................ 58
Section 1108. Securities Redeemed in Part.................................. 58
Section 1109. Conversion Arrangements on Call for Redemption............... 58

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<PAGE>

ARTICLE 12.
SUBORDINATION OF SECURITIES

Section 1201. Securities Subordinated to Senior Indebtedness............... 59
Section 1202. Payment Over of Proceeds Upon Dissolution, Etc............... 59
Section 1203. Acceleration of Securities................................... 60
Section 1204. No Payment When Senior Indebtedness in Default............... 60
Section 1205. Subrogation to Rights of Holders of Senior Indebtedness...... 61
Section 1206. Provisions Solely to Define Relative Rights.................. 62
Section 1207. Trustee to Effectuate Subordination.......................... 62
Section 1208. No Waiver of Subordination Provisions........................ 62
Section 1209. Notice to Trustee............................................ 63
Section 1210. Reliance on Judicial Order or Certificate of
Liquidating Agent........................................... 63
Section 1211. Trustee Not Fiduciary for Holders of Senior Indebtedness..... 64
Section 1212. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights............................ 64
Section 1213. Article Applicable to Paying Agents.......................... 64
Section 1214. Rights with respect to Conversion and Certain Payments....... 64

ARTICLE 13.
CONVERSION OF SECURITIES

Section 1301. Conversion Privilege and Conversion Price.................... 65
Section 1302. Exercise of Conversion Privilege............................. 65
Section 1303. Fractions of Shares.......................................... 66
Section 1304. Adjustment of Conversion Price............................... 67
Section 1305. Notice of Adjustments of Conversion Price.................... 71
Section 1306. Notice of Certain Corporate Action........................... 71
Section 1307. Company to Reserve Common Stock.............................. 72
Section 1308. Taxes on Conversions......................................... 72
Section 1309. Covenant as to Common Stock.................................. 73
Section 1310. Cancellation of Converted Securities......................... 73
Section 1311. Provisions as to Consolidation, Merger or Sale of Assets..... 73
Section 1312. Disclaimer of Responsibility for Certain Matters............. 74

ARTICLE 14.
RIGHT TO REQUIRE REPURCHASE

Section 1401. Right to Require Repurchase.................................. 75

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<PAGE>

Section 1402. Notice; Method of Exercising Repurchase Right................ 75
Section 1403. Deposit of Repurchase Price.................................. 76
Section 1404. Securities Not Repurchased on Repurchase Date................ 76
Section 1405. Securities Repurchased in Part............................... 76
Section 1406. Certain Definitions.......................................... 77

Testimonium
Signatures and Seals
Acknowledgments

-vii-
<PAGE>

INDENTURE, dated as of September __, 1997 between KENT ELECTRONICS
CORPORATION, a corporation duly organized and existing under the laws of the
State of Texas (herein called the "Company"), having its principal executive
offices at 7433 Harwin Drive, Houston, Texas 77036, and TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, a national banking association, as Trustee (herein called
the "Trustee"), having an office at 600 Travis, Suite 1150, Houston, Texas
77002.

RECITALS OF THE COMPANY

The Company has duly authorized the creation of an issue of its _____%
Convertible Subordinated Notes Due 2004 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.

All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:

ARTICLE 1.

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 101. Definitions.

For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:

(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;

(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
<PAGE>

(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with United States generally accepted
accounting principles, and, except as otherwise herein expressly provided, the
term "generally accepted accounting principles" with respect to any computation
required and permitted hereunder shall mean United States accounting principles
as are generally accepted at the date of this Indenture; and

(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.

Certain terms used in either Article Twelve or Thirteen are
defined in such Article.

"Act", when used with respect to any Holder, has the meaning
specified in Section 104.

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

"Agent Member" means any member of, or participant in, the
Depositary.

"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Global Security to the extent
applicable to such transaction and as in effect from time to time.

"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities.

The term "Beneficial Owner" is determined in accordance with Rule
13d-3 promulgated by the Commission under the Exchange Act.

"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.

"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.

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<PAGE>

"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York or
the city in which the Corporate Trust Office is located are authorized or
obligated to close by law or executive order.

"Change in Control" has the meaning specified in Section 1406.

"Close of Business" means 5:00 p.m. in New York, New York.

"Commission" means the Securities and Exchange Commission as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.

"Common Stock" includes any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding-up of
the Company and which is not subject to redemption by the Company. However,
subject to the provisions of Section 1311, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Stock of
the Company at the date of this Indenture or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which are not subject to redemption by the Company; provided, that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.

"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.

"Company Request" or "Company Order" means a written request or
order delivered to the Trustee and signed in the name of the Company by (a) the
Chairman of the Board, the President or any Vice President of the Company and
(b) the Treasurer, any Assistant Treasurer, the Secretary or any Assistant
Secretary of the Company.

"Corporate Trust Office" means the office of the Trustee, at which
at any particular time its corporate trust business shall be administered, as
follows:

For payment, registration, transfer, exchange and tender of the
Securities:

-3-
<PAGE>

<TABLE>
<CAPTION>
BY HAND BY MAIL
<S> <C>
Texas Commerce Bank National Association Texas Commerce Bank National Association
Attention: Registered Bond Events Attention: Registered Bond Events
One Main Place P.O. Box 2320
1201 Main Street, 10th Floor Dallas, Texas 75221-2320
Dallas, Texas 75202
</TABLE>
Telephone: (214) 871-9393 or (800) 275-2048

IN NEW YORK

Texas Commerce Bank National Association
c/o Texas Commerce Trust Company of New York
55 Water Street, North Building
Room 234 Windows 20 and 21
New York, New York 10041

Telephone: (212) 638-4020 or 638-4021
Telecopy No.: (212) 638-7267

For all other communications relating to the Securities:

Texas Commerce Bank National Association
600 Travis Street, Suite 1150
Houston, Texas 77002
Attention: Corporate Trust Officer

Telephone: (713) 216-5811
Telecopy: (713) 216-5476

"Corporation" means a corporation, association, company, joint-
stock company, business trust, limited liability company or other similar
entity.

"Credit Facility" means the revolving promissory note with
agreement dated as of June 12, 1997 between the Company and Texas Commerce Bank
National Association, as may be amended from time to time, and any agreement
evidencing the refinancing, replacement, renewal or refunding thereof.

"Current Market Price" has the meaning specified in
Section 1304(f).

"Daily Market Price" means the price of a share of Common Stock on
the relevant date, determined on the basis of the last reported sale price
regular way of the Common Stock as reported on the composite tape, or similar
reporting system, for issues listed on the New York Stock

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<PAGE>

Exchange (or if the Common Stock is not then listed on that Exchange, on the
principal national securities exchange upon which the Common Stock is listed or,
if not listed on any national securities exchange, on the Nasdaq National
Market, if the Common Stock shall be listed thereon or, if there is no such
reported sale on the day in question, on the basis of the average of the closing
bid and asked quotations regular way as so reported, or, if the Common Stock is
not listed on any national securities exchange or on the Nasdaq National Market,
on the basis of the average of the high bid and low asked quotations regular way
on the day in question in the over-the-counter market as reported by the
National Association of Securities Dealers Automated Quotation System, or if not
so quoted, as reported by National Quotation Bureau, Incorporated, or a similar
organization.

"Defaulted Interest" has the meaning specified in Section 307.

"Depositary" means, with respect to any Global Securities, a clearing
agency that is registered as such under the Exchange Act and is designated by
the Company to act as a Depositary for such Global Securities (or any successor
securities clearing agency so registered).

"DTC" means The Depository Trust Company, a New York limited purpose
trust company.

"Event of Default" has the meaning specified in Section 501.

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

"Global Security" means a Security that is registered in the Security
Register in the name of a Depositary or nominee thereof.

"Holder" means a Person in whose name a Security is registered in the
Security Register.

"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.

"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Securities.

"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity thereof or by declaration of
acceleration, redemption or otherwise.

-5-
<PAGE>

"Officers' Certificate" means a certificate delivered to the Trustee
and signed by (a) the Chairman of the Board, the President or any Vice President
of the Company and (b) the Treasurer, any Assistant Treasurer, the Secretary or
any Assistant Secretary of the Company. One of the officers signing an Officers'
Certificate given pursuant to Section 1004 shall be the principal executive,
financial or accounting officer of the Company.

"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for or an employee of the Company, and who shall not be unacceptable to
the Trustee.

"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:

(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;

(ii) Securities, or portions thereof, for the payment or redemption of
which moneys in the necessary amount have been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own Paying
Agent) for the Holders of such Securities; provided, that if such Securities, or
portions thereof, are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and

(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory to it
that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company; provided, however, that in
determining whether the Holders of the requisite principal amount of the
Outstanding Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Securities owned by the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.

"Paying Agent" means any Person authorized by the Company to pay the
principal of and premium, if any, or interest on any Securities on behalf of the
Company.

"Person" means any individual, Corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.

-6-
<PAGE>

"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.

"Record Date" means either a Regular Record Date or a Special Record
Date, as applicable.

"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.

"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture on the applicable Redemption Date.

"Regular Record Date," for the interest payable on any Interest
Payment Date, means the February 15 or August 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.

"Repurchase Date" has the meaning specified in Section 1401.

"Repurchase Event" has the meaning specified in Section 1406.

"Repurchase Price" has the meaning specified in Section 1401.

"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305(a).

"Senior Indebtedness" means (a) principal of, premium, if any, and
accrued and unpaid interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company) on
(i) indebtedness of the Company for money borrowed, whether outstanding on the
date of execution of this Indenture or thereafter created, incurred or assumed,
(ii) guarantees by the Company of indebtedness for money borrowed by any other
person, or reimbursement obligations under letters of credit, in either case,
whether outstanding on the date of execution of this Indenture or thereafter
created, incurred or assumed, (iii) indebtedness evidenced by notes (other than
the Securities), debentures, bonds or other instruments of indebtedness for the
payment of which the Company is responsible or liable, by guarantees or
otherwise, whether outstanding on the date of execution of this Indenture or
thereafter created, incurred or assumed, (iv) obligations of the Company under
interest rate and currency swaps, caps, floors, collars or similar agreements or
arrangements intended to protect the Company against fluctuations in interest or
currency rates, whether outstanding on the date of execution of this Indenture
or thereafter created, incurred or assumed and (v) obligations of the Company
under any agreement to lease, or any lease of, any real or personal property,
which obligations, whether outstanding on the date of execution

-7-
<PAGE>

of this Indenture or thereafter created, incurred or assumed, are required to be
capitalized on the books of the Company in accordance with generally accepted
accounting principles, or guarantees by the Company of similar obligations of
others, and (b) modifications, renewals, extensions and refundings of any such
indebtedness, obligations or guarantees; unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such indebtedness, obligations or guarantees or such modification, renewal,
extension or refunding thereof are not superior in right of payment to the
Securities; provided, however, that Senior Indebtedness shall not be deemed to
include, and the Securities will rank pari passu in right of payment with, any
obligation of the Company to any Subsidiary.

"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307(a).

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

"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which ordinarily
has voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.

"Termination of Trading" has the meaning specified in Section
1406(c).

"Time of Determination" means (1) for purposes of Section 1304(b) or
(c), the time and date of the earlier of (a) the record date for determining
shareholders entitled to receive the rights, warrants or distributions referred
to in Section 1304(b) and (c), or (b) the commencement of "ex-dividend" trading
on the exchange or market referred to in the definition of the term "Daily
Market Price"; and (2) for purposes of Section 1304(e) the Expiration Time (as
defined in Section 1304(e)).

"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.

"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.

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<PAGE>

"Vice President," when used with respect to the Company, means any
vice president, whether or not designated by a number or a word or words added
before or after the title "vice president".

Section 102. Compliance Certificates and Opinions.

Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall furnish
to the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.

Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:

(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;

(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;

(c) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and

(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.

Section 103. Form of Documents Delivered to Trustee.

In any case where several matters are required to be certified by
or covered by an opinion of any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any Person may certify or
give an opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certification or Opinion
of Counsel unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion with respect to the matters upon
which his certificate or opinion is based are erroneous. Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate of public officials
-9-
<PAGE>

or upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

Section 104. Acts of Holders; Record Dates.

(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.

(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.

(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 701)
prior to such first solicitation or vote, as the case may be. With regard to
any record date, only the Holders on such date (or their duly designated
proxies) shall be entitled to give or take, or vote on, the relevant action.
Notwithstanding the foregoing, the Company shall not set a record date for,

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<PAGE>

and the provisions of this paragraph shall not apply with respect to, any Act by
the Holders pursuant to Section 501, 502 or 512.

(d) The ownership of Securities shall be proved by the Security
Register.

(e) Any Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
registration of transfer therefor or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.

(f) Without limiting the foregoing, a Holder entitled hereunder
to give or take any action hereunder with regard to any particular Security may
do so with regard to all or any part of the principal amount of such Security or
by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such principal amount.

Section 105. Notices, Etc., to Trustee and Company.

Any Act of Holders or other documents provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,

(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at the address specified in the first paragraph
of this Indenture or such other address as previously furnished in writing by
the Trustee, or

(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Company,
addressed to it at the address of its principal executive offices specified in
the first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.

Section 106. Notice to Holders; Waiver.

Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at its address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail any notice nor any defect
in any notice so mailed to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such

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<PAGE>

notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.

Section 107. Conflict With Trust Indenture Act.

If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.

Section 108. Effect of Headings and Table of Contents.

The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.

Section 109. Successors and Assigns.

All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.

Section 110. Separability Clause.

In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

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Section 111. Benefits of Indenture.

Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Senior Indebtedness and the Holders of
Securities, any benefit or any legal or equitable right, remedy or claim under
this Indenture.

Section 112. Governing Law.

This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York, but without
regard to the principles of conflicts of laws of such State.

Section 113. Legal Holidays.

In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security or the last date on which a Holder has the right
to convert its Securities shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal and premium, if any, or conversion of the Securities need not be made
on such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date or Redemption Date, or
at the Stated Maturity, or on such last day for conversion; provided, that no
interest shall accrue for the period from and after such Interest Payment Date,
Redemption Date, Stated Maturity or last day for conversion, as the case may be.

Section 114. No Security Interest Created.

Nothing in this Indenture or in the Securities, express or
implied, shall be construed to constitute a security interest under the Uniform
Commercial Code or similar legislation, as now or hereafter enacted and in
effect in any jurisdiction where property of the Company or its Subsidiaries is
or may be located.

Section 115. Limitation on Individual Liability.

No recourse under or upon any obligation, covenant or agreement
contained in this Indenture or in any Security, or for any claim based thereon
or otherwise in respect thereof, shall be had against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or any successor corporation, either directly or through the Company,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the incorporators, shareholders, officers or
directors, as such, of the Company or any successor Person, or any of them,
because of the creation of the indebtedness hereby authorized, or

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under or by reason of the obligations, covenants or agreements contained in this
Indenture or in any Security or implied therefrom; and that any and all such
personal liability of every name and nature, either at common law or in equity
or by constitution or statute, of, and any and all such rights and claims
against, every such incorporator, shareholder, officer or director, as such,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or in any Security or implied therefrom, are hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issuance of such Security.

ARTICLE 2.

SECURITY FORMS

Section 201. Forms Generally.

The Securities and the Trustee's certificates of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with any law or with the rules of any securities
exchange on which the Securities are listed or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities.

The definitive Securities (other than a Global Security) shall be
printed, lithographed or engraved or produced by any combination of these
methods on steel engraved borders or may be produced in any other manner
permitted by the rules of any securities exchange on which the Securities may be
listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.

Section 202. Form of Face of Security.

A legend in substantially the following form shall also appear on
the face of each Global Security:

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE REFERRED TO BELOW AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND
ANY AGENT THEREOF AS THE OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES.

A legend in substantially the following form shall also appear on
the face of each Global Security for which The Depository Trust Company is to be
the Depositary:

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<PAGE>

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR REGISTERED
SECURITIES IN DEFINITIVE REGISTERED FORM, THIS GLOBAL SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

KENT ELECTRONICS CORPORATION

___% Convertible Subordinated Notes Due 2004

No. _________ $____________
CUSIP No. ____________

KENT ELECTRONICS CORPORATION, a corporation duly organized and
existing under the laws of the State of Texas (herein called the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to _______________, or
registered assigns, upon presentment and surrender hereof, the principal sum of
____________ Dollars on September 1, 2004, and to pay interest thereon from and
including the date of the initial issuance of Securities under the Indenture
referred to on the reverse side of this Security or from and including the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually on March 1 and September 1 in each year, commencing March 1,
1998 at the rate of ____% per annum, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the Close of Business on the Regular Record Date
for such interest, which shall be the February 15 or August 15 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or

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more Predecessor Securities) is registered at the Close of Business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities may be
listed and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Notice of a Special Record Date shall be given
to Holders of Securities not less than ten days prior to such Special Record
Date. Payment of the principal of and premium, if any, and interest on this
Security will be made (i) in same day funds on or prior to the payment dates
with respect to such amounts in the case of Securities held of record by DTC or
its nominee and (ii) at the offices of the Trustee in New York, New York (or
such other office maintained for that purpose pursuant to Section 1002) in the
case of Securities held of record by Holders other than DTC or its nominee, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
at the option of the Company payment of interest may be made, with respect to
Securities held of record by a Holder other than DTC or its nominee, by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.

Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.

Dated: ______________________ KENT ELECTRONICS CORPORATION

By:_________________________
[Title]

Attest:______________________
[Title]

Section 203. Form of Reverse of Security.

This Security is one of a duly authorized issue of Securities of
the Company designated as its ______% Convertible Subordinated Notes Due 2004
(herein called the "Securities"), limited in aggregate principal amount to
$___________ (including $__________

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<PAGE>

principal amount of the Securities issuable upon exercise of an underwriters'
over-allotment option), issued and to be issued under an Indenture, dated as of
September ___, 1997 (herein called the "Indenture"), between the Company and
Texas Commerce Bank National Association, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee, the holders of Senior
Indebtedness and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered.

Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Security is entitled, at its option, at any time on or before
the Close of Business on September 1, 2004, or in case this Security or a
portion hereof is called for redemption, then in respect of this Security or
such portion hereof until and including, but (unless the Company defaults in
making the payment due upon redemption) not after, the Close of Business on the
Business Day immediately preceding the Redemption Date, to convert this Security
(or any portion of the principal amount hereof which is $1,000 or an integral
multiple thereof), at the principal amount hereof, or of such portion, into
fully paid and non-assessable shares (calculated as to each conversion to the
nearest 1/100th of a share) of Common Stock of the Company at a conversion price
equal to $__________ principal amount for each share of Common Stock (or at the
adjusted conversion price at the Close of Business on the Redemption Date if an
adjustment has been made as provided in the Indenture) by surrender of this
Security, duly endorsed or assigned to the Company or in blank, to the Company
at its office or agency maintained for that purpose pursuant to Section 1002 of
the Indenture, accompanied by written notice to the Company in the form provided
in this Security (or such other notice as is acceptable to the Company) that the
Holder hereof elects to convert this Security, or if less than the entire
principal amount hereof is to be converted, the portion hereof to be converted,
and, in case such surrender shall be made after the Close of Business on any
Regular Record Date next preceding any Interest Payment Date and before the
Close of Business on such Interest Payment Date (unless there exists a default
in the payment of interest on this Security or this Security or the portion
thereof being converted has been called for redemption), also accompanied by
payment in funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of this Security
then being converted. Subject to the aforesaid requirement for payment and, in
the case of a conversion after the Regular Record Date next preceding any
Interest Payment Date and on or before such Interest Payment Date, to the right
of the Holder of this Security (or any Predecessor Security) of record at such
Regular Record Date to receive an installment of interest (with certain
exceptions provided in the Indenture), no payment or adjustment is to be made
upon conversion on account of any interest accrued hereon or on account of any
dividends on the Common Stock issued upon conversion. No fractional shares or
scrip representing fractions of shares will be issued on conversion, but instead
of any fractional share the Company shall pay a cash adjustment as provided in
the Indenture. The conversion price is subject to adjustment as provided in the
Indenture. In addition, the Indenture provides that in case of certain
consolidations, mergers or statutory exchanges of securities with another
corporation to which the Company is a party or the sale or conveyance of the
assets of the Company substantially as an entirety, the Indenture shall be
amended, without the consent of any Holders of Securities, so that

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this Security, if then outstanding, will be convertible thereafter, during the
period this Security shall be convertible as specified above, only into the kind
and amount of securities, cash and other property receivable upon the
consolidation, merger, statutory exchange or transfer by a holder of the number
of shares of Common Stock into which this Security was convertible immediately
prior to such consolidation, merger, statutory exchange or transfer (assuming
such holder of Common Stock failed to exercise any rights of election and
received per share the kind and amount of consideration received per share by a
plurality of nonelecting shares).

The Securities are subject to redemption upon not less than 15 and not
more than 60 days' notice by mail, at any time on or after September 6, 2000, as
a whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount) plus accrued interest
to the Redemption Date, provided that interest installments whose Maturity is on
or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the Close of
Business on the relevant Record Dates, all as provided in the Indenture.

If redeemed during the 12-month period beginning September 1 in the
year indicated (September 6, in the case of the year 2000), the Redemption Price
shall be:

Redemption
Year Price
---- -----

2000 %
2001 %
2002 %
2003 %

If all accrued interest on the Securities has not been paid, the
Securities may not be redeemed in part and the Company may not purchase or
acquire any Security otherwise than pursuant to a purchase or exchange offer
made on the same terms to all holders of the Securities.

In certain circumstances involving the occurrence of a Repurchase
Event (as defined in the Indenture), the Holder hereof shall have the right to
require the Company to repurchase this Security at 100% of the principal amount
hereof, together with accrued interest to the Repurchase Date, but interest
installments whose Stated Maturity is on or prior to such Repurchase Date will
be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the Close of Business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture.

In the event of redemption, conversion or repurchase of this Security
in part only, a new Security or Securities for the unredeemed, unconverted or
unpurchased portion hereof will be issued in the name of the Holder hereof upon
the cancellation hereof.

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<PAGE>

Any Securities called for redemption, unless surrendered for
conversion by the Close of Business on the Business Day immediately preceding
the date fixed for redemption, are subject to being purchased from the Holder of
such Securities at the redemption price by one or more investment banking firms
or other purchasers who may agree with the Company to purchase such Securities
and convert them into Common Stock.

The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on its behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided, and (c) appoints the Trustee its attorney-in-fact for any and all such
purposes.

If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.

The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.

No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.

As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer in any
place where the principal of and premium, if any, and interest on this Security
are payable, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or its attorney duly authorized in writing, in
each case, with an appropriate signature guarantee, and thereupon one or more
new Securities, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.

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<PAGE>

The Securities are issuable only in fully registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities are exchangeable for a like aggregate principal amount of Securities
of a different authorized denomination, as requested by the Holder surrendering
the same.

No service charge shall be made for any such registration of transfer
or exchange except as provided in the Indenture. The Company may require
payment of a sum sufficient to cover any tax or other governmental charge and
any other expenses (including the fees and reasonable expenses of the Trustee)
payable in connection therewith.

Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, except as provided in this Security, whether or not
this Security be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.

All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.

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<PAGE>

[FORM OF CONVERSION NOTICE]

TO KENT ELECTRONICS CORPORATION:

The undersigned registered owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion hereof (which is
$1,000 or a multiple thereof) designated below, into shares of Common Stock in
accordance with the terms of the Indenture referred to in this Security, and
directs that the shares issuable and deliverable upon the conversion, together
with any check in payment for a fractional share and any Security representing
any unconverted principal amount hereof, be issued and delivered to the
registered owner hereof unless a different name has been provided below. Except
as otherwise provided in the Indenture, if this Notice is being delivered on a
date after the Close of Business on a Regular Record Date and before the Close
of Business on the related Interest Payment Date, this Notice is accompanied by
payment in funds acceptable to the Company, of an amount equal to the interest
payable on such Interest Payment Date on the principal of this Security to be
converted. If shares or any portion of this Security not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.

