SHERRY LANE GROWTH FUND INC, N-2/A, 1996-02-22

SHERRY LANE GROWTH FUND INC
N-2/A, 1996-02-22

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 1996

1933 Act File No. 33-96108
1940 Act File No. 814-180

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

AMENDMENT NO. 2 TO

FORM N-2

[ ] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[x] Pre-Effective Amendment No. 2
[ ] Post-Effective Amendment No._
[ ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[x] Amendment No. 2

SHERRY LANE GROWTH FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
320 SOUTH BOSTON
SUITE 1000
TULSA, OKLAHOMA 74103-3703
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (918) 584-7272)

BARRY M. DAVIS
SHERRY LANE CAPITAL ADVISORS, INC.
320 SOUTH BOSTON, SUITE 1000
TULSA, OKLAHOMA 74103-3703
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:

William G. Lee Richard Marlin
Vinson & Elkins L.L.P. Kramer, Levin, Naftalis, Nessen,
2300 First City Tower Kamin & Frankel
1001 Fannin Street 919 Third Avenue
Houston, Texas 77002-6760 New York, New York 10022

-------------------
Approximate date of proposed public offering: As soon as possible
after this registration statement becomes effective.

If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [x]

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
=============================================================================================================
Proposed Proposed Maximum
Maximum Aggregate
Title of Securities Amount Being Offering Price Offering Price Amount of
Being Registered Registered Per Share (1) (1) Registration Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value
per share . . . . . . . . . . . 5,000,000 $10.00 $50,000,000 $18,242
=============================================================================================================
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
SHERRY LANE GROWTH FUND, INC.

FORM N-2
CROSS-REFERENCE SHEET

<TABLE>
<CAPTION>
Part A
Item Number Caption Prospectus Caption
----------- ------- ------------------
<S> <C> <C>
1 Outside Front Cover Outside Front Cover of Prospectus
2 Inside Front and Outside Inside Front Cover and Outside Back Cover Page of
Back Cover Page Prospectus

3 Fee Table and Synopsis Fee Table

4 Financial Highlights Not Applicable
5 Plan of Distribution Outside Front Cover; Plan of Distribution

6 Selling Shareholders Not Applicable
7 Use of Proceeds Use of Proceeds; Investment Objectives and
Policies

8 General Description of Registrant The Company; Investment Objectives and Policies

9 Management Management; The Investment Adviser
10 Capital Stock, Long Term Description of Capital Stock
Debt and Other Securities

11 Defaults and Arrears on Senior Not Applicable
Securities
12 Legal Proceedings Not Applicable

13 Table of Contents of the Statement of Not Applicable
Additional Information
</TABLE>

<TABLE>
<CAPTION>
Part B
Item Number Caption Prospectus Caption
----------- ------- ------------------
<S> <C> <C>
14 Cover Page Cover Page
15 Table of Contents Outside Back Cover

16 General Information and History The Company

17 Investment Objectives and Policies Investment Objectives and Policies
18 Management Management; The Investment Adviser

19 Control Persons and Principal Holders The Company
of Securities
20 Investment Advisory and Other Services The Investment Adviser; The Investment Advisory
Agreement

21 Brokerage Allocation and Other The Company
Practices

22 Tax Status Federal Income Tax Matters
23 Financial Statements Financial Statements
</TABLE>
<PAGE> 3

***************************************************************************
* *
* 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 FEBRUARY 22, 1996

PROSPECTUS
5,000,000 SHARES
SHERRY LANE GROWTH FUND, INC.
COMMON STOCK

All of the 5,000,000 shares of Common Stock, par value $.01 per share
(the "Common Stock"), offered hereby are being offered by Sherry Lane Growth
Fund, Inc., a newly organized Delaware corporation (the "Company"). The
Company is a closed-end, non- diversified investment company which has elected
to be treated as a business development company (a "Business Development
Company") under the Investment Company Act of 1940 (the "Investment Company
Act"). Sherry Lane Capital Advisors, Inc. (the "Investment Adviser"), a
registered investment advisor under the Investment Advisers Act of 1940 (the
"Advisers Act"), will act as administrator and adviser to the Company.

The Company's principal objective is the realization of long-term
capital appreciation on its investments in portfolio companies. In addition,
the Company will seek to structure its investments to provide an element of
current income through interest, dividends and fees whenever feasible in light
of market conditions and the cash flow characteristics of its portfolio
companies. The Company will distribute 90% of its investment company taxable
income (net investment income from interest and dividends and net short-term
capital gains) to stockholders on a quarterly basis. The Company may choose to
distribute long term capital gains, or to retain such gains, net of applicable
taxes, to supplement equity capital and to support growth in its portfolio.

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING
THE COMPANY'S LACK OF PRIOR OPERATING HISTORY, THE RISKY NATURE OF THE
COMPANY'S INVESTMENTS, RISKS ASSOCIATED WITH BORROWING BY THE COMPANY, LIMITED
LIQUIDITY OF THE COMPANY'S INVESTMENTS, AND UNCERTAINTY REGARDING THE VALUE OF
THE COMPANY'S INVESTMENTS. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC
MARKET FOR THE COMMON STOCK, AND THERE CAN BE NO ASSURANCE THAT ANY SUCH MARKET
WILL DEVELOP. TRANSFERS WILL BE RESTRICTED DURING AND FOR SIX MONTHS FOLLOWING
THE FIRST SALE OF COMMON STOCK IN THIS OFFERING. THEREAFTER, THE COMPANY MAY
SEEK TO HAVE THE COMMON STOCK LISTED OR QUOTED ON A NATIONAL STOCK EXCHANGE OR
ON THE NASDAQ STOCK MARKET. SHARES OF CLOSED-END INVESTMENT COMPANIES HAVE IN
THE PAST FREQUENTLY TRADED AT DISCOUNTS FROM THEIR NET ASSET VALUES AND INITIAL
OFFERING PRICES. THE RISK OF LOSS ASSOCIATED WITH THIS CHARACTERISTIC OF
CLOSED-END INVESTMENT COMPANIES MAY BE GREATER FOR INVESTORS EXPECTING TO SELL
SHARES OF COMMON STOCK PURCHASED IN THIS OFFERING SOON AFTER THE COMPLETION OF
THIS OFFERING. SEE "RISK FACTORS" ON PAGE 6 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF COMMON STOCK.

This Prospectus sets forth concisely the information about the Company
that a prospective investor ought to know before investing. This Prospectus
should be retained for future reference. Additional information has been filed
with the Securities and Exchange Commission and is available upon written or
oral request and without charge. See "Additional Information."

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

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.

<TABLE>
<CAPTION>
======================================================================================================
Price to Proceeds to
Public (1) Sales Load Company (1)(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Per Share . . . . . . . . . $ 10.00 $ .725 $ 9.275
- ------------------------------------------------------------------------------------------------------
Total Minimum(1) . . . . . $15,000,000 $1,087,500 $13,912,500
- ------------------------------------------------------------------------------------------------------
Total Maximum . . . . . . . $50,000,000 $3,625,000 $46,375,000
======================================================================================================
</TABLE>

(1) The Price to Public per share will be $9.85 for each investor who
purchases a minimum of 50,000 shares in the offering. The shares are
offered on a best efforts basis. The offering terminates on May 31,
1996, provided the Company and the Principal Underwriter may agree to
extend the offering until December 31, 1996. Subscriptions will be
placed in escrow with Continental Stock Transfer & Trust Company, New
York, New York, pending attainment of the minimum offering. See
"Plan of Distribution."

(2) The Sales Load will be $.575 for sales to each investor who purchases
a minimum of 50,000 shares in the offering. Before deducting
organizational and other expenses of the offering estimated to be
$350,000.

The Common Stock is offered by RAS Securities Corp. (the "Principal
Underwriter") and by other members of the NASD authorized as selling agents
(collectively, the "Broker/Dealers"). The Common Stock is offered when, as and
if delivered to and accepted by the Principal Underwriter and subject to the
approval of certain legal matters by counsel and to certain other conditions.
The Principal Underwriter reserves the right to withdraw, cancel or modify the
offering and to reject any order in whole or in part. Share certificates will
be delivered on or about 30 days after subscription acceptance and upon release
of escrow funds. The Company has agreed to indemnify the Principal Underwriter
against certain liabilities, including liabilities under the Securities Act of
1933. For information regarding these matters see "Plan of Distribution."

RAS SECURITIES CORP.
_____________, 1996
<PAGE> 4
ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form N-2 (the "Registration
Statement") under the Securities Act of 1933 (the "Securities Act"), and the
Investment Company Act with respect to the shares of Common Stock offered by
this Prospectus. This Prospectus, which is a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement or the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement, including the exhibits and schedules thereto.

The Registration Statement and the exhibits and schedules thereto
filed with the Commission may be inspected, without charge, at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at Seven World Trade Center, New York, New York 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.

The Company will furnish to its stockholders annual reports containing
audited financial statements, quarterly unaudited statements and such other
periodic reports as it may determine to furnish or as may be required by law.

IN CONNECTION WITH THIS OFFERING, THE PRINCIPAL UNDERWRITER MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

[INSERT REQUIRED BLUE SKY LEGENDS, IF ANY]

2
<PAGE> 5
PROSPECTUS SUMMARY

The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information
appearing elsewhere herein. Each prospective investor is urged to read this
Prospectus in its entirety.

THE COMPANY

Sherry Lane Growth Fund, Inc. (the "Company") is a closed-end,
non-diversified investment company which has been formed primarily to invest in
the equity and equity-linked debt securities of small to medium-sized
companies. It is expected that the securities in which the Company invests
will include common stock, preferred stock, convertible debt securities,
warrants and options. It is expected that most of the Company's investments
will be in small to medium-sized companies with total assets and annual sales
under $100,000,000. It is contemplated that most of these companies will be
privately owned and may have very limited operating history. It is anticipated
that investments will be made mainly in enterprises located in the southwestern
and south central United States, provided, however, that the Company will
participate in selected opportunities outside this region. The Company's
principal objective is the realization of long-term capital appreciation on its
investments in portfolio companies. In addition, the Company will seek to
structure its investments to provide an element of current income through
interest, dividends and other fees whenever feasible in light of market
conditions and the cash flow characteristics of its portfolio companies. The
Company will locate investment opportunities primarily through referrals from
finance and other professionals, business executives and entrepreneurs known to
the Company's management from prior business, investment and professional
relationships. The Company will offer managerial assistance to its portfolio
companies. See "The Company."

The Company's main criterion for the selection of portfolio companies
is the potential for above average long-term growth in sales, earnings and
enterprise value. The Company will consider a number of factors in evaluating
prospective investments in portfolio companies including, among others, the
quality, depth and experience of management; the existence of potentially large
unfulfilled markets for the portfolio companies' products and services; the
nature of the portfolio companies' products and services, with a strong
preference for proprietary characteristics that create barriers to competition;
and the structure, price and terms of investments in the portfolio companies.
The Company will focus particular attention on industries that it considers to
be good candidates for successful consolidation. The Company will also favor
investments in companies that it believes can achieve the necessary size,
profitability and management depth and sophistication to become public
companies. See "Investment Objectives and Policies."

The Company has elected to be treated as a Business Development
Company under the Investment Company Act. As such, the Company must distribute
90% of its investment company taxable income (net investment income from
interest and dividends and net short-term capital gains) to stockholders on a
quarterly basis. The Company may choose to distribute long-term capital gains,
or to retain such gains, net of applicable taxes, to supplement equity capital
and to support growth in its portfolio. See "Federal Income Tax Matters."

Sherry Lane Capital Advisors, Inc., based in Tulsa, Oklahoma, with a
branch office in Houston, Texas, will serve as the Investment Adviser. It will
be responsible, on a day-to-day basis, for the selection and supervision of
portfolio investments and for management of the Company's records and financial
reporting requirements. The Company will pay the Investment Adviser an annual
management fee of 2.0% of the Company's net asset value, payable quarterly. In
addition, the Company will pay the Investment Adviser an incentive fee of 20%
of net realized capital gains after adjusting for any net unrealized
depreciation. See "Management," "The Investment Adviser," and "The Investment
Advisory Agreement."

The Company was incorporated in Delaware on July 24, 1995. Its
principal office is located at 320 South Boston, Suite 1000, Tulsa, Oklahoma
74103-3703 and its telephone number is (918) 584-7272.

3
<PAGE> 6
THE OFFERING

<TABLE>
<S> <C>
COMMON STOCK OFFERED
BY THE COMPANY . . . . . . . . . . . . . . . 5,000,000 shares

INVESTMENT
PER INVESTOR . . . . . . . . . . . . . . . . Minimum of 500 shares and greater purchases in
100 share increments.
COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING . . . . . . . . . . . . . 5,002,000 shares. See "Description of Capital
Stock."

USE OF PROCEEDS . . . . . . . . . . . . . . . To make investments in accordance with the
Company's investment policies and objectives.
See "Use of Proceeds."

OFFERING TERMINATION . . . . . . . . . . . . The offering will terminate on May 31, 1996,
provided that the Company and the Principal
Underwriter may agree to extend the offering
from time to time until December 31, 1996. See
"Plan of Distribution."
DISTRIBUTIONS . . . . . . . . . . . . . . . . The Company intends to distribute quarterly to
its stockholders 90% of its investment company
taxable income (net investment income from
interest and dividends and net short-term
capital gains). See "Federal Income Tax
Matters."

REINVESTMENT PLAN . . . . . . . . . . . . . . All cash distributions to stockholders will be
reinvested automatically under the Company s
Dividend Reinvestment and Cash Purchase Plan
(the "Reinvestment Plan") in additional whole
and fractional shares of Common Stock unless a
stockholder or its representative elects to
receive cash. See "Dividend Reinvestment Plan"
and "Federal Income Tax Matters."
LEVERAGE AND BORROWING . . . . . . . . . . . The Company does not intend to use borrowed
funds to make investments. However, the Company
may borrow on a short term basis against
maturities of other investments for purposes of
meeting short term cash needs. Also, it may
borrow funds from time to time and at quarter
end solely in order to maintain sufficient cash
assets necessary to meet the requirements for
qualification as a Business Development Company
and the diversification requirements to qualify
as a regulated investment company for federal
income tax purposes. See "Investment and
Objectives Policies."

RISK FACTORS . . . . . . . . . . . . . . . . The securities offered hereby involve a high
degree of risk including, but not limited to,
the Company's lack of prior operating history;
the risky nature of the Company's investments;
risks associated with borrowing by the Company;
limited liquidity of the Company's portfolio
investments; competition for investments; and
risks relating to regulation, conflicts of
interest and a limited public market for Common
Stock of the Company. See "Risk Factors."
</TABLE>

4
<PAGE> 7
FEES AND EXPENSES

The purpose of the following table is to assist the investor in
understanding the various costs and expenses that an investor in the Company
will bear directly or indirectly.

<TABLE>
<S> <C>
SALES LOAD (AS A PERCENTAGE OF OFFERING PRICE)(1)

Underwriting Discount . . . . . . . . . . . . . . . . . . 6.75%
Principal Underwriter non-accountable expense allowance . . 0.50%
-----
Total . . . . . . . . . . . . . . . . . . . . . . . . 7.25%
=====

ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSET VALUE)

Management fees(2) . . . . . . . . . . . . . . . . . . . . 2.00%
Other expenses(3) . . . . . . . . . . . . . . . . . . . . 0.50%
-----
Total . . . . . . . . . . . . . . . . . . . . . . . . 2.50%
=====
</TABLE>

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

(1) Not including the organizational and other expenses of this offering,
which are estimated to be $250,000. In addition, the selling
commissions will be 3.75% for sales to each investor who purchases a
minimum of 50,000 shares in the offering, resulting in total stockholder
transaction expenses of 5.75% for sales to each such investor.

(2) Management fees represent the Investment Adviser's operating expenses
and consist primarily of compensation and employee benefits, travel and
marketing expenses, rent and other similar expenses. See "The Company -
Expenses of the Company."

(3) Includes estimated accounting, legal, stockholder relations, transfer
agent, stock record and custodian expenses and directors' fees and
assumes that 5,000,000 shares of Common Stock are sold in this offering.
Not including the Investment Adviser's 20% management incentive fee on
net realized capital gains. See "The Investment Advisory Agreement,"
"The Company - Expenses of the Company" and "Management."

EXAMPLE

The following example demonstrates the projected dollar amount of
total cumulative expenses that would be incurred over various periods with
respect to a hypothetical investment in the Company. These amounts assume no
additional leverage and are based upon payment by an investor of a 7.25% sales
load and payment by the Company of operating expenses at the levels set forth
in the table above.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses, cumulatively,
on a $1,000 investment, assuming a 5.0% annual return . . $95 $145 $200 $334
</TABLE>

This example should not be considered a representation of the future
expenses of the Company, and actual expenses may be greater or less than those
shown. Moreover, while the example assumes (as required by the Commission) a
5.0% annual return, the Company's performance will vary and may result in a
return greater or less than 5.0%. In addition, while the example assumes
reinvestment of all dividends and distributions at net asset value,
participants in the Reinvestment Plan may receive shares purchased by the
Reinvestment Plan administrator at the market price in effect at the time,
which may be at, above or below net asset value. See "Dividend Reinvestment
Plan."

5
<PAGE> 8

RISK FACTORS

The purchase of the shares offered by this Prospectus involves a
number of significant risks. As a result, there can be no assurance that the
Company will achieve its investment objectives. In addition to the other
information contained in this Prospectus, the following risk factors should be
carefully considered in evaluating an investment in the Common Stock.

LACK OF OPERATING HISTORY; DEPENDENCE UPON INVESTMENT ADVISER

The Company has recently been organized to make investments in
portfolio companies selected by the Investment Adviser. While Barry M. Davis,
Chairman and Chief Executive Officer, and Philip A. Tuttle, President of the
Investment Adviser, have a prior record of making and managing investments
similar to those to be made by the Company, the Company itself has no operating
history. The Company is dependent for the selection, structuring, closing and
monitoring of its investments upon the diligence and skill of the Investment
Adviser and Mr. Davis and Mr. Tuttle, the loss of whose services could have a
material adverse effect on the operations of the Company. See "Management."

UNSPECIFIED USE OF PROCEEDS

The Company has not identified the particular uses for the net
proceeds from this offering other than to make future unspecified investments.
Therefore, prospective investors must rely on the ability of the Investment
Adviser to identify and make portfolio investments consistent with the
Company's investment objectives. Investors will not have the opportunity to
evaluate personally the relevant economic, financial and other information
which will be utilized by the Investment Adviser in deciding whether to make a
particular investment or to dispose of any investment.

INVESTMENTS IN SMALL PRIVATELY-OWNED COMPANIES

The portfolio of the Company is expected to consist primarily of
investments in small businesses, many privately owned. There is generally no
publicly available information about such companies, and the Company must rely
on the diligence of its Investment Adviser to obtain information in connection
with the Company's investment decisions. Typically, small businesses depend
for their success on the management talents and efforts of one person or a
small group of persons, and the death, disability or resignation of one or more
of these persons could have a material adverse impact on their company.
Moreover, small businesses frequently have smaller product lines and market
shares than their competition. Small companies may be more vulnerable to
economic downturns and often need substantial additional capital to expand or
compete. Such companies may also experience substantial variations in
operating results. Therefore, investment in small businesses involves a high
degree of business and financial risk, which can result in substantial losses.
See "Investment Objectives and Policies."

USE OF LEVERAGE

Although the Company does not intend to borrow for investment
purposes, the Company may borrow on a short term basis against maturities of
other investments for purposes of meeting short term cash needs. Also, the
Company may borrow funds from time to time and at quarter end solely in order
to maintain sufficient cash assets necessary to satisfy the requirements for
qualification as a Business Development Company and the diversification
requirements to qualify as a regulated investment company for federal income
tax purposes. See "Regulation" and "Federal Income Tax Matters." Any such
borrowing by the Company will be subject to the requirements of Section 18 of
the Investment Company Act, as modified by Section 61 of the Investment Company
Act, including the requirement that any amount borrowed must have asset
coverage of at least 200 percent of the amount borrowed. Such borrowing by the
Company could increase the investment risk and the volatility of the price of
the Company's shares of Common Stock because (i) leverage exaggerates any
increase or decrease in the value of the Company's portfolio, (ii) the costs of
borrowing may exceed the income from the portfolio assets mortgaged or pledged
to secure the borrowing, (iii) a decline in net asset value results if the
investment performance of the portfolio assets mortgaged or pledged to secure
the borrowing fails to cover the repayment of the borrowing together with
interest and other costs associated with the borrowing, (iv) a decline in net
asset value could affect the ability of the Company to make Common Stock
dividend payments, (v) a failure to pay dividends or make distributions could
affect the ability of the Company to qualify as a

6
<PAGE> 9

regulated investment company under the Internal Revenue Code, and (vi) if the
asset coverage for the debt securities issued to effect the borrowing declines
to less than two hundred percent (as a result of market fluctuations or
otherwise), the Company may be required to sell a portion of its investments
when it may be disadvantageous to do so. The officers and directors of the
Company will seek to manage the Company's borrowings in such a manner to
mitigate or avoid these risks, but there is no assurance that they will be
successful in this regard.

ILLIQUIDITY OF PORTFOLIO INVESTMENTS

Many of the investments of the Company will be securities acquired
directly from small, privately owned companies. The Company's portfolio
securities will usually be subject to restrictions on resale or otherwise have
no established trading market. The illiquidity of most of the Company s
portfolio securities may adversely affect the ability of the Company to dispose
of such securities in a timely manner and at a fair price at times when the
Company deems it necessary or advantageous.

CONFLICTS OF INTEREST

Barry M. Davis, Chairman and Chief Executive Officer, and Philip A.
Tuttle, President of the Investment Adviser, serve as general partners of the
general partners of two venture capital investment partnerships and, as such,
may encounter conflicts of interest regarding the selection of investment
opportunities and the allocation of management time. One of these, Davis
Venture Partners, L.P., which was formed in 1986, is in the process of
liquidating its portfolio and will not make any further investments. The
other, Davis Venture Partners II, L.P., was formed in October 1995 with capital
commitments of approximately $11,000,000 and is currently raising additional
funds, and has investment objectives substantially similar to those of the
Company. Although the principals of the Investment Adviser intend to select
investments for the Company and for Davis Venture Partners II, L.P. separately
considering in each case only the investment objectives, investment position,
available funds and other pertinent factors of the particular investment fund,
it is expected that the Company and Davis Venture Partners II, L.P. may
frequently invest in the same portfolio companies, with each of the Company and
Davis Venture Partners II, L.P. taking a position in the portfolio company.
Also, two of the officers of the Company are officers, directors and
shareholders of Alliance Business Investment Company which is also engaged in
venture capital investing, but is currently in the process of liquidating its
portfolio and has no plans for further investment. See "Management."

VALUATION OF PORTFOLIO

There is typically no public market for the securities of small,
privately owned companies. As a result, the valuation of such securities in
the Company's portfolio is subject to the good faith determination of the
Company's Board of Directors. See "Valuation of Portfolio Securities." There
can be no assurance that the values so determined reflect the amounts that will
ultimately be realized on these investments.

COMPETITIVE MARKET FOR INVESTMENT OPPORTUNITIES

A large number of entities and individuals compete for the types of
investments to be made by the Company. Many of these entities and individuals
have greater financial resources than the Company. As a result of this
competition, the Company may from time to time be precluded from entering into
attractive transactions. There can be no assurance that the Company will be
able to identify and complete investments that satisfy the Company's investment
objectives or that it will be able to invest fully its available capital.