Dated:________________________ _______________________________________

_______________________________________
Signature(s)

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Signature(s) must be guaranteed by an Eligible Guarantor Institution
with membership in an approved signature guarantee program pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934.

__________________________________
Signature Guarantee

Fill in for registration of shares of Common Stock if they are to be
delivered, or Securities if they are to be issued, other than to and in the name
of the registered owner:

__________________________________
(Name)

__________________________________
(Street Address)

_________________________________
(City, State and Zip code)

(Please print name and address)

_____ Securities

(Check appropriate line(s)).

Principal amount to be converted (if less than all):
$_________,000

_____________________________________
Social Security or other Taxpayer
Identification Number of owner

Section 204. Form of Trustee's Certificate of Authentication.

The Trustee's certificate of authentication shall be in
substantially the following form:

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This is one of the Securities referred to in the within-mentioned Indenture.

Texas Commerce Bank National Association,
as Trustee

By________________________________________
Authorized Signatory

ARTICLE 3.

THE SECURITIES

Section 301. Title and Terms.

The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $___________
(including $__________ aggregate principal amount of Securities that may be sold
by the Company pursuant to the over-allotment option granted pursuant to the
Underwriting Agreement, dated September ___, 1997, among the Company, Smith
Barney Inc., BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated),
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906, 1108, 1302 or 1405.

The Securities shall be known and designated as the "____%
Convertible Subordinated Notes Due 2004" of the Company. Their Stated Maturity
shall be September 1, 2004 and they shall bear interest at the rate of ____ %
per annum, from and including the date of the initial issuance of Securities
under this Indenture or from and including the most recent Interest Payment Date
to which interest has been paid or duly provided for, as the case may be,
payable semi-annually on March 1 and September 1 commencing March 1, 1998, until
the principal thereof is paid or made available for payment. Each payment of
interest shall include interest accrued to but excluding the Interest Payment
Date on which payment is to be made. The Company shall pay interest on overdue
principal at the rate borne by the Securities, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.

The principal of and premium, if any, and interest on the
Securities shall be payable (i) in same day funds on or prior to the payment
dates with respect to such amounts in the case of Securities held of record by
DTC or its nominee and (ii) at the offices of the Trustee in New York, New York
(or such other office maintained for that purpose pursuant to Section 1002) in
the case of Securities held of record by Holders other than DTC or its nominee;
provided, however, that at the option of the Company payment of interest may be
made, with respect to Securities held of

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record by a Holder other than DTC or its nominee, by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register.

The Securities shall be redeemable as provided in Article Eleven.

The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article Twelve.

The Securities shall be subject to repurchase at the option of
the Holder as provided in Article Fourteen.

Section 302. Denominations.

The Securities shall be issuable only in fully registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.

Section 303. Execution, Authentication, Delivery and Dating.

The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal or a facsimile thereof reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.

Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.

At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall either at one time or from time to time pursuant
to such instructions as may be described therein authenticate and deliver such
Securities as in this Indenture provided and not otherwise.

Each Security shall be dated the date of its authentication.

No Security shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Security
a certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of the Indenture.

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<PAGE>

Section 304. Temporary Securities.

Pending the preparation of definitive Securities, the Company may
execute, and upon receipt of a Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities. Every such temporary Security
shall be executed by the Company and shall be authenticated and delivered by the
Trustee upon the same conditions and in substantially the same manner, and with
the same effect, as the definitive Security or Securities in lieu of which it is
issued.

If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
1002, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor one or more definitive Securities
of a like principal amount of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.

For purposes of this Section 304 each Global Security shall be
considered a definitive Security.

Section 305. Registration, Registration of Transfer and Exchange.

(a) The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the "Security Register") in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided. At all reasonable times the
Security Register shall be open for inspection by the Company.

Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.

At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at the office
or agency maintained for that purpose. Whenever any Securities are

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<PAGE>

so surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.

(b) All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange. Every
Security presented or surrendered for registration of transfer or for exchange
shall (if so required by the Company or the Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed, by the Holder thereof or its
attorney duly authorized in writing, and, in the case of a transfer, with an
appropriate guarantee of signature.

No service charge shall be made for any registration of transfer or
exchange of Securities except as provided in Section 306. The Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Securities, other than exchanges pursuant to Section 304, 906, 1108,
1302 or 1405 not involving any transfer.

The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the Close of Business
on the day of such mailing, (ii) to register the transfer of or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part, or (iii) to register the
transfer or exchange of any Securities surrendered for conversion or repurchase
upon the occurrence of a Repurchase Event.

The provisions of clauses (1), (2), (3), (4) and (5) below shall apply
only to Global Securities;

(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security or
a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.

(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (A) such Depositary (i) has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Security or (ii)
has ceased to be a clearing agency registered under the Exchange Act at a time
when the Depositary is required to be so registered to act as depositary, in
each case unless the Company has approved a successor Depositary within 90 days,
(B) there shall have occurred and be continuing an Event of Default with

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respect to such Global Security or (C) the Company in its sole discretion
determines that such Global Security will be so exchangeable or transferable.

(3) Subject to Clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued in
exchange for a Global Security or any portion thereof shall be registered in
such names as the Depositary for such Global Security shall direct.

(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article Three or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global Security,
unless such Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.

(5) The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security will be
shown only on, and the transfer of such interest shall be effected only through
records maintained by the Depositary or its nominee or its Agent Members and
such owners of beneficial interests in a Global Security will not be considered
the owners or holders thereof. Neither the Company nor the Trustee will have
any responsibility or obligation to the Depositary or any of its Agent Members
with respect to (i) the accuracy of any records maintained by the Depositary
(ii) the payment by the Depositary or any Agent Members of any amount due to any
owner of beneficial interests in a Global Security in respect of any Securities,
(iii) the delivery of any notice by the Depositary or any Agent Member, or (iv)
any other action taken by the Depositary or any Agent Members.

Section 306. Mutilated, Destroyed, Lost and Stolen Securities.

If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.

If there shall be delivered to the Company and the Trustee (a)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (b) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.

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In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.

Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and reasonable expenses of the Trustee) connected
therewith.

Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.

The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.

Section 307. Payment of Interest; Interest Rights Preserved.

Interest on any Security which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is
registered at the Close of Business on the Regular Record Date for such
interest. At the option of the Company, interest on any Security held of record
by any Holder other than DTC or its nominee may be paid by mailing checks to the
addresses of the Holders thereof as such addresses appear in the Securities
Register.

Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (a) or (b) below:

(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the Close of Business on a Special
Record Date for the payment of such Defaulted Interest which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, which payment date shall be at least 30 calendar days
after such notice delivered by the Company to the Trustee (or such shorter
period as is satisfactory to the Trustee), and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for

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such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this Clause provided. Thereupon, the Trustee shall fix
a Special Record Date for the payment of such Defaulted Interest which shall be
not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at its address as it appears in the Security Register, not less
than 10 days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at the
Close of Business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (b).

(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.

In the case of any Security which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the Close of Business on such Regular Record Date; provided,
however, that Securities so surrendered for conversion shall (except in the case
of Securities or portions thereof (i) which have been called for redemption or
(ii) as to which there exists a default in the payment of interest thereon) be
accompanied by payment in funds acceptable to the Company of an amount equal to
the interest payable on such Interest Payment Date on the principal amount being
surrendered for conversion. Except as otherwise expressly provided in the
immediately preceding sentence, in the case of any Security which is converted,
interest whose Stated Maturity is after the date of conversion of such Security
shall not be payable.

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Section 308. Persons Deemed Owners.

Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and premium,
if any, and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

Section 309. Cancellation.

All Securities surrendered for payment, redemption, registration
of transfer, exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.

Section 310. Computation of Interest.

Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.

Section 311. CUSIP Number.

The Company in issuing the Securities may use a "CUSIP" number
and, if it does so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided that such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Securities and that reliance
may be placed only on the other identification numbers printed on the
Securities. The Company shall promptly notify the Trustee of any change in the
CUSIP number.

ARTICLE 4.

SATISFACTION AND DISCHARGE

Section 401. Satisfaction and Discharge of Indenture.

This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of conversion or registration of
transfer or exchange of Securities herein

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expressly provided for), and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when

(a) either

(i) all Securities theretofore authenticated and delivered
(other than (A) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(B) Securities 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, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or

(ii) all such Securities not theretofore delivered to the
Trustee for cancellation

(A) have become due and payable, or

(B) will become due and payable at their Stated
Maturity within one year, or

(C) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in
the name, and at the expense, of the Company, or

(D) are delivered to the Trustee for conversion in
accordance with Article Thirteen;

and the Company, in the case of (A), (B), (C) or (D) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust for
the purpose an amount sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for cancellation for
principal and premium, if any, and interest to the date of such deposit (in the
case of Securities which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be;

(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and

(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with. Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 607, the
obligations of the Trustee to any Authenticating Agent under Section 614 and, if

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money shall have been deposited with the Trustee pursuant to subclause (ii) of
Clause (a) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.

Section 402. Application of Trust Money.

Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to Section 401 shall be held in
trust and applied by it, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and premium, if
any, and interest for whose payment such money has been deposited with the
Trustee. All moneys deposited with the Trustee pursuant to Section 401 (and held
by it or any Paying Agent) for the payment of Securities subsequently converted
shall be returned to the Company upon Company Request.

Section 403. Reinstatement.

If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article Four by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Four until such time as the Trustee or Paying Agent is
permitted to apply all money held in trust with respect to the Securities;
provided, however, that if the Company makes any payment of principal of or any
premium or interest on any Security following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of the
Securities to receive such payment from the money so held in trust.

ARTICLE 5.

REMEDIES

Section 501. Events of Default.

"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

(a) default in the payment of any interest upon any Security when
it becomes due and payable, whether or not such payment is prohibited by the
provisions of Article Twelve, and continuance of such default for a period of 30
days; or

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(b) default in the payment of the principal of or premium, if any,
on any Security at its Maturity, whether or not such payment is prohibited by
the provisions of Article Twelve; or

(c) default in the payment of the Repurchase Price in respect of
any Security on the Repurchase Date therefor, whether or not such payment is
prohibited by the provisions of Article Twelve or failure to provide timely
notice of a Repurchase Event as required by Section 1402; or

(d) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a period
of 45 days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or

(e) default under one or more bonds, debentures, notes or other
evidences of indebtedness for money borrowed by the Company or any Subsidiary or
under one or more mortgages, indentures or instruments under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company or any Subsidiary, whether such indebtedness is
outstanding on the date of this Indenture or thereafter created, which default
individually or in the aggregate shall constitute a failure to pay the principal
of indebtedness in excess of $15,000,000 when due and payable after the
expiration of any applicable grace period with respect thereto or shall have
resulted in indebtedness in excess of $15,000,000 becoming or being declared due
and payable prior to the date on which it would otherwise have become due and
payable, without such indebtedness having been discharged, or such acceleration
having been rescinded or annulled, within a period of 30 days after there shall
have been given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities a written notice specifying such default
and requiring the Company to cause such indebtedness to be discharged or cause
such acceleration to be rescinded or annulled and stating that such notice is a
"Notice of Default" hereunder; or

(f) a final judgment or final judgments for the payment of money
against the Company or any Subsidiary the entry by a court or courts of
competent jurisdiction of which remain undischarged for a period (during which
execution shall not be effectively stayed, the posting of any required bond not
being deemed an execution for purposes hereof) of 30 days, provided that the
aggregate amount of all such judgments exceeds $15,000,000 (net of amounts to
which the Company or such Subsidiary is entitled pursuant to insurance policies
which can reasonably be expected to be paid in the ordinary course); or

(g) the entry by a court having jurisdiction in the premises of
(i) a decree or order for relief in respect of the Company or any Subsidiary in
an involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or (ii) a

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decree or order adjudging the Company or any Subsidiary a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Subsidiary
under any applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any Subsidiary or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 90 consecutive days; or

(h) the commencement by the Company or any Subsidiary of a
voluntary case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of the Company or any
Subsidiary in an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it, or
the filing by it of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Subsidiary or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company or any
Subsidiary in furtherance of any such action.

Upon receipt by the Trustee of any Notice of Default pursuant to
this Section 501, a record date shall automatically and without any other action
by any Person be set for the purpose of determining the Holders of Outstanding
Securities entitled to join in such Notice of Default, which record date shall
be the Close of Business on the day the Trustee receives such Notice of Default.
The Holders of Outstanding Securities on such record date (or their duly
appointed agents), and only such Persons, shall be entitled to join in such
Notice of Default, whether or not such Holders remain Holders after such record
date; provided, that unless such Notice of Default shall have become effective
by virtue of the Holders of the requisite principal amount of Outstanding
Securities on such record date (or their duly appointed agents) having joined
therein on or prior to the 90th day after such record date, such Notice of
Default shall automatically and without any action by any Person be canceled and
of no further force or effect.

Section 502. Acceleration of Maturity; Rescission and Annulment.

If an Event of Default (other than an Event of Default specified
in Section 501(g) or (h)) occurs and is continuing, then and in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal plus
any interest accrued on the Securities to the date of declaration shall become
immediately due and payable. In the case of an Event of Default specified in
Section 501(g) or (h), all unpaid principal of and accrued interest on

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the Securities then outstanding shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the holders of
Securities.

At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if:

(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all overdue interest on all Securities, (ii) the principal
of and premium, if any, on any Securities which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate borne by
the Securities, (iii) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities, and (iv) all
sums paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel; and

(b) all Events of Default, other than the nonpayment of the principal
of Securities which has become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513.

No such rescission and waiver shall affect any subsequent default or
impair any right consequent thereon.

Upon receipt by the Trustee of any declaration of acceleration, or any
rescission and annulment of any such declaration, pursuant to this Section 502,
a record date shall automatically and without any other action by any Person be
set for the purpose of determining the Holders Of Outstanding Securities
entitled to join in such declaration, or rescission and annulment, as the case
may be, which record date shall be the Close of Business on the day the Trustee
receives such declaration, or rescission and annulment, as the case may be. The
Holders of Outstanding Securities on such record date (or their duly appointed
agents), and only such Persons, shall be entitled to join in such declaration,
or rescission and annulment, as the case may be, whether or not such Holders
remain Holders after such record date; provided, that unless such declaration,
or rescission and annulment, as the case may be, shall have become effective by
virtue of Holders of the requisite principal amount of Outstanding Securities on
such record date (or their duly appointed agents) having joined therein on or
prior to the 90th day after such record date, such declaration, or rescission
and annulment, as the case may be, shall automatically and without any action by
any Person be canceled and of no further force or effect.

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Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.

The Company covenants that if

(a) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or

(b) default is made in the payment of the principal of or premium,
if any, on any Security at the Maturity thereof,

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and premium, if any, and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal and premium, if any, and on any overdue interest, at the rate
borne by the Securities, and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.

If an Event of Default specified in Section 503(a) or (b) occurs
and is continuing with respect to the Securities, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the collection of such sums due and unpaid.

If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights of
the Holders by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.

Section 504. Trustee May File Proofs of Claim.

In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, including filing proofs of claim in federal bankruptcy proceedings,
to take any and all actions authorized under the Trust Indenture Act in order to
have the claims of the Holders and the Trustee allowed in any such proceeding.
In particular, the Trustee shall be authorized to collect and receive any moneys
or other property payable or deliverable on any such claims and to distribute
the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 607.

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No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and may be a member of the
Creditors' Committee.

Section 505. Trustee May Enforce Claims Without Possession of Securities.

All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.

Section 506. Application of Money Collected.

Subject to Article Twelve, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal or premium, if any, or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:

FIRST: To payment of all amounts due the Trustee under Section 607;

SECOND: To the payment of the amounts then due and unpaid for principal
of and premium, if any, and interest on the Securities in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such Securities for principal and premium, if any, and interest, respectively;
and

THIRD: The balance, if any, to the Company or any other Person or Persons
determined to be entitled thereto.

Section 507. Limitation on Suits.

No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default; (b) the Holders of not less than 25% in principal
amount of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in

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respect of such Event of Default in its own name as Trustee hereunder; (c) such
Holder or Holders have offered to the Trustee indemnity satisfactory to the
Trustee against the costs, expenses and liabilities to be incurred in compliance
with such request; (d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given to the
Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities; it being understood and intended that no
one or more Holders shall have any right in any manner whatever by virtue of, or
by availing of, any provision of this Indenture to affect, disturb or prejudice
the rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and ratable benefit of
all the Holders.

Section 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest and to Convert.

Notwithstanding any other provision in this Indenture, the Holder
of any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and (subject to Section
307) interest on such Security on the respective Stated Maturities expressed in
such Security (or, in the case of redemption, on the Redemption Date or, in the
case of a repurchase pursuant to Article Fourteen, on the Repurchase Date) and
to convert such Security in accordance with Article Thirteen and to institute
suit for the enforcement of any such payment and right to convert, and such
rights shall not be impaired without the consent of such Holder.

Section 509. Restoration of Rights and Remedies.

If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.

Section 510. Rights and Remedies Cumulative.

Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

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Section 511. Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.

Section 512. Control by Holders.

The Holders of a majority in principal amount of the Outstanding
Securities shall 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; provided, that

(a) such direction shall not be in conflict with any rule of law
or with this Indenture; and

(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction; and

(c) subject to the provisions of Section 601, the Trustee shall
have the right to decline to follow any such direction if the Trustee in good
faith shall determine that the action so directed would involve the Trustee in
personal liability or would be unduly prejudicial to Holders not joining in such
direction.

Upon receipt by the Trustee of any such direction, a record date
shall automatically and without any other action by any Person be set for the
purpose of determining the Holders of Outstanding Securities entitled to join in
such direction, which record date shall be the Close of Business on the day the
Trustee receives such direction. The Holders of Outstanding Securities on such
record date (or their duly appointed agents), and only such Persons, shall be
entitled to join in such direction, whether or not such Holders remain Holders
after such record date; provided, that unless such direction shall have become
effective by virtue of Holders of the requisite principal amount of Outstanding
Securities on such record date (or their duly appointed agents) having joined
therein on or prior to the 90th day after such record date, such direction shall
automatically and without any action by any Person be canceled and of no further
force or effect.

Section 513. Waiver of Past Defaults.

The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default

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(a) in the payment of the principal of or premium, if any, or
interest on any Security, or, without the consent of the Holder of the Security
affected, in the repurchase of any Security or part thereof in accordance with
Article Fourteen, or

(b) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.

Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.

Section 514. Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court in its discretion may require any party
litigant in such suit to file an undertaking to pay the costs of such suit, and
may assess reasonable costs against any such party litigant, including
reasonable attorneys' fees, in the manner and to the extent provided in the
Trust Indenture Act; provided, that this Section shall not be deemed to
authorize any court to require such an undertaking or to make such an assessment
in any suit instituted by the Company or in any suit for the enforcement of the
right to convert any Security in accordance with Article Thirteen.

Section 515. Waiver of Stay or Extension Laws.

The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

ARTICLE 6.

THE TRUSTEE

Section 601. Certain Duties and Responsibilities.

The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision
of this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have

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reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section.

Section 602. Notice of Defaults.

The Trustee shall give the Holders notice of any default hereunder
known to the Trustee in the manner and to the extent provided by the Trust
Indenture Act; provided, however, that in the case of any default of the
character specified in Section 501(d), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default. Notwithstanding the
foregoing, the Trustee shall be entitled to withhold notice of any default
hereunder to the extent permitted by Section 315(b) of the Trust Indenture Act.

Section 603. Certain Rights of Trustee.

Subject to the provisions of Section 601:

(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;

(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;

(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;

(d) the Trustee may consult with counsel satisfactory to it and
the written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;

(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity satisfactory to the Trustee against
the costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;

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(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, personally or by agent
or attorney;

(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and

(h) the Trustee shall not be required to give any bond or surety
in respect of the performance of its powers and duties hereunder.

Section 604. Not Responsible for Recitals or Issuance of Securities.

The recitals contained herein and in the Securities, except the
Trustee's certificate of authentication, shall be taken as the statements of the
Company, and the Trustee and any Authenticating Agent assume no responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. The Trustee and any
Authenticating Agent shall not be accountable for the use or application by the
Company of Securities or the proceeds thereof.

Section 605. May Hold Securities.

The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.

Section 606. Money Held in Trust.

Money held by the Trustee or any Paying Agent in trust hereunder
need not be segregated from other funds except to the extent required by law.
The Trustee or any Paying Agent shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.

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Section 607. Compensation and Reimbursement.

The Company agrees:

(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder as may be mutually agreed
upon in writing by the Company and the Trustee (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust);

(b) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the reasonable
expenses and disbursements of its agents and counsel) except to the extent any
such expense, disbursement or advance may be attributable to its negligence or
bad faith; and

(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
this trust, including the reasonable costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.

As security for the performance of the obligations of the Company
under this Section 607, the Trustee shall have a lien prior to the Securities
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the benefit of the Holders of particular Securities.

Section 608. Disqualification; Conflicting Interests.

If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.

Section 609. Corporate Trustee Required; Eligibility.

There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, or any State or Territory or the District of Columbia that (a) is
eligible pursuant to the Trust Indenture Act to act as such, (b) has (or, in the
case of a corporation included in a bank holding company system, whose related
bank holding company has) a combined capital and surplus of at least $50,000,000
and (c) has an office in the Borough of Manhattan, The City of New York as
required by Section 1002. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of a Federal or state
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set

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forth in its most recent report of condition so published. No obligor upon the
Securities or Affiliate of such obligor shall serve as Trustee upon the
Securities. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.

Section 610. Resignation and Removal; Appointment of Successor.

(a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.

(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
required by Section 611 shall not have been delivered to the resigning Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.

(c) The Trustee may be removed at any time by the Company or by an
Act of the Holders of a majority in principal amount of the Outstanding
Securities delivered to the Trustee and to the Company.

(d) If at any time:

(i) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for the last six months, or

(ii) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the
Company or by any such Holder, or

(iii) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,

then, in any such case, subject to Section 514, any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.

(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee and
such successor Trustee shall comply with the

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applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee shall be appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities delivered to the Company and the
retiring Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable requirements of
Section 611 become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner required by
Section 611, any Holder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.

(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.

Section 611. Acceptance of Appointment by Successor.

Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.

No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.

Section 612. Merger, Conversion, Consolidation or Succession to Business.

Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication

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and deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.

Section 613. Preferential Collection of Claims Against Company.

The Trustee shall comply with Section 311 of the Trust Indenture
Act, provided that the Trustee shall have the benefit of the provisions of
Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been
removed shall be subject to Section 311 of the Trust Indenture Act to the extent
indicated therein.

Section 614. Appointment of Authenticating Agent.

The Trustee may appoint an Authenticating Agent or Agents which
shall be authorized to act on behalf of the Trustee to authenticate Securities
issued upon original issue and upon exchange, registration of transfer, partial
conversion or partial redemption, and Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a Person organized and doing
business under the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.

Any Person into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any Person succeeding to the corporate agency or corporate trust
business of an Authenticating Agent, shall continue to be an Authenticating
Agent, provided such Person shall be otherwise eligible under this Section,
without the execution or filing of any paper or any further act on the part of
the Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any

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time such Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail notice of such
appointment by first-class mail, postage prepaid, to all Holders as their names
and addresses appear in the Security Register. Any successor Authenticating
Agent upon acceptance of its appointment under this Section shall become vested
with all the rights, powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible to act as such under the
provisions of this Section.

Any Authenticating Agent by the acceptance of its appointment shall be
deemed to have represented to the Trustee that it is eligible for appointment as
Authenticating Agent under this Section and to have agreed with the Trustee
that: it will perform and carry out the duties of an Authenticating Agent as
herein set forth, including among other things the duties to authenticate
Securities when presented to it in connection with the original issuance and
with exchanges, registrations of transfer or redemptions or conversions thereof
or pursuant to Section 306; it will keep and maintain, and furnish to the
Trustee from time to time as requested by the Trustee, appropriate records of
all transactions carried out by it as Authenticating Agent and will furnish the
Trustee such other information and reports as the Trustee may reasonably
require; and it will notify the Trustee promptly if it shall cease to be
eligible to act as Authenticating Agent in accordance with the provisions of
this Section. Any Authenticating Agent by the acceptance of its appointment
shall be deemed to have agreed with the Trustee to indemnify the Trustee against
any loss, liability or expense incurred by the Trustee and to defend any claim
asserted against the Trustee by reason of any acts or failures to act of such
Authenticating Agent, but such Authenticating Agent shall have no liability for
any action taken by it in accordance with the specific written direction of the
Trustee.

The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.

If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in lieu of the Trustee's certificate of authentication,
an alternative certificate of authentication in the following form:

This is one of the Securities described in the within-mentioned Indenture.

_______________________________________
As Trustee

By:____________________________________
As Authenticating Agent

By:____________________________________
Authorized Officer

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ARTICLE 7.

HOLDERS' LIST AND REPORTS BY TRUSTEE AND COMPANY

Section 701. Company to Furnish Trustee Names and Addresses of Holders.

The Company will furnish or cause to be furnished to the Trustee:

(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require containing all
the information in the possession or control of the Company, or any of its
Paying Agents, other than the Trustee, as to the names and addresses of the
Holders as of such Regular Record Date, and

(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished. Notwithstanding the foregoing, so long as the Trustee is
the Security Registrar, no such list shall be required to be furnished.

Section 702. Preservation of Information; Communication to Holders.

(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 701 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.

(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.

(c) The Company, the Trustee and any other Person shall have the
protection of Section 312(c) of the Trust Indenture Act.

Section 703. Reports by Trustee.

(a) The Trustee shall transmit to Holders such reports dated as of
August 15 concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto.

(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the

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Commission and with the Company. The Company will notify the Trustee when the
Securities are listed on any stock exchange.

Section 704. Reports by Company.

The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided, that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act, as amended, shall be filed
with the Trustee within 15 days after the same is so required to be filed with
the Commission.

ARTICLE 8.

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER or LEASE

Section 801. Company May Consolidate, Etc., Only on Certain Terms.

The Company shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company, unless:

(a) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer, or which leases, the properties and assets of the
Company substantially as an entirety shall be a corporation, partnership or
trust, shall be organized and validly existing under the laws of the United
States of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, the due and punctual payment
of the principal of and premium, if any, and interest on all the Securities and
the performance and observance of each covenant and obligation on the part of
the Company to be performed or observed under this Indenture and shall have
provided for conversion rights in accordance with Section 1311;

(b) immediately after giving effect to such transaction, no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing;

(c) such consolidation, merger, conveyance, transfer or lease does
not adversely affect the validity or enforceability of the Securities; and

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(d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.

Section 802. Successor Substituted.

Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.

ARTICLE 9.

SUPPLEMENTAL INDENTURES

Section 901. Supplemental Indentures Without Consent of Holders.

Without the consent of any Holders, the Company, when authorized
by a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:

(a) to evidence the succession of another Person to the Company,
or successive successions, and the assumption by any such successor of the
covenants of the Company herein and in the Securities; or

(b) to add to the covenants of the Company for the benefit of the
Holders or an additional Event of Default, or to surrender any right or power
herein conferred upon the Company; or

(d) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Section 1311; or

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(e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities; or

(f) to cause the Indenture and the Securities to comply with
applicable law, including the Trust Indenture Act; or

(g) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to amend any other provisions with respect to matters or questions arising
under this Indenture; provided, that such action pursuant to this clause (g)
shall not adversely affect the interests of the Holders in any material respect.

Section 902. Supplemental Indentures with Consent of Holders.

With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each outstanding Security affected thereby,

(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount thereof
or the rate of interest thereon or any premium payable upon the redemption
thereof, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of redemption,
on or after the Redemption Date), or make the principal thereof or any premium
or interest thereon payable in any coin or currency other than that provided for
in the form of Security hereinabove set forth or modify the provisions of this
Indenture with respect to the subordination of the Securities in a manner
adverse to the Holders, or impair the right to convert the Securities into
Common Stock or to require the Company to repurchase the Securities upon the
occurrence of a Repurchase Event, subject to the terms set forth herein, or

(b) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture, or

(c) modify any of the provisions of this Section, Section 513 or
Section 1006, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby; provided,
however, that this Clause shall not be deemed to require the consent of any
Holder with respect to changes in the references to "the Trustee" and
concomitant changes in

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this Section and Section 1006, or the deletion of this proviso, in accordance
with the requirements of Section 901(e).

It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.

Section 903. Execution of Supplemental Indentures.

In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not
(except to the extent required in the case of a supplemental indenture entered
into under 901(f)) be obligated to, enter into any such supplemental indenture
which adversely affects in a material way the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

Section 904. Effect of Supplemental Indentures.

Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.

Section 905. Conformity with Trust Indenture Act.

Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act, as then in effect.

Section 906. Reference in Securities to Supplemental Indentures.

Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Company, bear a notation in form approved by the Company and the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.

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Section 907. Notice of Supplemental Indenture.

Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to Section 902, the Trustee shall transmit to
the Holders a notice setting forth the substance of such supplemental indenture.

ARTICLE 10.

COVENANTS

Section 1001. Payment of Principal, Premium and Interest.

The Company will duly and punctually pay the principal of and
premium, if any, and interest on the Securities in accordance with the terms of
the Securities and this Indenture.

Section 1002. Maintenance of Office or Agency.

The Company will maintain in New York, New York an office or
agency (which may be the Corporate Trust Office or other office of the Trustee)
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer, where Securities may be
surrendered for exchange, conversion or repurchase in accordance with the terms
of this Indenture and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in the
location, of any such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.

The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in New
York, New York for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.

If the Company shall at any time act as its own Paying Agent, on
or before each due date of the principal of and premium, if any, or interest on
any of the Securities, the Company will segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
and premium, if any, or interest so becoming due until such sums shall be paid
to such

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Persons or otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.

Whenever the Company shall have one or more Paying Agents, on or prior
to each due date of the principal of and premium, if any, or interest on any
Securities, the Company will deposit with a Paying Agent a sum sufficient to pay
the principal and any premium and interest so becoming due, such sum to be held
as provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.

The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (a) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and hold all sums held by it for the payment
of principal of or any premium or interest on the Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided; and (b) at any time during
the continuance of any default by the Company (or any other obligor upon the
Securities) in the making of any payment in respect of the Securities, upon the
written request of the Trustee, forthwith pay to the Trustee all sums held in
trust by such Paying Agent for payment in respect of the Securities.

The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.

Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of and premium, if
any, or interest on any Security and remaining unclaimed for two years after
such principal and premium, if any, or interest has become due and payable shall
be paid to the Company on Company Request, or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in New York, New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.

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Section 1004. Statement by Officers as to Default.

The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate stating whether or not to the best knowledge of the
signers thereof the Company is in compliance with all conditions and covenants
under this Indenture (without regard to any period of grace or requirement of
notice provided hereunder) and, if the Company shall be in default, specifying
all such defaults and the nature and status thereof of which they may have
knowledge.

Section 1005. Existence.

Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise,
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.

Section 1006. Waiver of Certain Covenants.

The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 1005, if before the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant or condition shall remain in full force and
effect.

ARTICLE 11.

REDEMPTION OF SECURITIES

Section 1101. Right of Redemption.

The Securities may be redeemed at the election of the Company, in
whole or from time to time in part, at any time on or after September 6, 2000 at
the Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued interest, to the Redemption Date; provided, however, that
if all accrued interest on the Securities has not been paid, the Securities may
not be redeemed in part and the Company may not redeem any Security other than
pursuant to a purchase or exchange offer to all holders of the Securities.

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Section 1102. Applicability of Article.

Redemption of Securities at the election of the Company as
permitted by any provision of this Indenture shall be made in accordance with
such provision and this Article.

Section 1103. Election to Redeem; Notice to Trustee.

The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company, the Company shall, at least 30 days prior to the
Redemption Date fixed by the Company (unless a shorter period shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities to be redeemed.

Section 1104. Selection by Trustee of Securities to Be Redeemed.

If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by lot or by such other method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
portions (equal to $1,000 or any integral multiple thereof) of the principal
amount of Securities of a denomination equal to or larger than $1,000.

If any Security selected for partial redemption is converted in
part before termination of the conversion right with respect to the portion of
the Security so selected, the converted portion of such Security shall be deemed
(so far as may be practical) to be the portion selected for redemption.
Securities which have been converted during a selection of Securities to be
redeemed shall be treated by the Trustee as Outstanding for the purpose of such
selection. In any case where more than one Security is registered in the same
name, the Trustee in its sole discretion may treat the aggregate principal
amount so registered as if it were represented by one Security.

The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.

For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.

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Section 1105. Notice of Redemption.

Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at its address appearing in
the Security Register.

All notices of redemption shall state:

(a) the Redemption Date,

(b) the Redemption Price,

(c) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial
redemption of any Securities, the principal amounts) of the
particular Securities to be redeemed,

(d) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and
that interest thereon will cease to accrue on and after said
date,

(e) the conversion price, the date on which the right to convert
the Securities to be redeemed will terminate and the place or
places where such Securities may be surrendered for
conversion, and

(f) the place or places where such Securities are to be
surrendered for payment of the Redemption Price. Notice of
redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the
Company.

Section 1106. Deposit of Redemption Price.

At or prior to 10:00 am on any Redemption Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust as provided in Section 1003)
an amount of money sufficient to pay on such date the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities or portions thereof which are to be redeemed on
that date other than any Securities called for redemption on that date which
have been converted prior to the Redemption Date.

If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to

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receive interest as provided in the last paragraph of Section 307) be paid to
the Company upon Company Request or, if then held by the Company, shall be
discharged from such trust.

Section 1107. Securities Payable on Redemption Date.

Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest to the Redemption Date, on the later of the Redemption Date or
the date such Security is surrendered; provided, however, that installments of
interest whose Maturity is on or prior to the Redemption Date shall be payable
to the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the Close of Business on the relevant Record Dates
according to their terms and the provisions of Section 307.

If any Security called for redemption shall not be so paid upon
surrender thereof for redemption as provided herein, the principal and premium,
if any, shall, until paid, bear interest from the Redemption Date at the rate
borne by the Security. The Company shall be deemed to have made payment as
provided herein if checks are mailed to the appropriate Persons not later than
the Redemption Date.

Section 1108. Securities Redeemed in Part.

Any Security which is to be redeemed only in part shall be
surrendered at an office or agency of the Company maintained for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or its attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in an aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.

Section 1109. Conversion Arrangements on Call for Redemption.

In connection with any redemption of Securities, the Company may
arrange for the purchase and conversion of any Securities surrendered for
redemption by an agreement with one or more investment banking firms or other
purchasers to purchase such Securities by paying to the Holders thereof, or to
the Trustee or Paying Agent in trust for such Holders, at or before 10:00 a.m.
on the Redemption Date, an amount not less than the Redemption Price, together
with interest accrued to the Redemption Date, payable by the Company on
redemption of such Securities. Notwithstanding anything to the contrary
contained in this Article Eleven, the obligation of the Company to pay the
Redemption Price of such Securities, together with interest accrued to the

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Redemption Date, shall be satisfied and discharged to the extent such amount is
so paid by such purchasers. Pursuant to such an agreement, any Securities
tendered by the Holder thereof for redemption or not duly surrendered for
conversion by such Holder shall be deemed acquired by such purchasers from such
Holders and surrendered by such purchasers for conversion, all as of immediately
prior to the Close of Business on the Redemption Date, subject to payment of the
above amount as aforesaid.

ARTICLE 12.

SUBORDINATION OF SECURITIES

Section 1201. Securities Subordinated to Senior Indebtedness.

The Company covenants and agrees, and each Holder of a Security,
by its acceptance thereof, likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article, the indebtedness
represented by the Securities and the payment of the principal of and premium,
if any, and interest on each and all of the Securities, and the amount, if any,
of the Repurchase Price payable in respect of Securities pursuant to Article
Fourteen, are hereby expressly made subordinate and subject in right of payment
to the prior payment in full of all Senior Indebtedness.

Section 1202. Payment Over of Proceeds Upon Dissolution, Etc.

In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding, relative to the Company or to its creditors, as such, or to
its assets, or (b) any proceeding for the liquidation, dissolution or other
winding up of the Company, whether total or partial, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (c) any
assignment for the benefit of creditors or any other marshaling of assets and
liabilities of the Company, then and in any such event the holders of Senior
Indebtedness shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Indebtedness before the Holders of
the Securities are entitled to receive any payment or distribution of any kind
or character, whether in cash, property or securities, on account of principal
of or premium, if any, or interest on the Securities (including the Repurchase
Price payable in respect of Securities pursuant to Article Fourteen), and to
that end the holders of Senior Indebtedness shall be entitled to receive, for
application, to the payment thereof, any payment or distribution of any kind or
character, whether in cash, property or securities, including any such payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of the
Securities, which may be payable or deliverable in respect of the Securities in
any such case, proceeding, dissolution, liquidation or other winding up or
event.

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In the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, prohibited by the foregoing, including
any such payment or distribution which may be payable or deliverable by reason
of the payment of any other indebtedness of the Company being subordinated to
the payment of the Securities, before all Senior Indebtedness is paid in full,
then and in such event such payment or distribution shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.

For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include securities of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment that does not adversely
alter the rights of holders of Senior Indebtedness which are subordinated in
right of payment to all Senior Indebtedness which may at the time be outstanding
to substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. The consolidation of the
Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the conveyance or transfer
of its properties and assets substantially as an entirety to another Person upon
the terms and conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshaling of assets and liabilities of the Company for the
purposes of this Section if the Person formed by such consolidation or into
which the Company is merged or which acquires by conveyance or transfer such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Article Eight.

Section 1203. Acceleration of Securities.

Notwithstanding anything in this Indenture to the contrary,
neither the Trustee nor any Holder shall exercise any right either may have to
accelerate the maturity of the Securities at any time when payment of any amount
owing on the Securities is prohibited, in whole or in part, pursuant to Section
1202 or 1204; provided, however, that such right may nevertheless be so
exercised upon the earliest of (i) the acceleration of the maturity of any
Senior Indebtedness, (ii) the exercise by any holder of Senior Indebtedness of
any remedies available to it upon a default with respect to Senior Indebtedness,
or (iii) the occurrence of an Event of Default described in Section 501(g) or
(h).

Section 1204. No Payment When Senior Indebtedness in Default.

(a) In the event (i) and during the continuation of any default in
the payment of principal of, premium, if any, or interest on any Senior
Indebtedness, whether at the date of a

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required payment, maturity, upon mandatory purchase, redemption or otherwise, or
(ii) that any other default with respect to any Senior Indebtedness shall have
occurred and be continuing, then no payment (including any payment which may be
payable by reason of the payment of any other indebtedness of the Company being
subordinated to the payment of the Securities) shall be made by the Company on
account of the principal of or premium, if any, or interest on the Securities or
on account of the purchase, redemption or other acquisition of Securities (x) in
the case of any default described in clause (i) above, unless and until the
Senior Indebtedness to which such default relates is discharged or such default
shall have been cured or waived or shall have ceased to exist or the holders of
such Senior Indebtedness or their agents have waived the benefits of this
Section 1204(a), and (y) in the case of any default specified in clause (ii)
above, from the date the Company or the Trustee receives written notice of such
default (a "Senior Default Notice") from the (1) the lender(s) under the Credit
Facility if such default relates to the Credit Facility, or (2) the holders of
at least 25% in principal amount of the kind or category of Senior Indebtedness
to which such default relates or any representative of such holders if such
default does not relate to the Credit Facility, until the earlier of (A) 180
days after such date or (B) the date, if any, on which the Senior Indebtedness
to which such default relates is discharged or such default shall have been
cured or waived or shall have ceased to exist or the holders of such Senior
Indebtedness or their agents shall have waived the benefits of this Section
1204(a); provided, however, that not more than one Senior Default Notice shall
be given during any period of 360 consecutive days, regardless of the number of
defaults specified in clause (ii) above with respect to Senior Indebtedness
during such 360-day period.

(b) In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security prohibited
by the foregoing provisions of this Section, then and in such event such payment
shall be paid over and delivered forthwith to the Company; provided, however,
that the Trustee shall only be required to return to the Company such payment or
any portion of such payment that is held by the Trustee.

The provisions of this Section shall not apply to any payment with
respect to which Section 1202 would be applicable.

Section 1205. Subrogation to Rights of Holders of Senior Indebtedness.

Subject to the payment in full of all amounts due on or in respect
of Senior Indebtedness, the Holders of the Securities shall be subrogated to the
extent of the payments or distributions made to the holders of such Senior
Indebtedness pursuant to the provisions of this Article (equally and ratably
with the holders of all indebtedness of the Company which by its express terms
is subordinated to other indebtedness of the Company to substantially the same
extent as the Securities are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of such Senior Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of and premium, if any, and interest on
the Securities shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness of any cash,
property or securities to which the Holders of the Securities or the Trustee
would be entitled except for the provisions of this Article, and no payments

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over pursuant to the provisions of this Article to the holders of Senior
Indebtedness by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness and the Holders
of the Securities, be deemed to be a payment or distribution by the Company to
or on account of the Senior Indebtedness.

Section 1206. Provisions Solely to Define Relative Rights.

The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders of
the Securities the principal of and premium, if any, and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than the holders of
Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article of the
holders of Senior Indebtedness to receive cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder.

Section 1207. Trustee to Effectuate Subordination.

Each Holder of a Security by its acceptance thereof authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee its attorney-in-fact for any and all such purposes.

Section 1208. No Waiver of Subordination Provisions.

No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any noncompliance by the Company with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.

Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which

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Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.

Section 1209. Notice to Trustee.

The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist.

Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.

Section 1210. Reliance on Judicial Order or Certificate of Liquidating Agent.

Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to the provisions of Section 601, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.

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Section 1211. Trustee Not Fiduciary for Holders of Senior Indebtedness.

The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other Person cash, property or securities to which
holders of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.

Section 1212. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.

The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.

Nothing in this Article shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 607.

Section 1213. Article Applicable to Paying Agents.

In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1212 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.

Section 1214. Rights with respect to Conversion and Certain Payments.

Nothing contained in this Article or elsewhere in this Indenture,
or in any of the Securities, shall prevent (x) the application by the Trustee or
any Paying Agent (including by the Company if the Company shall then be acting
as Paying Agent) of any moneys deposited with it hereunder to the payment of or
on account of the principal of and premium, if any, or interest on Securities,
including, without limitation, redemptions or repurchases pursuant to Articles
Eleven or Fourteen, if, at the time of such deposit (provided that the time of
such deposit was not more than 10 days prior to the time of such payment), such
payment would not have been prohibited by the foregoing provisions of this
Article, or (y) conversion of Securities.

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ARTICLE 13.

CONVERSION OF SECURITIES

Section 1301. Conversion Privilege and Conversion Price.

Subject to and upon compliance with the provisions of this
Article, at the option of the Holder thereof, any Security or any portion of the
principal amount thereof which equals $1,000 or any integral multiple thereof
may be converted at the principal amount thereof, or of such portion thereof,
into fully paid and nonassessable shares (calculated as to each conversion to
the nearest 1/100 of a share) of Common Stock, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion. Such
conversion right shall expire at the Close of Business on September 1, 2004. In
case a Security or portion thereof is called for redemption, such conversion
right in respect of the Security or portion so called shall expire at the Close
of Business on the Business Day immediately preceding the Redemption Date,
unless the Company defaults in making the payment due upon redemption.

The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be initially $_______
per share of Common Stock. The conversion price shall be adjusted in certain
instances as provided in paragraphs (a), (b), (c), (d), (e) and (h) of Section
1304.

Section 1302. Exercise of Conversion Privilege.

In order to exercise the conversion privilege, the Holder of any
Security shall surrender such Security, duly endorsed or assigned to the Company
or in blank, at any office or agency of the Company maintained pursuant to
Section 1002, accompanied by written notice to the Company in the form provided
in the Security (or such other notice as is acceptable to the Company) at such
office or agency that the Holder elects to convert such Security or, if less
than the entire principal amount thereof is to be converted, the portion thereof
to be converted. In the case of any Security which is surrendered for
conversion during the period from the Close of Business on any Regular Record
Date through and including but before the Close of Business on the next
succeeding Interest Payment Date (other than any Security whose Maturity is
prior to such Interest Payment Date), interest whose Stated Maturity is on such
Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is
registered at the Close of Business on such Regular Record Date (unless the
Company shall default in the payment of interest on such Interest Payment Date,
in which case such amount shall be paid to the person who made the payment
referred to below); provided, however, that Securities so surrendered for
conversion shall be accompanied by payment in funds acceptable to the Company of
an amount equal to the interest payable on such Interest Payment Date on the
principal amount being surrendered for conversion; provided, however, that no
such payment need be made if there shall exist at the time of conversion a
default in the payment of interest on the Securities or if such Securities or
portion thereof being

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converted shall have been called for redemption. Except as provided in the
immediately preceding sentence, in the case of any Security which is converted,
(a) interest on such Security whose Stated Maturity is after the date of
conversion of such Security shall not be payable and (b) no payment or
adjustment shall be made upon conversion on account of any dividends on the
Common Stock issued upon conversion.

Securities shall be deemed to have been converted immediately
prior to the Close of Business on the day of surrender of such Securities for
conversion in accordance with the foregoing provisions, and at such time the
rights of the Holders of such Securities as Holders shall cease, and the Person
or Persons entitled to receive the Common Stock issuable upon conversion shall
be treated for all purposes as the record holder or holders of such Common Stock
as and after such time. As promptly as practicable on or after the conversion
date, the Company shall issue and shall deliver at any office or agency of the
Company maintained pursuant to Section 1002 a certificate or certificates for
the number of full shares of Common Stock issuable upon conversion, together
with payment in lieu of any fraction of a share, as provided in Section 1303.

In the case of any Security which is converted in part only, upon
such conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.

Section 1303. Fractions of Shares.

No fractional share of Common Stock shall be issued upon
conversion of Securities. If more than one Security shall be surrendered for
conversion at one time by the same Holder, the number of full shares which shall
be issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Securities (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Security or Securities (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fractional share in an amount equal to such fraction multiplied by the
Closing Price (as hereinafter defined) at the Close of Business on the day of
conversion (or, if such day is not a Trading Day (as hereafter defined), on the
Trading Day immediately preceding such day). For the purposes of this Indenture,
"Closing Price" shall mean the closing price per share of Common Stock as quoted
on the composite tape of the principal national securities exchange upon which
the Common Stock is listed or the NASDAQ National Market System or, in case no
such reported sale takes place on such day, the average of the reported closing
bid and asked prices regular way, in either case on the NASDAQ National Market
System or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on the NASDAQ National Market System, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for that purpose, or, if such prices are not available, the fair
market value set by, or in a manner established by, the Board of Directors of
the Company in good faith. For the purposes of this Indenture, "Trading Day"
shall mean, any day on which (A) trading in the Common Stock is not

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suspended on any national securities exchange or association or over-the-counter
market at the close of business and (B) the Common Stock has traded at least
once on the national securities exchange or association or over-the-counter
market that is the primary market for the trading of the Common Stock.

Section 1304. Adjustment of Conversion Price.