DEPENDENCE ON PUBLIC OFFERING MARKET OR AVAILABILITY OF STRATEGIC BUYERS

The success of the investment strategy of the Company will be affected
in large part by the state of the securities markets in general and the market
for public financings in particular. Changes in the securities markets and
general economic conditions, including economic downturns, fluctuations in
interest rates, the availability of credit, inflation and other factors, may
affect the value of the Company's investments. The market for initial public
offerings is cyclical in nature and, accordingly, there can be no assurance
that the securities markets will be receptive to initial public offerings,
particularly those of emerging growth companies. Any adverse change in the
market for public offerings could have a material adverse effect on the Company
and could severely limit the Company's ability to realize

7
<PAGE> 10
its investment objectives. The availability of strategic buyers for the
companies in which the Company invests may also fluctuate from time to time.
Such availability will also be affected by the state of the securities markets
and general economic conditions.

LACK OF DIVERSIFICATION

Based on the amount of funds to be realized from this offering, it is
unlikely that the Company will be able to commit its funds to the acquisition
of securities of a large number of companies or to direct its investments to
diverse areas. Although the Company intends to elect Subchapter M status under
the Internal Revenue Code of 1986, as amended (the "Code"), and will,
therefore, be required to meet certain diversification requirements thereunder,
the Company intends to operate as a non-diversified investment company within
the meaning of the Investment Company Act and, therefore, the Company s
investments may not be substantially diversified. In any event, the Company
will not be able to achieve the same level of diversification as much larger
entities engaged in similar activities.

POSSIBLE LOSS OF PASS-THROUGH TAX TREATMENT

The Company intends to qualify for and elect to be treated as a
regulated investment company under Subchapter M of the Code. To qualify, the
Company must meet certain income distribution and diversification requirements.
In any year in which the Company so qualifies, it generally will not be
subjected to federal income tax on net investment income and net short-term
capital gains distributed to its stockholders. If the Company were to fail to
qualify under Subchapter M and its income became fully taxable, a substantial
reduction in the amount of income available for distribution to the Company s
stockholders could result. See "Federal Income Tax Matters" and "Regulation."

LIMITED PUBLIC MARKET FOR COMMON STOCK; TRADING BELOW NET ASSET VALUE

There has been no prior trading market for the Common Stock and there
can be no assurance that a regular trading market will develop, or that, if
developed, it will be sustained. The Company may seek to have the Common Stock
listed on a national stock exchange or quoted on The Nasdaq Stock Market. The
Company will not seek such listing or quotation until, at the earliest, six
months following the first sale of Common Stock in this offering. No
assurances can be given that the Company will seek such listing or quotation or
that a stock exchange or The Nasdaq Stock Market will agree to list or quote
the Common Stock. In addition, shares of closed-end investment companies, such
as the Company, often trade below their net asset value.

RESTRICTION ON TRANSFER OF COMMON STOCK

No shares of Common Stock may be transferred by any investor during
and for the first six months following the first sale of Common Stock in this
offering.

SALE OF SMALL NUMBER OF SHARES

This offering may be consummated by the Company with the sale of as
few as 1,500,000 shares of Common Stock. In the event that only a small
portion of the maximum offering amount of 5,000,000 shares of Common Stock is
sold by the Company, the performance of individual portfolio companies will
have a greater effect on the ability of the Company to realize long-term
appreciation on its investments. In addition, certain of the Company's
expenses will not vary in proportion with the amount of capital of the Company
and will be relatively higher if only a small portion of the shares are sold
than if a large portion of the shares are sold. See "The Company--Expenses of
the Company" and "Plan of Distribution."

ANTI-TAKEOVER PROVISIONS

8
<PAGE> 11

of having cause to remove the incumbent directors and simultaneously gain
control of the Board of Directors by filling the vacancies created by such
removal with new nominees.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock
offered hereby are estimated to be approximately $13,562,500 if 1,500,000
shares of Common Stock are sold in this offering and $46,025,000 if 5,000,000
shares of Common Stock are sold in this offering. No portion of the net
proceeds of the offering has been allocated to any particular investment. The
proceeds will be used to invest in portfolio companies and for working capital
and general corporate purposes. Pending such uses, such proceeds will be
invested, in compliance with the Investment Company Act, in U.S. government
securities or deposited in federally insured accounts of banks or in money
market accounts of other financial institutions.

The Company intends to invest at least one-half of its total assets in
portfolio companies within the earlier of (i) two years after the completion of
this offering or (ii) two and one-half years after the effective date of this
Prospectus.

DISTRIBUTIONS

The Company intends to make quarterly distributions to its
stockholders of 90% of its investment company taxable income (net investment
income from interest and dividends and net short-term capital gains) and to
declare the first distribution during the period ending December 31, 1995,
which shall be payable shortly thereafter. Net realized long-term capital
gains will be retained to supplement the Company's equity capital and support
growth in its portfolio, unless the Company's Board of Directors determines in
certain cases to make a distribution. Pursuant to the Company's Dividend
Reinvestment Plan, a stockholder whose shares are registered in his own name
will have all distributions reinvested automatically in additional shares of
Common Stock by the Company's transfer agent, Continental Stock Transfer &
Trust Company, New York, New York, as administrator of the Dividend
Reinvestment Plan (the "Reinvestment Plan Administrator"), unless the
stockholder elects, by letter to the Company received prior to the
corresponding record date, to receive cash. No assurances can be given that
the Company will achieve investment results that will permit any specified
level of cash distributions. See "Regulation" and "Federal Income Tax
Matters."

THE COMPANY

GENERAL

The Company is a newly organized, closed-end, non-diversified
investment company which has elected to be treated as a Business Development
Company under the Investment Company Act. The Company intends to invest
primarily in the equity and equity-linked debt securities, including common
stock, preferred stock, convertible debt securities, warrants, and options, of
companies that the Investment Adviser believes to have significant potential
for growth in sales, earnings and enterprise value. As a Business Development
Company, the Company will distribute 90% of its net investment income (net
investment income from interest and dividends plus net short term capital
gains) to stockholders on a quarterly basis. The Company may choose to
distribute long term capital gains, or to retain such gains, net of applicable
taxes, to supplement equity capital and to support growth in its portfolio.

9
<PAGE> 12
INVESTMENT ADVISER

Sherry Lane Capital Advisors, Inc., based in Tulsa, Oklahoma with a
branch office in Houston, Texas, will serve as the Investment Adviser to the
Company. It will be responsible, on a day-to-day basis, for the selection and
supervision of portfolio investments and for management of the Company s
records and financial reporting requirements. The Company will pay the
Investment Adviser an annual management fee of 2.0% of net asset value, payable
quarterly. In addition, the Company will pay the Investment Adviser an
incentive fee of 20.0% of net realized capital gains from portfolio investments
after adjusting for any net unrealized depreciation. See "The Investment
Advisory Agreement."

Barry M. Davis, Chairman and Chief Executive Officer, and Philip A.
Tuttle, President of the Investment Adviser, have substantial experience in
identifying, evaluating, selecting, negotiating and closing investments similar
to those being sought by the Company. See "Management," "The Investment
Adviser," and "The Investment Advisory Agreement."

NATURE OF INVESTMENTS IN PORTFOLIO COMPANIES

The Company's investments in portfolio companies may be styled as debt
or equity, or some combination, but will always include some equity feature
through which the Company can participate in the growth in the value of the
underlying business. The Company's investment in a given portfolio company may
consist of common stock, preferred stock (which may or may not be convertible
into common stock), debentures (which may or may not be convertible into common
stock and may or may not be subordinated), warrants to purchase common stock,
or some combination thereof. The Company's investments in preferred stock and
debentures will, whenever practical in light of competitive considerations and
the cash-flow capabilities of the portfolio companies, be structured to provide
an element of current income to the Company. The Company's investments in
portfolio companies will generally be structured with the intention of having
the initial investment capital repaid within five years and the equity feature
of the investments realized in cash within five to ten years. Although the
Company expects to dispose of investments after a certain limited time,
situations may arise in which it may hold equity securities for a longer
period.

TEMPORARY INVESTMENTS

Pending investments in the types of securities described above, the
Company will invest its cash in (i) federal government or agency issued or
guaranteed securities that mature in 15 months or less; (ii) repurchase
agreements with banks whose deposits are insured by the Federal Deposit
Insurance Corporation (an "insured bank"), with maturities of seven days or
less, the underlying instruments of which are securities issued or guaranteed
by the federal government; (iii) certificates of deposit in an insured bank
with maturities of one year or less, up to the amount of the deposit insurance;
(iv) deposit accounts in an insured bank subject to withdrawal restrictions of
one year or less, up to the amount of deposit insurance; and (v) certificates
of deposit or deposit accounts in an insured bank in amounts in excess of the
insured amount if the insured bank is deemed "well-capitalized" by the Federal
Deposit Insurance Corporation.

OPERATIONS

The Investment Adviser will locate potential investment opportunities
primarily by making use of an extensive network of investment bankers,
commercial bankers, accountants and other finance professionals; venture
capitalists and other investment professionals; attorneys; business executives;
and entrepreneurs.

The investment process includes the identification, evaluation,
negotiation, documentation and closing of the investment. The Investment
Adviser has extensive experience in all phases of the investment process. The
evaluation of a potential investment includes due diligence, which usually
involves on-site visits; review of historical and prospective financial
information; interviews with management, employees, customers and vendors of
the potential portfolio company; and background checks and research relating to
its management, markets, products and services.

Upon the completion of due diligence and a decision to proceed with an
investment, the Investment Adviser will create an investment memorandum
containing information pertinent to the investment for presentation to the

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<PAGE> 13
Company's Board of Directors, which must approve the investment. Additional
due diligence may be conducted by the Company's attorneys and independent
accountants prior to the closing of the investment.

SELECTION OF INVESTMENTS

The Company's main criterion for the selection of investments in
portfolio companies is the potential for substantial growth in sales, earnings
and enterprise value. The Company will seek to identify companies which have
extraordinary opportunities in the markets they serve or that have devised
innovative products, services or ways of doing business that afford them a
distinct competitive advantage. Such companies might achieve growth either
internally or by acquisition. In addition, the Company intends to invest in
companies seeking to consolidate fragmented industries. Often, such
consolidations can improve performance by bringing extraordinary management
talent, economies of scale and greater capital resources to bear on businesses
that might have lacked such talent, economies and resources in the past.

In evaluating potential portfolio companies, the Company will pay
particular attention to the following characteristics:

Management. The Company will favor investments in companies whose
management teams consist of talented individuals of high integrity with
significant experience. The Company intends to pay particular attention to the
depth of the management team and the extent to which key managers have an
ownership interest in the company.

Market. The Company will favor investments in companies that are
addressing a large, unfulfilled market demand with long- term high-growth
prospects and that can reasonably expect to achieve and maintain a significant
market share through proprietary products and services. The Company will also
favor investments in companies that deliver products and services with
significant performance and cost advantages and for which there exist
significant barriers to effective competition by others.

Ability to Achieve Size and Become Public. The Company will favor
investments in companies that can achieve the necessary size, profitability and
management depth and sophistication to become public companies.

In selecting investments, the Company will consider the potential and
likely means for achieving the liquidity that would ultimately enable the
Company to achieve cash value for its equity investments. Possible ways of
achieving liquidity include an initial public offering, a sale of the portfolio
company or a purchase by the portfolio company of the Company's equity interest
in the portfolio company.

ELIGIBLE PORTFOLIO COMPANIES

The Company, as a Business Development Company, will be required by
statute to invest at least 70% of its assets in securities of companies that
qualify as "Eligible Portfolio Companies" as defined under the Investment
Company Act. An Eligible Portfolio Company generally is any United States
company that is not an investment company, provided that it does not have a
class of securities listed on a securities exchange or included in the Federal
Reserve Board's over-the-counter margin list. The Company will be required by
statute to make available significant managerial assistance to each of the
Eligible Portfolio Companies in which it invests.

The Company may invest up to 30% of its assets in other portfolio
investments. The Company intends to retain maximum flexibility in connection
with its investments and, therefore, does not have a policy as to the minimum
percentage of its assets that will be so invested. Such investments, if made,
would be primarily in securities of companies that are regularly traded on a
recognized exchange or in the over-the-counter market and which the Investment
Adviser believes have significant potential for appreciation in value.

COMPETITION

The Company's primary competitors include financial institutions,
venture capital firms and other non-traditional investors. Many of these
entities have greater financial and managerial resources than the Company. The
Company believes that it will compete with such entities primarily on the basis
of the quality of its services, its

11
<PAGE> 14
reputation, the timely investment analysis and decision-making processes it
will follow, and, to a significantly lesser degree, on the investment terms it
offers on the securities to be issued by its portfolio companies.

EMPLOYEES

The Company currently has six employees. The Company believes that
its relations with its employees are excellent. The Company will maintain a
relatively low overhead as a result of outsourcing of certain job functions not
directly related to the evaluation, selection, negotiation or management of
portfolio company investments or the executive management of the Company.

EXPENSES OF THE COMPANY

In addition to the fees paid to the Investment Adviser, the Company
will pay all of its own expenses, including directors' fees; taxes; fees and
expenses of the Company's legal counsel, independent accountants and transfer
agent; expenses of printing and mailing share certificates, stockholder
reports, notices to stockholders and proxy statements; reports to governmental
offices; brokerage and other expenses in connection with the execution,
recording and settlement of portfolio security transactions; expenses of
stockholders' meetings; Commission and state blue sky registration fees; and
the Company's other business and operating expenses not covered in the Advisory
Agreement. See "The Investment Advisory Agreement."

On the basis of the anticipated size of the Company immediately
following the closing of the offering, and assuming sale of the maximum amount
of shares of Common Stock being offered hereby, it is estimated that the
Company's annual operating expenses, including the Management Fee paid to the
Investment Adviser, will be approximately $1,250,000 (approximately 2.50% of
the net proceeds of this offering). While the foregoing estimates have been
made in good faith, there can be no assurance that actual annual expenses will
not be substantially greater than such estimates as a result of increases in
the cost of transfer agent activities and professional and similar services
that cannot be predicted and are beyond the control of the Company.

Organizational and other expenses of the offering are estimated to be
approximately $250,000 and will be paid by the Company. Offering expenses,
excluding the underwriting discounts and commissions and non-accountable
expense allowance, will be charged to capital at the time of issuance of such
shares.

TRANSFER AGENT

Continental Stock Transfer & Trust Company, New York, New York, will
serve as Transfer Agent for the Common Stock.

INVESTMENT OBJECTIVES AND POLICIES

The Company's principal objective is the realization of long-term
capital appreciation on its net investments in portfolio companies. In
addition, the Company will seek to structure its investments to provide an
element of current income through interest, dividends and fees whenever
feasible in light of market conditions and the cash flow characteristics of the
portfolio companies. The planned investment strategy of the Company will be to
invest in a diversified portfolio of companies which have the potential for
rapid growth in sales, earnings and enterprise value. It is expected that the
Company, after completion of the initial investment phase, will maintain a
portfolio of investments in 10 to 20 companies in diverse industries. Most of
the portfolio companies, at the time of investment, will be private, although
some may be very small capitalization public companies. The Company will focus
its investment activity on private companies, in most cases not technology
intensive, which in the judgment of the Investment Adviser can provide superior
investment returns, either because they are presented with extraordinary
opportunities to which they are especially well suited to respond, or because
they have devised innovative products, services, or ways of doing business
which afford them distinct, defensible, competitive advantages. It is expected
that investments will be made mainly in enterprises located in the southwestern
and south central United States, provided, however, that the Company will
participate in selected opportunities outside this region.

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<PAGE> 15
In addition to the growth investment opportunities described above,
the Company will look for investments in companies seeking to consolidate
fragmented industries. In many instances, such consolidations can improve
performance by bringing excellent, professional management, economics of scale,
and adequate capital resources, to bear on businesses which have lacked these
resources. Also, in industry consolidations, often a company can be built
through a series of acquisitions at a relatively low multiple of earnings, then
sold or taken public at a higher price-earnings ratio.

Although technology is not an area of emphasis for the Company, the
Company will consider investments in companies having innovative,
technology-based products which satisfy large, unfulfilled market needs. The
Company will also consider investments in "classic" leveraged acquisitions of
companies which can be acquired for attractive prices, although this will not
be an area of emphasis for the Company. The Company has chosen not to
emphasize this area because of the large amount of investment funds already
devoted to leveraged buyouts and because the Company believes that the talent
of its management can be more effectively employed in building companies than
in financial engineering.

The Investment Adviser believes that maintaining a high level of
involvement and influence in portfolio companies is an important factor in
achieving the desired result. In the past, the executive officers of the
Investment Adviser have been most successful as a substantial, preferably lead,
investor with a high degree of control over the investment management and the
Company building process. This control is accomplished through a significant
ownership position, presence on the board of directors, and close working
relationships with portfolio company management. The Company will focus on
being a partner in building companies rather than being merely a financial
participant. It is expected that the Company's representatives will play a
role in setting corporate strategy for portfolio companies, and will advise
such companies regarding important decisions affecting their business,
including acquisitions for such companies, recruiting key managers, and
securing equity and debt financing. Except for the fundamental policies
described below, the Company's investment objectives and investment strategies
may be changed by a majority vote of its Board of Directors.

In making investments and managing its portfolio, the Company will
adhere to the following fundamental policies, which policies may not be changed
without the approval of the holders of a majority, as defined in the Investment
Company Act, of the outstanding shares of Common Stock. The percentage
restrictions set forth below, as well as those contained elsewhere in this
Prospectus, apply at the time a transaction is effected, and a subsequent
change in a percentage resulting from market fluctuations or any other cause
other than an action by the Company will not require the Company to dispose of
portfolio securities or to take other action to satisfy the percentage
restriction.

The Company will at all times conduct its business so as to retain its
status as a Business Development Company. In order to retain that status, the
Company may not acquire any assets (other than non-investment assets necessary
and appropriate to its operations as a Business Development Company) if, after
giving effect to such acquisition, the value of its "qualifying assets" amounts
to less than 70% of the value of its total assets. For a summary definition of
"qualifying assets," see "Regulation." The Company believes that the
securities it proposes to acquire, as well as temporary investments that it
will make with its idle funds, will generally be qualifying assets. Securities
of public companies, on the other hand, are generally not qualifying assets
unless they were acquired in a distribution in exchange for, or upon the
exercise of, a right relating to securities that were qualifying assets.

The Company will not concentrate its investments in any particular
industry or particular group of industries. Therefore, the Company will not
acquire any securities (except upon the exercise of a right related to
previously acquired securities) if, as a result, 30% or more of the value of
its total assets consists of securities of companies in the same industry.

The Company will not (i) act as an underwriter of securities of other
issuers (except to the extent that it may be deemed an "underwriter" of
securities purchased by it that subsequently must be registered under the
Securities Act before they may be offered or sold to the public), (ii) purchase
or sell real estate or interests in real estate or real estate investment
trusts (except that the Company may purchase and sell real estate or interests
in real estate in connection with the orderly liquidation of investments or the
foreclosure of mortgages held by the Company), (iii) sell securities short,
(iv) purchase securities on margin, (v) write or buy put or call options
(except to the extent of warrants or conversion privileges obtained in
connection with its investments, and rights to require the issuers of such
investments or their affiliates to repurchase such securities under certain
circumstances), (vi) engage in the purchase or sale of commodities

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<PAGE> 16
or commodity contracts, including futures contracts (except where necessary in
working out distressed loan or investment situations), (vii) purchase interests
in oil and gas exploration, development or production, except as they may be
acquired as a small part of a merger, consolidation or acquisition of assets,
and only if they are to be immediately sold or disposed of as part of the
transaction, (viii) invest in other financial derivative instruments or
securities other than such instruments and securities issued by portfolio
companies, or (ix) acquire the voting stock of, or invest in any securities
issued by, any other investment company, except as they may be acquired as part
of a merger, consolidation or acquisition of assets.

The Company may make selective bridge loans to public and, to a lesser
extent, private companies. These bridge loans may be either secured or
unsecured and convertible into common stock of the issuer or issued together
with warrants for equity participation, or both. These loans will generally be
designed to carry the portfolio company to a private placement, an initial or
secondary public offering, a merger and acquisition transaction, or other
financing within three years from the date of investment. Bridge loans carry
the risk that the event which the loan is intended to bridge to may not occur.
It is intended that every effort will be made to minimize such risk, but it
will be present. In addition to equity participation, the Company may receive
fees in connection with providing bridge financings.

The Company may invest as "other portfolio investments" in marketable
securities of public companies which the Company's management believes have
significant potential for price appreciation. Investments in such other
portfolio companies may be made in the form of common stock, preferred stock or
securities convertible into or exchangeable for common stock or preferred
stock.

The Company does not intend to borrow for investment purposes.
However, the Company may borrow on a short term basis against maturities of
other investments for purposes of meeting short term cash needs. Normally,
such investments will have a maturity of less than one year. Also, it may
borrow funds from time to time and at quarter end solely in order to maintain
sufficient cash assets necessary to meet the requirements for qualification as
a Business Development Company and the diversification requirements to qualify
as a regulated investment company for federal income tax purposes. See
"Regulation" and "Federal Income Tax Matters." Additionally, the Company may
enter into standby agreements or agree to subordinate its investments in a
portfolio company to other lenders to such company. Other than pursuant to
such borrowing, the Company will not issue senior securities.

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<PAGE> 17
MANAGEMENT

The business and affairs of the Company are managed under the
direction of its Board of Directors. All of the Company's directors are
subject to election at each annual meeting of stockholders. The Board of
Directors elects the Company's officers who serve at the pleasure of the Board
of Directors.

DIRECTORS AND OFFICERS

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

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Barry M. Davis (1) 55 Chairman of the Board, Chief Executive
Officer and Director
Philip A. Tuttle(1) 54 President and Director

James A. O'Donnell 42 Director

David L. Daniel 49 Director
Terry K. Dorsey 48 Director

Elmer C. Wilkening 70 Vice President, Secretary and Treasurer
- ----------------------
</TABLE>

(1) "Interested Person" as defined in Section 2(a)(19) of the Investment
Company Act.

Barry M. Davis is Chairman of the Board and Chief Executive Officer of
Sherry Lane Capital Advisors, Inc. Since 1975 he has served as President and a
director of Alliance Business Investment Company, a privately owned small
business investment company organized in 1959 which has made venture capital
investments similar to the investments to be made by the Company. Since 1986
Mr. Davis has also been the managing general partner in Davis Venture Group,
which is the general partner of Davis Venture Partners, L.P. ("Davis Venture
Partners I"), a Delaware limited partnership formed in 1986 to make venture
capital investments similar to the investments to be made by the Company. Mr.
Davis is also the managing general partner of Davis Venture Group II, L.P., a
Delaware limited partnership which is the general partner of Davis Venture
Partners II, L.P. ("Davis Venture Partners II"), a Delaware limited partnership
formed in October 1995 to make venture capital investments similar to the
investments to be made by the Company. In addition to his roles with the
entities described above, Mr. Davis is a partner in the Davis Companies
energy/natural resource group with primary activities in the southwest. Mr.
Davis has served on the board of directors of four portfolio companies in which
Davis Venture Partners I has invested: Coleman Natural Products, Inc.; LMS
Holding Company; Numar Corporation; and Wallace and Tiernan Group Inc. Mr.
Davis has over 25 years of experience in making venture capital investments and
currently serves on the board of directors of the National Venture Capital
Association. In 1980, Mr. Davis was elected Chairman of the Board of Governors
of the National Association of Small Business Investment Companies, a venture
capital industry trade association, and he has served as president of the
organization's Southwest Regional Association. In 1975, he received the
National Achievement Award in the venture capital industry for his efforts in
founding the Venture Capital Management Institute, the formal training program
for a significant portion of the venture capital managers in the United States.
In addition, Mr. Davis lectures at public forums and universities about venture
capital and strategies for emerging growth companies and was a founder of the
Oklahoma Private Enterprise Forum. He has served on numerous boards of civic
organizations and is past Chairman of the Board of Hillcrest Healthcare
Corporation as well as a current trustee of the University of Tulsa. He is a
graduate of the University of Oklahoma with a B.B.A. degree in corporate
finance.