(a) In case the Company shall (i) issue Common Stock as a dividend
or distribution on its capital stock, including the Common Stock, (ii) combine
its outstanding shares of Common Stock into a smaller number of shares, (iii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, or (iv) issue by reclassification of its Common Stock any shares of
capital stock of the Company, the conversion price in effect immediately prior
to such action shall be adjusted so that the holder of any Security thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock or other capital stock of the Company that it would have owned or
been entitled to receive immediately following such action had such Security
been converted immediately prior to the occurrence of such action. An adjustment
made pursuant to this subsection (a) shall become effective immediately after
the record date, in the case of a dividend or distribution, or immediately after
the effective date, in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this
subsection (a), the holder of any Securities thereafter surrendered for
conversion shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the Company,
the Board of Directors (whose determination shall be conclusive and shall be
described in a statement filed by the Company with the Trustee and with any
conversion agent as soon as practicable) shall determine the allocation of the
adjusted conversion price between or among shares of such classes of capital
stock or shares of Common Stock and other capital stock.

(b) In case the Company shall issue rights, warrants or options to
all holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price per share less than the Current Market Price per share
(as determined pursuant to subsection (f) of this Section 1304) of the Common
Stock, the conversion price in effect immediately prior thereto shall be
adjusted so that it shall equal the price determined by multiplying the
conversion price in effect immediately prior to the date of issuance of such
rights, warrants or options by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding on the date of issuance of such
rights, warrants or options (immediately prior to such issuance) plus the number
of shares that the aggregate offering price of the total number of shares so
offered would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights, warrants or options (immediately prior to such
issuance) plus the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be made successively whenever
any rights, warrants or options are issued, and shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such rights, warrants or options. In determining whether any rights,
warrants or options entitle the holders to subscribe for or purchase shares of
Common Stock at less than such Current

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Market Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received by
the Company for such rights, warrants or options, the value of such
consideration, if other than cash, to be determined by the Board of Directors
(whose determination shall be conclusive and shall be described in a certificate
filed by the Company with the Trustee and with any conversion agent as soon as
practicable); provided, however, that rights, warrants or options issued by the
Company to all holders of its Common Stock entitling the holders thereof to
subscribe for or purchase shares of Common Stock, which rights, warrants or
options (i) are deemed to be transferred with such shares of Common Stock, (ii)
are not exercisable and (iii) are also issued in respect of future issuance of
Common Stock, in each case in clauses (i) through (iii) until the occurrence of
a specified event or events, shall, for purposes of this Section 1304, not be
deemed issued until the occurrence of the earliest such specified event.

(c) In case the Company shall distribute to all holders of its
outstanding Common Stock any shares of capital stock (other than Common Stock),
evidences of its indebtedness or assets (including securities and cash, but
excluding any regular periodic cash dividend paid from surplus of the Company
and dividends or distributions payable in stock for which adjustment is made
pursuant to subsection (a) of this Section 1304) or rights, warrants or options
to subscribe for or purchase securities of the Company (excluding those referred
to in subsection (b) of this Section 1304), then in each such case the
conversion price shall be adjusted so that the same shall equal the price
determined by multiplying the conversion price in effect immediately prior to
the record date of such distribution by a fraction of which the numerator shall
be the Current Market Price per share (as determined pursuant to the subsection
(f) of this Section 1304) of the Common Stock less the fair market value on such
record date (as determined by the Board of Directors, whose determination shall
be conclusive and shall be described in a certificate filed by the Company with
the Trustee and with any conversion agent as soon as practicable) of the portion
of the capital stock or the evidences of indebtedness or the assets so
distributed to the holder of one share of Common Stock or of such rights,
warrants or options applicable to one share of Common Stock, and of which the
denominator shall be such Current Market Price per share of Common Stock. Such
adjustment shall become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution; provided,
however, that rights, warrants or options issued by the Company to all holders
of its Common Stock entitling the holders thereof to subscribe for or purchase
shares of securities of the Company (excluding those referred to in subsection
(b) of this Section 1304), which rights, warrants or options (i) are deemed to
be transferred with such shares of Common Stock, (ii) are not exercisable and
(iii) are also issued in respect of future issuance of Common Stock, in each
case in clauses (i) through (iii) until the occurrence of a specified event or
events, shall, for purposes of this Section 1304, not be deemed issued until the
occurrence of the earliest such specified event.

(d) In case the Company shall, by dividend or otherwise, at any time
make a distribution to all holders of the Common Stock consisting exclusively of
cash (excluding any cash that is distributed as part of a distribution referred
to in subsection (c) of this Section 1304 or in connection with a transaction to
which Section 1311 applies) in an aggregate amount that, together with (A) the
aggregate amount of any other distributions to all holders of the Common Stock
made exclusively in cash (excluding any cash distributions referred to in
subsection (c) of this Section

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1304 or in connection with a transaction to which Section 1311 applies) made
within the 12 months preceding such distribution and in respect of which no
conversion price adjustment pursuant to this subsection (d) has been made and
(B) the aggregate of any cash plus the fair market value (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
shall be described in a certificate filed by the Company with the Trustee and
with any conversion agent as soon as practicable) of other consideration payable
in respect of any previous tender offer by the Company or a Subsidiary for the
Common Stock consummated within the 12 months preceding such distribution and in
respect of which no adjustment pursuant to subsection (e) of this Section 1304
has been made, exceeds 10% of the product of the Current Market Price per share
(determined pursuant to subsection (f) of this Section 1304) of the Common Stock
on the date fixed for determining the shareholders entitled to such distribution
times the number of shares of Common Stock outstanding on such date, the
conversion price shall be reduced by multiplying the conversion price in effect
immediately prior to the Close of Business on such date of determination by a
fraction of which the numerator shall be the Current Market Price per share
(determined pursuant to subsection (f) of this Section 1304) of Common Stock on
such date of determination less the amount of cash to be distributed at such
time applicable to one share of Common Stock and the denominator of which shall
be such Current Market Price, such reduction to become effective immediately
prior to the opening of business on the day after such date of determination.

(e) In case a tender offer made by the Company or any Subsidiary for
all or any portion of the Common Stock shall be consummated and such tender
offer shall involve an aggregate consideration having a fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and shall be described in a certificate filed by the Company with the
Trustee and with any conversion agent as soon as practicable) on the last time
(the "Expiration Time") tenders may be made pursuant to such tender offer (as it
may have been amended) that, together with (X) the aggregate of the cash plus
the fair market value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and shall be described in a certificate
filed by the Company with the Trustee and with any conversion agent as soon as
practicable), of other consideration paid or payable in respect of any previous
tender offer by the Company or a Subsidiary for all or any portion of the Common
Stock consummated within the 12 months preceding the consummation of such tender
offer and in respect of which no conversion price adjustment pursuant to this
paragraph (e) has been made, such cash plus the fair market value of other
consideration to be calculated in each case as of the expiration of each such
previous tender offer, and (Y) the aggregate amount of all cash distributions to
holders of Common Stock (excluding any cash that is distributed as part of a
distribution referred to in subsection (c) of this Section 1304) within the 12
months preceding the consummation of such tender offer and in respect of which
no conversion price adjustment pursuant to this paragraph (e) has been made,
exceeds 10% of the product of the Current Market Price per share (determined
pursuant to subsection (f) of this Section 1304) of the Common Stock at the
Expiration Time times the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time, the conversion price
shall be reduced so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the Expiration
Time by a fraction of which the numerator shall be (i) the product of the
Current Market Price per share (determined pursuant

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to subsection (f) of this Section 1304) of the Common Stock at the Expiration
Time times the number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time minus (ii) the fair market value
(determined as aforesaid) of the aggregate consideration paid or payable to
shareholders based on the number of validly tendered shares to be purchased and
not withdrawn prior to the Expiration Time (the number of shares so purchased
being hereinafter referred to as the "Purchased Shares") and the denominator of
which shall be the product of (i) such Current Market Price per share on the
Expiration Time times (ii) such number of outstanding shares on the Expiration
Time less the number of Purchased Shares, such reduction to become effective
immediately prior to the opening of business on the day following the Expiration
Time.

(f) For the purpose of any computation under subsections (b), (c), (d)
and (e) of this Section 1304, the Current Market Price per share of Common Stock
on any date shall be deemed to be the average of the Daily Market Prices for the
shorter of (i) 30 consecutive Business Days ending on the last full Trading Day
on the exchange or market referred to in determining such Daily Market Prices
prior to the Time of Determination or (ii) the period commencing on the date
next succeeding the first public announcement of the issuance of such rights or
warrants, such distribution, or such tender offer, as the case may be, through
such last full Trading Day prior to the Time of Determination.

(g) In any case in which this Section 1304 shall require that an
adjustment be made immediately following a record date or an effective date, the
Company may elect to defer (but only until five Business Days following the
filing by the Company with the Trustee and any conversion agent of the
certificate required by Section 1305) issuing to the holder of any Security
converted after such record date or effective date the shares of Common Stock
issuable upon such conversion over and above the shares of Common Stock issuable
upon such conversion on the basis of the conversion price prior to adjustment,
and paying to such holder any amount of cash in lieu of a fractional share.

(h) No adjustment in the conversion price shall be required to be made
unless such adjustment would require an increase or decrease of at least 1% of
such price; provided, however, that any adjustments that by reason of this
subsection (h) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
1304 shall be made to the nearest cent or to the nearest 1/100th of a share, as
the case may be. Anything in this Section 1304 to the contrary notwithstanding,
the Company shall be entitled to make such reduction in the conversion price, in
addition to those adjustments required by this Section 1304, as it in its
discretion shall determine to be advisable in order that any stock dividend,
subdivision of shares, distribution of rights to purchase stock or securities or
distribution of securities convertible into or exchangeable for stock hereafter
made by the Company to its shareholders shall not be taxable to the recipients.

(i) In the event that at any time as a result of an adjustment made
pursuant to subsection (a) of this Section 1304, the holder of any Security
thereafter surrendered for conversion shall become entitled to receive any
shares of the Company other than shares of Common Stock,

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thereafter the conversion price of such other shares so receivable upon
conversion of any Security shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Article Thirteen.

Section 1305. Notice of Adjustments of Conversion Price.

Whenever the conversion price is adjusted as herein provided:

(a) the Company shall compute the adjusted conversion price in
accordance with Section 1304 and shall prepare a certificate signed by the
Treasurer or Chief Financial Officer of the Company setting forth the adjusted
conversion price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed (with a copy
to the Trustee) at each office or agency maintained for the purpose of
conversion of Securities pursuant to Section 1002; and

(b) a notice stating that the conversion price has been adjusted
and setting forth the adjusted conversion price shall forthwith be prepared, and
as soon as practicable after it is prepared, such notice shall be furnished by
the Company to the Trustee and mailed by the Trustee at the expense of the
Company to all Holders at their last addresses as they shall appear in the
Security Register.

Section 1306. Notice of Certain Corporate Action.

In case:

(a) the Company shall take an action that would require a
conversion price adjustment pursuant to Section 1304(b), (c), (d) or (e); or

(b) the Company shall grant to the holders of its Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock of
any class (excluding shares of capital stock or options for capital stock issued
pursuant to a benefit plan for employees, officers or directors of the Company
and excluding rights or warrants described in the provisos to Sections 1304(b)
and 1304(c)); or

(c) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any shareholders of the Company is required, or of the sale or
transfer of the properties and assets of the Company as an entirety or
substantially as an entirety to any Person; or

(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or

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(e) the Company or any Subsidiary shall commence a tender offer
for all or a portion of the outstanding shares of Common Stock (or shall amend
any such tender offer to change the maximum number of shares being sought or the
amount or type of consideration being offered therefor);

then the Company shall cause to be filed at each office or agency
maintained pursuant to Section 1002, and shall cause to be mailed to all Holders
at their last addresses as they shall appear in the Security Register, at least
20 days (or 10 days in any case specified in clause (a), (b) or (e) above) prior
to the applicable record, effective or expiration date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or granting of rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
who will be entitled to such dividend, distribution, rights or warrants are to
be determined, (y) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up, or (z) the date on which such tender
offer commenced, the date on which such tender offer is scheduled to expire
unless extended, the consideration offered and the other material terms thereof
(or the material terms of any amendment thereto). Neither the failure to give
any such notice nor any defect therein shall affect the legality or validity of
any action described in clauses (a) through (e) of this Section 1306.

Section 1307. Company to Reserve Common Stock.

The Company shall at all times reserve and keep available, free
from preemptive rights, out of the authorized but unissued Common Stock or out
of the Common Stock held in treasury, for the purpose of effecting the
conversion of Securities, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding Securities.

Before taking any action that would cause an adjustment reducing
the conversion price below the then par value (if any) of the shares of Common
Stock deliverable upon conversion of the Securities, the Company will take any
corporate action that may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and non-assessable
shares of Common Stock at such adjusted conversion price.

Section 1308. Taxes on Conversions.

The Company will pay any and all original issuance, transfer,
stamp and other similar taxes that may be payable in respect of the issue or
delivery of shares of Common Stock on conversion of Securities pursuant hereto.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that of the Holder of the Security or
Securities to be converted,

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and no such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.

Section 1309. Covenant as to Common Stock.

The Company covenants that all shares of Common Stock which may be
issued upon conversion of Securities will upon issuance in accordance with the
terms of this Indenture be validly issued, fully paid and nonassessable.

The Company further covenants that for so long as the Common Stock
shall be listed on the New York Stock Exchange or any other national securities
exchange, the Company will, if permitted by the rules of such exchange, list and
keep listed all Common Stock issuable upon conversion of the Securities.

Section 1310. Cancellation of Converted Securities.

All Securities delivered for conversion shall be delivered to the
Trustee to be canceled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 309.

Section 1311. Provisions as to Consolidation, Merger or Sale of Assets.

Notwithstanding any other provision herein to the contrary, in
case of any consolidation or merger to which the Company is a party (other than
a merger or consolidation in which the Company is the continuing corporation and
in which the Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash or the securities or other property of
another corporation), or in case of any sale or conveyance to another
corporation of the properties and assets of the Company as an entirety or
substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation (other than in connection with a merger or
acquisition), the corporation formed by such consolidation or the corporation
whose securities, cash or other property will immediately after the merger or
consolidation be owned, by virtue of the merger or consolidation by the holders
of Common Stock of the Company immediately prior to the merger, or the
corporation that shall have acquired such assets or securities of the Company,
as the case may be, shall promptly execute and deliver to the Trustee a
supplemental indenture providing that the holder of each Security then
outstanding shall have the right thereafter to convert such Security into the
kind and amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance by a holder of the
number of shares of Common Stock into which such Security might have been
converted immediately prior to such consolidation, merger, statutory exchange,
sale or conveyance assuming such holder of Common Stock did not exercise its
rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon such consolidation, merger, statutory exchange,
sale or conveyance (provided that, if the kind or amount of securities, cash or
other property receivable upon such consolidation, merger, statutory exchange,
sale or conveyance is not the same for each share of

-73-
<PAGE>

Common Stock in respect of which such rights of election shall not have been
exercised (a "non-electing share"), then for the purposes of this Section 1311,
the kind and amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance for each non-
electing share shall be deemed to be the kind and amount so receivable per share
by a plurality of the non-electing shares). Such supplemental indenture shall
provide for appropriate adjustment with respect to the rights of the holders of
the Securities, to the end that the provisions set forth in this Article
Thirteen shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the conversion of the Securities. Any such
adjustment shall be evidenced by a certificate delivered to the Trustee and any
paying agent.

The above provisions of this Section 1311 shall similarly apply to
successive consolidations, mergers, statutory exchanges, sales or conveyances.

The Company shall give notice of the execution of such a
supplemental indenture to the holders of Securities in the manner provided in
Section 1006 within 30 days after the execution thereof; provided, however, that
such notice need not be given if such information has been provided
prospectively in the notice given pursuant to Section 1306. Failure to give such
notice, or any defects therein, shall not affect the legality or validity of any
such supplemental indenture.

Section 1312. Disclaimer of Responsibility for Certain Matters.

Neither the Trustee nor any conversion agent shall at any time be
under any duty or responsibility to any holder of Securities to determine
whether any facts exist that may require any adjustment of the conversion price,
or with respect to the nature or extent of any such adjustment when made, or
with respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. Neither the Trustee nor any
conversion agent shall be accountable with respect to the listing referred to in
Section 1309 or the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities, cash or other property that may at any time
be issued or delivered upon the conversion of any Security; and neither the
Trustee nor any conversion agent makes any representation with respect thereto.
Neither the Trustee nor any conversion agent shall be responsible for any
failure of the Company to issue, transfer or deliver any shares of Common Stock
or stock certificates or other securities or property or to make any cash
payment upon the surrender of any Security for the purpose of conversion or,
subject to the provisions of Section 601, to comply with any of the covenants
contained in this Article Thirteen.

-74-
<PAGE>

ARTICLE 14.

RIGHT TO REQUIRE REPURCHASE

Section 1401. Right to Require Repurchase.

In the event that there shall occur a Repurchase Event (as defined
in Section 1406), then each Holder shall have the right, at such Holder's
option, to require the Company to purchase, and upon the exercise of such right,
the Company shall, subject to the provisions of Article Twelve, purchase all (or
any portion with a principal amount equal to $1,000 or an integral multiple
thereof) of such Holder's Securities on the date (the "Repurchase Date") that is
30 days after the date the Company gives notice of the Repurchase Event as
contemplated in Section 1402(a) at a price (the "Repurchase Price") equal to
100% of the principal amount thereof, together with accrued and unpaid interest
to the Repurchase Date.

Section 1402. Notice; Method of Exercising Repurchase Right.

(a) On or before the 15th day after the occurrence of a Repurchase
Event, the Company, or at the written request of the Company received by the
Trustee at least 40 days prior to the Repurchase Date, the Trustee (in the name
and at the expense of the Company), in its capacity as tender agent (for which
services it shall be reasonably compensated), shall give notice of the
occurrence of the Repurchase Event and of the repurchase right set forth herein
arising as a result thereof by first-class mail, postage prepaid, to the Trustee
and to each Holder of the Securities at such Holder's address appearing in the
Security Register. The Company shall also deliver a copy of such notice of a
repurchase right to the Trustee.

Each notice of a repurchase right shall state:

(i) the event constituting the Repurchase Event and the date
thereof,

(ii) the Repurchase Date,

(iii) the date by which the repurchase right must be exercised,

(iv) the Repurchase Price, and

(v) the instructions a Holder must follow to exercise a
repurchase right.

No failure of the Company to give the foregoing notice shall limit
any Holder's right to exercise a repurchase right. The Trustee shall have no
affirmative obligation to determine if there shall have occurred a Repurchase
Event.

-75-
<PAGE>

(b) To exercise a repurchase right, a Holder shall deliver to the
Company (or an agent designated by the Company for such purpose in the notice
referred to in (a) above) and to the Trustee on or before the Close of Business
on the Repurchase Date (i) written notice of the Holder's exercise of such
right, which notice shall set forth the name of the Holder, the principal amount
of the Security or Securities (or portion of a Security which is $1,000 or an
integral multiple thereof) to be repurchased, and a statement that an election
to exercise the repurchase right is being made thereby, and (ii) the Security or
Securities with respect to which the repurchase right is being exercised, duly
endorsed for transfer to the Company. Such written notice may be withdrawn at
any time on or before the Close of Business on the Repurchase Date. If the
Repurchase Date falls between any Regular Record Date and the next succeeding
Interest Payment Date, Securities to be repurchased must be accompanied by
payment from the Holder of an amount equal to the interest thereon which the
registered Holder thereof is to receive on such Interest Payment Date.

(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall on or promptly following the
Repurchase Date pay or cause to be paid in cash to the Holder thereof the
Repurchase Price of the Security or Securities as to which the repurchase right
had been exercised.

Section 1403. Deposit of Repurchase Price.

On or prior to the Close of Business on the Repurchase Date the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay the Repurchase
Price of the Securities which are to be repaid on or promptly following the
Repurchase Date.

Section 1404. Securities Not Repurchased on Repurchase Date.

Interest on any Security surrendered for repurchase shall cease to
accrue from and after the Repurchase Date unless the Company shall default in
the payment of any such Security at the purchase price, together with interest
accrued thereon to the Repurchase Date.

Section 1405. Securities Repurchased in Part.

Any Security which is to be repurchased only in part shall be
surrendered at any office or agency of the Company designated for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or its attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of any authorized denomination as requested
by such Holder, in an aggregate principal amount equal to and in exchange for
the repurchased portion of the principal of the Security so surrendered.

-76-
<PAGE>

Section 1406. Certain Definitions.

For purposes of this Article:

(a) A "Repurchase Event" shall have occurred upon the occurrence
of a Change in Control or Termination of Trading after the date of this
Indenture and on or prior to September 1, 2004.

(b) A "Change in Control" shall occur when:

(i) all or substantially all of the Company's assets are sold
as an entirety to any Person or related group of Persons;

(ii) there shall be consummated any consolidation or merger of
the Company (A) in which the Company is not the continuing or
surviving corporation (other than a consolidation or merger with a
wholly owned Subsidiary of the Company in which all shares of
Common Stock outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock would be converted into
cash, securities or other property, in each case, other than a
consolidation or merger of the Company in which the holders of the
Common Stock immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the total
voting power of all classes of capital stock entitled to vote
generally in the election of directors of the continuing or
surviving corporation immediately after such consolidation or
merger in substantially the same proportion as their ownership of
Common Stock immediately before such transaction;

(iii) any Person, or any Persons acting together which would
constitute a "group" for purposes of Section 13(d) of the Exchange
Act (a "Group"), together with any Affiliates thereof, shall be
the Beneficial Owner of at least 40% of the total voting power of
all classes of capital stock of the Company entitled to vote
generally in the election of directors of the Company; or

(iv) at any time during any consecutive two-year period,
individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new directors
whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company was approved by a vote
of 66-2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the
Company then in office; or

-77-
<PAGE>

(v) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution.

(c) A "Termination of Trading" shall occur if the Common Stock (or
other common stock into which the Securities are then convertible) is neither
listed for trading on a national securities exchange in the United States nor
approved for trading on an established automated over-the-counter trading market
in the United States.

This instrument may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

-78-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.

KENT ELECTRONICS CORPORATION

By:____________________________________
Name:
Title:

Attest:

________________________
Name:
Title:

TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
as Trustee

By:____________________________________
Name:
Title:

Attest:

________________________
Name:
Title:

-79-

<PAGE>

EXHIBIT 5.1

September 15, 1997

Kent Electronics Corporation
7433 Harwin Drive
Houston, Texas 77036

Ladies and Gentlemen:

We have acted as counsel for Kent Electronics Corporation, a Texas
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of the offering and sale by the
Company of (i) $150,000,000 aggregate principal amount of Convertible
Subordinated Notes Due 2004 (the "Notes") ($172,500,000 aggregate principal
amount of the Notes if the Underwriter's over-allotment option is exercised) and
(ii) an indeterminate number of shares of the Company's common stock, without
par value, issuable upon conversion of the Notes (the "Conversion Shares"). The
terms and conditions of such offering and sale are described in the Registration
Statement on Form S-3 (Registration No. 333-34045) filed by the Company with the
Securities and Exchange Commission on August 21, 1997, as amended (the
"Registration Statement").

In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents and instruments: (i) the Registration Statement; (ii) the Form of
Indenture proposed to be entered into between the Company, as Issuer, and Texas
Commerce Bank National Association, as Trustee, governing the Notes (the
"Indenture"); (iii) certain corporate documents and records of the Company,
including its Amended and Restated Articles of Incorporation, Amended and
Restated Bylaws, minutes of meetings of its directors and shareholders and
written consents evidencing action taken by its directors and shareholders in
lieu of meetings; and (iv) such other records, documents, and instruments as in
our judgment are necessary or appropriate to enable us to render this opinion.
With respect to certain factual matters we have relied on statements of officers
of the Company.
<PAGE>

Kent Electronics Corporatino
September 15, 1997
Page 2

Based upon the foregoing, and having regard for such legal considerations
as we deem relevant, we are of the opinion that:

1. the Notes are duly authorized, and when executed and authenticated
in the manner set forth in the Indenture and when duly delivered against
payment of the agreed consideration therefor in accordance with the
Underwriting Agreement and the Indenture referred to in the Registration
Statement, will be valid and binding obligations of the Company entitled to
the benefits of, and subject to the restrictions in, the Indenture; and

2. the Conversion Shares issuable upon conversion of the Notes have
been duly authorized and reserved for issuance upon such conversion, and
when issued upon conversion of the Notes in accordance with the terms of
the Indenture, will have been validly issued, fully paid and nonassessable.