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<PAGE> 18
general partner of Davis Venture Group, the general partner of Davis Venture
Partners I, a private investment partnership which raised $32 million from
institutional investors to invest primarily in business located in the
southwestern and south central United States. He is also a general partner in
Davis Venture Group II, L.P. the general partner of Davis Venture Partners II.
Mr. Tuttle has served on the board of directors of four portfolio companies in
which Davis Venture Partners I has invested: Drypers Holding Corp., Quality
Tubing, Inc., Taylor Medical, Inc. and WCC Holding Corp. Mr. Tuttle currently
serves on the board of directors of Medical Innovations, Inc., a publicly
traded company listed on NASDAQ that provides home intravenous therapies,
specialized home nursing care and other outpatient health care services, the
board of directors of Zydeco Energy, Inc., a publicly traded company listed on
NASDAQ engaged in acquiring oil and gas leases, drilling and producing reserves
utilizing focused geologic concepts and advanced 3D seismic and computer aided
exploration technology, and the board of directors of Drypers Holding Corp., a
publicly traded company listed on NASDAQ that manufactures and distributes
disposable diapers. Mr. Tuttle is a founder and was formerly a President of
the Houston Venture Capital Association and was President and is currently a
Director of The Houston Chapter of the Association for Corporate Growth. He
has served as Chairman of the Accounting Council at Rice University-Jones
Graduate School of Administration and as a member of the Board of Governors of
the National Association of Small Business Investment Companies. He currently
serves as a member of the Board of Trustees of Child Advocates Endowment, Inc.
Mr. Tuttle earned a B.A. degree from Rice University and an M.B.A. degree from
Northwestern University. He is a certified Public Accountant and Fellow of the
Institute of Directors, London, England.

James A. O'Donnell is currently a general partner of CGW Southeast
Partners III, L.P., a partnership being formed to engage in management buy
outs. He is a Chartered Financial Analyst with more than 15 years of
experience in investing in emerging companies. Since 1989, Mr. O'Donnell has
been a general partner of O'Donnell & Masur, L.P., a private equity
partnership. He is also a general partner of Sherry Lane Partners, L.P., a
private equity partnership formed in 1991. From 1983 through 1988, he was
President and Chief Executive Officer of First Republic Venture Group and its
predecessor, InterFirst Venture Corp., a venture capital firm with assets
valued at approximately $100 million in 1988. From 1981 through 1982, Mr.
O'Donnell was Senior Vice President and Manager of the Corporate Finance
Department for InterFirst Bank, Dallas, then the largest bank in Texas.
Previously, Mr. O'Donnell worked for The Equitable Life Assurance Society of
the U.S. as a Regional Investment Manager for the Southeastern United States.
Mr. O'Donnell serves as a director of several public and private companies,
including Bestway Rental, Inc. (a rental company), Gardiner Communications
Corp. (a developer and manufacturer of telecommunications equipment and
software), MBS Holdings (a wholesaler of building supplies), Chatwins Group,
Inc. (a diversified manufacturer of industrial products) and RailTex, Inc. (a
short-line railroad company). Mr. O'Donnell graduated with distinction from
Rhodes College with a B.A. and received his M.B.A. from the Wharton Graduate
Division of the University of Pennsylvania. Mr. O'Donnell currently has no
interest in the Investment Adviser or the Company.

David L. Daniel has served, since 1992, as the President and Chief
Executive Officer of Quality Tubing, Inc., a manufacturer of steel coil tubing
for the Energy Services Industry. For the seven years prior thereto, he was
employed by Baker Hughes Inc., a New York Stock Exchange-listed company engaged
in the Energy Services Industry, most recently as President of its tubular
services subsidiary. Mr. Daniel also served from 1975 to 1983 in numerous
executive positions with NL Industries, a company engaged in the Energy
Services Industry. Mr. Daniel earned a B.S. degree in Mathematics from
Southern Methodist University and an M.B.A. degree from Harvard Business
School.

Terry K. Dorsey, Ph.D. has served since July 1987 as the Chief
Executive Officer of TVA, Inc. a firm which provides financial advisory and
management services. From November 1984 to June 1987, Dr. Dorsey served as
President of United Capital Ventures, Inc. a venture capital company. From
April 1983 until November 1984, Dr. Dorsey served as an investment director of
Churchill International, an international venture capital fund. Dr. Dorsey
earned a B.B.A. degree and an M.B.A. degree from Texas Tech University and
Ph.D. from the University of Texas at Austin.

Elmer C. Wilkening is Vice President, Secretary and Treasurer of
Sherry Lane Capital Advisors, Inc. Since 1959 he has been Secretary-Treasurer
and a director of Alliance Business Investment Company. In 1986 he became a
general partner in Davis Venture Group, the general partner of Davis Venture
Partners I. He is also a general partner in Davis Venture Group II, L.P., the
general partner of Davis Venture Partners II. He has served as a director of
two portfolio companies of Davis Venture Partners I: Photometrics, Ltd. and LMS
Holding Company. Mr. Wilkening holds a B.S. degree in accounting from the
University of Illinois and is a Certified Public Accountant.

16
<PAGE> 19
The Company's Certificate of Incorporation provides, among other
things, for a Board of Directors divided into three classes, designated Class
I, Class II and Class III. Directors serve for staggered terms of three years
each, except that initially the Class I director will serve until the Company's
1996 annual meeting of stockholders, the Class II director until the 1997
meeting and the Class III director until the 1998 meeting. The Class I
director is Mr. Daniel, the Class II directors are Mr. O'Donnell and Mr. Tuttle
and the Class III directors are Mr. Davis and Dr. Dorsey.

It is currently anticipated that the officers of the Company will be
compensated solely by the Investment Adviser. Non-management directors will
each receive a monthly fee of $500 for serving on the Board of Directors and
will receive an additional $1,000 for each meeting of the Board of Directors or
a committee thereof that he attends.

It is estimated that the amounts which would be paid by the Company
during its first fiscal year of operations to its officers and directors would
be as follows:

<TABLE>
<CAPTION>
Pension or Estimated Total Compensation
Aggregate Retirement Benefits Annual Benefits From Company and
Name of Compensation Accrued As Part of Upon Company Complex
Person, Position from Company Company Expenses Retirement Paid to Directors
- --------------------------- ------------ ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Barry M. Davis,
Chairman of the Board,
Chief Executive Officer None None None None
and Director

Philip A. Tuttle,
President and Director None None None None

Elmer C. Wilkening,
Vice President, Secretary
and Treasurer None None None None

James A. O'Donnell,
Director $10,000 None None $10,000

David L. Daniel,
Director $10,000 None None $10,000

Terry K. Dorsey,
Director $10,000 None None $10,000
</TABLE>

INDEMNITY AGREEMENTS

The Company intends to enter into indemnity agreements with each of
its directors and officers upon the closing of this offering. Pursuant to
these agreements, the Company will, to the extent permitted under applicable
law, indemnify these persons against all expenses, judgments, fines and
penalties incurred in connection with the defense or settlement of any actions
brought against them by reason of the fact that they are or were directors or
officers of the Company or that they assumed certain responsibilities at the
direction of the Company. In addition, the Company's Certificate of
Incorporation and Bylaws provide for certain limitations on director liability.

17
<PAGE> 20

THE INVESTMENT ADVISER

As indicated above, Barry M. Davis, Philip A. Tuttle and Elmer C.
Wilkening have substantial experience managing partnerships which have made
investments similar to the investments which will be made by the Company. The
most recent activity of this type in which these persons have been engaged is
Davis Venture Partners I ("DVP I"), an investment partnership formed in 1986
with committed capital of approximately $32 million from thirteen corporate and
public pension funds. DVP I's funds have been invested in 15 portfolio
companies. Messrs. Davis, Tuttle and Wilkening are general partners of the
general partner of DVP I, as well as of the general partner of Davis Venture
Partners II ("DVP II"), a new investment partnership similar to DVP I.

Since 1975, Mr. Davis has served as President of Alliance Business
Investment Company ("ABIC"), a small business investment company ("SBIC") he
joined in 1966. ABIC, based in Tulsa, Oklahoma, is one of the oldest privately
held SBIC's in the United States. Between 1974 and 1990, the 27 investments
made by ABIC generated a composite annual internal rate of return ("IRR") of
24.5%. A model which imputed to these investments annual management fees and
expenses of 2.5% of the cost of the investments and a management incentive fee
of 20% of net realized gain on sale similar to the fees contemplated by the
Company produced a composite IRR for these 27 investments of 19.4%. Mr. Davis
has been primarily responsible for the selection of investments by ABIC since
before 1974.

From 1982 to 1987, Mr. Tuttle served as President of Allied Bancshares
Capital Corporation ("Allied"), another SBIC. During this time, Mr. Tuttle was
primarily responsible for selecting investments. During Mr. Tuttle's tenure,
24 investments made by Allied generated a composite annual internal rate of
return of 20.1%. A model which imputed to these investments annual management
fees and expenses of 2.5% of the cost of the investments and a management
incentive fee of 20% of net realized gain on sale similar to the fees
contemplated by the Company would reduce the composite rate of return, but the
data needed to make such a computation are not available.

The DVP I portfolio, which has geographic focus and investments
similar to the Company's, typically reflects a five to seven year investment
cycle. The following representative investments are indicative of DVP I's
investment strategy and industry focus.

- Numar Corporation, headquartered outside of Philadelphia, but
with primary operations in Houston, is the creator and
developer of a new application of nuclear magnetic resonance
to a proprietary $400,000,000 market segment within the
petroleum industry, a sector that is open to rapid penetration
and nearly exclusive possession.

- Taylor Medical, Inc. ("Taylor"), of Beaumont, Texas, is a
national distributor of medical supplies and equipment to the
physician and alternate site health care market. Following
the investment in July 1989, Taylor's sales grew over the next
five years from $15 million to $150 million. In August 1995,
Taylor was merged into Physician's Sales & Service, Inc., a
leading national health care company.

- Coleman Natural Meats, Inc. ("Coleman"), headquartered in
Denver, Colorado, is the largest natural beef producer and
marketer in the United States, delivering residue-free lowfat
meats into a Coleman dominated market niche that targets food
safety and environmental concerns.

- Wallace & Tiernan Group, Inc., located in Belleville, New
Jersey, at the time of the investment exit was an
environmental company manufacturing water and waste-water
treatment equipment and instrumentation with annual gross
sales of $120,000,000 with facilities in the United Kingdom,
Germany, and four other countries.

Like DVP I, ABIC and Allied, the Company, through its strategically
placed offices in Tulsa and Houston, will primarily aim to provide venture
capital for businesses in the following states: Oklahoma, Texas, Colorado,
Kansas, Missouri, Arkansas, Louisiana, New Mexico, and Arizona. Also like DVP
I, ABIC and Allied, the Company will focus on emerging and expanding businesses
with strong positions in basic industries, especially those capitalizing on
advanced technologies for production or marketing superiority, and will seek
ventures with experienced management teams who can expand their companies into
global markets. Like DVP I, ABIC and Allied, the Company will also

18
<PAGE> 21

participate nationally in selected, attractive investment
opportunities. Accordingly, the investment policies and objectives of
DVP I, ABIC and Allied are essentially the same as those of the
Company.

During the period from 1974 to the present, Messrs. Davis and Tuttle,
on behalf of these entities, managed investments in a total of 59 companies, 47
of which were located in the southwest/south central region targeted by the
Company. Also, 46 of the total investments were in companies engaged in basic
industries and technologies.

The investment portfolio results generated by Messrs. Davis and Tuttle
for these periods are summarized in the table below:(1)

<TABLE>
<CAPTION>
DVP I DVP I
(Davis) ABIC (Tuttle) Allied Total
<S> <C> <C> <C> <C> <C>
Stage of Enterprise Development:
Early Stage Financings(2) . . . . . 1 10 0 11 22
Expansion Financings(3) . . . . . . 2 12 3 4 21

Acquisition/Buy-Out Financings(4) . 1 5 1 7 14
Special Situations . . . . . . . . 0 0 0 2 2
</TABLE>

<TABLE>
<CAPTION>
Portfolio IRR Results: Adjusted to Reflect
Before Fees(5) Imputed Fees(5)
<S> <C> <C>
ABIC (Davis) . . . . . . . . . . . . . . . . 24.5% (16 yrs.) 19.4%
Allied (Tuttle) . . . . . . . . . . . . . . 20.1% (5 yrs.) Not Available
DVP I (Davis & Tuttle only) . . . . . . . . . 22.9% (8 yrs.) 15.3%
</TABLE>

- --------------------
(1) As Messrs. Davis and Tuttle were primarily responsible for
selecting the portfolio investments, a record of Mr. Wilkening, who is
principally a financial manager, as opposed to an investment manager, has not
been presented. Also, this table does not reflect the investment records of
certain individuals who were responsible for selecting certain early investments
of DVP I, but who have since resigned or are not involved with the Investment
Adviser.

(2) These companies are at an early stage of product and market
development, but are run by qualified management. Accordingly, the highest
priority will be given to companies with management teams with established
records of technical and managerial achievements in closely related fields. Such
firms will have launched operations or will have assembled key management,
prepared a business plan, have a product ready for market, effected market
studies, and be generally well set to do business.

(3) These companies have already created a product or service
they are marketing with some success. They need further funds to finance the
growth of their businesses and to achieve profitability. In addition, companies
in this category may be established and profitable, but still need expansion
capital to fuel further growth.

(4) Acquisition financing provides funds to a company to finance
its acquisition of another enterprise. Buyout financing usually comprises two
categories: (a) large divisions or subsidiaries of diversified corporations
being divested because of a poor strategic fit; or (b) privately owned companies
available because the owner desires liquidity for various reasons, including
estate planning. In both cases members of existing management will participate
in the company's ownership and ongoing operation. These are usually mature
enterprises with stable earnings history and a positive cash flow.

(5) The portfolio internal rates of return set forth in the
Before Fees column do not include the effect of annual management fees and
expenses and management incentive fees. A model which imputed annual management
fees and expenses of 2.5% of the cost of the investments and a management
incentive fee of 20% of net realized gain on sale similar to the fees
contemplated by the Company produced a composite return for the 27 investments
made by ABIC of 19.4%. A similar model produced a composite return for the 8
investments made by DVP I of 15.3%. The composite return for the investments
made by Allied would be similarly reduced by such fees, but the data needed to
make such a computation are not available. The portfolio rates of return set
forth relate to portfolio investments and do not include the effect of funds
held in short term investments pending investment in portfolio companies.

19
<PAGE> 22

The Company's investment strategy will build on the investment
philosophy and valuation methods, as well as the network of business and
professional relationships and the successful track record developed by the
management team of DVP I, ABIC and Allied. Of course, investors in the Company
are not acquiring an interest in DVP I, ABIC or Allied or any other entity in
which Messrs. Davis and Tuttle are involved. The past performance of DVP I,
ABIC or Allied or of Messrs. Davis and Tuttle is no guaranty of future
performance.

THE INVESTMENT ADVISORY AGREEMENT

Pursuant to the Investment Advisory Agreement dated September 21,
1995, Sherry Lane Capital Advisors, Inc. serves as investment adviser to the
Company. The Investment Adviser will, subject to the overall supervision of
the Company's Board of Directors, administer the Company's business affairs and
furnish the Company with office facilities and clerical, bookkeeping and record
keeping services at such facilities. See "Management."

The Investment Adviser will be responsible for the financial records
required to be maintained by the Company and will prepare financial information
for reports to stockholders and reports filed with the Commission. In
addition, the Investment Adviser will assist the Company in determining and
publishing the Company's net asset value, oversee both the preparation and
filing of the Company's tax returns, the printing and dissemination of
stockholder reports, and generally oversee the payment of the Company's
expenses and the performance of administrative and professional services
rendered to the Company by others.

In return for its services, the Company will pay to the Investment
Adviser an annual management fee of two percent of the Company's net assets,
determined and payable quarterly, throughout the term of the Investment
Advisory Agreement and a management incentive fee of 20% of net realized
capital gains after adjusting for any net unrealized depreciation.

The Investment Adviser will be responsible for the salaries and
expenses of its own personnel, any costs of office space, local telephone and
administrative support to be provided to the Company by the Investment Adviser,
expenses relating to calculating and publishing the Company's net asset value
and all other expenses incurred by either the Investment Adviser or the Company
in connection with administering the ordinary course of the Company's business,
other than the organizational expenses described above, and direct costs such
as printing, mail, long distance telephone, staff, independent accountants and
outside legal costs.

The Investment Advisory Agreement was approved by the Board of
Directors on September 21, 1995 and is effective until it is terminated by
either party upon at least 60 days' notice to the other, provided that its
continuance is approved annually by the Company's Board of Directors or the
holders of the Common Stock, including, in either case, approval by the
directors of the Company who are not interested persons.

REGULATION

After filing its election to be treated as a Business Development
Company under the Investment Company Act, a company may not withdraw its
election without first obtaining the approval of holders of a majority of its
outstanding voting securities (as defined under the Investment Company Act).
The following is a brief description of the Investment Company Act and is
qualified in its entirety by reference to the full text of the Investment
Company Act and the rules thereunder.

Generally, to be eligible to elect Business Development Company
status, a company must engage in the business of furnishing capital and
offering significant managerial assistance to companies that do not have ready
access to capital through conventional financial channels. Such portfolio
companies are termed "eligible portfolio companies." More specifically, in
order to qualify as a Business Development Company, a company must (i) be a
domestic company; (ii); have registered a class of its securities or have filed
a registration statement with the Commission pursuant to Section 12 of the
Exchange Act; (iii) operate for the purpose of investing in the securities of
certain types of eligible portfolio companies, namely less seasoned or emerging
companies and businesses suffering or just recovering from

20
<PAGE> 23
financial distress; (iv) offer to extend significant managerial assistance to
such eligible portfolio companies; (v) have a majority of directors who are not
"interested persons" (as defined in the Investment Company Act); and (vi) file
(or under certain circumstances, intend to file) a proper notice of election
with the Commission.

An eligible portfolio company generally is a United States company
that is not an investment company and that (i) does not have a class of
securities registered on an exchange or included in the Federal Reserve Board's
over-the-counter margin list; or (ii) is actively controlled by a Business
Development Company and has an affiliate of a Business Development Company on
its board of directors; or (iii) meets such other criteria as may be
established by the Commission. Control under the Investment Company Act is
presumed to exist where a Business Development Company owns more than 25% of
the outstanding voting securities of the eligible portfolio company.

Making available significant managerial assistance by a business
development company means any arrangement whereby a business development
company, through its directors, officers or employees, offers to provide, and,
if accepted, does so provide, significant guidance and counsel concerning the
management, operations, or business objectives and policies of a portfolio
company. It is expected that one of Barry M. Davis, Philip A. Tuttle or Elmer
C. Wilkening will offer to serve on the board of directors of each portfolio
company in which the Company invests and, if such offer is not accepted, will
offer to enter into a consulting contract with the management of each portfolio
company. In such capacity, such person will offer his substantial experience
in strategic management and, if requested, will lend his assistance in
arranging financings, managing relationships with financing sources, recruiting
management personnel, and evaluating acquisition and divestiture opportunities.
Such person will be able to call on the experience of the others, as well, if
needed.

The Investment Company Act prohibits or restricts companies subject to
the Investment Company Act from investing in other investment companies.
Moreover, the Investment Company Act limits the type of assets that Business
Development Companies may acquire to certain prescribed qualifying assets and
certain assets necessary for its operations (such as office furniture,
equipment and facilities) if, at the time of acquisition, less than 70% of the
value of the Business Development Company's assets consist of qualifying
assets. Qualifying assets include (i) privately acquired securities of
companies that were eligible portfolio companies at the time the Business
Development Company acquired the securities; (ii) securities of bankrupt or
insolvent companies; (iii) securities of eligible portfolio companies
controlled by a Business Development Company; (iv) securities received in
exchange for or distributed in or with respect to any of the foregoing; and (v)
cash items, government securities and high-quality short term debt. The
Investment Company Act also places restrictions on the nature of the
transactions in which, and the persons from whom, securities can be purchased
in order for the securities to be considered qualifying assets. Such
restrictions include limiting purchases to transactions not involving a public
offering and the requirement that securities be acquired directly from either
the portfolio company or its officers, directors or affiliates.

Many of the transactions involving a company and its affiliates (as
well as affiliates of those affiliates) which were prohibited without the prior
approval of the Commission under the Investment Company Act prior to its
amendment in 1980 are permissible for Business Development Companies. However,
certain transactions involving certain persons related to the Company,
including its directors, officers and employees, may still require the prior
approval of the Commission. In general, (i) any person who owns, controls or
holds power to vote more than 5% of the Company's outstanding Common Stock;
(ii) any director, executive officer or general partner of that person; and
(iii) any person who directly or indirectly controls, is controlled by, or is
under common control with, that person, must obtain the prior approval of a
majority of the Company's disinterested directors and, in some situations, the
prior approval of the Commission, before engaging in certain transactions
involving the Company or any company controlled by the Company. The Investment
Company Act generally does not restrict transactions between the Company and
its eligible portfolio companies.

While a Business Development Company may change the nature of its
business so as to cease being a Business Development Company (and in connection
therewith withdraw its election to be treated as a Business Development
Company) only if authorized to do so by a majority vote (as defined in the
Investment Company Act) of its outstanding voting securities, changes in other
fundamental investment policies of a Business Development Company do not
require stockholder approval (in contrast to the general Investment Company Act
requirement which requires stockholder approval for a change in any fundamental
investment policy). The Company is entitled to change its non-diversification

21
<PAGE> 24
status without stockholder approval. The Company may, in the future, seek to
become exempt from Investment Company Act regulation.

VALUATION OF PORTFOLIO SECURITIES

On a quarterly basis, and at such other times as deemed appropriate
under the circumstances, the Company's Board of Directors will prepare a
valuation of the assets of the Company. Valuations of portfolio securities
will be done in accordance with generally accepted accounting principles and
the financial reporting policies of the Commission. The applicable methods
prescribed by such principles are described below.

As a general principle, the current "fair value" of an investment
being valued by the Company's Board of Directors would be the amount which the
Company might reasonably expect to receive for it upon its current sale. There
is a range of values that are reasonable for such investments at any particular
time. Generally, pursuant to procedures established by the Company's Board of
Directors, the fair value of each such investment will be initially based
primarily upon its original cost to the Company. Cost will be the primary
factor used to determine fair value until significant developments or other
factors affecting the portfolio company (such as results of operations, changes
in general market conditions or the availability of market quotations) provide
a basis for value other than a cost valuation.

The Company anticipates that many future investments made in
securities for which a public market exists will be "restricted securities" by
virtue of the Securities Act. Generally, in such instances, the Company will
negotiate for securities registration rights necessary for a public offering
thereof on specified terms whenever deemed to be reasonably feasible by
management. The value for restricted stock investments for which no public
market exists cannot be precisely determined. Generally, such investments will
be valued on a "going concern" basis without giving effect to any disposition
costs. There is a range of values that is reasonable for such investments at
any particular time.

Portfolio investments for which market quotations are readily
available and which are freely transferable will be valued as follows: (i)
securities traded on a securities exchange or NASDAQ will be valued at the
closing price on the last trading day prior to the date of valuation; and (ii)
securities traded in the over-the-counter market (pink sheets) will be valued
at the average of the closing bid and asked prices for the last trading day
prior to the date of valuation. Securities for which market quotations are
readily available but are restricted from free trading in the public securities
markets (such as Rule 144 stock) will be valued by discounting the closing
price or the closing bid and asked prices, as the case may be, for the last
trading day prior to the date of valuation to reflect the illiquidity caused by
such restrictions, but taking into consideration the existence, or lack
thereof, of any contractual right to have the securities registered and freed
from such trading restrictions. For this purpose, an investment that is
convertible into a security for which market quotations are readily available
or otherwise contains the right to acquire such a security will be deemed to be
an investment for which market quotations are readily available.

Debt securities with maturities of 60 days or less remaining will be
valued under the amortized cost method. The amount to be amortized will be the
value on the 61st day if the security was obtained with more than 60 days
remaining to maturity. Securities with maturities of more than 60 days
remaining will be valued at the most recent bid price or yield equivalent as
obtained from dealers that make markets in such securities. Certificates of
deposit purchased by the Company generally will be valued at their face value,
plus interest accrued to the date of valuation.

The fair value of investments for which no market exists will be
determined on the basis of appraisal procedures established in good faith by
the Company's Board of Directors. Appraisal valuations will be based upon such
factors as the portfolio company's earnings and net worth, the market prices
for similar securities of comparable companies and an assessment of the
company's future financial prospects. In the case of unsuccessful operations,
the appraisal may be based upon liquidation value. Appraisal valuations are
necessarily subjective.

The Company may also use, when available, third-party transactions in
a portfolio company's securities as the basis of valuation (the "private market
method"). The private market method will be used only with respect to
completed transactions or firm offers made by sophisticated, independent
investors. Securities with legal, contractual or practical restrictions on
transfer may be valued at a discount from their value determined by the
foregoing methods to reflect such restrictions.

22
<PAGE> 25
The Company's Board of Directors will review the Company's valuation
policies from time to time to determine their appropriateness. The Company's
Board of Directors may also hire independent firms to review the Investment
Adviser's methodology of valuation or to conduct a valuation, which shall be
binding and conclusive.

In order to determine the net asset value per share of the Common
Stock, (i) the value of the assets of the Company, including its portfolio
securities, will be determined by the Company's Board of Directors; (ii) the
Company's liabilities, if any, will be subtracted therefrom; and (iii) the
difference will be divided by the number of outstanding shares of Common Stock.
However, there can be no assurance that such value will represent the return
that might ultimately be realized by the Company from the investments or that
stockholders might ultimately realize on their stockholdings.

FEDERAL INCOME TAX MATTERS

THE FOLLOWING DISCUSSION IS A GENERAL SUMMARY OF THE MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO THE COMPANY AND TO AN
INVESTMENT IN THE COMMON STOCK AND DOES NOT PURPORT TO BE A COMPLETE
DESCRIPTION OF THE TAX CONSIDERATIONS APPLICABLE TO SUCH AN INVESTMENT.
PROSPECTIVE STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE TAX CONSIDERATIONS WHICH PERTAIN TO THEIR PURCHASE OF THE COMMON STOCK.
THIS SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION RELEVANT
TO HOLDERS OF THE COMPANY'S COMMON STOCK IN LIGHT OF THEIR PERSONAL
CIRCUMSTANCES, OR TO CERTAIN TYPES OF HOLDERS SUBJECT TO SPECIAL TREATMENT
UNDER FEDERAL INCOME TAX LAWS, INCLUDING FOREIGN TAXPAYERS. THIS SUMMARY DOES
NOT DISCUSS ANY ASPECTS OF FOREIGN, STATE OR LOCAL TAX LAWS.

The Company intends to qualify for treatment as a "regulated
investment company" under Subchapter M of the Code. If the Company qualifies
as a regulated investment company and distributes to stockholders each year in
a timely manner at least 90% of its "investment company taxable income" as
defined in the Code (i.e., net investment income from interest and dividends
and net short-term capital gains), it will not be subject to federal income
tax on the portion of its taxable income and gains it distributes to
stockholders. In addition, if the Company distributes in a timely manner (or
treats as "deemed distributed" as described below) 98% of its capital gain net
income for each one year period ending on October 31 (or December 31, if so
elected by the Company), and distributes 98% of its ordinary income for each
calendar year (as well as any income not distributed in prior years), it will
not be subject to the 4% nondeductible federal excise tax on certain
undistributed income of regulated investment companies. The Company would be
subject to regular corporate income tax (currently at rates up to 35%) on any
undistributed net investment income and any undistributed net capital gain.
The Company would also be subject to alternative minimum tax, but any tax
preference items would be apportioned between the Company and its stockholders
in the same proportion that dividends (other than capital gain dividends) paid
to each stockholder bear to the taxable income of the Company determined
without regard to the dividends paid deduction.

In order to qualify as a regulated investment company for federal
income tax purposes, the Company must elect to be treated as a regulated
investment company and, among other things, (a) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments with respect
to securities, loans, gains from the sale or other disposition of stock or
securities or other income derived with respect to its business of investing in
such stock or securities; (b) derive in each taxable year less than 30% of its
gross income from the sale of stock or securities held for less than three
months; (c) diversify its holdings so that at the end of each quarter of the
taxable year (i) at least 50% of the value of the Company's assets consists of
cash, cash items, government securities, the securities of other regulated
investment companies and other securities if such other securities of any one
issuer do not represent more than 5% of the Company's total assets and 10% of
the outstanding voting securities of the issuer and (ii) no more than 25% of
the value of the Company's total assets are invested in the securities of one
issuer (other than U.S. government securities or the securities of other
regulated investment companies), or of two or more issuers that are controlled
by the Company and are engaged in the same or similar or related trades of
businesses; and (d) distribute at least 90% of its investment company taxable
income each taxable year.

If the Company acquires debt obligations that were originally issued
at a discount, or that bear interest rates that are not fixed (or certain
"qualified variable rates") or payable at regular intervals over the life of
the obligation, it will be required to include in taxable income each year a
portion of the "original issue discount" that accrues over the

23
<PAGE> 26
life of the obligation, regardless of whether the income is received by the
Company, and may be required to make distributions in order to continue to
qualify as a regulated investment company or to avoid the 4% excise tax on
certain undistributed income. In this event, the Company may borrow funds or
sell temporary investments or other assets to meet the distribution
requirements. See "Investment Objectives and Policies."

For any period during which the Company qualifies as a regulated
investment company for federal income tax purposes, distributions to
stockholders attributable to the Company's ordinary income (including
dividends, interest and original issue discount) and net short-term capital
gains generally will be taxable as ordinary income to stockholders to the
extent of the Company's current or accumulated earnings and profits.
Distributions in excess of the Company's earnings and profits will first be
treated as a return of capital which reduces the stockholder's adjusted basis
in his Common Stock and then as gain from the sale of Common Stock.
Distributions of the Company's net long-term capital gains (designated by the
Company as capital gain dividends) will be taxable to stockholders as long-term
capital gains regardless of the stockholder's holding period in his shares.
Corporate stockholders are generally eligible for the 70% dividends received
deduction with respect to ordinary income (but not capital gain) dividends to
the extent such amount designated by the Company does not exceed the dividends
received by the Company from domestic corporations. Any dividend declared by
the Company in October, November or December of any calendar year, payable to
stockholders of record on a specified date in such a month and actually paid
during January of the following year, will be treated as if it were paid by the
Company and received by the stockholders on December 31 of the previous year.
In addition, the Company may elect to relate a dividend back to the prior
taxable year for the purposes of (i) determining whether the 90% distribution
requirement is satisfied, (ii) computing investment company taxable income and
(iii) determining the amount of capital gain dividends paid during the prior
taxable year if the Company makes such election prior to filing its return for
the taxable year and distributes the amount in the 12 month period following
the close of the taxable year. Any such election will not alter the general
rule that a stockholder will be treated as receiving a dividend in the taxable
year in which the distribution is made.

To the extent that the Company retains any capital gains, it may
designate them as "deemed distributions" and pay a tax thereon for the benefit
of its stockholders. In that event, the stockholders report their share of
retained realized capital gains on their individual tax returns as if it had
been received, and report a credit for the tax paid thereon by the Company.
The amount of the deemed distribution net of such tax is then added to the
stockholder's cost basis for his shares. Since the Company expects to pay tax
on capital gains at the regular corporate tax rate of 34% and the maximum rate
payable by individuals on such gains is 28%, the amount of credit that
individual stockholders may report will exceed the amount of tax that they
would be required to pay on capital gains. Stockholders who are not subject to
federal income tax or tax on capital gains should be able to file a return on
the appropriate form or a claim for refund that allows them to recover the
taxes paid on their behalf.

The Budget Reconciliation Act of 1993 added Section 1202 to the Code
which permits the exclusion, for federal income tax purposes, of 50% of any
gain (subject to certain limitations) realized upon the sale or exchange of
"qualified small business stock" held for more than five years. Generally,
qualified small business stock is stock of a small business corporation
acquired directly from the issuing corporation, which must at the time of
issuance and immediately thereafter have assets of not more than $50 million
and be actively engaged in the conduct of a trade or business not excluded by
law. If the Company acquires "qualified small business stock," holds such
stock for five years and disposes of such stock at a profit, a stockholder who
held his shares in the Company at the time the Company purchased the qualified
small business stock and at all times thereafter until disposition of the stock
by the Company would be entitled to exclude from his taxable income 50% of such
stockholder's share of such gain. One half of any amount so excluded would be
treated as a preference item for alternative minimum tax purposes.

If at least 50% of the value of the total assets of a regulated
investment company at the close of each quarter of the taxable year consists of
tax exempt obligations, the regulated investment company may designate all or a
portion of any dividend (other than a capital gain dividend) as an exempt
interest dividend to the extent of the regulated investment company's net
income from tax exempt obligations. An exempt interest dividend would be
treated by the stockholder as excludable from gross income under Section 103(a)
of the Code, but would also be treated as a preference item by the stockholder
for alternative minimum tax purposes.

A stockholder may recognize taxable gain or loss if the stockholder
sells or exchanges his shares of Common Stock. Any gain arising from the sale
or exchange of shares generally will be treated as a capital gain or loss
except

24
<PAGE> 27
in the case of a dealer or a financial institution, and will be treated as a
long-term capital gain or loss if the stockholder has held his shares for more
than one year. However any capital loss arising from the a sale or exchange of
shares held for six months or less will be treated as a long-term capital loss
to the extent of the amount of capital gain dividends (or undistributed capital
gain) received with respect to such shares.

The Company may be required to withhold U.S. federal income tax at the
rate of 31% of all taxable distributions payable to stockholders who fail to
provide the Company with their correct taxpayer identification number or a
certificate that he is exempt from backup withholding, or the Internal Revenue
Service notifies the Company that the stockholder is subject to backup
withholding. Any amounts withheld may be credited against a stockholder's U.S.
federal income tax liability.

Federal withholding taxes at a 30% rate (or a lesser treaty rate) may
apply to distributions to stockholders that are nonresident aliens or foreign
partnerships, trusts or corporations. Foreign stockholders should consult
their tax advisors with respect to the possible U.S. federal, state and local
and foreign tax consequences of an investment in the Company.

If the offering is consummated at or close to the minimum level of
shares of Common Stock that may be sold, the Company may have difficulty
structuring its investments in a manner to cause the Company to qualify as a
Business Development Company under the Investment Company Act, while at the
same time satisfying the diversification requirements necessary to be treated
as a regulated investment company under Subchapter M of the Code. If the
Company were unable to meet the regulated investment company diversification
requirements, it would be subject to tax on its ordinary income and capital
gains (including gains realized on the distribution of appreciated property) at
regular corporate rates. Distributions to stockholders would not be deductible
by the Company, nor would they be required to be made. Distributions would be
taxable to the stockholders as ordinary dividend income to the extent of the
Company's current and accumulated earnings and profits. Subject to certain
limitations under the Code, corporate distributees would be eligible for the
dividends received deduction. Distributions in excess of current and
accumulated earnings and profits would be treated first as a return of capital
to the extent of the shareholder's tax basis, and any remaining distributions
would be treated as a gain realized from the sale or exchange of property.

The Company will mail to each stockholder, as promptly as possible
after the end of each fiscal year, a notice detailing, on a per distribution
basis, the amounts includable in such stockholder's taxable income for such
year as net investment income, as net realized capital gains (if applicable),
as "deemed" distributions of capital gains and as taxes paid by the Company
with respect thereto. In addition, the federal tax status of each year's
distributions will be reported to the Internal Revenue Service. Distributions
may also be subject to additional state, local and foreign taxes depending on
each stockholder's particular situation. Stockholders should consult their own
tax advisers with respect to the particular tax consequences to them of an
investment in the Company.

Under the Company's Dividend Reinvestment Plan, all cash distributions
to stockholders will be automatically reinvested in additional whole and
fractional shares of Common Stock unless a stockholder or its representative
elects to receive cash. Such distributions that are invested in additional
shares of Common Stock are considered to be constructively received by the
stockholder for federal income tax purposes and are included in his income to
the extent such constructive distribution otherwise represents a taxable
dividend for the year in which such distribution is credited to his account.
The amount of the distribution is the value of the shares acquired through the
Dividend Reinvestment Plan. See "Dividend Reinvestment Plan."

DIVIDEND REINVESTMENT PLAN

Pursuant to the Company's Dividend Reinvestment Plan, any stockholders
whose shares of Common Stock are registered in their own names will be deemed
to have elected to have all cash dividends and cash distributions automatically
reinvested by Continental Stock Transfer & Trust Company, New York, New York
(the "Plan Agent") in shares of Common Stock pursuant to the Dividend
Reinvestment Plan unless and except for each such stockholder who individually
elects to receive such on a current basis in lieu of reinvestment. In the case
of stockholders such as banks, brokers or nominees that hold shares for others
who are beneficial owners ("Nominee Stockholders"), the Plan Agent will
administer the Dividend Reinvestment Plan on the basis of the number of shares
certified by such Nominee

25
<PAGE> 28
Stockholders as registered for stockholders that have not elected to receive
dividends and distributions in cash. Investors that own shares registered in
the name of a Nominee Stockholder should consult with such nominee as to
participation or withdrawal from the Dividend Reinvestment Plan.

The Plan Agent serves as agent for the stockholders in administering
the Dividend Reinvestment Plan. When the Company declares a dividend or
distribution payable in cash or in Common Stock, the non-participants will
receive cash and the participants will receive Common Stock to be issued by the
Company or purchased by the Plan Agent in the open market. If the market value
per share on the valuation date equals or exceeds the net asset value per share
on that date, the Company will issue new shares at the net asset value. If the
net asset value exceeds the market price, the Plan Agent will, as agent for the
participant, buy Common Stock in the open market or in private transactions as
soon as practicable after such date. If before the Plan Agent has completed
the purchases the market price exceeds the net asset value, the Plan Agent may
suspend purchasing in the market and the Company will issue new shares at net
asset value to fulfill the purchase requirements.

Participants also have the option commencing on January 1st of each
year, of making additional annual cash payments to the Dividend Reinvestment
Plan in any amount of $l,000 or more up to $10,000. Larger amounts may be
accepted with the prior approval of the Plan Agent. The Plan Agent will use all
funds received from participants to purchase shares of Common Stock to be
issued by the Company or purchased in the open market on or about February 28.
Any voluntary funds must be received no later than ten days prior to such date
and any prior deposit may be withdrawn if written request for withdrawal is
received by the Plan Agent no later than ten days prior to such date.

The Plan Agent will maintain all stockholder accounts in the Dividend
Reinvestment Plan and furnish written confirmation of all transactions in an
account. Shares in the Dividend Reinvestment Plan will be held in the name of
the participant and each stockholder's proxy will include any Dividend
Reinvestment Plan holdings.

There is no charge to the participants for reinvesting dividends and
distributions or for voluntary cash payments. The Plan Agent's fees will be
paid by the Company. There will be no brokerage charges with respect to shares
issued directly by the Company for participants in the Dividend Reinvestment
Plan. However, each participant will pay a pro rata share of brokerage charges
for shares purchased in the market.

The Company and the Plan Agent reserve the right to terminate the
Dividend Reinvestment Plan. Further, the Dividend Reinvestment Plan may be
amended by agreement between the Company and the Plan Agent upon 30 days notice
to participants. A participant may withdraw from the Dividend Reinvestment
Plan upon written request to the Plan Agent, in which event, no further share
purchases will be made for such withdrawing participant and all shares and
funds held for such participant will be forwarded to the participant or to his
order. All communications regarding the Dividend Reinvestment Plan should be
directed to Continental Stock Transfer & Trust Company, New York, New York.

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company is authorized to issue 20,000,000 shares of Common Stock,
par value $.01 per share. The holders of Common Stock are entitled to one vote
per share on all matters submitted for action by the stockholders. There is no
provision for cumulative voting rights with respect to the election of
directors. Accordingly, the holders of more than 50% of the shares of Common
Stock can, if they choose to do so, elect all of the directors. In such event,
the holders of the remaining shares will not be able to elect any directors.
The holders of shares of Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors out of funds legally available
therefor. In the event of liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all
assets remaining available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the Common Stock. Holders of shares of Common Stock, as
such, have no conversion, preemptive or other subscription rights, and there
are no redemption provisions applicable to the Common Stock. All of the
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby, when issued against the consideration set forth in this Prospectus,
will be, fully-paid and non-assessable.

26
<PAGE> 29
ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation provides for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. Under Delaware law, in the case of a corporation having a
classified board, stockholders may remove a director only for cause. As a
result, the stockholders will be unable in the absence of having cause to
remove incumbent directors and simultaneously gain control of the Board of
Directors by filling the vacancies created by such removal with new nominees
without cause. See "Management."

These provisions have been included in the Certificate of
Incorporation to provide greater likelihood of continuity of management for the
Company since the nature of the Company's investments is such that continuity
of management for a substantial period may be necessary to realize the full
value of the investments made by the Company. Although the presence of these
provisions may reduce the likelihood that stockholders would be able to sell
their shares at a premium in a takeover situation, the directors of the Company
believe that such is unlikely for a Business Development Company such as the
Company and the positive benefit of continuity of management outweighs the
possible detriment of these provisions. Any removal of the directors of the
Company would be in accordance with the law of the state of Delaware
pertaining to the removal of directors who are serving on a classified board.

ANNUAL MEETINGS

The Company will hold annual meetings of stockholders for the election
of directors and other matters if required to do so under applicable laws or
rules of exchanges or other applicable regulatory agencies.

TRANSFER AND DIVIDEND PAYING AGENT

Continental Stock Transfer & Trust Company, New York, New York, will
act as the Company's transfer and dividend paying agent and registrar.

PLAN OF DISTRIBUTION

The shares of Common Stock offered hereby are being offered on a best
efforts basis by the Principal Underwriter, whose office is at 2 Broadway, New
York, New York 10004.

The Principal Underwriter has agreed, subject to the terms and
conditions contained in the Selling Agreement, to offer up to 5,000,000 shares
of Common Stock to the public at the offering prices set forth on the cover
page of this Prospectus. The purchase price must be paid upon subscription.
All payments shall be forwarded to the Escrow Agent pending attainment of the
minimum offering and thereafter until acceptance by the Company. Interest on
escrowed funds will be paid to the Company. If the minimum offering of
1,500,000 shares of Common Stock is not attained by May 31, 1996, all funds
will be returned to investors and accrued interest, net of expenses, will be
paid to the investors pro rata to the date of their subscription. The
Principal Underwriter may enter into selling agreements with certain
Broker/Dealers who are members of the NASD for sale of the shares and will pay
a 4.5% sales commission (or, if a sale is made to a purchaser of at least
50,000 shares, a 3.0% sales commission) to such Broker/Dealers and may also
reallow up to 1% of the Principal Underwriter's underwriting discount.

Each investor must purchase a minimum of 500 shares of Common Stock in
this offering. Any larger number of shares must be purchased in 100 share
increments.

The Company has agreed to pay to the Principal Underwriter a
non-accountable expense allowance of one half percent of the gross proceeds of
this offering. The Company has also agreed to pay all expenses in connection
with qualifying the shares of Common Stock offered hereby for sale under the
laws of such states as the Principal Underwriter may designate, including
expenses of counsel retained for such purposes by the Principal Underwriter.

The Company anticipates that the selling Broker/Dealers or their
affiliates may, from time to time, subject to the regulations set forth in the
Investment Company Act, act as brokers or dealers in connection with the
execution of the Company's investments after the Principal Underwriter ceases
to be the underwriter.

27
<PAGE> 30
The Company has agreed to indemnify the Principal Underwriter against
certain civil liabilities, including liabilities under the federal securities
laws. However, such indemnification is subject to the provisions of Section
17(1) of the Investment Company Act which provides, in part, that no agreement
shall contain a provision which protects or purports to protect an underwriter
of an investment company or Business Development Company against any liability
to such company or its security holders to which it would otherwise be subject
due to its misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties under such
agreement.

The Principal Underwriter may act as a market maker with respect to
the Common Stock. The Principal Underwriter and the Company have agreed that
no transfers of shares will be allowed during the offering period and until six
months following the termination of the offering except in accordance with laws
of descent and in certain non-public transactions.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Vinson & Elkins L.L.P., Houston, Texas.

EXPERTS

The Statement of Assets and Liabilities of the Company as of July 26,
1995 has been included herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of the same firm
as experts in auditing and accounting.

28
<PAGE> 31
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Sherry Lane Growth Fund, Inc.

We have audited the accompanying statement of assets and liabilities of Sherry
Lane Growth Fund, Inc. (the Company) as of July 26, 1995. This financial
statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.

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

In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Sherry
Lane Growth Fund, Inc. as of July 26, 1995, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Fort Worth, Texas
July 31, 1995

F-1
<PAGE> 32
SHERRY LANE GROWTH FUND, INC.

Statement of Assets and Liabilities

July 26, 1995

<TABLE>
<S> <C>
Assets

Cash $ 20,000
Organization expenses (note 2) 22,441
---------
42,441

Liabilities

Liabilities:
Accrued organization expenses (note 2) 22,441
---------

Net Assets (20,000,000 shares of $.01 par value shares of common
stock authorized; 2,000 shares issued and outstanding) $ 20,000
=========

Net asset value per share $ 10.00
=========
</TABLE>

See accompanying notes to statement of assets and liabilities.

F-2
<PAGE> 33
SHERRY LANE GROWTH FUND, INC.

Notes to Statement of Assets and Liabilities

July 26, 1995

(1) Organization and Business Purpose

Sherry Lane Growth Fund, Inc. (the Company), a Delaware corporation,
was incorporated on July 21, 1995, and has had no operations to date
other than matters relating to its organization and registration as a
closed-end nondiversified investment company organized as a business
development company under the Investment Company Act of 1940, and the
sale and issuance to Sherry Lane Capital Advisors, Inc. (the
Investment Adviser) of 2,000 shares of common stock for an aggregate
purchase price of $20,000. The registration and offering of the
Company's common stock is for a maximum of 5,000,000 shares at a
proposed maximum offering price per share of $10.

(2) Organization Expenses

Organization expenses relating to the Company incurred and to be
incurred by the Investment Adviser will be reimbursed by the Company.
Such expenses will be deferred and amortized on a straight-line basis
for a five-year period beginning at the commencement of operations of
the Company. Offering costs, estimated at $250,000, will be paid from
the proceeds of the offering and charged to capital at the time of the
issuance of such shares.

(3) Investment Advisory Agreement

The Company will enter into an investment advisory agreement with the
Investment Adviser pursuant to which the Investment Adviser will,
among other things, provide investment advisory services to the
Company and will be responsible for the management of the Company's
portfolio in accordance with the Company's investment policies and for
making decisions to buy, sell, or hold particular securities.

The Company will pay the Investment Adviser an annual fee for its
management services at an annual rate of 2.0% of the Company's net
assets, determined and paid quarterly, and an incentive management fee
of 20% of net realized capital gains after adjusted for any net
unrealized depreciation unrealized losses (defined in the investment
advisory agreement).

F-3
<PAGE> 34
================================================================================

No dealer, salesman or any other person has been authorized to give
any information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with the offer made
by this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or by any
Underwriter. This Prospectus does not constitute an offer of any securities
other than those to which it relates or an offer to sell, or a solicitation of
an offer to buy, to any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor
any sale made hereunder shall under any circumstances create an implication
that there has been no change in the affairs of the Company since the date
hereof.