This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the use of our name under the
caption "LEGAL MATTERS" in the Registration Statement. In giving this consent,
we do not thereby admit that we are within the category of persons whose consent
is required under Section 7 of the Act and the rules and regulations thereunder.

Very truly yours,

Liddell, Sapp, Zivley,
Hill & LaBoon, L.L.P.

<PAGE>

EXHIBIT 8.1

September 15, 1997

Kent Electronics Corporation
7433 Harwin Drive
Houston, Texas 77036

Ladies and Gentlemen:

We have acted as tax counsel for Kent Electronics Corporation, a Texas
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of the offering and sale by
the Company of (i) $150,000,000 aggregate principal amount of Convertible
Subordinated Notes Due 2004 (the "Notes") ($172,500,000 aggregate principal
amount of the Notes if the Underwriter's over-allotment option is exercised)
and (ii) an indeterminate number of shares of the Company's common stock,
without par value, issuable upon conversion of the Notes (the "Conversion
Shares"). The terms and conditions of such offering and sale are described in
the Registration Statement on Form S-3 (Registration No. 333-34045) filed by
the Company with the Securities and Exchange Commission on August 21, 1997, as
amended (the "Registration Statement").

In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents and instruments: (i) the Registration Statement; (ii) the Form of
Indenture proposed to be entered into between the Company, as Issuer, and
Texas Commerce Bank National Association, as Trustee, governing the Notes (the
"Indenture"); and (iii) such other documents as we have deemed necessary or
appropriate in order to enable us to render our opinion. Our opinion is based
and conditioned upon the initial and continuing accuracy of the facts and the
factual matters assumed as set forth in the Registration Statement and the
Indenture regarding the offering and terms of the Notes and Conversion Shares
issuable upon conversion of the Notes. Our opinion is also based upon existing
provisions of the Internal Revenue Code of 1986, as amended, regulations
promulgated or proposed thereunder and interpretations thereof by the Internal
Revenue Service and the courts, all of which are subject to change with
prospective or retroactive effect, and our opinion could be adversely affected
or rendered obsolete by any such change.

Based on the foregoing, we are of the opinion that the discussion and legal
conclusions set forth in the Registration Statement under the caption "CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS" are accurate and complete in all material
respects and constitute our opinion of the material tax considerations to
initial holders of the Notes and shares of Common Stock issuable upon
conversion of the Notes.

This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the use of our name under the
caption "LEGAL MATTERS" in the Registration Statement. In giving this consent,
we do not thereby admit that we are within the category of persons whose
consent is required under Section 7 of the Act and the rules and regulations
thereunder.

Very truly yours,

Liddell, Sapp, Zivley,
Hill & LaBoon, L.L.P.

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our reports dated May 5, 1997, accompanying the
consolidated financial statements of Kent Electronics Corporation contained in
the Registration Statement and Prospectus and accompanying the financial
statements and schedule included in the Annual Report on Form 10-K/A for the
year ended March 29, 1997, which is incorporated by reference in the
Registration Statement and Prospectus. We consent to the use and incorporation
by reference of the aforementioned reports in the Registration Statement and
Prospectus, and to the use of our name as it appears under the caption
"Experts".

/s/ Grant Thornton LLP
-----------------------
GRANT THORNTON LLP

Houston, Texas
September 15, 1997

<PAGE>

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________

FORM T-1

STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) ____
____________________

TEXAS COMMERCE BANK NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
74-0800980
(I.R.S. Employer Identification Number)

712 MAIN STREET, HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip code)

LEE BOOCKER, 712 MAIN STREET, 26TH FLOOR
HOUSTON, TEXAS 77002 (713) 216-2448
(Name, address and telephone number of agent for service)

KENT ELECTRONICS CORPORATION
(Exact name of obligor as specified in its charter)

TEXAS 74-1763541
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

7433 HARWIN DRIVE, HOUSTON, TEXAS 77036-2015
(Address of principal executive offices) (Zip code)

__% CONVERTIBLE SUBORDINATED NOTES DUE 2004
(Title of indenture securities)

================================================================================
<PAGE>

ITEM 1. GENERAL INFORMATION.

FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING
AUTHORITY TO WHICH IT IS SUBJECT.

Comptroller of the Currency, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System, Washington, D.C.

(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

The trustee is authorized to exercise corporate trust powers.

ITEM 2. AFFILIATIONS WITH THE OBLIGOR.

IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.

The obligor is not an affiliate of the trustee. (See Note on
Page 7.)

ITEM 3. VOTING SECURITIES OF THE TRUSTEE.

FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING
SECURITIES OF THE TRUSTEE.

COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
--------------- ------------------

Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.

ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.

IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:

(A) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER
INDENTURE.

Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.

1
<PAGE>

ITEM 4. (CONTINUED)

(B) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE
CLAIM THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION
310(B)(1) OF THE ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY
SUCH OTHER INDENTURE, INCLUDING A STATEMENT AS TO HOW THE INDENTURE
SECURITIES WILL RANK AS COMPARED WITH THE SECURITIES ISSUED UNDER SUCH
OTHER INDENTURE.

Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.

ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH OBLIGOR OR
UNDERWRITERS.

IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICER OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE
OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON
HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.

Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.

ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.

FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR.

COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
------------- -------------- ------------ -----------------

Not applicable by virtue of Form T-1 General Instruction B and response to Item
13.

2
<PAGE>

ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.

FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.

Not applicable by virtue of Form T-1 General Instruction B and response to Item
13.

ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.

FURNISH THE FOLLOWING INFORMATION AS TO THE SECURITIES OF THE OBLIGOR
OWNED BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY
THE TRUSTEE.

COL. A COL. B COL. C COL. D
AMOUNT OWNED
WHETHER THE BENEFICIALLY OR PERCENT OF
SECURITIES HELD AS COLLATERAL CLASS
ARE VOTING SECURITY FOR REPRESENTED BY
OR NONVOTING OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS SECURITIES DEFAULT IN COL. C
- ---------------------- ------------ ------------------ --------------
Not applicable by virtue of Form T-1 General Instruction B and response to Item
13.

3
<PAGE>

ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.

IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY
OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.

COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
--------------- ----------- ------------------- -----------------

Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.

ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.

IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR OR (2)
IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE FOLLOWING
INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON.

Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.

4
<PAGE>

ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.

IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OR SUCH PERSON ANY OF WHICH
ARE SO OWNED OR HELD BY THE TRUSTEE.

Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.

ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.

EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:

COL. A COL. B COL. C

NATURE OF AMOUNT
INDEBTEDNESS OUTSTANDING DATE DUE
------------ ----------- --------

Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.

ITEM 13. DEFAULTS BY THE OBLIGOR.

(A) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.

There is not, nor has there been, a default with respect to the securities
under this indenture. (See Note on Page 7.)

5
<PAGE>

ITEM 13. (CONTINUED)

(B) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.

There has not been a default under any such indenture or series. (See Note
on Page 7.)

ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.

IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.

Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.

ITEM 15. FOREIGN TRUSTEE.

IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.

Not applicable.

ITEM 16. LIST OF EXHIBITS.

LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.

. 1. A copy of the articles of association of the trustee now in
effect.

# 2. A copy of the certificate of authority of the trustee to
commence business.

* 3. A copy of the certificate of authorization of the trustee to
exercise corporate trust powers issued by the Board of Governors of
the Federal Reserve System under date of January 21, 1948.

+ 4. A copy of the existing bylaws of the trustee.

5. Not applicable.

6. The consent of United States institutional trustees required by
Section 321(b) of the Act.

6
<PAGE>

7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.

8. Not applicable.

9. Not applicable.
_______________________

. Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission as exhibits to
the Form S-3 File No. 33-56195.

# Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission as exhibits to
the Form S-3 File No. 33-42814.

* Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission as exhibits to
the Form S-11 File No. 33-25132.

+ Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission as exhibits to
the Form S-3 File No. 33-65055.

____________________

NOTE

Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Items 2 and 13, the
answers to said Items are based on incomplete information. Such Items may,
however, be considered as correct unless amended by an amendment to this Form
T-1.

7
<PAGE>

SIGNATURE

PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939 THE
TRUSTEE, TEXAS COMMERCE BANK NATIONAL ASSOCIATION, A NATIONAL BANKING
ASSOCIATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF
AMERICA, HAS DULY CAUSED THIS STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF
HOUSTON, AND STATE OF TEXAS, ON THE 15TH DAY OF SEPTEMBER, 1997.

TEXAS COMMERCE BANK NATIONAL ASSOCIATION
(Trustee)

By: /S/ Mauri J. Cowen
_______________________
Mauri J. Cowen
Vice President and Trust Officer

8
<PAGE>

EXHIBIT 6

Securities and Exchange Commission
Washington, D.C. 20549

Gentlemen:

The undersigned is trustee under an indenture dated as of September
__, 1997, between Kent Electronics Corporation, a Texas corporation, and Texas
Commerce Bank National Association, as Trustee, entered into in connection with
the issuance of its __ % Convertible Subordinated Notes Due 2004.

In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned hereby consents that reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.

Very truly yours,

TEXAS COMMERCE BANK
NATIONAL ASSOCIATION

By: /S/ Mauri J. Cowen
_________________________
Mauri J. Cowen
Vice President and Trust Officer

<PAGE>

EXHIBIT 7
<TABLE>
<CAPTION>

Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 2000
<S> <C>
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
- ------------------------------------------------------------------------------------------------------------------------------------

Please refer to page i, [1]
Table of Contents, for
the required disclosure
of estimated burden.
- ------------------------------------------------------------------------------------------------------------------------------------

CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(970630)
__________
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1997 (RCRI 9999)

This report is required by law: 12 U.S.C. (S)324 (State This report form is to be filed by banks with branches and
member banks); 12 U.S.C. (S)1817 (State nonmember banks); consolidated subsidiaries in U.S. territories and possessions,
and 12 U.S.C. (S)161 (National banks). Edge or Agreement subsidiaries, foreign branches, consoli-
dated foreign subsidiaries, or International Banking Facilities.
- ------------------------------------------------------------------------------------------------------------------------------------

NOTE: The Reports of Condition and Income must be signed The Reports of Condition and Income are to be prepared in
by an authorized officer and the Report of Condition must be accordance with Federal regulatory authority instructions.
attested to by not less than two directors (trustees) for NOTE: These instructions may in some cases differ from generally
State nonmember banks and three directors for State member accepted accounting principles.
and National banks.
We, the undersigned directors (trustees), attest to the
I, C. Richards Summers, FVP & Controller correctness of this Report of Condition (including the
____________________________________________________________ supporting schedules) and declare that it has been examined
Name and Title of Officer Authorized to Sign Report by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the
of the named bank to hereby declare that these Reports of appropriate Federal regulatory authority and is true and correct.
Condition and Income (including the supporting schedules)
have been prepared in conformance with the instructions Marc J. Shapiro
issued by the appropriate Federal regulatory authority and ___________________________________________________________
are true to the best of my knowledge and belief. Director (Trustee)

Alan R. Buckwalter, III
____________________________________________________________ ___________________________________________________________
Signature of Officer Authorized to Sign Report Director (Trustee)

Robert C. Hunter
____________________________________________________________ ___________________________________________________________
Date of Signature Director (Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------

FOR BANKS Submitting Hard Copy Report Forms:

STATE MEMBER BANKS: Return the original and one copy to the NATIONAL BANKS: Return the original only in the special return
appropriate Federal Reserve District Bank. address envelope provided. If express mail is used in lieu of
the special return address envelope, return the original only to
STATE NONMEMBER BANKS: Return the original only in the the FDIC, c/o Quality Data Systems, 2127 Espey Court, Suite 204,
special return address envelope provided. If express mail Crofton, MD 21114.
is used in lieu of the special return address envelope, return
the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- ------------------------------------------------------------------------------------------------------------------------------------

FDIC Certificate Number |0|3|2|6|3|
(RCRI 9050)

Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RI-1

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1997 - JUNE 30, 1997

All Report of Income schedules are to be reported on a calendar year-to-date basis in thousands of dollars.

SCHEDULE RI--INCOME STATEMENT
__________
I480 (-
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate..................................................... | 4011 110,191 | 1.a.(1)(a)
(b) Loans to depository institutions................................................. | 4019 415 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers.............. | 4024 1,546 | 1.a.(1)(c)
(d) Commercial and industrial loans.................................................. | 4012 220,523 | 1.a.(1)(d)
(e) Acceptances of other banks....................................................... | 4026 0 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans............................................... | 4054 8,735 | 1.a.(1)(f)(1)
(2) Other........................................................................ | 4055 103,139 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions........................... | 4056 5,325 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations.......................................................... | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations....................................................... | 4504 240 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices.............................................. | 4058 39,780 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs........................ | 4059 5,411 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases....................................................................... | 4505 5,002 | 1.b.(1)
(2) Tax-exempt leases.................................................................... | 4307 0 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices.................................................................. | 4105 0 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs........................ | 4106 0 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency obligations...................... | 4027 134,859 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities............................................................... | 4506 2 | 1.d.(2)(a)
(b) Tax-exempt securities............................................................ | 4507 24 | 1.d.(2)(b)
(3) Other domestic debt securities....................................................... | 3657 89 | 1.d.(3)
(4) Foreign debt securities.............................................................. | 3658 0 | 1.d.(4)
(5) Equity securities (including investments in mutual funds)............................ | 3659 1,384 | 1.d.(5)
e. Interest income from trading assets...................................................... | 4069 0 | 1.e.
|____________________|
________________
(1) Includes interest income on time certificates of deposit not held for trading.
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RI-2

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RI--CONTINUED ______________
Dollar Amounts in Thousands | Year-to-date |
________________________________________________________________________________________________________|
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased under | ////////////////// |
agreements to resell ....................................................... | 4020 28,702 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ....................... | 4107 665,367 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) ..................... | 4508 2,761 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) .......................... | 4509 20,518 | 2.a.(1)(b)(1)
(2) Other savings deposits ......................................... | 4511 54,741 | 2.a.(1)(b)(2)
(3) Time deposits of $100,000 or more .............................. | A517 21,874 | 2.a.(1)(b)(3)
(4) Time deposits of less than $100,000 ............................ | A518 62,314 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs ................................................. | 4172 8,749 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase ................................................... | 4180 47,630 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other borrowed money ..................................... | 4185 22,356 | 2.c.
d. Not applicable | ////////////////// |
e. Interest on subordinated notes and debentures .............................. | 4200 14,195 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ...................... | 4073 255,138 | 2.f.
|______________________
3. Net interest income (item 1.g minus 2.f) ...................................... | ////////////////// | RIAD 4074 | 410,229 | 3.
|_____________________
4. Provisions: | ////////////////// |_____________________
a. Provision for loan and lease losses ........................................ | ////////////////// | RIAD 4230 | 0 | 4.a.
b. Provision for allocated transfer risk ...................................... | ////////////////// | RIAD 4243 | 0 | 4.b.
|_____________________|
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities ........................................... | 4070 61,998 | 5.a.
b. Service charges on deposit accounts in domestic offices .................... | 4080 78,768 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d) ..................................................... | A220 8,229 | 5.c.
d.-e. Not applicable | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ....................................................... | 5407 7,979 | 5.f.(1)
(2) All other noninterest income* .......................................... | 5408 35,788 | 5.f.(2)
|_____________________
g. Total noninterest income (sum of items 5.a through 5.f) .................... | ////////////////// | RIAD 4079 | 222,762 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities ..................... | ////////////////// | RIAD 3521 | 0 | 6.a.
b. Realized gains (losses) on available-for-sale securities ................... | ////////////////// | RIAD 3196 | 1,370 | 6.b.
|_____________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ............................................. | 4135 224,368 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) ........... | 4217 85,904 | 7.b.
c. Other noninterest expense* ................................................. | 4092 111,711 | 7.c.
|_____________________
d. Total noninterest expense (sum of items 7.a through 7.c) ................... | ////////////////// | RIAD 4093 | 421,983 | 7.d.
|_____________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
|_____________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)...... | ////////////////// | RIAD 4301 | 212,378 | 8.
9. Applicable income taxes (on item 8) ........................................... | ////////////////// | RIAD 4302 | 77,381 | 9.
|_____________________
10. Income (loss) before extraordinary items and other adjustments (item 8 | ////////////////// |_____________________
minus 9) ..................................................................... | ////////////////// | RIAD 4300 | 134,997 | 10.
11. Extraordinary items and other adjustments, net of income taxes* .............. | ////////////////// | RIAD 4320 | 0 | 11.
12. Net income (loss) (sum of items 10 and 11) ................................... | ////////////////// | RIAD 4340 | 134,997 | 12.
|____________________|___________|_________|
____________
*Describe on Schedule RI-E--Explanations.
</TABLE>

4
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RI-3

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RI--CONTINUED
| I480 | (-
| Year-to-date |
Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________________________________
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes.......................... | 4513 100 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8)............................................................... | 8431 3,877 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees at end of current period (round to | //// Number |
nearest whole number)........................................................................... | 4150 8,921 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | RIAD CC YY MM DD |
accounting this calendar year, report the date of the bank's acquisition(1)............... | 9106 00 00 00 00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures...................................................................... | 8757 679 | M.8.a.
b. Foreign exchange exposures................................................................... | 8758 7,550 | M.8.b.
c. Equity security and index exposures.......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures................................................................. | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income................................................... | 8761 302 | M.9.a.
b. Net (increase) decrease to interest expense.................................................. | 8762 481 | M.9.b.
c. Other (noninterest) allocations.............................................................. | 8763 0 | M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).............................. | A251 0 | M.10.
____________________
11. Does the reporting bank have a Subchapter S election in effect for federal income tax YES NO
____________________
purposes for the current tax year?............................................................. | A530 | | /// | X | M.11.
____________________
12. Deferred portion of total applicable income taxes included in Schedule RI, | //// Bil Mil Thou |
____________________
items 9 and 11 (to be reported with the December Report of Income)............................. | 4772 N/A | M.12.
____________________
____________
(1) For example, a bank acquired on June 1, 1997, would report 19970601.
</TABLE>

5
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RI-4

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RI--A--CHANGES IN EQUITY CAPITAL

Indicate decreases and losses in parentheses. ________
| I483 | (-
|____________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________|___________________ |
1. Total equity capital originally reported in the December 31, 1996, Reports of Condition | ////////////////// |
and Income....................................................................................... | 3215 1,746,010 | 1.
2. Equity capital adjustments from amended Reports of Income, net*.................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2)............................. | 3217 1,746,010 | 3.
4. Net income (loss) (must equal Schedule RI, item 12).............................................. | 4340 134,997 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net............................... | 4346 0 | 5.
6. Changes incident to business combinations, net................................................... | 4356 0 | 6.
7. LESS: Cash dividends declared on preferred stock................................................. | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock.................................................... | 4460 100,000 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions for | ////////////////// |
this schedule)................................................................................... | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ............... | 8433 96 | 11.
12. Foreign currency translation adjustments........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ....... | 4415 0 | 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal | ////////////////// |
Schedule RC, item 28)........................................................................... | 3210 1,781,103 | 14.
|____________________|
____________
*Describe on Schedule RI-E--Explanations.

SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES AND CHANGES in Allowance for Loan and Lease Losses

PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES

Part I excludes charge-offs and recoveries through the allocated transfer risk reserve. __________
| I486 | (-
_________________________________________|
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
|____________________|____________________|
| Calendar year-to-date |
|_________________________________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
________________________________________________________________________________|_________________________________________|
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ........................................... | 4651 2,238 | 4661 10,038 | 1.a.
b. To non-U.S. addressees (domicile) ....................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................... | 4653 0 | 4663 4 | 2.a.
b. To foreign banks ........................................................ | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ........ | 4655 72 | 4665 4 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ........................................... | 4645 1,845 | 4617 2,435 | 4.a.
b. To non-U.S. addressees (domicile) ....................................... | 4646 0 | 4618 0 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans .......................................... | 4656 1,866 | 4666 126 | 5.a.
b. Other (includes single payment, installment, and all student loans) ..... | 4657 22,133 | 4667 3,708 | 5.b.
6. Loans to foreign governments and official institutions ..................... | 4643 0 | 4627 19 | 6.
7. All other loans ............................................................ | 4644 8 | 4628 797 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ........................................... | 4658 0 | 4668 0 | 8.a.
b. Of non-U.S. addressees (domicile) ....................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ........................................... | 4635 28,162 | 4605 17,131 | 9.
|_________________________________________|
</TABLE>

6
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RI-5

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RI--B--CONTINUED

PART I. CONTINUED
_________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
_________________________________________|
| Calendar year-to-date |
_________________________________________
Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
________________________________________________________________________________________________________________________
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 0 | 5410 75 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 0 | 3583 9,290 | M.5.a.
b. Secured by farmland ................................................... | 3584 0 | 3585 0 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ......................... | 5411 0 | 5412 0 | M.5.c. (1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 1,613 | 5414 303 | M.5.c. (2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 0 | 3589 4 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 625 | 3591 441 | M.5.e.
|_________________________________________|

PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES

Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________
1. Balance originally reported in the December 31, 1996, Reports of Condition and Income ......... | 3124 250,613 | 1.
2. Recoveries (must equal part I, item 9, column B above)......................................... | 4605 17,131 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above).................................. | 4635 28,162 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 0 | 4.
5. Adjustments* (see instructions for this schedule).............................................. | 4815 (18)| 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b)...................................................................................... | 3123 239,564 | 6.
|____________________|
____________
*Describe on Schedule RI-E--Explanations.
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RI-6

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RI--D--INCOME FROM INTERNATIONAL OPERATIONS

FOR ALL BANKS WITH FOREIGN OFFICES, EDGE OR AGREEMENT SUBSIDIARIES, OR IBFs WHERE INTERNATIONAL OPERATIONS ACCOUNT FOR MORE THAN 10
PERCENT OF TOTAL REVENUES, TOTAL ASSETS, OR NET INCOME.

PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
_________
| I492 | (-
_______________|
| Year-to date |
____________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked................................................................... | 4837 N/A | 1.a.
b. Interest expense booked.................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and | ////////////////// |
IBFs (item 1.a minus 1.b)................................................................ | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices.. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices ......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b)..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations.............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............ | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a minus | ////////////////// |
3.b and 3.c)............................................................................. | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d)................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5)........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 ... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) ............. | 4341 N/A | 8.
|____________________|

____________________
Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
1. Intracompany interest income included in item 1.a above..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above.................................... | 4848 N/A | M.2.
|____________________|

PART II. SUPPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS REQUIRED BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR
PURPOSES OF U.S. INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS

______________
| Year-to date |
____________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
1. Interest income booked at IBFs.............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs)........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic | ////////////////// |
offices (excluding IBFs).................................................................... | 4853 N/A | 5.
|____________________|
</TABLE>

8
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-7
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RI-E--EXPLANATIONS

Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.

Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
_________
| I495 | (-
_______________|
| Year-to-date |
|______________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains (losses) on other real estate owned............................................ | 5415 0 | 1.a.
b. Net gains (losses) on sales of loans..................................................... | 5416 0 | 1.b.
c. Net gains (losses) on sales of premises and fixed assets................................. | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, | ////////////////// |
item 5.f.(2): | ////////////////// |
___________ | |
d. | TEXT 4461 | Check Printing Income | 4461 4,946 | 1.d.
|___________|_____________________________________________________________________________| |
e. | TEXT 4462 | Interbank Contract Services | 4462 24,570 | 1.e.
|___________|_____________________________________________________________________________| |
f. | TEXT 4463 | Check Redesign Income | 4463 0 | 1.f.
|___________|_____________________________________________________________________________| |
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets................................................ | 4531 21,277 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net (gains) losses on other real estate owned............................................ | 5418 0 | 2.b.
c. Net (gains) losses on sales of loans..................................................... | 5419 0 | 2.c.
d. Net (gains) losses on sales of premises and fixed assets................................. | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, | ////////////////// |
item 7.c: | ////////////////// |
___________ | |
e. | TEXT 4464 | | 4464 | 2.e.
|___________|_____________________________________________________________________________| |
f. | TEXT 4467 | | 4467 | 2.f.
|___________|_____________________________________________________________________________| |
g. | TEXT 4468 | | 4468 | 2.g.
|___________|_____________________________________________________________________________| |
3. Extraordinary items and other adjustments and applicable income tax effect | ////////////////// |
(from Schedule RI, item 11) (itemize and describe all extraordinary items and | ////////////////// |
other adjustments): | ////////////////// |
___________ | |
a. (1) | TEXT 4469 | | 4469 | 3.a. (1)
|___________|_________________________________________________________________________| |
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a. (2)
___________ |___________|______________| |
b. (1) | TEXT 4487 | | 4487 | 3.b. (1)
_____________________________________________________________________________________| |
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b. (2)
___________ |___________|______________| |
c. (1) | TEXT 4489 | | 4489 | 3.c. (1)
______________________________________________________________________________________| |
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c. (2)
|___________|______________| |
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) | ////////////////// |
(itemize and describe all adjustments): | ////////////////// |
___________ | |
a. | TEXT 4492 | | 4492 | 4.a.
b. | TEXT 4493 | | 4493 | 4.b.
___________ | |
5. Cumulative effect of changes in accounting principles from prior years | ////////////////// |
(from Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
___________ | |
a. | TEXT A546 | Effect of change to GAAP from previous non-GAAP instructions | A546 0 | 5.a.
b. | TEXT 4495 | | 4495 | 5.b.
___________ | |
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) | ////////////////// |
(itemize and describe all corrections): | ////////////////// |
___________ | |
a. | TEXT 4496 | | 4496 | 6.a.
b. | TEXT 4497 | | 4497 | 6.b.
_________________________________________________________________________________________|____________________|
</TABLE>

9
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-8
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RI-E--CONTINUED ______________
| Year-to-date |
____________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
___________ | |
a. | TEXT 4498 | | 4498 | 7.a.
|___________|_____________________________________________________________________________| |
b. | TEXT 4499 | | 4499 | 7.b.
|___________|_____________________________________________________________________________| |
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) | ////////////////// |
(itemize and describe all adjustments): | ////////////////// |
___________ | |
a. | TEXT 4521 | Sale of Business Unit | 4521 (18)| 8.a.
_________________________________________________________________________________________| |
b. | TEXT 4522 | | 4522 | 8.b.
_________________________________________________________________________________________|____________________|
9. Other explanations (the space below is provided for the bank to briefly describe, at its | I498 | I499 | (-
option, any other significant items affecting the Report of Income): |____________________|
No comment [ ] (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>

10
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-1
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1997

All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding
as of the last business day of the quarter.

SCHEDULE RC--BALANCE SHEET ______
| C400 | (-
|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_____________________________________________________________________________________________________________________
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1)................................... | 0081 2,741,298 | 1.a.
b. Interest-bearing balances(2)............................................................ | 0071 101 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A).............................. | 1754 489,645 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)............................. | 1773 3,466,917 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell..................... | 1350 2,105,790 | 3.
4. Loans and lease financing receivables: ________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 13,151,891 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ..................... | RCFD 3123 | 239,564 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ......................... | RCFD 3128 | 0 | ////////////////// | 4.c.
d. Loans and leases, net of unearned income, ________________________| ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c)..................................... | 2125 12,912,327 | 4.d.
5. Trading assets (from Schedule RC-D)........................................................ | 3545 28,907 | 5.
6. Premises and fixed assets (including capitalized leases)................................... | 2145 570,425 | 6.
7. Other real estate owned (from Schedule RC-M)............................................... | 2150 471 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) .. | 2130 13,870 | 8.
9. Customers' liability to this bank on acceptances outstanding............................... | 2155 8,906 | 9.
10. Intangible assets (from Schedule RC-M)..................................................... | 2143 400,914 | 10.
11. Other assets (from Schedule RC-F).......................................................... | 2160 324,428 | 11.
12. Total assets (sum of items 1 through 11)................................................... | 2170 23,063,999 | 12.
|____________________|
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>

11
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-2
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC--CONTINUED _________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
___________________________________________________________________________________________|_________________________|
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, | /////////////////////// |
part I)........................................................................... | RCON 2200 17,097,137 | 13.a.
______________________| |
(1) Noninterest-bearing(1) ................................. | RCON 6631 7,972,040 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ....................................... | RCON 6636 9,125,097 | /////////////////////// | 13.a.(2)
______________________| |
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II)........................................................................... | RCFN 2200 400,748 | 13.b.
_______________________| |
(1) Noninterest-bearing ....................................| RCFN 6631 0 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 400,748 | /////////////////////// | 13.b.(2)
_______________________| |
14. Federal funds purchased and securities sold under agreements to repurchase............ | RCFD 2800 1,643,245 | 14.
15. a. Demand notes issued to the U.S. Treasury........................................... | RCON 2840 1,449,182 | 15.a.
b. Trading liabilities (from Schedule RC-D)........................................... | RCFD 3548 23,146 | 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under | /////////////////////// |
capitalized leases): | /////////////////////// |
a. With a remaining maturity of one year or less...................................... | RCFD 2332 69,209 | 16.a.
b. With a remaining maturity of more than one year through three years................ | RCFD A547 217 | 16.b.
c. With a remaining maturity of more than three years................................. | RCFD A548 26,196 | 16.c.
17. Not applicable | /////////////////////// |
18. Bank's liability on acceptances executed and outstanding.............................. | RCFD 2920 8,906 | 18.
19. Subordinated notes and debentures(2).................................................. | RCFD 3200 345,000 | 19.
20. Other liabilities (from Schedule RC-G)................................................ | RCFD 2930 219,910 | 20.
21. Total liabilities (sum of items 13 through 20)........................................ | RCFD 2948 21,282,896 | 21.
22. Not applicable | /////////////////////// |
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus......................................... | RCFD 3838 0 | 23.
24. Common stock.......................................................................... | RCFD 3230 612,893 | 24.
25. Surplus (exclude all surplus related to preferred stock).............................. | RCFD 3839 924,675 | 25.
26. a. Undivided profits and capital reserves............................................. | RCFD 3632 266,312 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities............. | RCFD 8434 (22,777)| 26.b.
27. Cumulative foreign currency translation adjustments................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27)..................................... | RCFD 3210 1,781,103 | 28.
29. Total liabilities and equity capital (sum of items 21 and 28)......................... | RCFD 3300 23,063,999 | 29.
|_________________________|
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best Number
describes the most comprehensive level of auditing work performed for the bank ________________
by independent external auditors as of any date during 1996................................... | RCFD 6724 N/A | M.1.
________________
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)

____________
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-3
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-A--CASH AND BALANCE DUE FROM DEPOSITORY INSTITUTIONS

Exclude assets held for trading. _____
| C405 | (-
_________________________________________|
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank Offices |
_________________________________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
___________________________________________________________________________________________________________________________|
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin ........................................................................ | 0022 2,443,756 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .................. | ////////////////// | 0020 2,125,612 | 1.a.
b. Currency and coin ........................................................ | ////////////////// | 0080 318,144 | 1.b.
2. Balances due from depository institutions in the U.S. ....................... | ////////////////// | 0082 78,811 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ....... | 0083 1 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ....................................... | 0085 78,810 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks ...... | ////////////////// | 0070 25,256 | 3.
a. Foreign branches of other U.S. banks ..................................... | 0073 2,786 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ............... | 0074 22,470 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ..................................... | 0090 193,576 | 0090 193,576 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) ...................................... | 0010 2,741,399 | 0010 2,741,399 | 5.
|_________________________________________|

Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou |
___________________________________________________________________________________________________________________________
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above)................................................................................... | 0050 78,711 | M.1.
____________________
SCHEDULE RC-B--SECURITIES

Exclude assets held for trading. ______
| C410 |
__________________________________________________________________________________ |
| Held-to-maturity | Available-for-sale |
|___________________________________________________________________________________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
|____________________|____________________|____________________|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
_______________________________________|____________________|____________________|____________________|____________________|
1. U.S. Treasury securities .......... | 0211 17,975 | 0213 17,957 | 1286 785,912 | 1287 775,806 | 1.
2. U.S. Government agency obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) ............... | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) .................... | 1294 36 | 1295 137 | 1297 0 | 1298 0 | 2.b.
___________________________________________________________________________________

_____________
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.b, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the Farm Credit System, the Federal Home Loan Bank
System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing Corporation,
Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.

</TABLE>
13
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-3
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-A--CASH AND BALANCE DUE FROM DEPOSITORY INSTITUTIONS

Exclude assets held for trading.
________________________________________ _________________________________________
| Held-to-maturity | Available-for-sale |
|___________________________________________________________________________________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
|____________________|____________________|____________________|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________|____________________|____________________|____________________|____________________|
3. Securities issued by states | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and political subdivisions | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
in the U.S.: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. General obligations ........... | 1676 230 | 1677 230 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ........... | 1681 30 | 1686 30 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and similar obligations ....... | 1694 0 | 1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities (MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Pass-through securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Guaranteed by | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
GNMA .......................... | 1698 0 | 1699 0 | 1701 1,155,677 | 1702 1,166,465 | 4.a. (1)
(2) Issued by FNMA | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and FHLMC ................. | 1703 471,374 | 1705 468,355 | 1706 1,202,607 | 1707 1,196,885 | 4.a. (2)
(3) Other pass-through | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities ................ | 1709 0 | 1710 0 | 1711 0 | 1713 0 | 4.a. (3)
b. Other mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities (include CMOs, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
REMICs, and stripped | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Issued or guaranteed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
by FNMA, FHLMC, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
or GNMA ................... | 1714 0 | 1715 0 | 1716 280,118 | 1717 278,992 | 4.b. (1)
(2) Collateralized | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
by MBS issued or | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
guaranteed by FNMA, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
FHLMC, or GNMA ............ | 1718 0 | 1719 0 | 1731 2,604 | 1732 2,642 | 4.b. (2)
(3) All other mortgage- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
backed securities ......... | 1733 0 | 1734 0 | 1735 0 | 1736 0 | 4.b. (3)
5. Other debt securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Other domestic debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities .................... | 1737 0 | 1738 0 | 1739 0 | 1741 0 | 5.a.
b. Foreign debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities .................... | 1742 0 | 1743 0 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Investments in mutual | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
funds and other equity | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities with readily | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
determinable fair values ...... | ////////////////// | ////////////////// | A510 0 | A511 0 | 6.a.
b. All other equity | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities(1) ................. | ////////////////// | ////////////////// | 1752 46,127 | 1753 46,127 | 6.b.
7. Total (sum of items 1 | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
through 6) (total of | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
column A must equal | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Schedule RC, item 2.a) | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(total of column D must | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
item 2.b) ........................ | 1754 489,645 | 1771 486,709 | 1772 3,473,045 | 1773 3,466,917 | 7.
|___________________________________________________________________________________|
_____________
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.b, column D.
</TABLE>

14
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-5

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-B--CONTINUED
_______
| C412 |(-
_____________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_______________________________________________________________________________________________________________________
1. Pledged securities(1)......................................................................... | 0416 1,770,118 | M.1.
2. Maturity and repricing data for debt securities(1),(2) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Securities issued by the U.S. Treasury, U.S. Government agencies, and states and political | ////////////////// |
subdivisions in the U.S.; other non-mortgage debt securities; and mortgage pass-through | ////////////////// |
securities other than those backed by closed-end first lien 1-4 family residential | ////////////////// |
mortgages with a remaining maturity or repricing frequency of:(3)(4) | ////////////////// |
(1) Three months or less................................................................... | A549 18,026 | M.2.a. (1)
(2) Over three months through 12 months.................................................... | A550 15 | M.2.a. (2)
(3) Over one year through three years...................................................... | A551 274,791 | M.2.a. (3)
(4) Over three years through five years.................................................... | A552 346,037 | M.2.a. (4)
(5) Over five years through 15 years....................................................... | A553 145,356 | M.2.a. (5)
(6) Over 15 years.......................................................................... | A554 9,852 | M.2.a. (6)
b. Mortgage pass-through securities backed by closed-end first lien 1-4 family residential | ////////////////// |
mortgages with a remaining maturity or repricing frequency of:(3)(5) | ////////////////// |
(1) Three months or less................................................................... | A555 12,045 | M.2.b. (1)
(2) Over three months through 12 months.................................................... | A556 119,081 | M.2.b. (2)
(3) Over one year through three years...................................................... | A557 106,413 | M.2.b. (3)
(4) Over three years through five years.................................................... | A558 232,740 | M.2.b. (4)
(5) Over five years through 15 years....................................................... | A559 408,831 | M.2.b. (5)
(6) Over 15 years.......................................................................... | A560 1,955,614 | M.2.b. (6)
c. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS; exclude mortgage | ////////////////// |
pass-through securities) with an expected average life of:(6) | ////////////////// |
(1) Three years or less.................................................................... | A561 0 | M.2.c. (1)
(2) Over three years....................................................................... | A562 281,634 | M.2.c. (2)
d. Fixed rate AND floating rate debt securities with a REMAINING MATURITY of one year or less | ////////////////// |
(included in Memorandum items 2.a through 2.c above)....................................... | A248 147,489 | M.2.d.
3.-6. Not applicable | ////////////////// |
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer).................................................................................. | 1778 0 | M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost............................................................................. | 8780 0 | M.8.a.
b. Fair value................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost............................................................................. | 8782 0 | M.9.a.
b. Fair value................................................................................. | 8783 0 | M.9.b.
--------------------
_____________
(1) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value.
(2) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock.
(3) Report fixed rate debt securities by remaining maturity and floating rate debt securities by repricing frequency.
(4) Sum of Memorandum items 2.a.(1) through 2.a.(6) plus any nonaccrual debt securities in the categories of debt securities
reported in Memorandum item 2.a that are included in Schedule RC-N, item 9, column C, must equal Schedule RC-B, sum of
items 1, 2, 3, and 5, columns A and D, plus mortgage pass-through securities other than those backed by closed-end first
lien 1-4 family residential mortgages included in Schedule RC-B, item 4.a, columns A and D.
(5) Sum of Memorandum items 2.b.(1) through 2.b.(6) plus any nonaccrual mortgage pass-through securities backed by closed-end first
lien 1-4 family residential mortgages included in Schedule RC-N, item 9, column C, must equal Schedule RC-B, item 4.a, sum of
columns A and D, less the amount of mortgage pass-through securities other than those backed by closed-end first lien 1-4
family residential mortgages included in Schedule RC-B, item 4.a, columns A and D.
(6) Sum of Memorandum items 2.c.(1) and 2.c.(2) plus any nonaccrual "Other mortgage-backed securities" included in Schedule RC-N,
item 9, column C, must equal Schedule RC-B, item 4.b, sum of columns A and D.

</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-6
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-C-LOANS AND LEASE FINANCING RECEIVABLES

PART I. LOANS AND LEASES

Do not deduct the allowance for loan and lease losses from amounts ______
reported in this schedule. Report total loans and leases, net of unearned | C415 | (-
income. Exclude assets held for trading and commercial paper. _________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank Offices |
_________________________________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_______________________________________________________________________________________________________________________|
1. Loans secured by real estate ........................................... | 1410 2,562,477 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 562,279 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 16,858 | 1.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 0 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 822,205 | 1.c.(2)(a)

(b) Secured by junior liens ..................................... | ////////////////// | 5368 321,549 | 1.c.(2)(b)

d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 138,112 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 701,474 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 4,274 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 2,700 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 1,574 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 0 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 19,326 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 0 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 19,609 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 41,137 | 1590 41,137 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 6,349,713 | 1763 6,264,588 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 233,362 | 1764 146,351 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 2,393,932 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 133,917 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans) . | 2011 2,260,015 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 123,936 | 2081 119,631 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 16,799 | 2107 16,799 | 8.
9. Other loans ............................................................ | 1563 1,265,174 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured) . | ////////////////// | 1545 96,766 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,168,408 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 141,478 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 129,440 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 12,038 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 | ////////////////// | ////////////////// |
through 10 minus item 11) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, item 4.a) ................................................. | 2122 13,151,891 | 2122 12,975,167 | 12.
-----------------------------------------
</TABLE>

16
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-7

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-C--CONTINUED
PART I. CONTINUED

__________________________
Memoranda Dollar Amounts in Thousands | ///////// Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Not applicable | /////////////////////// |
2. Loans and leases restructured and in compliance with modified terms (included in Schedule | /////////////////////// |
RC-C, part I, above and not reported as past due or nonaccrual in Schedule RC-N, | /////////////////////// |
Memorandum item 1): | /////////////////////// |
a. Loans secured by real estate: | /////////////////////// |
(1) To U.S. addressees (domicile) .................................................... | RCFD 1687 0 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ................................................ | RCFD 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to individuals for | /////////////////////// |
household, family, and other personal expenditures) .................................. | RCFD 8691 147,859 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables of non-U.S. | /////////////////////// |
addresses (domicile) included in Memorandum item 2.b above ........................... | RCFD 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases (excluding those in | /////////////////////// |
nonaccrual status): | /////////////////////// |
a. Closed-end loans secured by first liens on 1-4 family residential properties | /////////////////////// |
in domestic offices with a remaining maturity or repricing frequency of:(1)(2) | /////////////////////// |
(1) Three months or less ............................................................. | RCON A564 15,684 | M.3.a.(1)
(2) Over three months through 12 months .............................................. | RCON A565 140,017 | M.3.a.(2)
(3) Over one year through three years ................................................ | RCON A566 43,402 | M.3.a.(3)
(4) Over three years through five years .............................................. | RCON A567 29,896 | M.3.a.(4)
(5) Over five years through 15 years ................................................. | RCON A568 64,821 | M.3.a.(5)
(6) Over 15 years .................................................................... | RCON A569 516,429 | M.3.a.(6)
b. All loans and leases other than closed-end loans secured by first liens on 1-4 family | /////////////////////// |
residential properties in domestic offices with a remaining maturity or repricing | /////////////////////// |
frequency of:(1)(3) | /////////////////////// |
(1) Three months or less ............................................................. | RCFD A570 7,350,018 | M.3.b.(1)
(2) Over three months through 12 months .............................................. | RCFD A571 1,534,829 | M.3.b.(2)
(3) Over one year through three years ................................................ | RCFD A572 804,147 | M.3.b.(3)
(4) Over three years through five years .............................................. | RCFD A573 1,730,237 | M.3.b.(4)
(5) Over five years through 15 years ................................................. | RCFD A574 639,605 | M.3.b.(5)
(6) Over 15 years .................................................................... | RCFD A575 193,748 | M.3.b.(6)
c. Fixed rate AND floating rate loans and leases with a REMAINING MATURITY of one year | /////////////////////// |
or less (included in Memorandum items 3.a and 3.b above) ............................. | RCFD A247 4,747,551 | M.3.c.
d. Fixed rate AND floating rate loans secured by nonfarm nonresidential properties | /////////////////////// |
in domestic offices(4) with a REMAINING MATURITY of over five years (included in | /////////////////////// |
Memorandum item 3.b above) ........................................................... | RCON A577 117,290 | M.3.d.
e. Fixed rate AND floating rate commercial and industrial loans(5) with a REMAINING | /////////////////////// |
MATURITY of over three years (included in Memorandum item 3.b above) ................. | RCFD A578 2,510,350 | M.3.e.
---------------------------
_____________
(1) Report fixed rate loans and leases by remaining maturity and floating rate loans by repricing frequency.
(2) Sum of Memorandum items 3.a.(1) through 3.a.(6) plus total nonaccrual closed-end loans secured by first liens on 1-4 family
residential properties in domestic offices included in Schedule RC-N, Memorandum item 3.c.(2), column C, must equal total
closed-end loans secured by first liens on 1-4 family residential properties from Schedule RC-C, part I, item 1.c.(2)(a),
column B.
(3) Sum of Memorandum items 3.b.(1) through 3.b.(6), plus total nonaccrual loans and leases from Schedule RC-N, sum of items 1
through 8, column C, minus nonaccrual closed-end loans secured by first liens on 1-4 family residential properties in domestic
offices included in Schedule RC-N, Memorandum item 3.c.(2), column C, must equal total loans and leases from Schedule RC-C,
part I, sum of items 1 through 10, column A, minus total closed-end loans secured by first liens on 1-4 family residential
properties in domestic offices from Schedule RC-C, part I, item 1.c.(2)(a), column B.
(4) As defined for Schedule RC-C, part I, item 1.e, column B.
(5) As defined for Schedule RC-C, part I, item 4, column A.

</TABLE>

17
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-8
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-C--CONTINUED
PART I. CONTINUED

__________________________
Memoranda (Continued) Dollar Amounts in Thousands | ///////// Bil Mil Thou |
________________________________________________________________________________________________________________________
4. Loans to finance commercial real estate, construction, and land development activities | /////////////////////// |
(not secured by real estate) included in Schedule RC-C, part I, items 4 and 9, column A, | /////////////////////// |
page RC-6(1) ................................................................................. | RCFD 2746 488,192 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, page RC-6) ................ | RCFD 5369 263,962 | M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family residential properties | /////////////////////// |
in domestic offices (included in Schedule RC-C, part I, item 1.c.(2)(a), column B, page RC-6) | RCON 5370 176,758 | M.6.
|_________________________|
_____________
(1) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.

SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES

Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).

_______
| C420 |(-
__________________________|
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
____________________________________________________________________________________________________________________________|
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency obligations in domestic offices (exclude mortgage-backed securities) . | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ..................................................... | RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 28,620 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3543 287 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 28,907 | 12.
|_________________________|
|_________________________|
| ///////// Bil Mil Thou |
LIABILITIES |_________________________|
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 23,146 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 23,146 | 15.
|_________________________|

</TABLE>

18
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-8a
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-C--CONTINUED

PART II. LOANS TO SMALL BUSINESSES AND SMALL FARMS

Schedule RC-C, Part II is to be reported only with the June Report of Condition.
<S> <C> <C> <C>
Report the number and amount currently outstanding as of June 30 of business loans with "original amounts" of $1,000,000 or
less and farm loans with "original amounts" of $500,000 or less. The following guidelines should be used to determine the
"original amount" of a loan: (1) For loans drawn down under lines of credit or loan commitments, the "original amount" of the loan
is the size of the line of credit or loan commitment when the line of credit or loan commitment was most recently approved,
extended, or renewed prior to the report date. However, if the amount currently outstanding as of the report date exceeds this
size, the "original amount" is the amount currently outstanding on the report date. (2) For loan participations and syndications,
the "original amount" of the loan participation or syndication is the entire amount of the credit originated by the lead lender.
(3) For all other loans, the "original amount" is the total amount of the loan at origination or the amount currently outstanding as
of the report date, whichever is larger.