_______________

TABLE OF CONTENTS

Page
----

Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . 12
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . 18
The Investment Advisory Agreement . . . . . . . . . . . . . . . . . . . . 20
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Valuation of Portfolio Securities . . . . . . . . . . . . . . . . . . . . 22
Federal Income Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 23
Dividend Reinvestment Plan . . . . . . . . . . . . . . . . . . . . . . . 26
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . 27
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . F-1

_______________

Until _____________ 1996, (25 days after the date of this Prospectus),
all dealers effecting transactions in the Common Stock, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.

5,000,000 SHARES

SHERRY LANE
GROWTH FUND, INC.

COMMON STOCK

____________________

PROSPECTUS
, 1996
____________________

RAS SECURITIES CORP.

================================================================================
<PAGE> 35
SUBSCRIPTION AND TAX QUALIFICATION PAGE
SHERRY LANE GROWTH FUND, INC.

Investments must be made through a participating NASD Broker/Dealer by
confirmation or by subscription utilizing this application. By signature
below, the undersigned investor subscribes for and agrees to purchase shares of
Common Stock, par value $.01 per share ("Common Stock"), of the Company as
provided below at a price of Ten Dollars ($10) per share ($9.85 for investors
who purchase at least 50,000 shares of Common Stock), such subscription being
tendered pursuant to the prospectus to which this page is attached (the
"Prospectus"). This subscription is subject to the terms and conditions
discussed in the Prospectus and on the reverse side hereof.

ESCROW

Payments pursuant hereto shall be placed in an escrow account at
Continental Stock Transfer & Trust Company, New York, New York, to be returned
to the investor without interest or expense if (i) this subscription has not
been accepted or is subsequently rejected by the Company or (ii) less than
1,500,000 shares of Common Stock are subscribed by the date of closing of the
subscription period as specified in the Prospectus or as extended pursuant
thereto. Costs of escrow and any interest on escrowed funds will accrue to the
Company. At such time as the minimum subscription and all other requirements
are met, whether by the closing date or before, all subscription funds
tendered, along with interest thereon, shall be released to the general account
of the Company in accordance with the terms of the offering of the Common Stock
contemplated by the Prospectus. If the investor is allocated less than the
full amount of shares subscribed, any overpayment of funds shall be promptly
refunded, without interest.

TERMS AND CONDITIONS OF SUBSCRIPTION AGREEMENT
ACCEPTANCE OR REJECTION

The Company, in its sole discretion and for any reason, shall have the
right to accept or reject this subscription in whole or in part. The investor
hereby agrees that the investor is not entitled to cancel, terminate or revoke
this subscription except as otherwise required under applicable law, and that
such subscription and agreement shall survive the death or disability of the
investor.

OFFERING INFORMATION

The investor acknowledges the investor's receipt and review of the
Prospectus; that the offering was made only through direct communication
between the investor and a duly authorized representative of the Company; that
the investor has been offered and has obtained all further information desired
to verify or supplement the information contained in the Prospectus; and that
the investor has been advised by the Company that a purchaser of the shares of
Common Stock must be prepared to bear the risk of such investment for an
indefinite time because, among other things, of the possible illiquidity of the
offering and the lack of a prior market. The investor also acknowledges that
no person except the officers of the Company and its duly authorized selling
agents have been authorized to make any representations on behalf of the
Company relating to this offering other than as set forth in the Prospectus
and, if given or made, such representations must not be relied upon.

SUITABILITY REQUIREMENTS

The investor represents that the shares of Common Stock are being
purchased solely for investment purposes and that the investor understands the
risk factors discussed in the Prospectus. The investor (if an individual) is
of majority age and under no disability with respect to entering into in the
Subscription Agreement. Based on the investor's investment expertise gained
through experience, education, consultation with qualified advisors, or a
combination thereof, the investor believes that the investment being made
hereby is suitable in view of the investor's financial situation and investment
objectives. In addition, the investor understands that no federal or state
agency has made any finding or determination as to the fairness of an
investment in the shares of Common Stock by the public at large or any
recommendations or endorsement of such shares. The investor, if acting herein
in a fiduciary capacity, represents that the representations and warranties
herein contained are true and correct as to the investor's principals, that the
investor has full and complete authority to execute this Agreement on behalf of
all parties whom it purports to represent and to bind them to the terms hereof.
If the investor is acting on behalf of an entity, such entity was not organized
for the specific purpose of acquiring the shares of Common Stock. The investor
agrees, to the fullest extent
<PAGE> 36
permitted by law, to indemnify and hold the Company and the officers, directors,
agents and representatives of the Company harmless from all loss, damage,
liability, cost or expense (including attorneys' fees and court costs) arising
out of any misrepresentation or warranty of the investor contained herein.

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

The investor authorizes the Company to pay all commissions and fees due
hereunder to the named Broker/Dealer.

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

The investor authorizes the Company to pay all dividends and distributions to
____________________ pursuant to the Dividend Reinvestment Plan unless and
until the Company is notified by the investor of the investor's election to
not participate in such plan.

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

TEXAS LAW

THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS.
<PAGE> 37
Number of Shares purchased hereby (MINIMUM PURCHASE OF 500 SHARES AND GREATER
PURCHASES IN 100 SHARE INCREMENTS ONLY)_________________________________________

Purchase price for Shares (AT $10 PER SHARE ($9.85 FOR INVESTORS WHO PURCHASE
AT LEAST _____ SHARES OF COMMON STOCK)) included herewith $_____________________

MAKE CHECK PAYABLE TO:

CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
AS ESCROW AGENT FOR SHERRY LANE GROWTH FUND, INC.

FORWARD CHECK AND THIS SIGNED TAX QUALIFICATION AND SUBSCRIPTION PAGE TO
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004

INDICATE MANNER OF OWNERSHIP

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Individual [_____] Separate Property [_____] Joint Tenants [_____]
Community [_____] Partnership [_____] Corporation [_____]
"S" Corp. [_____] Trust [_____] Other [_____] (describe):________
</TABLE>

ENTER

Social Security Number ____ _____ _____ or Tax Identification Number __________

PRINT NAMES IN WHICH SHARES OF COMMON STOCK ARE TO BE REGISTERED

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
First Name M.I. Last Name
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For Individual(s),
Print Names here

- -----------------------------------------------------------------------------------------------------------
For Trust, Print Trust Name here

- -----------------------------------------------------------------------------------------------------------
For Corporation or Other
Business, Print Name here
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 38
ADDITIONAL SUBSCRIPTION INFORMATION - PLEASE PRINT

REGISTERED STOCKHOLDER'S ADDRESS
- --------------------------------------------------------------------------------

Residency Address
- --------------------------------------------------------------------------------

City State Zip
- --------------------------------------------------------------------------------

ADDITIONAL ADDRESS FOR STOCKHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------

Mail Address
- --------------------------------------------------------------------------------

City State Zip
- --------------------------------------------------------------------------------

Office Phone (___) Home Phone (___) Fax (___)
- --------------------------------------------------------------------------------

ADVISOR'S ADDRESS (CPA, ATTORNEY, CFP, RIA)
- --------------------------------------------------------------------------------

Name and Firm
- --------------------------------------------------------------------------------

Mail Address
- --------------------------------------------------------------------------------

City State Zip
- --------------------------------------------------------------------------------

Office Phone (___) Home Phone (___) Fax (___)
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
INFORMATION TO BE COMPLETED BY ACCOUNT EXECUTIVE - PLEASE PRINT
- --------------------------------------------------------------------------------

Broker Dealer Firm
- --------------------------------------------------------------------------------

Branch Office Name Manager Name
- --------------------------------------------------------------------------------

ACCOUNT EXECUTIVE
Name Signature
- --------------------------------------------------------------------------------

OFFICE ADDRESS
Street Address City State Zip
- --------------------------------------------------------------------------------

Office Phone (___) Home Phone (___) Fax (___)
- --------------------------------------------------------------------------------

SIGNATURE

I certify that (1) the Taxpayer ID number is correct as shown and (2)
I am not subject to backup withholding as a result of failure to report all
interest or dividends, or the Internal Revenue Service has notified me I am no
longer subject to withholding under Section 3406(a)(1)(C) of the Internal
Revenue Code of 1986, as amended.

Dated Signature
---------------------------- ----------------------------------

Dated Signature
---------------------------- ----------------------------------
<PAGE> 39
SHERRY LANE GROWTH FUND, INC.
DIVIDEND REINVESTMENT PLAN

The Company has adopted a Dividend Reinvestment Plan (the "Plan").

Please be aware that all dividends and distributions will be
automatically reinvested in shares of Common Stock, par value $.01 per share,
of the Company ("Common Stock") at no cost to the stockholder.

Stockholders may make additional cash purchases of shares of Common
Stock in accordance with the Plan. Acquisitions of shares of Common Stock for
reinvestment or cash purchases of Common Stock will be made by the Company from
shares selling at a discount to the Company's Net Asset Value ("NAV") or
through the issuance of new shares by the Company at NAV. Reinvested dividends
and distributions will be used by the Company for general investment and
operating purposes, including additional investments in portfolio companies.

Shares of Common Stock acquired by the Company in accordance with the
Plan will be held in the name of the Company in unissued form by the Company's
transfer agent and investors will receive a quarterly statement reflecting the
number of shares of Common Stock owned in the Plan. These shares can be issued
to the individual investor, or can be liquidated upon written instructions of
the registered investor.

If you wish to have your dividends sent to you instead of held for
reinvestment, please complete and execute the following section.

ELECTION TO RECEIVE DIVIDENDS AND NOT PARTICIPATE IN THE PLAN

The undersigned elects not to participate in the Dividend Reinvestment
Plan and requests all dividends and distributions to be forwarded to the
following address:

Name of Stockholder_____________________________________________________________

Account Number for Deposit______________________________________________________

Bank or Custodial Name__________________________________________________________

Address for Dividend Mailing_______________ City ________ State______ Zip______

Phone (___) ___ ____ Fax (___) ___ ____

Date_______________________ Signature of Registered Holder____________________

________________________________________________________________________________

RETURN THIS ELECTION TO THE FUND

[NEED TO PROVIDE]
<PAGE> 40
PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

The following financial statements and exhibits are filed as part of the
registration statement.

1. Financial Statements

Statement of Assets and Liabilities of the Company as of July 26,
1995.

2. Exhibits

(a) Certificate of Incorporation of the Company.

(b) Bylaws of the Company.

(g) Form of Investment Advisory Agreement between the Company and
the Investment Adviser.

(h) Form of Principal Underwriter Agreement with Soliciting Dealer
Agreement relating to the offering of the shares.**

(i) Form of Escrow Agreement among the Registrant, RAS Securities
Corp. and Continental Stock Transfer & Trust Company.**

(l) Opinion of Vinson & Elkins L.L.P.*

(m) (1) Consent of Vinson & Elkins L.L.P. (contained in Exhibit (l)).*

(m) (2) Consent of KPMG Peat Marwick LLP.

(n) Form of Indemnification Agreement for directors and officers.

* To be filed by amendment

** Filed with Amendment No. 2 to the Registration Statement

ITEM 25. MARKETING ARRANGEMENTS

The Company will enter into an agreement with an investment banking
firm (the "Principal Underwriter") for the organization and management of a
syndication of Broker/Dealers to serve as selling agents for the Company. The
Company and the Principal Underwriter will agree that, during the period of the
offering and for six months following the termination of the offering, all
trading in the securities of the Company shall be suspended.

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities covered by this
Registration Statement.

<TABLE>
<S> <C>
Securities and Exchange Commission $ 18,242
National Association of Security Dealers, Inc. 18,000
Blue Sky fees and expenses 50,000
Printing Expenses *
--------
Legal fees and expenses 175,000
Accounting fees and expenses *
--------
Miscellaneous *
--------
Total $ *
--------
</TABLE>

* To be furnished by amendment.

C-1
<PAGE> 41
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

The outstanding capital stock of Sherry Lane Growth Fund, Inc., a
Delaware corporation (the "Registrant"), is owned by Barry M. Davis, Philip A.
Tuttle, Elmer C. Wilkening and certain relatives of Barry M. Davis. The
investment adviser for the Registrant is Sherry Lane Capital Advisors, Inc., a
Texas corporation, a majority of the outstanding capital stock of which is
owned by Barry M. Davis, Philip A. Tuttle and Elmer C. Wilkening. Barry M.
Davis, Philip A. Tuttle and Elmer C. Wilkening are general partners in Davis
Venture Group, the general partner of Davis Venture Partners, L.P., a Delaware
limited partnership, and are also general partners in Davis Venture Group II,
L.P., a Delaware limited partnership, which is the general partner of Davis
Venture Partners II, L.P. Sherry Lane Capital Advisors, Inc. serves as
administrator and adviser to the Registrant in accordance with the Advisory
Agreement described in the Prospectus contained herein and filed as an exhibit
to this Registration Statement. James A. O'Donnell, David L. Daniel and Terry
K. Dorsey serve as the independent directors of the Registrant. See
"Management" in the Prospectus contained herein.

C-2
<PAGE> 42
ITEM 28. NUMBER OF HOLDERS OF SECURITIES

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Common Stock 1
</TABLE>

ITEM 29. INDEMNIFICATION

Article VI of the Bylaws of the Company provides that the Company
shall indemnify its officers and directors to the maximum extent allowed by the
Delaware General Corporation Law. Pursuant to Section 145 of the Delaware
General Corporation Law, the Company generally has the power to indemnify its
present and former directors and officers against expenses and liabilities
incurred by them in connection with any suit to which they are, or are
threatened to be made, party by reason of their serving in those positions so
long as they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the Company, and with respect to
any criminal action, so long as they had no reasonable cause to believe their
conduct was unlawful. With respect to suits by or in the right of the Company,
however, indemnification is generally limited to attorneys' fees and other
expenses and is not available if the person is adjudged to be liable to the
Company, unless the court determines that indemnification is appropriate. The
statute expressly provides that the power to indemnify authorized thereby is
not exclusive of any rights granted under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise. The Company also has
the power to purchase and maintain insurance for its directors and officers.

The preceding discussion of the Company's Bylaws and Section 145 of
the Delaware General Corporation Law is not intended to be exhaustive and is
qualified in its entirety by the Company's Bylaws and Section 145 of the
Delaware General Corporation Law.

The Company intends to enter into indemnity agreements with the
Company's directors and officers. Pursuant to such agreements, the Company
will, to the extent permitted by applicable law, indemnify such persons against
all expenses, judgments, fines and penalties incurred in connection with the
defense or settlement of any actions brought against them by reason of the fact
they were directors or officers of the Company or assumed certain
responsibilities at the direction of the Company.

The form of Principal Underwriter Agreement included herein as Exhibit
(a) provides for indemnification of the Company, the Principal Underwriter, and
certain controlling persons under certain circumstances, including
indemnification for liabilities under the Securities Act of 1933, as amended
(the "Securities Act").

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER

Barry M. Davis, Philip A. Tuttle and Elmer C. Wilkening,
respectively, own 27%, 27% and 9.5% of the outstanding capital stock of Sherry
Lane Capital Advisors, Inc. The remainder of the outstanding capital stock of
Sherry Lane Capital Advisors, Inc. is owned by certain relatives of Barry M.
Davis.

C-3
<PAGE> 43
Forum. He has served on numerous boards of civic organizations and is past
Chairman of the Board of Hillcrest Healthcare Corporation as well as a current
trustee of the University of Tulsa. He is a graduate of the University of
Oklahoma with a B.B.A. degree in corporate finance.

Philip A. Tuttle is President of Sherry Lane Capital Advisors, Inc.
From August 1987 to June 1989, Mr. Tuttle was Chief Executive Officer of OMNA
Corporation, a home healthcare provider. From 1982 to August 1987 Mr. Tuttle
served as the President of Allied Bancshares Capital Corporation, a federally
licensed small business investment company which grew from $5 million to $40
million in capital during his tenure. He has since June 1989, been a general
partner of Davis Venture Group, the general partner of Davis Venture Partners
I, a private investment partnership which raised $32 million from institutional
investors to invest primarily in business located in the southwestern and south
central United States. He is also a general partner in Davis Venture Group II,
L.P. the general partner of Davis Venture Partners II. Mr. Tuttle has served
on the board of directors of four portfolio companies in which Davis Venture
Partners I has invested: Drypers Holding Corp., Quality Tubing, Inc., Taylor
Medical, Inc. and WCC Holding Corp. Mr. Tuttle currently serves on the board
of directors of Medical Innovations, Inc., a publicly traded company listed on
NASDAQ that provides home intravenous therapies, specialized home nursing care
and other outpatient health care services, the board of directors of Zydeco
Energy, Inc., a publicly traded company listed on NASDAQ engaged in acquiring
oil and gas leases, drilling and producing reserves utilizing focused geologic
concepts and advanced 3D seismic and computer aided exploration technology,
and the board of directors of Drypers Holding Corp., a publicly traded company
listed on NASDAQ that manufactures and distributes disposable diapers. Mr.
Tuttle is a founder and was formerly a President of the Houston Venture Capital
Association and was President and is currently a Director of The Houston
Chapter of the Association for Corporate Growth. He has served as Chairman of
the Accounting Council at Rice University-Jones Graduate School of
Administration and as a member of the Board of Governors of the National
Association of Small Business Investment Companies. He currently serves as a
member of the Board of Trustees of Child Advocates Endowment, Inc. Mr. Tuttle
earned a B.A. degree from Rice University and an M.B.A. degree from
Northwestern University. He is a certified Public Accountant and Fellow of the
Institute of Directors, London, England.

ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

The books of account, securities and other documents and records of
the Registrant are maintained by the Investment Adviser at its offices at 320
South Boston, Suite 1000, Tulsa, Oklahoma 74103-3703.

ITEM 32. MANAGEMENT SERVICES

None other than as described in the prospectus contained herein (the
"Prospectus").

ITEM 33. UNDERTAKINGS

The Company undertakes to suspend the offering of its shares of Common
Stock until it amends the Prospectus if (i) subsequent to the effective date of
this Registration Statement, the net asset value declines more than ten percent
from its net asset value as of the effective date of this Registration
Statement or (ii) the net asset value increases to an amount greater than its
net proceeds as stated in the Prospectus.

The Company undertakes to file a post-effective amendment with
certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons, if the Company proposes to
raise its initial capital under Section 14(a)(3) of the Investment Company Act.

The Company undertakes:

(a) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (i) to include
any prospectus required by section 10(a)(3) of the Securities Act, (ii) to
reflect in the Prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
thereof) that, individually or in the aggregate, represent a fundamental change
in the

C-4
<PAGE> 44
information set forth in this Registration Statement and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement;

(b) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of those securities at that time shall be deemed to be the initial
bona fide offering thereof; and

(c) to remove from registration by means of a post-effective
amendment any of the securities that remain unsold at the termination of the
offering.

The Company undertakes that, for purposes of determining any liability
under the Securities Act:

(a) the information omitted from the Prospectus in reliance upon
Rule 430A of the Securities Act and contained in the form of Prospectus filed
by the Company pursuant to Rule 497(h) under the 1933 Securities Act, shall be
deemed to be part of this Registration Statement as of the time it was declared
effective; and

(b) each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
securities offered hereby and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

C-5
<PAGE> 45
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Company has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on the 21st day of February, 1996.

SHERRY LANE GROWTH FUND, INC.

By: /s/ Philip A. Tuttle
----------------------------------
Philip A. Tuttle, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature to this
Registration Statement appears below hereby appoints Philip A. Tuttle as his
attorney-in-fact to sign on his behalf, individually and in the capacities
stated below, and to file any and all amendments and post-effective amendments
to this Registration Statement, which amendment or amendments may make such
changes and additions as such attorney in fact may deem necessary or
appropriate.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Barry M. Davis Chairman of the Board, Chief Executive February 21, 1996
---------------------------------- Officer and Director (principal
Barry M. Davis executive officer)

/s/ Elmer C. Wilkening Vice President, Secretary and Treasurer February 21, 1996
---------------------------------- (principal financial and accounting
Elmer C. Wilkening officer)

/s/ James A. O'Donnell Director February 21, 1996
----------------------------------
James A. O'Donnell

/s/ Philip A. Tuttle Director February 21, 1996
----------------------------------
Philip A. Tuttle

/s/ Terry K. Dorsey Director February 21, 1996
----------------------------------
Terry K. Dorsey

/s/ David L. Daniel Director February 21, 1996
----------------------------------
David L. Daniel
</TABLE>

C-6

<PAGE> 1

EXHIBIT (h)
<PAGE> 2
[KL Draft 2/20/96]

5,000,000

SHARES OF COMMON STOCK

SHERRY LANE GROWTH FUND, INC.

UNDERWRITING AGREEMENT

Tulsa, Oklahoma
__________ ___, 1996

RAS Securities Corp.
2 Broadway
New York, New York 10004

Ladies and Gentlemen:

Sherry Lane Growth Fund, Inc., a Delaware corporation (the "Company")
proposes to offer and sell to the public up to 5,000,000 shares of the
Company's common stock, $.01 par value per share (the "Shares"), subject to the
terms and conditions herein stated. The Shares are more fully described in the
Registration Statement and the Prospectus referred to below. The Company
hereby appoints RAS Securities Corp. (the "Underwriter") as its exclusive
agent, on a best efforts basis, to sell the Shares, on behalf of the Company
subject to the terms and conditions herein stated.

Sherry Lane Capital Advisors, Inc., a Delaware corporation (the
"Adviser"), will act as investment adviser for the Company pursuant to an
investment advisory agreement (the "Investment Advisory Agreement"), dated
September 21, 1995, between the Company and the Adviser.

1. Representations and Warranties. (a) The Company and the
Adviser each, jointly and severally, represent and warrant to, and agree with,
the Underwriter, as of the date hereof, and as of the Closing Date (hereinafter
defined), as follows:

(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form N-2 (No. 33-96108), including any
related preliminary prospectus
<PAGE> 3
("Preliminary Prospectus"), for the registration of the Shares under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended (collectively, the "Acts"), which registration statement and amendment
or amendments have been prepared by the Company in conformity with the
requirements of the Acts, and the Rules and Regulations of the Commission
thereunder. The Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the Underwriter and
will not file any other amendment thereto to which the Underwriter shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein
(including, but not limited to those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the rules and regulations), is
hereinafter called the "Registration Statement", and the form of prospectus in
the form first filed with the Commission pursuant to Rule 497 of the rules and
regulations, is hereinafter called the "Prospectus." For purposes hereof,
"Rules and Regulations" mean the rules and regulations adopted by the
Commission under either the Securities Act of 1933, as amended (the "Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Investment Company Act of 1940, as amended (the "1940 Act") or the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), as applicable.

(ii) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part of any thereof
and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending or threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed
with the requirements of the Acts and the Rules and Regulations, and none of
the Preliminary Prospectus, the Registration Statement or Prospectus at the
time of filing thereof contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein and necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except that this representation and warranty does
not apply to statements made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriter by or on
behalf of the Underwriter expressly for use in such Preliminary Prospectus,
Registration Statement or Prospectus. The Company and the Adviser acknowledge
that the only such information so furnished by the Underwriter is the paragraph
relating to stabilization on the inside front cover page of the Prospectus and
the statements under the caption "Underwriting" in the Prospectus.

(iii) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and during such longer
period as the Prospectus may be required to be delivered in connection with
sales by the Underwriter or a dealer, the Registration Statement and the
Prospectus will contain all statements which are required to be stated therein
in accordance with the Acts and the Rules and Regulations, and will conform to

- 2 -
<PAGE> 4
the requirements of the Acts and the Rules and Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided, however, that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and in
conformity with information furnished to the Company in writing by or on behalf
of the Underwriter (as set forth in paragraph 1(a)(ii) hereof) expressly for
use in the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereof or supplement thereto.

(iv) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company does not own an interest in any corporation,
partnership, trust, joint venture or other business entity. The Company is not
qualified as a foreign corporation in any jurisdiction, there being no
jurisdiction in which failure to so qualify would have a material adverse
effect upon the Company. The Company has all requisite power and authority
(corporate and other), and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar matters),
materially necessary to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations, except where the failure to so comply does not and
will not have a material adverse effect on the Company; and the Company has not
received any notice of proceedings relating to the revocation or modification
of any such authorization, approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
condition, financial or otherwise, or the earnings, position, prospects, value,
operation, properties, business or results of operations of the Company. The
disclosures in the Registration Statement concerning the effects of federal,
state, local, and foreign laws, rules and regulations on the Company's business
as currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.

(v) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and will have the adjusted
capitalization set forth therein on the Closing Date based upon the assumptions
set forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any
capital stock, rights, warrants, options or other securities, except for this
Agreement and as described in the Prospectus. The Securities and all other
securities issued or issuable by the Company conform or, when issued and paid
for, will conform, in all respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are

- 3 -
<PAGE> 5
fully paid and non-assessable and the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability
under the laws of the State of Delaware as currently in effect by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The Shares are not and will not be
subject to any preemptive or other similar rights of any stockholder, have been
duly authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable and will
conform to the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability under the laws of the State of
Delaware as currently in effect solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the Shares has
been duly and validly taken; and the certificates representing the Shares will
be in due and proper form. Upon the issuance and delivery pursuant to the
terms hereof of the Securities to be sold by the Company hereunder or the
Underwriter, as the case may be, will acquire good and marketable title to such
Shares free and clear of any lien, charge, claim, encumbrance, pledge, security
interest defect or other restriction or equity of any kind whatsoever (except
those arising out of acts of or claims against the Underwriter).

(vi) The financial statements of the Company together with the
related notes and schedules thereto, included in the Registration Statement,
each Preliminary Prospectus and the Prospectus fairly present the financial
position, changes in cash flow, changes in stockholders' equity and the results
of operations of the Company at the respective dates and for the respective
periods to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved. There has
been no material adverse change or development involving a material prospective
change in the condition, financial or otherwise, or net assets of the Company
or in the management, capital stock, investment objectives, investment
policies, earnings, liabilities, business affairs or business prospects of the
Company whether or not arising in the ordinary course of business, since the
date of the financial statements included in the Registration Statement and the
Prospectus.

(vii) The Company (A) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to,
withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (B) has
established adequate reserves for such taxes which are not due and payable, and
(C) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.

(viii) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriter in connection with (A) the issuance
by the Company of the Securities, (B) the purchase by the Underwriter of the
Securities from the Company, (C) the consummation by the Company of any of its
obligations under this Agreement, or (D) resales of the Securities in
connection with the distribution contemplated hereby.

- 4 -
<PAGE> 6
(ix) The Company maintains insurance policies, including, but
not limited to, general liability and property insurance, which insures the
Company and its employees, against such losses and risks generally insured
against by comparable businesses. The Company (A) has not failed to give
notice or present any insurance claim with respect to any matter, including but
not limited to the Company's business, property or employees, under the
insurance policy or surety bond in a due and timely manner, (B) does not have
any disputes or claims against any underwriter of such insurance policies or
surety bonds or has not failed to pay any premiums due and payable thereunder,
or (C) has not failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company.

(x) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or circumstances
that may give rise to the same), or involving the properties or business of the
Company which (A) questions the validity of the capital stock of the Company,
this Agreement, the Investment Advisory Agreement (as defined herein), or of
any action taken or to be taken by the Company pursuant to or in connection
with this Agreement or the Investment Advisory Agreement, (B) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all material respects), or (C) if adversely determined, might
materially and adversely affect the condition, financial or otherwise, or the
business affairs or business prospects, earnings, liabilities, prospects,
stockholders' equity, value, properties, business or assets of the Company.

(xi) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Shares, enter into this Agreement and
the Investment Advisory Agreement and to consummate the transactions provided
for in such agreements; and this Agreement and the Investment Advisory
Agreement have each been duly and properly authorized, executed and delivered
by the Company. Each of this Agreement and the Investment Advisory Agreement
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, and none of the Company's
issue and sale of the Shares, execution or delivery of this Agreement and the
Investment Advisory Agreement, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein, or the
conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute a default under,
or result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever upon, any property or assets (tangible or intangible) of
the Company pursuant to the terms of, (A) the certificate of incorporation or
by-laws of the Company, (B) any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other

- 5 -
<PAGE> 7
agreement or instrument to which the Company is a party or by which it is or
may be bound or to which its properties or assets (tangible or intangible) is
or may be subject, or any indebtedness, or (C) any statute, judgment, decree,
order, rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Company or
any of its activities or properties, in each case except for conflicts,
breaches, violations, defaults, creations or impositions which do not and would
not have a material adverse effect on the Company.

(xii) Except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court, regulatory
body, government agency or other body, domestic or foreign, is required for the
issuance of the Shares pursuant to the Prospectus and the Registration
Statement, and the transactions contemplated hereby and thereby, including
without limitation, any waiver of any preemptive, first refusal or other rights
that any entity or person may have for the issue and/or sale of any of the
Shares, except such as have been or may be obtained under the Acts or may be
required under state securities or Blue Sky laws in connection with the
Underwriter's purchase and distribution of the Shares, to be sold by the
Company hereunder.

(xiii) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits
to the Registration Statement to which the Company is a party or by which it
may be bound or to which its assets, properties or business may be subject have
been duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company, enforceable
against the Company, in accordance with their respective terms. The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate and fairly present the information required to be shown
with respect thereto by Form N-2, and there are no contracts or other documents
which are required by the Acts to be described in the Registration Statement or
filed as exhibits to the Registration Statement which are not described or
filed as required, and the exhibits which have been filed are complete and
correct copies of the documents of which they purport to be copies.

(xiv) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(A) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (B) entered into any transaction other than in
the ordinary course of business, or (C) declared or paid any dividend or made
any other distribution on or in respect of its capital stock of any class, and
there has not been any change in the capital stock, or any change in the debt
(long or short term) or liabilities or material adverse change in or affecting
the business affairs or prospects, management, stockholders' equity,
properties, business or assets of the Company.

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<PAGE> 8
(xv) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, partnership agreement, note, loan or credit agreement,
purchase order, or any other material agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
the property or assets (tangible or intangible) of the Company is subject or
affected, which default would have a material adverse effect on the Company.

(xvi) Neither the Company, the Adviser, nor any of their
respective employees, directors, stockholders, partners, or affiliates (within
the meaning of the Rules and Regulations) of any of the foregoing has taken or
will take, directly or indirectly, any action designed to or which has
constituted or which might be expected to cause or result in, under the
Exchange Act, or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares or
otherwise.

(xvii) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
stated in the Prospectus, to be owned or leased by it free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects, or
other restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and payable.

(xviii) KPMG Peat Marwick LLP, whose report is filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Acts and the Rules and Regulations.

(xix) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Shares hereunder or
any other arrangements, agreements, understandings, payments or issuance with
respect to the Company, or any of its officers, directors, stockholders,
partners, employees or affiliates that may affect the Underwriter's
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").

(xx) Neither the Company, nor any of its officers, employees,
agents or any other person acting on behalf of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business)
to any customer, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency (domestic or foreign) or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist
the Company in connection with any actual or proposed transaction) which (A)
might subject the Company, or any other such person to any damage or penalty in
any civil, criminal or governmental litigation or proceeding (domestic or
foreign), (B) if not given in the past, might have had a materially adverse
effect on the assets,

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<PAGE> 9
business or operations of the Company, or (C) if not continued in the future,
might adversely affect the assets, business, operations or prospects of the
Company.

(xxi) Except as set forth in the Prospectus, no officer,
director, or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and
Regulations) of any of the foregoing persons or entities has or has had, either
directly or indirectly, (A) an interest in any person or entity which (1)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (2) purchases from or sells
or furnishes to the Company any goods or services, or (B) a beneficiary
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus under
"Certain Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions between or among the Company, and any officer or
director of the Company, or any partner, affiliate or associate of any of the
foregoing persons or entities.

(xxii) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to Underwriter's Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriter
as to the matters covered thereby.

(xxiii) The minute books of the Company have been made available
to the Underwriter and contain a complete summary of all meetings and actions
of the directors and stockholders of the Company, since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.

(xxiv) Except and to the extent described in the Prospectus, no
holders of any securities of the Company have the right to include any
securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Acts and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.

(xxv) The rules adopted by the Commission concerning "blank
check" and "blind pool" offerings are not applicable to the Company's offering
of the Shares.

(xxvi) The Company has entered into the Investment Advisory
Agreement substantially in the form filed as Exhibit 10.2 to the Registration
Statement with the Adviser in form and substance satisfactory to the
Underwriter (the "Investment Advisory Agreement"). The Investment Advisory
Agreement has been duly and validly authorized by the Company and, assuming due
execution by the parties thereto other than the Company, constitutes a valid
and legally binding agreement of the Company, enforceable against the Company
in accordance with its terms.

(xxvii) The Company is registered with the Commission under the
1940 Act as a closed-end, non-diversified investment company. The Company is,
and at all times through

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<PAGE> 10
the Closing Date, as hereinafter defined, will be, in compliance with the terms
and provisions of the Acts in all material respects. No person is serving or
acting as an officer or director of, or investment adviser to, the Company
except in accordance with the provisions of the 1940 Act, the Advisers Act, and
the Rules and Regulations thereunder.

(b) The Adviser represents to the Underwriter as follows:

(i) The Adviser (A) is duly registered as an investment
adviser under the Advisers Act and (B) is not prohibited by the Advisers Act,
the 1940 Act, or the Rules and Regulations thereunder from acting as investment
adviser for the Company as contemplated under the Investment Advisory
Agreement.

(ii) The Adviser has been duly organized and is validly
existing as a corporation in good standing under the laws of Delaware, with
full power and authority, to own or lease all assets owned or leased by it and
to conduct its business as described in the Registration Statement and
Prospectus, and is duly licensed or qualified as a foreign entity and in good
standing in each other jurisdiction in which its ownership of property or the
conduct of its business requires such qualification or license and owns,
possesses, or has obtained and currently maintains all material governmental
licenses, permits, consents, orders, approvals and authorizations
(collectively, the "Authorizations"), whether foreign or domestic, necessary to
carry on its business as contemplated in the Prospectus, except where the
failure to be so licensed or qualified or obtaining such Authorizations would
not have a material adverse effect on the Adviser.

(iii) Each of this Agreement and the Investment Advisory
Agreement has been duly and validly authorized, executed and delivered by the
Adviser and the Investment Advisory Agreement complies with the all applicable
provisions of the 1940 Act, the Advisers Act, and the Rules and Regulations
thereunder, as the case may be, and, assuming due authorization, execution and
delivery by the other parties thereto, each of this Agreement and the
Investment Advisory Agreement constitutes a legal, valid and binding obligation
of the Adviser, enforceable in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, fraudulent transfer, moratorium,
reorganization, insolvency or other similar laws relating to or affecting
creditors' rights generally and to general equitable principles, except, with
respect to this Agreement, as rights to indemnity and contribution thereunder
may be limited by U.S. federal or state securities laws.

(iv) No consent, approval, authorization or order (each, a
"Consent"), of any court or governmental agency or body or securities exchange
or securities association having jurisdiction over the Adviser, whether foreign
or domestic, is required to be obtained by the Adviser for the consummation by
the Adviser of the transactions contemplated in, or the performance by the
Adviser of its obligations under, this Agreement or the Financial Advisory,
Agreement, except (A) for any consent required pursuant to state or foreign
securities or "blue sky" laws and (B) such as have been obtained under the 1940
Act, the Advisers Act, and the Rules and Regulations thereunder.

- 9 -
<PAGE> 11
(v) Neither the execution and delivery by the Adviser of this
Agreement or the Investment Advisory Agreement, nor the performance by the
Adviser of its obligations under such agreements or the consummation by the
Adviser of the transactions contemplated by such agreements, conflicts or will
conflict with, or results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute a default under,
or result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever upon, any property or assets (tangible or intangible) of
the Adviser pursuant to the terms of, (A) the certificate of incorporation or
by-laws of the Adviser, (B) any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Adviser is a party
or by which it is or may be bound or to which its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or (C) any
statute, judgment, decree, order, rule or regulation applicable to the Adviser
of any arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over the Adviser or any of its activities or properties, in
each case except for conflicts, breaches, violations, defaults, creations or
impositions which do not and would not have a material adverse effect on the
Adviser.

(vi) The description of the Adviser in the Registration
Statement and the Prospectus complies with the requirements of the Acts and the
Rules and Regulations and does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

(vii) There is no action, suit or providing before or by any
court or governmental agency or body, foreign or domestic, now pending or, to
the knowledge of the Adviser, threatened against the Adviser of a nature
required to be disclosed in the Registration Statement or the Prospectus (other
than as may be disclosed therein) that might result in any material adverse
change in the condition, financial or otherwise, or business affairs of the
Adviser or the ability of the Adviser to perform its obligations hereunder or
under the Investment Advisory Agreement, as the case may be.

(viii) The information with respect to the prior performance of
Davis Venture Partners I, Alliance Business Investment Company, and Allied
Bancshares Capital Corporation, included in the Registration Statement and the
Prospectus, presents fairly and accurately the information set forth therein
for the periods specified and complies as to form and content in all material
respects with the requirements of the Acts and the Rules and Regulations.

(ix) Any certificate signed by any officer of the Adviser and
delivered to the Underwriter or to Underwriter' counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriter
as to the matters covered thereby.

- 10 -
<PAGE> 12
2. Purchase, Sale and Delivery of the Securities. (a) The
Company and the Underwriter hereby mutually agree as follows:

(i) The Company hereby appoints the Underwriter as its exclusive
agent ("Agent") to sell for its account up to 5,000,000 Shares ; provided, that
the Company reserves the right to reject any prospective purchaser. The
Underwriter hereby agrees to use its best efforts as such Agent, promptly
following the receipt of notice (thereafter confirmed in writing) of the
effective date of the Registration Statement, to sell the Shares, for the
account and risk of the Company, subject to the terms, provisions, and
conditions set forth herein and in the Prospectus and the Registration
Statement. The retention of the Agent hereunder shall terminate on the Closing
Date (as hereinafter defined); provided, however, that if the Underwriter does
not sell a minimum of [__________] Shares within [___] days from the effective
date of the Registration Statement (which period may be extended for an
additional period of up to [___] days upon the mutual consent of the Company
and the Underwriter) (the "Effective Period"), the retention hereunder shall
terminate.

(ii) The Underwriter may use the services of other brokers or
dealers who are members in good standing of the National Association of
Securities Dealers, Inc. and who are registered or qualified under all
applicable blue-sky laws in connection with the offer and sale of the Shares
(hereinafter referred to as "Selected Dealer"). The Underwriter's agreement
with any Selected Dealer shall be subject to the Company's approval, which
approval will not be unreasonably withheld, and shall be substantially in the
form of the Selected Dealer's Agreement attached hereto as Exhibit A. The
Underwriter shall have the right to allow such brokers or dealers, if any, such
concessions out of the commissions to be received by the Underwriter as the
Underwriter may determine.

(iii) In the event that a minimum of [____________] Shares shall
not be sold within the Effective Period, the Company and the Underwriter shall
cause Continental Stock Transfer & Company (the "Escrow Agent"), under the form
of Escrow Agreement attached hereto as Exhibit B, to refund, to all persons who
have subscribed for any of the Shares the full amount, without interest or
deduction for commissions and expenses, which may have been received from such
subscribers by the Underwriter and deposited by it with the Escrow Agent.
Appropriate arrangements for placing the funds received on the sale of the
Shares in escrow shall be made prior to the commencement of the offering
hereunder, with provision for refund to the purchasers as set forth in this
Subsection 2(a)(iii), and for delivery on the Closing Date to the Company if a
minimum of [_____________] (or a larger number of) Shares are sold. Except as
provided in this Subsection 2(a)(iii) , and in Sections 7, 8, and 10 hereof,
the Company will not be under any liability to the Underwriter and the
Underwriter will not be under any liability to the Company in the event that
the Underwriter does not sell a minimum of 500,000 Shares within the Effective
Period.

(iv) The Company will pay the Underwriter, as compensation for its
services hereunder, a commission of [$____] per share with respect to all
Shares sold and for which payment is actually received by the Company, which
compensation the Underwriter shall be

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<PAGE> 13
entitled to deduct and retain from the proceeds of the sale for such Shares
concurrently with transmittal of payment to the Company by the Escrow Agent.

(b) Payment of the purchase price for, and delivery of
certificates evidencing the Shares shall be made at the offices of RAS
Securities Corp. at 2 Broadway, New York, New York 10004, or at such other
place as shall be agreed upon by the Underwriter and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
_________________ ___, 1996 or at such other time and date as shall be agreed
upon by the Underwriter and the Company, but not less than three (3) nor more
than ten (10) full business days after the effective date of the Registration
Statement (such time and date of payment and delivery being herein called
"Closing Date"). Delivery of the certificates for the Shares shall be made to
the Underwriter against payment by the Underwriter of the purchase price for
the Shares to the order of the Company by New York Clearing House Funds.
Certificates for the Shares shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Underwriter may request in writing at least two
(2) business days prior to Closing Date. The certificates for the Shares shall
be made available to the Underwriter at such office or such other place as the
Underwriter may designate for inspection, checking and packaging no later than
9:30 a.m. on the last business day prior to Closing Date.

3. Public Offering of the Shares. As soon after the Registration
Statement becomes effective as the Representatives deem advisable, the
Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of the Shares is
required and has not become effective) at the price and upon the other terms
set forth in the Prospectus. The Representatives may from time to time
increase or decrease the public offering price after distribution of the Shares
has been completed to such extent as the Representatives, in their sole
discretion deem advisable. The Underwriters may enter into one of more
agreements as the Underwriters, in each of their sole discretion, deem
advisable with one or more broker- dealers who shall act as dealers in
connection with such public offering.

4. Covenants and Agreements of the Company. The Company
covenants and agrees with the Underwriter as follows:

(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Acts or Exchange Act before termination of the offering of the Shares
by the Underwriter of which the Underwriter shall not previously have been
advised and furnished with a copy, or to which the Underwriter shall have
objected or which is not in compliance with the Acts, the Exchange Act or the
Rules and Regulations.

(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the notice in
writing, (i) when the

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<PAGE> 14
Registration Statement, as amended, becomes effective, if the provisions of
Rule 497 promulgated under the Act will be relied upon, when the Prospectus has
been filed in accordance with said Rule 497 and when any post-effective
amendment to the Registration Statement becomes effective, (ii) of the issuance
by the Commission of any stop order or of the initiation, or the threatening,
of any proceeding, suspending the effectiveness of the Registration Statement
or any order preventing or suspending the use of the Preliminary Prospectus or
the Prospectus, or any amendment or supplement thereto, or the institution of
proceedings for that purpose, (iii) of the issuance by the Commission or by any
state securities commission of any proceedings for the suspension of the
qualification of any of the Securities for offering or sale in any jurisdiction
or of the initiation, or the threatening, of any proceeding for that purpose,
(iv) of the receipt of any comments from the Commission; and (v) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information. If
the Commission or any state securities commission authority shall enter a stop
order or suspend such qualification at any time, the Company will make every
effort to obtain promptly the lifting of such order.

(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriter) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 497 not later than the Commission's close of business on the earlier of
(i) the second business day following the execution and delivery of this
Agreement and (ii) the third business day after the effective date of the
Registration Statement.

(d) The Company will give the Underwriter notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriter in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 497 of the Rules and
Regulations), and will furnish the Underwriter with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Underwriter or Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
("Underwriter's Counsel"), shall reasonably object.

(e) The Company shall endeavor in good faith, in cooperation
with the Underwriter, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Underwriter may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification shall
be effected, the Company will, unless the Underwriter agrees

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<PAGE> 15
that such action is not at the time necessary or advisable, use all reasonable
efforts to file and make such statements or reports at such times as are or may
reasonably be required by the laws of such jurisdiction to continue such
qualification.

(f) During the time when a prospectus is required to be
delivered under the Acts, the Company shall comply with all requirements
imposed upon it by the Acts and the Exchange Act, as now and hereafter amended
and by the Rules and Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Securities
in accordance with the provisions hereof and the Prospectus, or any amendments
or supplements thereto. If at any time when a prospectus relating to the
Securities is required to be delivered under the Acts, any event shall have
occurred as a result of which, in the reasonable opinion of counsel for the
Company or Underwriter' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any 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, or if it is necessary at any time to amend the Prospectus
to comply with the Acts and the Rules and Regulations, the Company will notify
the Underwriter promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the Act,
each such amendment or supplement to be satisfactory to Underwriter' Counsel,
and the Company will furnish to the Underwriter copies of such amendment or
supplement as soon as available and in such quantities as the Underwriter may
request.

(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriter, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the
Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.

(h) During a period of five years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Underwriter:

(i) concurrently with furnishing such quarterly reports
to its stockholders, statements of income of the Company for each quarter in
the form furnished to the Company's stockholders and certified by the Company's
principal financial or accounting officer;

(ii) concurrently with furnishing such annual reports to
its stockholders, a balance sheet of the Company as at the end of the preceding
fiscal year, together with

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<PAGE> 16
statements of operations, stockholders' equity, and cash flows of the Company
for such fiscal year, accompanied by a copy of the certificate thereon of
independent certified public accountants;

(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;

(iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission, the NASD or
any securities exchange;

(v) every press release and every material news item or
article of interest to the financial community in respect of the Company or its
affairs which was released or prepared by or on behalf of the Company; and

(vi) any additional information of a public nature
concerning the Company (and any future subsidiaries) or its businesses which
the Underwriter may reasonably request.

(i) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent) for its Common Stock.

(j) The Company will furnish to the Underwriter, without
charge, at such place as the Underwriter may designate, copies of each
Preliminary Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (two of which copies will be signed and will
include all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any Prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such quantities as the Underwriter may reasonably request.

(k) Neither the Company, the Adviser, nor any of their
respective officers, directors, stockholders or affiliates (within the meaning
of the Rules and Regulations) will take, directly or indirectly, any action
designed to, or which might in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any securities of the
Company.

(l) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. No portion of the net proceeds will be
used, directly or indirectly, to acquire any securities issued by the Company.

(m) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under
the Act, the Exchange Act, the 1940 Act, the

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<PAGE> 17
Advisers Act and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, the Advisers Act, the 1940 Act,
and the Rules and Regulations.

(n) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in their letters to be
furnished pursuant to Section 6(j) hereof.

(o) For a period of five (5) years from the Closing Date, the
Company shall furnish to the Underwriter at the Underwriter's reasonable
request and at the Company's sole expense, (i) daily consolidated transfer
sheets relating to the Shares, (ii) the list of holders of all of the Company's
securities and (iii) a Blue Sky "Trading Survey" for secondary sales of the
Company's securities prepared by counsel to the Company.

(p) As soon as practicable, (i) but in no event more than five
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities and (ii) but in no event more than 30 days from the
effective date of the Registration Statement, take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
Descriptions and Moody's Manual and to use its best efforts to continue such
inclusion for a period of not less than seven (7) years.

(q) Until the completion of the distribution of the
Securities, the Company shall not without the prior written consent of the
Underwriter and Underwriter's Counsel, issue, directly or indirectly any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent
with past practices with respect to the Company's operations.

[ (r) For a period of three (3) years after the effective date
of the Registration Statement, the Underwriter shall have the right to
designate one (1) individual for election to the Company's Board of Directors
("Board") and the Company shall use its best efforts to elect such individuals
to the Board. In the event the Underwriter shall not have designated such
individual at the time of any meeting of the Board or such person is
unavailable to serve, the Company shall notify the Underwriter of each meeting
of the Board and an individual designated by the Underwriter shall be permitted
to attend all meetings of the Board and to receive all notices and other
correspondence and communications sent by the Company to members of the Board.
Such individual shall be reimbursed for all out-of-pocket expenses incurred in
connection with his or her service on, or attendance at meetings of, the
Board.]