Loans to Small Businesses
1. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of your
bank's "Loans secured by nonfarm nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B, and all or substantially all of the dollar volume of your bank's _________
"Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | C418 | (-

_____________________
| RCON YES NO |
part I, item 4.a, column B, have original amounts of $100,000 or less (If your bank has no loans |____________________|
outstanding in both of these two loan categories, place an "X" in the box marked "NO".) .......... | 6999| |///| X | 1.
|____________________|

If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO and your bank has loans outstanding in either loan category, skip items 2.a and 2.b,
complete items 3 and 4 below, and go to item 5.
If NO and your bank has no loans outstanding in both loan categories, skip items 2 through 4,
and go to item 5.
______________________
2. Report the total number of loans currently outstanding for each of the | Number of Loans |
following Schedule RC-C, part I, loan categories: | RCON |//////////// |
a. "Loans secured by nonfarm nonresidential properties" in domestic offices | ////////////////// |
reported in Schedule RC-C, part I, item 1.e, column B. (Note: Item 1.e, | ////////////////// |
column B, divided by the number of loans should NOT exceed $100,000.) ... | 5562 N/A | 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic offices | ////////////////// |
reported in Schedule RC-C, part I, item 4.a, column B. (Note: Item 4.a, | ////////////////// |
column B, divided by the number of loans should NOT exceed $100,000.) ... | 5563 N/A | 2.b.
______________________
___________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
___________________________________________
Dollar Amounts in Thousands | RCON |/////////////| RCON Bil Mil Thou |
___________________________________________________________________________________________________________________________
3. Number and amount currently outstanding of "Loans secured by nonfarm | /////////////////////////////////////// |
nonresidential properties" in domestic offices reported in Schedule RC-C, | /////////////////////////////////////// |
part I, item 1.e, column B (sum of items 3.a through 3.c must be less than | /////////////////////////////////////// |
or equal to Schedule RC-C, part I, item 1.e, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ................................ | 5564 582 | 5565 21,103 | 3.a.
b. With original amounts of more than $100,000 through $250,000 ............. | 5566 506 | 5567 56,876 | 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ........... | 5568 537 | 5569 175,259 | 3.c.
4. Number and amount currently outstanding of "Commercial and industrial | /////////////////////////////////////// |
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | /////////////////////////////////////// |
part I, item 4.a, column B (sum of items 4.a through 4.c must be less than | /////////////////////////////////////// |
or equal to Schedule RC-C, part I, item 4.a, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ................................ | 5570 12,496 | 5571 237,529 | 4.a.
b. With original amounts of more than $100,000 through $250,000 ............. | 5572 1,523 | 5573 165,339 | 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ........... | 5574 1,587 | 5575 448,175 | 4.c.
___________________________________________

</TABLE>

18a
<PAGE>

<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-8b
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-C--CONTINUED

PART II. CONTINUED
<S> <C> <C> <C>
Agricultural Loans to Small Farms
5. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of
your bank's "Loans secured by farmland (including farm residential and other improvements)" in
domestic offices reported in Schedule RC-C, part I, item 1.b, column B, and all or substantially all
of the dollar volume of your bank's "Loans to finance agricultural production and other loans to
farmers" in domestic offices reported in Schedule RC-C, part I, item 3, column B, have original amounts YES NO
of $100,000 or less (If your bank has no loans outstanding in both of these two loan categories, ------------------------
place an "X" in the box marked "NO".) ............................................................ | 6860| |///| X | 5.
------------------------
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO and your bank has loans outstanding in either loan category, skip items 6.a and 6.b
and complete items 7 and 8 below.
If NO and your bank has no loans outstanding in both loan categories, do not complete
items 6 through 8.
______________________
6. Report the total number of loans currently outstanding for each of the | Number of Loans |
following Schedule RC-C, part I, loan categories: |_____________________|
a. "Loans secured by farmland (including farm residential and other | RCON |//////////// |
improvements)" in domestic offices reported in Schedule RC-C, part I, | ////////////////// |
item 1.b, column B. (Note: Item 1.b, column B, divided by the number of | ////////////////// |
loans should NOT exceed $100,000.) ....................................... | 5576 N/A | 6.a.
b. "Loans to finance agricultural production and other loans to farmers" in | ////////////////// |
domestic offices reported in Schedule RC-C, part I, item 3, column B. | ////////////////// |
(Note: Item 3, column B, divided by the number of loans should NOT | ////////////////// |
exceed $100,000.) ........................................................ | 5577 N/A | 6.b.
-----------------------

__________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
|_________________________________________|
Dollar Amounts in Thousands | RCON | /////////////| RCON Bil Mil Thou |
_________________________________________________________________________________| ________________________________________|
7. Number and amount currently outstanding of "Loans secured by farmland | /////////////////////////////////////// |
(including farm residential and other improvements)" in domestic offices | /////////////////////////////////////// |
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a | /////////////////////////////////////// |
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, | /////////////////////////////////////// |
column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ................................ | 5578 17 | 5579 474 | 7.a.
b. With original amounts of more than $100,000 through $250,000 ............. | 5580 12 | 5581 1,778 | 7.b.
c. With original amounts of more than $250,000 through $500,000 ............. | 5582 9 | 5583 2,488 | 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural | /////////////////////////////////////// |
production and other loans to farmers" in domestic offices reported in | /////////////////////////////////////// |
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c | /////////////////////////////////////// |
must be less than or equal to Schedule RC-C, part I, item 3, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ................................ | 5584 109 | 5585 2,847 | 8.a.
b. With original amounts of more than $100,000 through $250,000 ............. | 5586 29 | 5587 2,925 | 8.b.
c. With original amounts of more than $250,000 through $500,000 ............. | 5588 9 | 5589 1,675 | 8.c.
|_________________________________________|

</TABLE>

18b
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-9

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-E--DEPOSIT LIABILITIES

PART I. DEPOSITS IN DOMESTIC OFFICES
________
| C425| (-
_______________________________________________________________
| | Nontransaction |
| Transaction Accounts | Accounts |
_______________________________________________________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
|accounts (including | demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
________________________________________________________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
_________________________________________________________________________________________________________________________
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 5,633,008 | 2240 5,220,485 | 2346 10,412,587 | 1.
2. U.S. Government ...................................... | 2202 34,740 | 2280 33,208 | 2520 1,012 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 138,852 | 2290 64,437 | 2530 119,867 | 3.
4. Commercial banks in the U.S. ......................... | 2206 620,603 | 2310 620,603 | 2550 0 | 4.
5. Other depository institutions in the U.S. ............ | 2207 19,898 | 2312 19,898 | 2349 0 | 5.
6. Banks in foreign countries ........................... | 2213 34,465 | 2320 34,465 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 1,545 | 2300 1,545 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 80,560 | 2330 80,560 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 6,563,671 | 2210 6,075,201 | 2385 10,533,466 | 9.
----------------------------------------------------------------

_____________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________________________________
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 727,929 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 0 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 0 | M.1.c.(1)

(2) Issued either in denominations of $100,000 or in denominations greater than | ////////////////// |
$100,000 and participated out by the broker in shares of $100,000 or less ............... | 2344 0 | M.1.c.(2)

d. Maturity data for brokered deposits: | ////////////////// |
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining | ////////////////// |
maturity of one year or less (included in Memorandum item 1.c.(1) above) ................ | A243 0 | M.1.d.(1)

(2) Brokered deposits issued in denominations of $100,000 or more with a remaining | ////////////////// |
maturity of one year or less (included in Memorandum item 1.b above) .................... | A244 0 | M.1.d.(2)

e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 229,076 | M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d | ////////////////// |
must equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 4,125,484 | M.2.a.(1)

(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 2,967,900 | M.2.a.(2)

b. Total time deposits of less than $100,000 ................................................... | 6648 2,548,730 | M.2.b.
c. Total time deposits of $100,000 or more ..................................................... | 2604 891,352 | M.2.c.
3. All NOW accounts (included in column A above) .................................................. | 2398 488,470 | M.3.
----------------------
4. Not applicable
</TABLE>

19
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-10

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-E--CONTINUED

PART I. CONTINUED

Memoranda (continued)
_____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_________________________________________________________________________________________________________________________
5. Maturity and repricing data for time deposits of less than $100,000: | ////////////////// |
a. Time deposits of less than $100,000 with a remaining maturity or repricing frequency | ////////////////// |
of:(1)(2) | ////////////////// |
(1) Three months or less ................................................................... | A579 1,146,827 | M.5.a.(1)
(2) Over three months through 12 months .................................................... | A580 972,681 | M.5.a.(2)
(3) Over one year through three years ...................................................... | A581 344,979 | M.5.a.(3)
(4) Over three years ....................................................................... | A582 84,243 | M.5.a.(4)
b. Fixed rate AND floating rate time deposits of less than $100,000 with a REMAINING MATURITY | ////////////////// |
of one year or less (included in Memorandum items 5.a.(1) through 5.a.(4) above) ........... | A241 2,119,519 | M.5.b.
6. Maturity and repricing data for time deposits of $100,000 or more: | ////////////////// |
a. Time deposits of $100,000 or more with a remaining maturity or repricing frequency of:(1)(3) | ////////////////// |
(1) Three months or less ................................................................... | A584 590,057 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A585 231,862 | M.6.a.(2)
(3) Over one year through three years ...................................................... | A586 55,616 | M.6.a.(3)
(4) Over three years ....................................................................... | A587 13,817 | M.6.a.(4)
b. Fixed rate AND floating rate time deposits of $100,000 or more with a REMAINING MATURITY of | ////////////////// |
one year or less (included in Memorandum items 6.a.(1) through 6.a.(4) above) .............. | A242 821,918 | M.6.b.
----------------------

_____________
(1) Report fixed rate time deposits by remaining maturity and floating rate time deposits by repricing frequency.
(2) Sum of Memorandum items 5.a.(1) through 5.a.(4) must equal Schedule RC-E, Memorandum item 2.b above.
(3) Sum of Memorandum items 6.a.(1) through 6.a.(4) must equal Schedule RC-E, Memorandum item 2.c above.

</TABLE>

20
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-11
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-E--CONTINUED

PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND
AGREEMENT SUBDIARIES AND IBFs)

_____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_________________________________________________________________________________________________________________________
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 371,724 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 28,940 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs) ... | 2625 84 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 400,748 | 7.
|____________________|

Memorandum _____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_________________________________________________________________________________________________________________________
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) | A245 400,748 | M.1.
____________________

Schedule RC-F--Other Assets
__________
| C430 | (-
__________________________
Dollar Amounts in Thousands | //////// Bil Mil Thou |
____________________________________________________________________________________________________________________________
1. Income earned, not collected on loans ........................................................ | RCFD 2164 91,268 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 58,300 | 2.
3. Interest-only strips receivable (not in the form of a security)(2) on: | /////////////////////// |
a. Mortgage loans ............................................................................ | RCFD A519 0 | 3.a.
b. Other financial assets .................................................................... | RCFD A520 0 | 3.b.
4. Other (itemize and describe amounts that exceed 25% of this item) ............................ | RCFD 2168 174,860 | 4.
_____________ | |
a. | TEXT 3549 | ____________________________| |
_________________________________________________________________| RCFD 3549 | /////////////////////// | 4.a.
b. | TEXT 3550 | ____________________________| |
_________________________________________________________________| RCFD 3550 | /////////////////////// | 4.b.
c. | TEXT 3551 | ____________________________| |
_________________________________________________________________| RCFD 3551 | /////////////////////// | 4.c.
____________________________| |
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 324,428 | 5.
|_________________________|

_________________________
Memorandum Dollar Amounts in Thousands | ///////// Bil Mil Thou |
____________________________________________________________________________________________________________________________
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
_________________________

Schedule RC-G--Other Liabilities

__________
| C435 | (-
__________________________|
Dollar Amounts in Thousands | //////// Bil Mil Thou |
____________________________________________________________________________________________________________________________|
1. a. Interest accrued and unpaid on deposits in domestic offices(3) ............................ | RCON 3645 23,235 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 183,704 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 0 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item) ............................ | RCFD 2938 12,971 | 4.
_____________ INTERCOMPANY RECEIVALBE ___________________________| |
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | 3,876 | /////////////////////// | 4.a.
------------- | |
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
------------- | |
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________________________________________________________________________________________| |
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 219,910 | 5.
_________________________

____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) Report interest-only strips receivable in the form of a security as available-for-sale securities
in Schedule RC, item 2.b, or as trading assets in Schedule RC, item 5, as appropriate.
(3) For savings banks, include "dividends" accrued and unpaid on deposits.

</TABLE>

21
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-12
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES

_________
| C440 | (-
_____________________|
| Domestic Offices |
_____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________________________________|
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 8,906 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 8,906 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 2,105,790 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 1,643,245 | 4.
5. Other borrowed money ............................................................................ | 3190 95,622 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 224,290 | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and | ////////////////// |
IBFs) ........................................................................................... | 2192 22,885,568 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and | ////////////////// |
IBFs) ........................................................................................... | 3129 20,880,175 | 9.
----------------------

______________________
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. | RCON Bil Mil Thou |
|____________________|
10. U.S. Treasury securities ....................................................................... | 1779 793,781 | 10.
11. U.S. Government agency obligations (exclude mortgage-backed securities) ........................ | 1785 36 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 260 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 2,834,724 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 0 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 278,992 | 13.b.(1)
(2) All other mortgage-backed securities .................................................... | 2253 2,642 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 0 | 14.
15. Foreign debt securities ........................................................................ | 3160 0 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds and other equity securities with readily | ////////////////// |
determinable fair values .................................................................... | A513 0 | 16.a.
b. All other equity securities ................................................................. | 3169 46,127 | 16.b.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 3,956,562 | 17.
|____________________|

Memorandum (to be completed only by banks with IBFs and other "foreign" offices)

______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________________________________
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 N/A | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
|____________________|

</TABLE>

22
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-13

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFs
To be completed only by banks with IBFs and other "foreign" offices.

_________
| C445 | (-
_____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 N/A | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, | ////////////////// |
item 12, column A) ............................................................................ | 2076 N/A | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, | ////////////////// |
column A) ..................................................................................... | 2077 N/A | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 N/A | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 N/A | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 N/A | 6.

SCHEDULE RC-K--QUARTERLY AVERAGES(1)

_________
| C445 | (-
_____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
__________________________________________________________________________________________________________________________
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions ............................... | RCFD 3381 101 | 1.
2. U.S. Treasury securities and U.S. Government agency obligations(2) ....................... | RCFD 3382 3,976,135 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) .................... | RCFD 3383 259 | 3.
4. a. Other debt securities(2) .............................................................. | RCFD 3647 2,644 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) . | RCFD 3648 46,127 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell ................... | RCFD 3365 960,810 | 5.
6. Loans: | /////////////////////// |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ....................................................................... | RCON 3360 12,687,803 | 6.a.(1)
(2) Loans secured by real estate ...................................................... | RCON 3385 2,638,407 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ............... | RCON 3386 45,235 | 6.a.(3)
(4) Commercial and industrial loans ................................................... | RCON 3387 6,443,252 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ....... | RCON 3388 2,435,508 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............. | RCFN 3360 188,595 | 6.b.
7. Trading assets ........................................................................... | RCFD 3401 27,613 | 7.
8. Lease financing receivables (net of unearned income) ..................................... | RCFD 3484 141,037 | 8.
9. Total assets(4) .......................................................................... | RCFD 3368 21,148,930 | 9.

LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............. | RCON 3485 412,814 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................. | RCON 3486 3,501,315 | 11.a.
b. Other savings deposits ................................................................ | RCON 3487 2,998,374 | 11.b.
c. Time deposits of $100,000 or more ..................................................... | RCON A514 894,126 | 11.c.
d. Time deposits of less than $100,000 ................................................... | RCON A529 2,529,094 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs .. | RCFN 3404 316,515 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase ............... | RCFD 3353 1,862,772 | 13.
14. Other borrowed money (includes mortgage indebtedness and obligations under capitalized | /////////////////////// |
leases) .................................................................................. | RCFD 3355 59,276 | 14.
---------------------------

_____________
(1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized cost.
(3) Quarterly averages for all equity securities should be based on historical cost.
(4) The quarterly average for total assets should reflect all debt securities (not held for trading) at amortized
cost, equity securities with readily determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.

</TABLE>

23
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-14

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-L--OFF-BALANCE SHEET ITEMS
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. _________
| C460 | (-
_____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
__________________________________________________________________________________________________________________________
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home equity | ////////////////// |
lines ...................................................................................... | 3814 0 | 1.a.
b. Credit card lines .......................................................................... | 3815 0 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 470,023 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 333,210 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 8,258,180 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 1,100,399 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 105,495 | ////////////////// | 2.a.
---------------------------
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 154,346 | 3.
___________________________
a. Amount of performance standby letters of credit conveyed to others| RCFD 3822 | 2,713| ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 183,189 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by the | ////////////////// |
reporting bank ................................................................................ | 3428 0 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 0 | 6.
7. Securities borrowed ........................................................................... | 3432 38,932 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified against | ////////////////// |
loss by the reporting bank) ................................................................... | 3433 17,975 | 8.
9. Financial assets transferred with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. First lien 1-to-4 family residential mortgage loans: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | A521 0 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | A522 0 | 9.a.(2)
b. Other financial assets (excluding small business obligations reported in item 9.c): | ////////////////// |
(1) Outstanding principal balance of assets transferred as of the report date .............. | A523 0 | 9.b.(1)
(2) Amount of recourse exposure on these assets as of the report date ...................... | A524 0 | 9.b.(2)
c. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date ...................................................................... | A249 0 | 9.c.(1)
(2) Amount of retained recourse on these obligations as of the report date ................. | A250 0 | 9.c.(2)
10. Notional amount of credit derivatives: | ////////////////// |
a. Credit derivatives on which the reporting bank is the guarantor ............................ | A534 0 | 10.a.
b. Credit derivatives on which the reporting bank is the beneficiary .......................... | A535 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 597,550 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
| ////////////////// |
____________ _____________________________
a. | TEXT 3555 |_____________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
____________ _____________________________
b. | TEXT 3556 |_____________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
____________ _____________________________
c. | TEXT 3557 |_____________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
____________ _____________________________
d. | TEXT 3558 |_____________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
---------------------------------------------------------------------------------------------------------------------

</TABLE>

24
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-15

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-L--CONTINUED

_____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________________________________
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 5591 0 | 13.
_____________ ___________________________ | ////////////////// |
a. | TEXT 5592 |_____________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
_____________ ___________________________
b. | TEXT 5593 |_____________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
_____________ ___________________________
c. | TEXT 5594 |_____________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________ ___________________________
d. | TEXT 5595 |_____________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
--------------------------------------------------------------------------------------------------------------------
____________
| C461 |
_________________________________________ ___________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative| Commodity and |
_____________________________________________| Contracts | Contracts | Contracts | Other Contracts |
| Off-balance Sheet Derivatives |__________________|___________________|__________________|__________________|
| Position Indicators |Tril Bil Mil Thou | Tril Bil Mil Thou |Tril Bil Mil Thou |Tril Bil Mil Thou |
|____________________________________________|__________________| __________________|__________________|__________________|
14. Gross amounts (e.g., notional | //////////////// | //////////////// | //////////////// | //////////////// |
amounts) (for each column, sum of | //////////////// | //////////////// | //////////////// | //////////////// |
items 14.a through 14.e must equal | //////////////// | //////////////// | //////////////// | //////////////// |
sum of items 15, 16.a, and 16.b): | //////////////// | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________
a. Futures contracts ................... | 700,000 | 0 | 0 | 0 | 14.a.
__________________ ___________________ __________________ __________________
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
__________________ ___________________ __________________ __________________
b. Forward contracts ................... | 0 | 965,494 | 0 | 0 | 14.b.
__________________ ___________________ __________________ __________________
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
__________________ ___________________ __________________ __________________
c. Exchange-traded option contracts: | //////////////// | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________
(1) Written options ................. | 0 | 0 | 0 | 0 | 14.c.(1)

__________________ ___________________ __________________ __________________
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
__________________ ___________________ __________________ __________________
(2) Purchased options ............... | 0 | 0 | 0 | 0 | 14.c.(2)

__________________ ___________________ __________________ __________________
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
__________________ ___________________ __________________ __________________
d. Over-the-counter option contracts: | //////////////// | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________
(1) Written options ................. | 1,040,478 | 26,752 | 0 | 0 | 14.d.(1)

__________________ ___________________ __________________ __________________
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
__________________ ___________________ __________________ __________________
(2) Purchased options ............... | 1,440,478 | 26,752 | 0 | 0 | 14.d.(2)

__________________ ___________________ __________________ __________________
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
__________________ ___________________ __________________ __________________
e. Swaps ............................... | 5,607,564 | 17,633 | 19,893 | 0 | 14.e.
__________________ ___________________ __________________ __________________
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
__________________ ___________________ __________________ __________________
15. Total gross notional amount of | //////////////// | //////////////// | //////////////// | //////////////// |
derivative contracts held for trading .. | 4,805,214 | 1,036,631 | 19,893 | 0 | 15.
__________________ ___________________ __________________ __________________
| RCFD A126 | RCFD A127 | RCFD 8723 | RCFD 8724 |
__________________ ___________________ __________________ __________________
16. Total gross notional amount of | //////////////// | //////////////// | //////////////// | //////////////// |
derivative contracts held for | //////////////// | //////////////// | //////////////// | //////////////// |
purposes other than trading: | //////////////// | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________
a. Contracts marked to market .......... | 1,600,000 | 0 | 0 | 0 | 16.a.
__________________ ___________________ __________________ __________________
| RCFD 8725 | RCFD 8726 | RCFD 8727 | RCFD 8728 |
__________________ ___________________ __________________ __________________
b. Contracts not marked to market ...... | 2,383,306 | 0 | 0 | 0 | 16.b.
__________________ ___________________ __________________ __________________
| RCFD 8729 | RCFD 8730 | RCFD 8731 | RCFD 8732 |
__________________ ___________________ __________________ __________________
c. Interest rate swaps where the bank | //////////////// | //////////////// | //////////////// | //////////////// |
has agreed to pay a fixed rate ...... | 8,306 | //////////////// | //////////////// | //////////////// | 16.c.
__________________ ___________________ __________________ __________________
| RCFD A589 | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________

</TABLE>
25
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-16
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-L--CONTINUED

_________________________________________ __________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and |
_____________________________________| Contracts | Contracts | Contracts | Other Contracts |
| Off-balance Sheet Derivatives |__________________ |___________________ |____________________|____________________|
| Position Indicators |Tril Bil Mil Thou | Tril Bil Mil Thou |Tril Bil Mil Thou |Tril Bil Mil Thou |
|____________________________________|__________________ | __________________ |____________________|__________________ |
17. Gross fair values of | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8733 23,530 | 8734 11,022 | 8735 104 | 8736 0 | 17.a.(1)
(2) Gross negative | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8737 18,458 | 8738 11,212 | 8739 104 | 8740 0 | 17.a.(2)
b. Contracts held for | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8741 1,086 | 8742 0 | 8743 0 | 8744 0 | 17.b.(1)
(2) Gross negative | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8745 1,050 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8749 29,420 | 8750 0 | 8751 0 | 8752 0 | 17.c.(1)
(2) Gross negative | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8753 1,751 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|___________________________________________________________________________________|

_____________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
________________________________________________________________________________________________________________________|
1.-2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ............................................... | 3833 5,347,696 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
__________________________
exceeding one year conveyed to others ........................... | RCFD 3834 | 97,749 | ////////////////// | M.3.a.
__________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above ............. | 3377 54,777 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold (with servicing retained), amounts outstanding by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only) ..................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY) ................................. | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans) (to be completed for the | ////////////////// |
September report only) ..................................................................... | 2743 N/A | M.5.c.
|____________________|

</TABLE>

26
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-17

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-M--MEMORANDA

__________
| C465 | (-
_____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________________________________
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders, and their related interests ..................................................... | 6164 18,965 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of | ////////////////// |
all extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________
of total capital as defined for this purpose in agency regulations . | RCFD 6165 | 3 | ////////////////// | 1.b.
___________________________
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, item 3) ............................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 0 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 0 | 4.b.(1)

(2) Serviced without recourse to servicer ..................................................... | 5502 0 | 4.b.(2)

c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 0 | 4.c.(1)

(2) Serviced under a special option contract .................................................. | 5504 0 | 4.c.(2)

d. Mortgages serviced under other servicing contracts ............................................ | 5505 0 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 4,455 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 4,451 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing assets ..................................................................... | 3164 0 | 6.a.
__________________________
(1) Estimated fair value of mortgage servicing assets .............. | RCFD A590 | 0 | ////////////////// | 6.a.(1)

__________________________
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)

(2) All other identifiable intangible assets .................................................. | 5507 85,395 | 6.b.(2)

c. Goodwill ...................................................................................... | 3163 315,519 | 6.c.
d. Total (sum of items 6.a, 6.b.(1), 6.b.(2), and 6.c) (must equal Schedule RC, item 10) ......... | 2143 400,914 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt .................................................................................. | 3295 0 | 7.
----------------------

_____________
(1) Do not report federal funds sold and securities purchased under agreements to resell with other
commercial banks in the U.S. in this item.