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<PAGE> 18
[ (s) For a period of five (5) years after the effective date of
the Registration Statement, the Underwriter shall have a preferential right on
the terms and subject to the conditions set forth in this paragraph, to
purchase for its account, or to sell for the account of the Company, any
securities of the Company, with respect to which the Company may seek a sale of
such securities; and the Company will consult with the Underwriter with regard
to any such offering and will offer to the Underwriter the opportunity, on
terms not more favorable to the Company than they can secure elsewhere, to
purchase or sell any such securities. If the Underwriter fails to accept in
writing such proposal made by the Company thereof within ten (10) business days
after receipt of a notice contained in such proposal, then the Underwriter
shall have no further claim or right with respect to the proposal contained in
such notice. If, thereafter such proposal is modified, the Company shall again
consult with the Underwriter in connection with such modification and shall in
all respects have the same obligations and adopt the same procedures with
respect to such proposal as are provided hereinabove with respect to the
original proposal. In addition, the Underwriter shall have a preferential
right, on the same terms and subject to the same conditions with respect to
sales of securities of the Company set forth in this paragraph, with respect to
any sale of securities by any business development company involved in
restructurings of financially distressed companies that the Adviser or any of
its affiliates, as such term is defined in Rule 405 promulgated under the Act,
sponsors.]

5. Payment of Expenses.

(a) The Company hereby agrees to pay on the Closing Date all
expenses and fees (other than fees of Underwriter's Counsel, except as provided
in (iv) below) incident to the performance of the obligations of the Company
under this Agreement, including, without limitation, (i) the fees and expenses
of accountants and counsel for the Company, (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing (including
mailing and handling charges), filing, delivery and mailing (including the
payment of postage with respect thereto) of the Registration Statement and the
Prospectus and any amendments and supplements thereto and the printing, mailing
(including the payment of postage with respect thereto) and delivery of this
Agreement, the Selected Dealer Agreements, and related documents, including the
cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriter and such dealers as the Underwriter may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Shares, (iv) the qualification of the Shares under state or foreign securities
or "Blue Sky" laws and determination of the status of such securities under
legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey," if any, and disbursements and fees of counsel in
connection therewith, (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with the "road show," information
meetings and presentations, bound volumes and prospectus memorabilia and
"tomb-stone" advertisement expenses, (vi) costs and expenses in connection with
Company counsel's due diligence investigations, including but not limited to
the fees of any independent counsel or consultant retained, (vii) fees and
expenses of the

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<PAGE> 19
transfer agent and registrar, (viii) applications for assignments of a rating
of the Securities by qualified rating agencies, and (ix) the fees payable to
the Commission and the NASD.

(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6 or Section 12, the Company shall
reimburse and indemnify the Underwriter for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriter's Counsel.

(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriter on the Closing Date by certified or bank cashier's check to, at
the election of the Underwriter, by deduction from the proceeds of the offering
contemplated herein a non-accountable expense allowance equal to one-half of
one percent (0.5%) of the gross proceeds received by the Company from the sale
of the Shares.

6. Conditions of the Underwriter' Obligations. The obligations
of the Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date, as if they had been or his made on and as of the
Closing Date; the accuracy on and as of the Closing Date of the statements of
the officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date of its covenants and
obligations hereunder and to the following further conditions:

(a) The Registration Statement shall have become effective not
later than 12:00 p.m., New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Underwriter and,
at the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or contemplated by the
Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Underwriter's Counsel.

(b) The Underwriter shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriter's opinion, is material, or omits to
state a fact which, in the Underwriter's opinion, is material and is required
to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Underwriter's opinion, is material, or
omits to state a fact which, in the Underwriter's opinion, is material and is
required to be stated therein or is necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

(c) On or prior to the Closing Date, the Underwriter shall
have received from Underwriter's Counsel, such opinion or opinions with respect
to the organization of the Company, the validity of the Shares, the
Registration Statement, the Prospectus and other

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<PAGE> 20
related matters as the Underwriter may request and Underwriter's Counsel shall
have received such papers and information as they request to enable them to
pass upon such matters.

(d) At Closing Date, the Underwriter shall have received the
favorable opinion of Vinson & Elkins L.L.P., counsel to the Company, dated the
Closing Date, addressed to the Underwriter and in form and substance
satisfactory to Underwriter's Counsel, to the effect that:

(i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, and (B) has all requisite corporate power and authority, and has
obtained any and all authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), materially necessary to own or lease its
properties and conduct its business as described in the Prospectus; the Company
is not qualified as a foreign corporation in any jurisdiction (to such
counsel's knowledge, there being no jurisdiction in which failure to so qualify
would have a material adverse effect on the Company); to such counsel's
knowledge, the Company has not received any notice of proceedings relating to
the revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding would materially
adversely affect the business, operations, condition, financial or otherwise,
or the earnings, business affairs or prospects, properties, business or assets
of the Company. The disclosures in the Registration Statement concerning the
effects of federal, state and local laws, rules and regulations on the
Company's business as currently conducted and as contemplated are correct in
all material respects and do not omit to state a fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.

(ii) to such counsel's knowledge, the Company does not own
an interest in any other corporation, partnership, joint venture, trust or
other business entity;

(iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization," and, to such counsel's knowledge,
the Company is not a party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement and as described in the
Prospectus. The Shares, and all other securities issued or issuable by the
Company, conform in all material respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no
rights of rescission with respect thereto, and are not subject to personal
liability under the laws of the State of Delaware as currently in effect by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company. The Shares to be sold by the Company hereunder are not and will

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<PAGE> 21
not be subject to any preemptive or other similar rights of any stockholder,
have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability under the
laws of the State of Delaware as currently in effect solely as such holders;
all corporate action required to be taken for the authorization, issue and sale
of the Shares has been duly and validly taken; and the certificates
representing the Shares are in due and proper form. Upon the issuance and
delivery pursuant to this Agreement of the Shares to be sold by the Company,
the Underwriter will acquire good and marketable title to the Shares free and
clear of any pledge, lien, charge, claim, encumbrance, pledge, security
interest, or other restriction or equity of any kind whatsoever (except those
arising out of acts or claims against the Underwriter). No transfer tax is
payable by or on behalf of the Underwriter in connection with (A) the issuance
by the Company of the Shares, (B) the purchase by the Underwriter of the Shares
from the Company, (C) consummation by the Company of any of its obligations
under this Agreement, or (D) resales of the Shares in connection with the
distribution contemplated hereby.

(iv) the Registration Statement is effective under the
Acts,and, to such counsel's knowledge, no stop order suspending the use of the
Preliminary Prospectus, the Registration Statement or Prospectus or any part of
any thereof or suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or, to the best of such counsel's knowledge, threatened or contemplated
under the Acts;

(v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements thereto (other
than the financial statements and other financial and statistical data included
therein, as to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Acts and the Rules and
Regulations.

(vi) to the best of such counsel's knowledge, (A) there
are no agreements, contracts or other documents required by the Acts to be
described in the Registration Statement and the Prospectus and filed as
exhibits to the Registration Statement other than those described in the
Registration Statement (or required to be filed under the Exchange Act if upon
such filing they would be incorporated, in whole or in part, by reference
therein) and the Prospectus and filed as exhibits thereto, and the exhibits
which have been filed are correct copies of the documents of which they purport
to be copies; (B) the descriptions in the Registration Statement and the
Prospectus and any supplement or amendment thereto of contracts and other
documents to which the Company is a party or by which it is bound, including
any document to which the Company is a party or by which it is bound,
incorporated by reference into the Prospectus and any supplement or amendment
thereto, are accurate in all material respects and fairly represent the
information required to be shown by Form N-2; (C) there is not pending or
threatened against the Company any action, arbitration, suit, proceeding,
inquiry, investigation, litigation, governmental or other proceeding
(including,

- 20 -
<PAGE> 22
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or circumstances
that may give rise to the same), or involving the properties or business of the
Company which (1) is required to be disclosed in the Registration Statement
which is not so disclosed (and such proceedings as are summarized in the
Registration Statement are accurately summarized in all respects), (2)
questions the validity of the capital stock of the Company or this Agreement or
the Investment Advisory Agreement, or of any action taken or to be taken by the
Company pursuant to or in connection with any of the foregoing; (D) no statute
or regulation or legal or governmental proceeding required to be described in
the Prospectus is not described as required; and (E) except as disclosed in the
Prospectus, there is no action, suit or proceeding pending, or threatened,
against or affecting the Company before any court or arbitrator or governmental
body, agency or official (or any basis thereof known to such counsel) in which
an adverse decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of the Company, which could materially adversely affect the present
or prospective ability of the Company to perform its obligations under this
Agreement or the Investment Advisory Agreement, or which in any manner draws
into question the validity or enforceability of this Agreement or the
Investment Advisory Agreement;

(vii) the Company has full legal right, power and authority
to enter into each of this Agreement and the Investment Advisory Agreement, and
to consummate the transactions provided for therein; and each of this Agreement
and the Investment Advisory Agreement has been duly authorized, executed and
delivered by the Company. Each of this Agreement and the Investment Advisory
Agreement, assuming due authorization, execution and delivery by each other
party thereto constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law), and none of the Company's
execution or delivery of this Agreement or the Investment Advisory Agreement,
its performance hereunder or thereunder, its consummation of the transactions
contemplated herein or therein, or the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or imposition of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of, (A) the
certificate of incorporation or by-laws of the Company, (B) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement
or instrument to which the Company is a party or by which it is or may be bound
or to which any of its properties or assets (tangible or intangible) is or may
be subject, or any indebtedness, or (C) any statute, judgment, decree, order,
rule or regulation applicable to the

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<PAGE> 23
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over the Company or any of its activities or properties,
except for conflicts, breaches, violations, defaults, creations or impositions
which do not and would not have a material adverse effect on the Company.

(viii) except as described in the Prospectus, no consent,
approval, authorization or order, and no filing with, any court, regulatory
body, government agency or other body (other than such as may be required under
Blue Sky laws, as to which no opinion need be rendered) is required in
connection with the issuance of the Shares pursuant to the Prospectus and the
Registration Statement, the performance of this Agreement and the Investment
Advisory Agreement and the transactions contemplated hereby and thereby;

(ix) to such counsel's knowledge, the properties and
business of the Company conform to the description thereof contained in the
Registration Statement and the Prospectus;

(x) to such counsel's knowledge, the Company is not in
breach of, or in default under, any term or provision of any license, contract,
indenture, mortgage, installment sale agreement, deed of trust, lease, voting
trust agreement, stockholders' agreement, partnership agreement, note, loan or
credit agreement or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company
is a party or by which any of the Company may be bound or to which the property
or assets (tangible or intangible) of any of the Company is subject or
affected, which could materially adversely affect the Company;

(xi) the statements in the Prospectus under "INVESTMENT
OBJECTIVES AND POLICIES," "INVESTMENT OPERATIONS" "REGULATION," "MANAGEMENT,"
"CONFLICTS OF INTEREST," "CERTAIN TRANSACTIONS," "FEDERAL INCOME TAX MATTERS,"
and "DESCRIPTION OF CAPITAL STOCK," have been reviewed by such counsel, and
insofar as they refer to statements of law, descriptions of statutes, licenses,
rules or regulations or legal conclusions, are correct in all material
respects;

(xii) to such counsel's knowledge, except as described in
the Prospectus, no person, corporation, trust, partnership, association or
other entity has the right to include and/or register any securities of the
Company in the Registration Statement, require the Company to file any
registration statement or, if filed, to include any security in such
registration statement;

(xiii) to such counsel's knowledge, except as described in
the Prospectus, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Shares hereunder or any

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<PAGE> 24
other arrangements, agreements, understandings, payments or issuances that may
affect the Underwriter's compensation, as determined by the NASD;

(xiv) The Company is duly registered with the Commission
under the 1940 Act as a closed-end non-diversified investment company, and all
action under the Acts necessary to make the public offering and consummate the
sale of the Shares as provided in this Agreement has been taken by the Company.
The provisions of the Certificate of Incorporation and Bylaws of the Company
comply as to form in all material respects with the Acts and the Rules and
Regulations; and

(xv) The statements set forth under the heading "Federal
Income Tax Matters" in the Prospectus, insofar as such statements describe or
summarize United States tax laws, doctrines or practices, fairly summarize the
matters described therein in all material respects as of the date of the
Prospectus.

Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company, at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus, and related matters were discussed and,
although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Preliminary Prospectus, the Registration Statement and
Prospectus, on the basis of the foregoing, no facts have come to the attention
of such counsel which lead them to believe that either the Registration
Statement or any amendment thereto, at the time such Registration Statement or
amendment became effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Preliminary Prospectus, the Registration
Statement or Prospectus).

In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriter's Counsel) of
other counsel acceptable to Underwriter's Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriter's Counsel if requested. The
opinion of such counsel for the Company shall state that the opinion of any
such other counsel

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<PAGE> 25
is in form satisfactory to such counsel and that the Underwriter and they are
justified in relying thereon.

(e) At Closing Date, the Underwriter shall have received the
favorable opinion of Vinson & Elkins L.L.P., counsel to the Adviser, dated the
Closing Date, addressed to the Underwriter and in form and substance
satisfactory to Underwriter's Counsel, to the effect that

(i) The Adviser is duly registered as an investment
adviser under the Advisers Act, and is not prohibited by the Advisers Act, the
1940 Act, or the Rules and Regulations thereunder from acting as contemplated
by the Prospectus.

(ii) The Adviser has been duly organized and is validly
existing as a corporation under the laws of the State of Delaware and is duly
qualified as a foreign entity and in good standing in each other jurisdiction
in which its ownership of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Adviser, and the Adviser has full power and
authority necessary to own or lease its properties and conduct its business as
described in the Registration Statement and the Prospectus.

(iii) The Adviser owns, possesses or has obtained and
currently maintains all material governmental licenses, permits, consents,
orders, approvals and other authorizations (collectively, the "Authorizations")
as is necessary for the Adviser to carry on its business as Adviser to the Fund
as set forth in and contemplated by the Registration Statement and Prospectus,
except where the failure to own, possess or obtain such Authorizations would
have a material adverse effect on the Adviser.

(iv) The Adviser has full power to enter into this
Agreement and the Investment Advisory Agreement, and to carry out all the terms
and provisions thereof to be carried out by it.

(v) Each of this Agreement and the Investment Advisory
Agreement has been duly and validly authorized, executed and delivered by the
Adviser; each of the Advisory Agreement and the Consulting Agreement complies
in all material respects with all applicable provisions of the 1940 Act, the
Advisers Act, and the Rules and Regulations thereunder, as the case may be;
and, assuming due authorization, execution and delivery by the other parties
thereto, each of this Agreement and the Investment Advisory Agreement
constitutes a legal, valid and binding obligation of the Adviser enforceable in
accordance with its terms subject, as to enforcement, to applicable bankruptcy,
fraudulent transfer, moratorium, reorganization, insolvency or other similar
laws relating to or affecting creditors' rights generally and to general
equitable principles and except, with respect to this Agreement, as rights to
indemnity and contribution thereunder may be limited by United States federal
or state securities laws.

(vi) No consent, approval, authorization or order of any
federal, Delaware or New York State court, governmental agency or body or
securities exchange or securities

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<PAGE> 26
association having jurisdiction over the Adviser, under the laws of the United
States or the State of New York is required to be obtained by the Adviser for
the performance by the Adviser of its obligations under this Agreement or the
Investment Advisory Agreement, except such as have been obtained.

(vii) Neither the execution and delivery of this Agreement
or the Investment Advisory Agreement nor the performance by the Adviser of in
obligations under such agreements, conflicts with, or results in a breach of,
the Certificate of Incorporation or By-laws of the Adviser or, to such
counsel's knowledge, any material agreement or instrument to which the Adviser
is a party or by which the Adviser is bound which would have a material adverse
effect on the ability of the Adviser to carry out its obligations under such
agreements, or any law, rule or regulation (including without limitation, the
1940 Act, the Advisers Act and Rules and Regulations), or order of which we are
aware, applicable to the Adviser of any federal, Delaware or New York state
court, governmental instrumentality, stock exchange or association or
arbitrator, material to the business of the Adviser.

(viii) The description of the Adviser and its business in
the Prospectus complies with the requirements of the Acts and the Rules and
Regulations, and does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading in light of the
circumstances under which they were made.

(ix) To the best of our knowledge, there is no action,
suit or proceeding before or by any court or governmental agency or body, now
pending or threatened against the Adviser that is required to be disclosed in
the Prospectus or the Registration Statement (other than as disclosed therein)
that might result in any material adverse change in the condition, financial or
otherwise, or business affairs of the Adviser of the ability of the Adviser to
perform its obligations under this Agreement or the Investment Advisory
Agreement.

(f) On or prior to the Closing Date, Underwriter's Counsel
shall have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in subsection (c) of this Section 6, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions of the Company, or herein contained.

(g) Prior to the Closing Date: (i) there shall have been no
adverse change nor development involving a prospective change in the condition,
financial or otherwise, prospects, stockholders' equity or the business
activities of the Company or the Adviser, whether or not in the ordinary course
of business, from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the
Company is set forth in the Registration Statement and Prospectus which is
adverse to the Company; (iii) the Company shall not be in default under any
provision of any instrument relating to any outstanding indebtedness; (iv) the
Company shall not have

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<PAGE> 27
issued any securities (other than the Securities) or declared or paid any
dividend or made any distribution in respect of its capital stock of any class
and there has not been any change in the capital stock or any change in the
debt (long or short term) or liabilities or obligations of the Company
(contingent or otherwise); (v) no material amount of the assets of the Company
shall have been pledged or mortgaged, except as set forth in the Registration
Statement and Prospectus; (vi) no action, suit or proceeding, at law or in
equity, shall have been pending or threatened (or circumstances giving rise to
same) against the Company or the Adviser, or affecting any of their respective
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may adversely affect the business, operations,
management prospects or financial condition or assets of the Company or the
ability of the Adviser to fulfill its obligations under this Agreement or the
Investment Advisory Agreement, except as set forth in the Registration
Statement and Prospectus; and (vii) no stop order shall have been issued under
the Acts and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.

(h) At the Closing Date, the Underwriter shall have received a
certificate of the principal executive officer and the chief financial or chief
accounting officer of each of the Company and the Adviser, dated the Closing
Date, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:

(i) The representations and warranties in this Agreement
of the Company (with respect to certificates from Company and Adviser officers)
and of the Adviser (with respect to the certificates from Adviser officers) are
true and correct, as if made on and as of the Closing Date, and the Company
(with respect to certificates from Company and Adviser officers) and the
Adviser (with respect to certificates from Adviser officers) has complied with
all agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to the Closing
Date;

(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no proceedings
for that purpose have been instituted or are pending or, to the best of each of
such person's knowledge, after due inquiry are contemplated or threatened under
the Acts;

(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and neither the Preliminary Prospectus or any supplement thereto
included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and

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<PAGE> 28
(iv) Since the dates as of which information is given in
the Registration Statement and the Prospectus, (A) there must not have been any
material change in the Shares or liabilities of the Company except as set forth
in or contemplated by the Prospectus; (B) there must not have been any material
adverse change in the general affairs, management, business, financial
condition or results of operations of the Company or (with respect to the
certificate of Adviser officers) the Adviser, whether or not arising from
transactions in the ordinary course of business, as set forth in or
contemplated by the Prospectus; (C) the Company must not have sustained any
material loss or interference with its business from any court or from
legislative or other governmental action, order or decree, whether foreign or
domestic, or from any other occurrence, not described in the Registration
Statement and Prospectus; and (D) there must not have occurred any event that
makes untrue or incorrect in any material respect any statement or information
contained in the Registration Statement or Prospectus or that is not reflected
in the Registration Statement or Prospectus but should be reflected therein in
order to make the statements or information therein, in light of the
circumstances in which they were made, not misleading in any material respect.

References to the Registration Statement and the Prospectus in this subsection
(h) are to such documents as amended and supplemented at the date of such
certificate.

(i) By the Closing Date, the Underwriter will have received
clearance from the NASD as to the amount of compensation allowable or payable
to the Underwriter, as described in the Registration Statement.

(j) At the time this Agreement is executed, the Underwriter
shall have received a letter, dated such date, addressed to the Underwriter in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all
respects to the Underwriter and Underwriter' Counsel, from KPMG Peat Marwick
LLP:

(i) confirming that they are independent accountants with
respect to the Company within the meaning of the Acts and the applicable Rules
and Regulations;

(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Acts and the Rules and Regulations thereunder
and that the Underwriter may rely upon the opinion of KPMG Peat Marwick LLP
with respect to the financial statements and supporting schedules included in
the Registration Statement;

(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the boards of directors of the Company, consultations with
officers and other employees of the

- 27 -
<PAGE> 29
Company responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention which would lead
them to believe that (A) the unaudited financial statements and supporting
schedules of the Company included in the Registration Statement do not comply
as to form in all material respects with the applicable accounting requirements
of the Acts and the Rules and Regulations or are not fairly presented in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements of the
Company included in the Registration Statement, or (B) at a specified date not
more than five (5) days prior to the effective date of the Registration
Statement, there has been any change in the capital stock or long-term debt of
the Company, or any decrease in the stockholders' equity or net current assets
or net assets of the Company as compared with amounts shown in the July 26,
1995 balance sheet included in the Registration Statement, other than as set
forth in or contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or decrease;

(iv) setting forth, at a date not later than five (5) days
prior to the effective date of the Registration Statement, the amount of
liabilities of the Company;

(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement;

(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may request.

(k) On the Closing Date there shall have been duly tendered to
the Underwriter the appropriate number of Shares.

(l) No order suspending the sale of the Shares in any
jurisdiction designated by the Underwriter pursuant to subsection (e) of
Section 4 hereof shall have been issued on the Closing Date, and no proceedings
for that purpose shall have been instituted or shall be contemplated.

(m) On or before the Closing Date, the Company shall have
executed the Investment Advisory Agreement, substantially in the form filed as
Exhibit 10.2 to the Registration Statement, in final form and substance
satisfactory to the Underwriter.

- 28 -
<PAGE> 30
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date, is not so fulfilled, the Underwriter
may terminate this Agreement or, if the Underwriter so elects, it may waive any
such conditions which have not been fulfilled or extend the time for their
fulfillment.

7. Indemnification.

(a) Each of the Company and the Adviser, jointly and
severally, will indemnify and hold harmless the Underwriter (for purposes of
this Section 7 "Underwriter" shall include the officers, directors, partners,
employees, agents and counsel of the Underwriter), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, from and against any and
all losses, claims, damages, expenses or liabilities, joint or several (and
actions in respect thereof), whatsoever (including but not limited to any and
all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), as such are incurred, to which the Underwriter or such controlling
person may become subject under the Acts, the Exchange Act, the Advisers Act or
any other statute or at common law or otherwise or under the laws of foreign
countries, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included securities of the
Company issued or issuable upon exercise of the Securities; or (iii) in any
application or other document or written communication (in this Section 7
collectively called "Application") executed by the Company or based upon
written information furnished by the Company or the Adviser in any jurisdiction
in order to qualify the Shares under the securities laws thereof or filed with
the Commission, any securities commission or agency, or any securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, or in any
Application, as the case may be.

The indemnity agreement in this subsection (a) shall be in addition
to any liability which the Company may have at common law or otherwise.