</TABLE>

27
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-18

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-M--CONTINUED
__________________________
Dollar Amounts in Thousands | Bil Mil Thou |
_______________________________________________________________________________________________________________________
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 0 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 303 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 0 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 168 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 471 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 13,870 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 13,870 | 8.b.(3)
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 0 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 9,018,432 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 28,866 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 10,745 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 122,477 | 10.d.
e. Annuities ........................................................................... | RCON 8430 14,174 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e above) ......................................................................... | RCON 8784 4,223,346 | 10.f.
11. Net unamortized realized deferred gains (losses) on off-balance sheet derivative | /////////////////////// |
contracts included in assets and liabilities reported in Schedule RC ................... | RCFD A525 415 | 11.
12. Amount of assets netted against nondeposit liabilities and deposits in foreign offices | /////////////////////// |
(other than insured branches in Puerto Rico and U.S. territories and possessions) on | /////////////////////// |
the balance sheet (Schedule RC) in accordance with generally accepted accounting | /////////////////////// |
principles(1) .......................................................................... | RCFD A526 0 | 12.
13. Outstanding principal balance of loans other than 1-4 family residential mortgage | /////////////////////// |
loans that are serviced for others (to be completed if this balance is more than | /////////////////////// |
$10 million and exceeds ten percent of total assets) ................................... | RCFD A591 0 | 13.
---------------------------
_________________________________________________________________________________________________________________________|
| ___________________________|
|Memeorandum Dollar Amounts in Thousands | Bil Mil Thou |
| _______________________________________________________________________________________________________________________|
|1. Reciprocal holdings of banking organizations' capital instruments | ////////////////// | |
| (to be completed for the December report only) ............................................| 3836 N/A |M.1.|
- -------------------------------------------------------------------------------------------------------------------------

_____________
(1) Exclude netted on-balance sheet amounts associated with off-balance sheet derivative contracts, deferred tax assets
netted against deferred tax liabilities, and assets netted in accounting for pensions.

</TABLE>

28
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-19

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES,
AND OTHER ASSETS

______
The FFIEC regards the information reported in |C470 | (-
all of Memorandum item 1, in items 1 through 10, _______________________________________________________________|
column A, and in Memorandum items 2 through 4, | (Column A) | (Column B) | (Column C) |
column A, as confidential. | Past due | Past due 90 | Nonaccural |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
|____________________|____________________|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
_____________________________________________________________|____________________|____________________|____________________|
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ........................ | 1245 37,800 | 1246 3,140 | 1247 27,865 |1.a.
b. To non-U.S. addressees (domicile) .................... | 1248 0 | 1249 0 | 1250 0 |1.b.
2. Loans to depository institutions and acceptances | ////////////////// | ////////////////// | ////////////////// |
of other banks: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ////////////////// | ////////////////// | ////////////////// |
institutions ............................................ | 5377 0 | 5378 0 | 5379 0 |2.a.
b. To foreign banks ..................................... | 5380 283 | 5381 0 | 5382 0 |2.b.
3. Loans to finance agricultural production and | ////////////////// | ////////////////// | ////////////////// |
other loans to farmers .................................. | 1594 137 | 1597 0 | 1583 2,346 |3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ........................ | 1251 113,901 | 1252 17,087 | 1253 55,002 |4.a.
b. To non-U.S. addressees (domicile) .................... | 1254 440 | 1255 0 | 1256 161 |4.b.
5. Loans to individuals for household, family, and | ////////////////// | ////////////////// | ////////////////// |
other personal expenditures: | ////////////////// | ////////////////// | ////////////////// |
a. Credit cards and related plans ....................... | 5383 1,060 | 5384 1,059 | 5385 0 |5.a.
b. Other (includes single payment, installment, | ////////////////// | ////////////////// | ////////////////// |
and all student loans) .................................. | 5386 42,677 | 5387 6,394 | 5388 2,037 |5.b.
6. Loans to foreign governments and official | ////////////////// | ////////////////// | ////////////////// |
institutions ............................................ | 5389 0 | 5390 0 | 5391 0 |6.
7. All other loans ......................................... | 5459 3,206 | 5460 3,966 | 5461 1,647 |7.
8. Lease financing receivables: | ////////////////// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ........................ | 1257 0 | 1258 0 | 1259 0 |8.a.
b. Of non-U.S. addressees (domicile) .................... | 1271 0 | 1272 0 | 1791 0 |8.b.
9. Debt securities and other assets (exclude other | ////////////////// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets).......... | 3505 0 | 3506 0 | 3507 0 |9.
|____________________|____________________|____________________|

=============================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in items

1 through 8.
_____________________________________________________________
| RCFD Bil Mil Thou |RCFD Bil Mil Thou | RCFD Bil Mil Thou |
10. Loans and leases reported in items 1 _____________________________________________________________
through 8 above which are wholly or partially | ////////////////// | ///////////////// | ////////////////// |
guaranteed by the U.S. Government ...................... | 5612 1,354 | 5613 657 | 5614 4,015 |10.
a. Guaranteed portion of loans and leases | ////////////////// | ////////////////// | ////////////////// |
included in item 10 above ........................... | 5615 1,136 | 5616 584 | 5617 3,212 |10.a.
|____________________|____________________|____________________|
</TABLE>
29
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-20

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-N--CONTINUED
______
|C473 | (-
_______________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccural |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
Memoranda |____________________|____________________|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
_____________________________________________________________|____________________|____________________|____________________|
1. Restructured loans and leases included in | ////////////////// | ////////////////// | ////////////////// |
Schedule RC-N, items 1 through 8, above (and not | ////////////////// | ////////////////// | ////////////////// |
reported in Schedule RC-C, part I, Memorandum | ////////////////// | ////////////////// | ////////////////// |
item 2) ................................................. | 1658 0 | 1659 0 | 1661 2,255 |M.1.
2. Loans to finance commercial real estate, | ////////////////// | ////////////////// | ////////////////// |
construction, and land development activities | ////////////////// | ////////////////// | ////////////////// |
(not secured by real estate) included in | ////////////////// | ////////////////// | ////////////////// |
Schedule RC-N, items 4 and 7, above ......................| 6558 2,622 | 6559 0 | 6560 3,322 |M.2.
|____________________|____________________|____________________|
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
3. Loans secured by real estate in domestic offices |____________________|____________________|____________________|
(included in Schedule RC-N, item 1, above): | ////////////////// | ////////////////// | ////////////////// |
a. Construction and land development .................... | 2759 7,909 | 2769 0 | 3492 1,993 |M.3.a.
b. Secured by farmland .................................. | 3493 0 | 3494 0 | 3495 409 |M.3.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ////////////////// | ////////////////// | ////////////////// |
1-4 family residential properties and | ////////////////// | ////////////////// | ////////////////// |
extended under lines of credit ...................... | 5398 0 | 5399 0 | 5400 0 |M.3.c.
(2) All other loans secured by 1-4 family | ////////////////// | ////////////////// | ////////////////// |
residential properties .............................. | 5401 21,658 | 5402 2,410 | 5403 11,956 |M.3.c.
d. Secured by multifamily (5 or more) residential | ////////////////// | ////////////////// | ////////////////// |
properties ........................................... | 3499 2,011 | 3500 0 | 3501 2,003 |M.3.d.
e. Secured by nonfarm nonresidential properties.......... | 3502 6,222 | 3503 730 | 3504 11,504 |M.3.e.
|____________________|____________________|____________________|
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
_________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
_________________________________________
4. Interest rate, foreign exchange rate, and other | ////////////////// | ////////////////// |
commodity and equity contracts: | ////////////////// | ////////////////// |
a. Book value of amounts carried as assets ............... | 3522 0 | 3528 0 |M.4.a.
b. Replacement cost of contracts with a | ////////////////// | ////////////////// |
positive replacement cost ............................. | 3529 0 | 3530 0 |M.4.b.
|____________________|____________________|

_______________________________________________________________________________________________________________________________
Person to whom questions about the Reports of Condition and Income should be directed: |C477| (-

Karen Gatenby, Vice President (713) 216-5263
_______________________________________________________________________________________________________________________________
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)

</TABLE>

30
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-21

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE AND FICO ASSESSMENTS

| C475 | (-
_____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________|____________________
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits....................................................... | 0030 N/A |1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits..................................... | 0031 0 |1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1)........................ | 0032 0 |1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits...................................................... | 3510 N/A |2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits................................... | 3512 0 |2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1)...................... | 3514 0 |2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices)................................................................. | 3520 23,873 |3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in Puerto | ////////////////// |
Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries............................................... | 2211 2,580 |4.a.
b. Time and savings deposits(1) of consolidated subsidiaries.................................. | 2351 17 |4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries....................... | 5514 0 |4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II).................... | 2229 0 |5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ...... | 2383 0 |5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b)....................................................... | 5515 0 |5.c.
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5, | ////////////////// |
column B).................................................................................. | 2314 1,173 |6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 |6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1),(2) | ////////////////// |
a. Unamortized premiums....................................................................... | 5516 483 |7.a.
b. Unamortized discounts...................................................................... | 5517 0 |7.b.
8. To be completed by banks with "Oakar deposits." | ////////////////// |
a. Deposits purchased or acquired from other FDIC-insured institutions during the quarter | ////////////////// |
(exclude deposits purchased or acquired from foreign offices other than insured branches | ////////////////// |
in Puerto Rico and U.S. territories and possessions): | ////////////////// |
(1) Total deposits purchased or acquired from other FDIC-insured institutions during | ////////////////// |
the quarter............................................................................ | A531 N/A |8.a.(1)
(2) Amount of purchased or acquired deposits reported in item 8.a.(1) above attributable | ////////////////// |
to a secondary fund (i.e., BIF members report deposits attributable to SAIF; SAIF | ////////////////// |
members report deposits attributable to BIF)........................................... | A532 N/A |8.a.(2)
b. Total deposits sold or transferred to other FIDC-insured institutions during the quarter | ////////////////// |
(exclude sales or transfers by the reporting bank of deposits in foreign offices other than | ////////////////// |
insured branches in Puerto Rico and U.S. territories and possessions) ..................... | A533 N/A |8.b.

_____________________
(1) For FDIC insurance and FICO assessment purposes, "time and savings deposits" consists of nontransaction accounts and all
transaction accounts other than demand deposits.
(2) Exclude core deposit intangibles.

</TABLE>
31
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-22

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-O--CONTINUED
_____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________|____________________
9. Deposits in lifeline accounts................................................................ | 5596 ///////////// |9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices)................................................................ | 8432 0 |10.
11. Adjustments to demand deposits in domestic offices and in insured branches in Puerto Rico | ////////////////// |
and U.S. territories and possessions reported in Schedule RC-E forcertain reciprocal | ////////////////// |
demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if the reporting bank's reciprocal | ////////////////// |
demand balances with the domestic offices of U.S. banks and savings associations | ////////////////// |
and insured branches in Puerto Rico and U.S. territories and possessions that were | ////////////////// |
reported on a gross basis in Schedule RC-E had been reported on a net basis .............. | 8785 0 |11.a.
b. Amount by which demand deposits would be increased if the reporting bank's reciprocal | ////////////////// |
demand balances with foreign banks and foreign offices of other U.S. banks (other than | ////////////////// |
insured branches in Puerto Rico and U.S. territories and possessions) that were reported | ////////////////// |
on a net basis in Schedule RC-E had been reported on a gross basis ....................... | A181 0 |11.b.
c. Amount by which demand deposits would be reduced if cash items in process of collection | ////////////////// |
were included in the calculation of the reporting bank's net reciprocal demand balances | ////////////////// |
with the domestic offices of U.S. banks and savings associations and insured branches | ////////////////// |
in Puerto Rico and U.S. territories and possessions in Schedule RC-E ..................... | A182 0 |11.c.
12. Amount of assets netted against deposit liabilities in domestic offices and in insured | ////////////////// |
branches in Puerto Rico and U.S. territories and possessions on the balance sheet | ////////////////// |
(Schedule RC) in accordance with generally accepted accounting principles (exclude amounts | ////////////////// |
related to reciprocal demand balances): | ////////////////// |
a. Amount of assets netted against demand deposits........................................... | A527 0 |12.a.
b. Amount of assets netted against time and savings deposits................................. | A528 0 |12.b.
|____________________|

Memoranda (to be completed each quarter except as noted)
_____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposit accounts of $100,000 or less: | ////////////////// |
(1) Amount of deposit accounts of $100,000 or less.......................................... | 2702 8,398,509 |M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less to be Number | ////////////////// |
completed for the June report only)................................|RCON 3779 |1,211,416 | ////////////////// |M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000....................................... | 2710 8,698,628 |M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 ................| RCON 2722 | 18,680 | ////////////////// |M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.

Indicate in the appropriate box at the right whether your bank has a method or YES NO
procedure for determining a better estimate of uninsured deposits than the |____________________|
estimate described above.................................................................. | 6861 | |///| |M.2.a.
b. If the box marked YES has been checked, report the estimate of uninsured deposits | RCON Bil Mil Thou |
determined by using your bank's method or procedure....................................... | 5597 N/A |M.2.b.
3. Has the reporting institution been consolidated with a parent bank or
savings association in that parent bank's or parent savings association's
Call Report or Thrift Financial Report?
If so, report the legal title and FDIC Certificate Number of the parent bank or parent
savings association: FDIC Cert No.
____________________
| TEXT A545 |N/A | RCON A545| N/A |M.3.
_________________________________________________________________________________________________________________________________
</TABLE>

32
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-23
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-R--REGULATORY CAPITAL

This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC, item
12, for June 30, 1996, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than $1 billion must
complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.

1. Test for determining the extent to which Schedule RC-R must be completed. To be | C480B | (-
completed only by banks with total assets of less than $1 billion. Indicate in the | YES NO |
appropriate box at the right whether the bank has total capital greater than or ____________________________|
equal to eight percent of adjusted total assets..............................................| RCFD 6056 | |////| |1.
|___________________________|
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for
loan and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than
eight percent or that the bank is not in compliance with the risk-based capital guidelines.
____________________________________________________________________
| NOTE: All banks are required to complete items 2 and 3 below. |
| See optional worksheet for items 3.a through 3.f. |
|___________________________________________________________________|

Dollar Amounts in Thousands | RCFD Bil Mil Thou |
___________________________________________________________________________________________________|____________________|
2. Portion of qualifying limited-life capital instruments (original weighted | ////////////////// |
average maturity of at least five years) that is includible in Tier 2 capital: | ////////////////// |
a. Subordinated debt(1) and intermediate term preferred stock.................................. | A515 329,000 |2.a.
b. Other limited-life capital instruments...................................................... | A516 0 |2.b.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// |
determined by the bank for its own internal regulatory capital analyses | ////////////////// |
consistent with applicable capital standards): | ////////////////// |
a. Tier 1 capital.............................................................................. | 8274 1,402,967 |3.a.
b. Tier 2 capital.............................................................................. | 8275 556,332 |3.b.
c. Total risk-based capital.................................................................... | 3792 1,959,299 |3.c.
d. Excess allowance for loan and lease losses (amount that exceeds 1.25% of gross | ////////////////// |
risk-weighted assets)....................................................................... | A222 12,232 |3.d.
e. Net risk-weighted assets (gross risk-weighted assets less excess allowance reported | ////////////////// |
in item 3.d above and all other deductions)................................................. | A223 18,174,339 |3.e.
f. "Average total assets" (quarterly average reported in Schedule RC-K, item 9, less all | ////////////////// |
assets deducted from Tier 1 capital)(2).................................................... | A224 20,748,016 |3.f.
|____________________|
_________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(3) |
|--------------------| ------------------|
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
4. Assets and credit equivalent amounts of off-balance sheet items | ------------------ | ------------------|
assigned to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 5163 2,737,025 | ////////////////// |4.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 36,833 |4.b.
|____________________|____________________|
___________________________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported in column A.
</TABLE>

33
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-24

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

SCHEDULE RC-R--CONTINUED

| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
|--------------------|--------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
___________________________________________________________________________________|____________________|____________________|
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................... | 5165 6,554,314 | ////////////////// |5.a
b. Credit equivalent amount of off-balance sheet items ..................... | ////////////////// | 3801 245,041 |5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................... | 3802 815,349 | ////////////////// |6.a.
b. Credit equivalent amount of off-balance sheet items ..................... | ////////////////// | 3803 95,136 |6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................... | 3804 12,757,398 | ////////////////// |7.a.
b. Credit equivalent amount of off-balance sheet items ..................... | ////////////////// | 3805 3,614,059 |7.b.
8. On-balance sheet asset values excluded from and deducted in | ////////////////// | ////////////////// |
the calculation of the risk-based capital ratio(2) ......................... | 3806 439,477 | ////////////////// |8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) ............................................ | 3807 23,303,563 | ////////////////// |9.
|____________________|____________________|
Memoranda

Dollar Amounts in Thousands| RCFD Bil Mil Thou |
_______________________________________________________________________________________________________|____________________ |
1. Current credit exposure across all off-balance sheet derivative contracts covered by the | ////////////////// |
risk-based capital standards........................................................................| 8764 51,418 |M.1.
|____________________ |

b. Foreign exchange contracts ................ | 3812 44,393 | 8769 5,553 | 8770 59,932 |M.2.b.

c. Gold contracts ............................ | 8771 0 | 8772 0 | 8773 0 |M.2.c.

d. Other precious metals contracts ........... | 8774 0 | 8775 0 | 8776 0 |M.2.d.

e. Other commodity contracts ................. | 8777 0 | 8778 0 | 8779 0 |M.2.e.

f. Equity derivative contracts ............... | A000 19,892 | A001 0 | A002 0 |M.2.f.

|________________________|_______________________|________________________|
______________________________
(1) Do not report in column B the risk-weighted amount of assets reported in column A.
(2) Include the difference between the fair value and the amortized cost of available-for-sale debt securities in item 8 and report
the amortized cost of these debt securities in items 4 through 7 above. For available-for-sale equity securities, if fair value
exceeds cost, include the difference between the fair value and the cost in item 8 and report the cost of these equity
securities in items 5 through 7 above; if cost exceeds fair value, report the fair value of these equity securities in items 5
through 7 above and include no amount in item 8. Item 8 also includes on-balance sheet asset values (or portions thereof) of
off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g., futures contracts)
not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables not included in the calculation
of credit equivalent amounts of off-balance sheet derivatives as well as any portion of the allowance for loan and lease losses
in excess of the amount that may be included in Tier 2 capital.

(3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts.

</TABLE>

34
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-25

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS
REPORTED IN THE REPORTS OF CONDITION AND INCOME
at close of business on June 30, 1997

TEXAS COMMERCE BANK NATIONAL ASSOCIATION HOUSTON , TEXAS
__________________________________________________________________ ___________________________________ ____________________
Legal Title of Bank City State

The management of the reporting bank may, if it wishes, both on agency computerized records and in computer-file

submit a brief narrative statement on the amounts reported in releases to the public.
the Reports of Condition and Income. This optional statement
will be made available to the public, along with the publicly All information furnished by the bank in the narrative
available data in the Reports of Condition and Income, in statement must be accurate and not misleading. Appropriate

response to any request for individual bank report data. efforts shall be taken by the submitting bank to ensure the

However, the information reported in column A and in all of statement's accuracy. The statement must be signed, in the

Memorandum item 1 of Schedule RC-N is regarded as space provided below, by a senior officer of the bank who

confidential and will not be released to the public. BANKS thereby attests to its accuracy.

CHOOSING TO SUBMIT THE NARRATIVE STATEMENT
SHOULD ENSURE THAT THE STATEMENT DOES NOT If, subsequent to the original submission, material changes are

CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF submitted for the data reported in the Reports of Condition
INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE and Income, the existing narrative statement will be deleted

AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN from the files, and from disclosure; the bank, at its option,

SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT may replace it with a statement, under signature, appropriate
THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT to the amended data.
WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOM-
ERS. Banks choosing not to make a statement may check the The optional narrative statement will appear in agency records

"No comment" box below and should make no entries of any and in release to the public exactly as submitted (or amended

kind in the space provided for the narrative statement; i.e., as described in the preceding paragraph) by the management

DO NOT enter in this space such phrases as "No statement," of the bank (except for the truncation of statements
"Not applicable," "N/A," "No comment," and "None." exceeding the 750-character limit described above). THE
STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY
The optional statement must be entered on this sheet. The WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR
statement should not exceed 100 words. Further, regardless RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT
of the number of words, the statement must not exceed 750 SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS
characters, including punctuation, indentation, and standard VERIFIED OR CONFIRMED THE ACCURACY OF THE
spacing between words and sentences. If any submission INFORMATION CONTAINED THEREIN. A STATEMENT TO
should exceed 750 characters, as defined, it will be truncated THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF
at 750 characters with no notice to the submitting bank and THE OPTIONAL STATEMENT SUBMITTED BY THE
the truncated statement will appear as the bank's statement MANAGEMENT OF THE REPORTING BANK.
___________________________________________________________________________________________________________________________________
No comment | | (RCON 6979) | C471 | C472 | (-

BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)

_______________________________________ ________________________________
Signature of Executive Officer of Bank Date of Signature

</TABLE>
35
<PAGE>

<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 6/30/97 ST-BK: 48-3926 FFIEC 031

Address: P.O. Box 2558 Page RC-26

City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|

THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- -----------------------------------------------------------------------------------------------------------------------------------

NAME AND ADDRESS OF BANK | OMB No. For OCC: 1557-0081
| OMB No. For FDIC: 3064-0052
| OMB No. For Federal Reserve: 7100-0036
PLACE LABEL HERE | Expiration Date: 3/31/2000
|
| SPECIAL REPORT
| (Dollar Amounts in Thousands)
___________________________________________________________________________________________________________________________________
| CLOSE OF BUSINESS | FDIC Certificate Number |
| DATE | | C-700 (-
| 6/30/97 | 0 |3|2|6|3| |
___________________________________________________________________________________________________________________________________
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- -----------------------------------------------------------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of Condition.
With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to their
executive officers made since the date of the previous Report of Condition. Data regarding individual loans or other extensions
of credit are not required. If no such loans or other extensions of credit were made during the period, insert "none" against
subitem (a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) See Sections 215.2
and 215.3 of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation O) for the definitions of "executive
officer" and "extension of credit," respectively. Exclude loans and other extensions of credit to directors and principal
shareholders who are not executive officers.
- -----------------------------------------------------------------------------------------------------------------------------------
a. Number of loans made to executive officers since the previous Call Report date .............. | RCFD 3561 | 1 a.
b. Total dollar amount of above loans (in thousands of dollars)................................. | RCFD 3562 | 320 b.
c. Range of interest charged on above loans ___________________________________________________________
(example: 9 3/4% = 9.75) ............................................ | RCFD 7701 | 8.10 | % to | RCFD 7702 | 8.10 % c.
___________________________________________________________
___________________________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________________________
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT | DATE (Month, Day, Year)
|
|
___________________________________________________________________________________________________________________________________
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) | AREA CODE/PHONE NUMBER/EXTENSION
| (TEXT 8904)
Karen Gatenby, Vice President | (713) 216-5263
___________________________________________________________________________________________________________________________________
FDIC 8040/53 (6-95)
</TABLE>