(b) The Underwriter agrees to indemnify and hold harmless the
Company, the Adviser, each of their respective directors, each of the Company's
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company or the Adviser within the meaning of the Act, to
the same extent as the foregoing indemnity from the Company and the Adviser to
the Underwriter but only with respect to statements or omissions, if any, made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any

- 29 -
<PAGE> 31
amendment thereof or supplement thereto or in any Application made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to the Underwriter by the Underwriter expressly for use in
such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such Application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or Prospectus directly
relating to the transactions effected by the Underwriter in connection with
this offering. The Company and the Adviser each acknowledges that the
statements with respect to the public offering of the Shares set forth under
the heading "Underwriting" and the stabilization legend in the Prospectus have
been furnished by the Underwriter expressly for use therein and constitute the
only information furnished in writing by or on behalf of the Underwriter for
inclusion in the Prospectus.

(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against
one or more indemnifying parties under this Section 7, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve
it from any liability which it may have under this Section 7 except to the
extent that it has been prejudiced in any material respect by such failure or
from any liability which it may have otherwise). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party or
parties of the commencement thereof, the indemnifying party or parties will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any

- 30 -
<PAGE> 32
claim or action effected without its written consent; provided, however, that
such consent was not unreasonably withheld.

(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Section 7 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of
any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Shares or (B) if the allocation provided
by clause (A) 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 each of the contributing parties, on
the one hand, and the party to be indemnified on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable
considerations. In any case where the Company or the Adviser is a contributing
party and the Underwriter is the indemnified party, the relative benefits
received by the Company or the Adviser on the one hand, and the Underwriter, on
the other, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses) bear
to the total underwriting discounts received by the Underwriter hereunder, in
each case as set forth in the table on the Cover Page of the Prospectus.
Relative fault 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 or the Adviser, or by the Underwriter, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d) the Underwriter shall not be required to contribute any amount
in excess of the underwriting discount applicable to the Securities purchased
by the Underwriter hereunder. 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. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under

- 31 -
<PAGE> 33
this subparagraph (d), notify such party or parties from whom contribution may
be sought, but the omission so to notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not
adversely affected by such omission. The contribution agreement set forth
above shall be in addition to any liabilities which any indemnifying party may
have at common law or otherwise.

8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company or the Adviser submitted
pursuant hereto, shall be deemed to be representations, warranties and
agreements at the Closing Date, and such representations, warranties and
agreements of the Company and the respective indemnity agreements contained in
Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Underwriter, the
Company, the Adviser, any controlling person of the Underwriter, the Company or
the Adviser, and shall survive termination of this Agreement or the issuance
and delivery of the Shares to the Underwriter.

9. Effective Date. This Agreement shall become effective at
10:00 a.m., New York City time, on the next full business day following the
date hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter, in it's sole discretion, shall release the Shares
for the sale to the public; provided, however, that the provisions of Sections
5, 7 and 10 of this Agreement shall at all times be effective. For purposes of
this Section 9, the Shares to be purchased hereunder shall be deemed to have
been so released upon the earlier of dispatch by the Underwriter of telegrams
to securities dealers releasing such shares for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Shares.

10. Termination.

(a) Subject to subsection (b) of this Section 10, the
Underwriter shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Underwriter's opinion will in the immediate future disrupt the financial
markets; or (ii) any material adverse change in the financial markets shall
have occurred; or (iii) if trading on the New York Stock Exchange, the American
Stock Exchange, or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required on the over-the-counter
market by the NASD or by order of the Commission or any other government
authority having jurisdiction; or (iv) if the United States shall have become
involved in a war or major hostilities, or if there shall have been an
escalation in an existing war or major hostilities or a national emergency
shall have been declared in the United States; or (v) if a banking moratorium
has been declared by a state or federal authority; or (vi) if a moratorium in
foreign exchange trading has been declared; or (vii) if the Company shall have
sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss

- 32 -
<PAGE> 34
shall have been insured, will, in the Underwriter's opinion, make it
inadvisable to proceed with the delivery of the Securities; or (viii) if there
shall have been such a material adverse change in the condition (financial or
otherwise), business affairs or prospects of the Company or the Adviser,
whether or not arising in the ordinary course of business, which would render,
in the Underwriter's judgment, either of such parties unable to perform
satisfactorily its respective obligations as by this Agreement, the Investment
Advisory Agreement or the Registration Statement, or such material adverse
change in the general market, political or economic conditions, in the United
States or elsewhere as in the Underwriter's judgment would make it inadvisable
to proceed with the offering, sale and/or delivery of the Shares.

(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 10(a), the Company and the Adviser
shall promptly reimburse and indemnify the Underwriter for all of its actual
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriter (less amounts previously paid pursuant to Section 5(c) above).
Notwithstanding any contrary provision contained in this Agreement, if this
Agreement shall not be carried out within the time specified herein, or any
extension thereof granted to the Underwriter, by reason of any failure on the
part of the Company or the Adviser to perform any undertaking or satisfy any
condition of this Agreement by it to be performed or satisfied (including,
without limitation, pursuant to Section 6 or Section 12) then, the Company and
the Adviser shall promptly reimburse and indemnify the Underwriter for all of
its actual out-of-pocket expenses, including the fees and disbursements of
counsel for the Underwriter (less amounts previously paid pursuant to Section
5(c) above). In addition, the Company shall remain liable for all Blue Sky
counsel fees and expenses and Blue Sky filing fees. Notwithstanding any
contrary provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
Sections 6, 10, 11 and 12 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 and Section 7 shall not be
in any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.

11. Default by the Company. If the Company shall fail at the
Closing Date to deliver the number of Shares which it is obligated to deliver
hereunder on such date, then this Agreement shall terminate without any
liability on the part of the Underwriter, other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section
shall relieve the Company from liability, if any, in respect of such default.

12. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication.

Notices to the Underwriter shall be directed to the Underwriter at:

RAS Securities Corp.
2 Broadway
New York, New York 10004

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<PAGE> 35
Attention: Eric Bashford

with a copy to:

Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10019
Attention: Richard Marlin, Esq.

Notices to the Company shall be directed to the Company at:

Sherry Lane Growth Fund, Inc.
320 South Boston, Suite 1000
Tulsa, Oklahoma 74103-3703
Attention: Barry M. Davis

with a copy to:

Vinson & Elkins, L.L.P.
1001 Fannin Street, Suite 2300
Houston, Texas 77002-6760
Attention: William G. Lee, Esq.

13. Parties. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Underwriter, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns and no other person
shall have or be construed to have any legal or equitable right, remedy or
claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. No purchaser of Shares from the Underwriter shall be deemed
to be a successor by reason merely of such purchase.

14. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.

15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.

16. Entire Agreement; Amendments. This Agreement constitutes the
entire agreement of the parties hereto and supersede all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing, signed by the
Underwriter and the Company.

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<PAGE> 36
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.

Very truly yours,

SHERRY LANE GROWTH FUND, INC.

By:______________________________________
Name:
Title:

SHERRY LANE CAPITAL ADVISORS, INC.

By:______________________________________
Name:
Title:

Confirmed and accepted as of
the date first above written

RAS SECURITIES CORP.

By:_____________________________
Name:
Title:

- 35 -

<PAGE> 1
EXHIBIT (i)

<PAGE> 2
ESCROW AGREEMENT
(Public Offering)

AGREEMENT made this _______ day of _______________, 1996 by and among
the Issuer and the Underwriter whose names and addresses appear on the
Information Sheet (as defined herein) attached to this Agreement and Continental
Stock Transfer & Trust Company (the "Escrow Agent").

W I T N E S S E T H :

WHEREAS, the Issuer has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") covering a proposed public offering of its securities as described
on the Information Sheet;

WHEREAS, the Underwriter proposes to offer the Securities, as agent for
the Issuer, for sale to the public on a "best efforts, all or none" basis with
respect to the Minimum Securities Amount and Minimum Dollar Amount and at the
price per share or other unit all as set forth on the Information Sheet;

WHEREAS, the Issuer and the Underwriter propose to establish an escrow
account (the "Escrow Account"), to which subscription monies which are received
by the Escrow Agent from the Underwriter in connection with such public offering
are to be credited, and the Escrow Agent is willing to establish the Escrow
Account on the terms and subject to the conditions hereinafter set forth; and

WHEREAS, the Escrow Agent has an agreement with Chemical Bank to
establish a special bank account (the "Bank Account") into which the
subscription monies, which are received by the Escrow Agent from the Underwriter
and credited to the Escrow Account, are to be deposited;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:

1. INFORMATION SHEET. Each capitalized term not otherwise defined in
this Agreement shall have the meaning set forth for such term on the information
sheet which is attached to this Agreement and is incorporated by reference
herein and made a part hereof (the "Information Sheet").

2. ESTABLISHMENT OF THE BANK ACCOUNT.

2.1 The Escrow Agent shall establish a non-interest-bearing
bank account at the branch of Chemical Bank selected by the Escrow Agent, and
bearing the designation set forth on the Information Sheet (heretofore defined
as the "Bank Account"). The purpose of the Bank Account is for (a) the deposit
of all subscription monies (checks, cash or wire transfers) which are received
by the Underwriter from prospective purchasers of the Securities and are
delivered by the Under-writer to the Escrow Agent, (b) the holding of amounts of
subscription monies which are collected through the banking system, and (c) the
disbursement of collected funds, all as described herein.

<PAGE> 3
2.2 On or before the date of the initial deposit in the Bank
Account pursuant to this Agreement, the Underwriter shall notify the Escrow
Agent in writing of the effective date of the Registration Statement (the
"Effective Date"), and the Escrow Agent shall not be required to accept any
amounts for credit to the Escrow Account or for deposit in the Bank Account
prior to its receipt of such notification.

2.3 The Offering Period, which shall be deemed to commence on
the Effective Date, shall consist of the number of calendar days or business
days set forth on the Information Sheet. The Offering Period shall be extended
by an Extension Period only if the Escrow Agent shall have received written
notice thereof at least five (5) business days prior to the expiration of the
Offering Period. The Extension Period, which shall be deemed to commence on the
next calendar day following the expiration of the Offering Period, shall consist
of the number of calendar days or business days set forth on the Information
Sheet. The last day of the Offering Period, or the last day of the Extension
Period (if the Escrow Agent has received written notice thereof as hereinabove
provided), is referred to herein as the "Termination Date." Except as provided
in Section 4.3 hereof, after the Termination Date the Underwriter shall not
deposit, and the Escrow Agent shall not accept, any additional amounts
representing payments by prospective purchasers.

3. DEPOSITS TO THE BANK ACCOUNT.

3.1 The Underwriter shall promptly deliver to the Escrow Agent
all monies which it receives from prospective purchasers of the Securities,
which monies shall be in the form of checks, cash or wire transfers. Upon the
Escrow Agent's receipt of such monies, they shall be credited to the Escrow
Account. All checks delivered to the Escrow Agent shall be made payable to
"Continental Stock Transfer & Trust Company, as Escrow Agent for the offering by
[the Issuer]." Any check payable other than to the Escrow Agent as required
hereby shall be returned to the prospective purchaser, or if the Escrow Agent
has insufficient information to do so, then to the Underwriter (together with
any Subscription Information, as defined below, or other documents delivered
therewith) by noon of the next business day following receipt of such check by
the Escrow Agent, and such check shall be deemed not to have been delivered to
the Escrow Agent pursuant to the terms of this Agreement.

3.2 Promptly after receiving subscription monies as described
in Section 3.1, the Escrow Agent shall deposit the same into the Bank Account.
Amounts of monies so deposited are hereinafter referred to as "Escrow Amounts."
The Escrow Agent shall cause Chemical Bank to process all Escrow Amounts for
collection through the banking system. Simultaneously with each deposit to the
Escrow Account, the Underwriter (or the Issuer, if such deposit is made by the
Issuer) shall inform the Escrow Agent in writing of the name and address of the
prospective purchaser, the amount of Securities subscribed for by such
purchaser, and the aggregate dollar amount of such subscription (collectively,
the "Subscription Information").

3.3 The Escrow Agent shall not be required to accept for
credit to the Escrow Account or for deposit into the Bank Account checks which
are not accompanied by the appropriate Subscription Information. Wire transfers
and cash representing payments by prospective purchasers shall not be deemed
deposited in the Escrow Account until the Escrow Agent has received in writing
the Subscription Information required with respect to such payments.

-2-
<PAGE> 4

3.4 The Escrow Agent shall not be required to accept in the
Escrow Account any amounts representing payment by prospective purchasers,
whether by check, cash or wire transfer, except during the Escrow Agent's
regular business hours.

3.5 Only those Escrow Amounts which have been deposited in the
Bank Account and which have cleared the banking system and have been collected
by the Escrow Agent are herein referred to as the "Fund."

3.6 If the proposed offering is terminated before the
Termination Date, the Escrow Agent shall refund any portion of the Fund prior to
disbursement of the Fund in accordance with Article 4 hereof upon instructions
in writing signed by both the Issuer and the Underwriter.

4. DISBURSEMENT FROM THE BANK ACCOUNT.

4.1 Subject to Section 4.3 below, if by the close of regular
banking hours on the Termination Date the Escrow Agent determines that the
amount in the Fund is less than the Minimum Dollar Amount or the Minimum
Securities Amount, as indicated by the Subscription Information submitted to the
Escrow Agent, then in either such case, the Escrow Agent shall promptly refund
to each prospective purchaser the amount of payment received from such purchaser
which is then held in the Fund or which thereafter clears the banking system,
without interest thereon or deduction therefrom, by drawing checks on the Bank
Account for the amounts of such payments and transmitting them to the
purchasers. In such event, the Escrow Agent shall promptly notify the Issuer and
the Underwriter of its distribution of the Fund.

4.2 Subject to Section 4.3 below, if at any time up to the
close of regular banking hours on the Termination Date the Escrow Agent
determines that the amount in the Fund is at least equal to the Minimum Dollar
Amount and represents the sale of not less than the Minimum Securities Amount,
the Escrow Agent shall promptly notify the Issuer and the Underwriter of such
fact in writing. The Escrow Agent shall promptly disburse the Fund, by drawing
checks on the Bank Account in accordance with instructions in writing signed by
both the Issuer and the Underwriter as to the disbursement of the Fund, promptly
after it receives such instructions.

4.3 [THIS PROVISION APPLIES ONLY IF A COLLECTION PERIOD HAS
BEEN PROVIDED FOR BY THE APPROPRIATE INDICATION ON THE INFORMATION SHEET.] If
the Escrow Agent or the Underwriter has on hand at the close of business on the
Termination Date any uncollected amounts which when added to the Fund would
raise the amount in the Fund to the Minimum Dollar Amount, and result in the
Fund representing the sale of the Minimum Securities Amount, the Collection
Period (consisting of the number of business days set forth on the Information
Sheet) shall be utilized to allow such uncollected amounts to clear the banking
system. During the Collection Period, the Underwriter (and the Issuer) shall not
deposit, and the Escrow Agent shall not accept, any additional amounts;
provided, however, that such amounts as were received by the Underwriter (or the
Issuer) by the close of business on the Termination Date may be deposited with
the Escrow Agent by noon of the next business day following the Termination
Date. If at the close of business on the last day of the Collection Period an
amount sufficient to raise the amount in the Fund to the Minimum Dollar Amount
and which would result in the Fund representing the sale of the Minimum
Securities Amount shall not have cleared the banking system, the Escrow Agent
shall promptly notify the Issuer

-3-
<PAGE> 5
and the Underwriter in writing of such fact and shall promptly return all
amounts then in the Fund, and any amounts which thereafter clear the banking
system, to the prospective purchasers as provided in Section 4.2 hereof.

4.4 Upon disbursement of the Fund pursuant to the terms of
this Article 4, the Escrow Agent shall be relieved of all further obligations
and released from all liability under this Agreement. It is expressly agreed and
understood that in no event shall the aggregate amount of payments made by the
Escrow Agent exceed the amount of the Fund.

5. RIGHTS, DUTIES AND RESPONSIBILITIES OF ESCROW AGENT. It is
understood and agreed that the duties of the Escrow Agent are purely ministerial
in nature, and that:

5.1 The Escrow Agent shall notify the Underwriter, on a daily
basis, of the Escrow Amounts which have been deposited in the Bank Account and
of the amounts, constituting the Fund, which have cleared the banking system and
have been collected by the Escrow Agent.

5.2 The Escrow Agent shall not be responsible for or be
required to enforce any of the terms or conditions of the underwriting agreement
or any other agreement between the Underwriter and the Issuer nor shall the
Escrow Agent be responsible for the performance by the Underwriter or the Issuer
of their respective obligations under this Agreement.

5.3 The Escrow Agent shall not be required to accept from the
Underwriter (or the Issuer) any Subscription Information pertaining to
prospective purchasers unless such Subscription Information is accompanied by
checks, cash or wire transfers meeting the requirements of Section 3.1, nor
shall the Escrow Agent be required to keep records of any information with
respect to payments deposited by the Underwriter (or the Issuer) except as to
the amount of such payments; however, the Escrow Agent shall notify the
Underwriter within a reasonable time of any discrepancy between the amount set
forth in any Subscription Information and the amount delivered to the Escrow
Agent therewith. Such amount need not be accepted for deposit in the Escrow
Account until such discrepancy has been resolved.

5.4 The Escrow Agent shall be under no duty or responsibility
to enforce collection of any check delivered to it hereunder. The Escrow Agent,
within a reasonable time, shall return to the Underwriter any check received
which is dishonored, together with the Subscription Information, if any, which
accompanied such check.

5.5 The Escrow Agent shall be entitled to rely upon the
accuracy, act in reliance upon the contents, and assume the genuineness of any
notice, instruction, certificate, signature, instrument or other document which
is given to the Escrow Agent pursuant to this Agreement without the necessity of
the Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall
not be obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document.

5.6 If the Escrow Agent is uncertain as to its duties or
rights hereunder or shall receive instructions with respect to the Bank Account,
the Escrow Amounts or the Fund which, in

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<PAGE> 6
its sole determination, are in conflict either with other instructions received
by it or with any provision of this Agreement, it shall be entitled to hold the
Escrow Amounts, the Fund, or a portion thereof, in the Bank Account pending the
resolution of such uncertainty to the Escrow Agent's sole satisfaction, by final
judgment of a court or courts of competent jurisdiction or otherwise; or the
Escrow Agent, at its sole option, may deposit the Fund (and any other Escrow
Amounts that thereafter become part of the Fund) with the Clerk of a court of
competent jurisdiction in a proceeding to which all parties in interest are
joined. Upon the deposit by the Escrow Agent of the Fund with the Clerk of any
court, the Escrow Agent shall be relieved of all further obligations and
released from all liability hereunder.

5.7 The Escrow Agent shall not be liable for any action taken
or omitted hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of willful misconduct or gross negligence.
The Escrow Agent shall be entitled to consult with counsel of its own choosing
and shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel.

5.8 The Escrow Agent shall have no responsibility at any time
to ascertain whether or not any security interest exists in the Escrow Amounts,
the Fund or any part thereof or to file any financing statement under the
Uniform Commercial Code with respect to the Fund or any part thereof.

6. AMENDMENT; RESIGNATION. This Agreement may be altered or amended
only with the written consent of the Issuer, the Underwriter and the Escrow
Agent. The Escrow Agent may resign for any reason upon three (3) business days'
written notice to the Issuer and the Underwriter. Should the Escrow Agent resign
as herein provided, it shall not be required to accept any deposit, make any
disbursement or otherwise dispose of the Escrow Amounts or the Fund, but its
only duty shall be to hold the Escrow Amounts until they clear the banking
system and the Fund for a period of not more than five (5) business days
following the effective date of such resignation, at which time (a) if a
successor escrow agent shall have been appointed and written notice thereof
(including the name and address of such successor escrow agent) shall have been
given to the resigning Escrow Agent by the Issuer, the Underwriter and such
successor escrow agent, then the resigning Escrow Agent shall pay over to the
successor escrow agent the Fund, less any portion thereof previously paid out in
accordance with this Agreement; or (b) if the resigning Escrow Agent shall not
have received written notice signed by the Issuer, the Underwriter and a
successor escrow agent, then the resigning Escrow Agent shall promptly refund
the amount in the Fund to each prospective purchaser, without interest thereon
or deduction therefrom, and the resigning Escrow Agent shall promptly notify the
Issuer and the Underwriter in writing of its liquidation and distribution of the
Fund; whereupon, in either case, the Escrow Agent shall be relieved of all
further obligations and released from all liability under this Agreement.
Without limiting the provisions of Section 8 hereof, the resigning Escrow Agent
shall be entitled to be reimbursed by the Issuer and the Underwriter for any
expenses incurred in connection with its resignation, transfer of the Fund to a
successor escrow agent or distribution of the Fund pursuant to this Section 6.

7. REPRESENTATIONS AND WARRANTIES. The Issuer and the Underwriter
hereby jointly and severally represent and warrant to the Escrow Agent that:

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<PAGE> 7
7.1 No party other than the parties hereto and the prospective
purchasers have, or shall have, any lien, claim or security interest in the
Escrow Amounts or the Fund or any part thereof.

7.2 No financing statement under the Uniform Commercial Code
is on file in any jurisdiction claiming a security interest in or describing
(whether specifically or generally) the Escrow Amounts or the Fund or any part
thereof.

7.3 The Subscription Information submitted with each deposit
shall, at the time of submission and at the time of the disbursement of the
Fund, be deemed a representation and warranty that such deposit represents a
bona fide payment by the purchaser described therein for the amount of
Securities set forth in such Subscription Information.

7.4 All of the information contained in the Information Sheet
is, as of the date hereof, and will be, at the time of any disbursement of the
Fund, true and correct.

8. FEES AND EXPENSES. The Escrow Agent shall be entitled to the Escrow
Agent Fees set forth on the Information Sheet, payable as and when stated
therein. In addition, the Issuer and the Underwriter jointly and severally agree
to reimburse the Escrow Agent for any reasonable expenses incurred in connection
with this Agreement, including, but not limited to, reasonable counsel fees.
Upon receipt of the Minimum Dollar Amount, the Escrow Agent shall have a lien
upon the Fund to the extent of its fees for services as Escrow Agent.

9. INDEMNIFICATION AND CONTRIBUTION.

9.1 The Issuer and the Underwriter (collectively referred to
as the "Indemnitors") jointly and severally agree to indemnify the Escrow Agent
and its officers, directors, employees, agents and shareholders (collectively
referred to as the "Indemnitees") against, and hold them harmless of and from,
any and all loss, liability, cost, damage and expense, including without
limitation, reasonable counsel fees, which the Indemnitees may suffer or incur
by reason of any action, claim or proceeding brought against the Indemnitees
arising out of or relating in any way to this Agreement or any transaction to
which this Agreement relates, unless such action, claim or proceeding is the
result of the willful misconduct or gross negligence of the Indemnitees.

9.2 If the indemnification provided for in Section 9.1 is
applicable, but for any reason is held to be unavailable, the Indemnitors shall
contribute such amounts as are just and equitable to pay, or to reimburse the
Indemnitees for, the aggregate of any and all losses, liabilities, costs,
damages and expenses, including counsel fees, actually incurred by the
Indemnitees as a result of or in connection with, and any amount paid in
settlement of, any action, claim or proceeding arising out of or relating in any
way to any actions or omissions of the Indemnitors.

9.3 The provisions of this Article 9 shall survive any
termination of this Agreement, whether by disbursement of the Fund, resignation
of the Escrow Agent or otherwise.

10. GOVERNING LAW AND ASSIGNMENT. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York and shall be
binding upon the parties hereto

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<PAGE> 8
and their respective successors and assigns; provided, however, that any
assignment or transfer by any party of its rights under this Agreement or with
respect to the Escrow Amounts or the Fund shall be void as against the Escrow
Agent unless (a) written notice thereof shall be given to the Escrow Agent; and
(b) the Escrow Agent shall have consented in writing to such assignment or
transfer.

11. NOTICES. All notices required to be given in connection with this
Agreement shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by the Express Mail
service offered by the United States Post Office, and addressed, if to the
Issuer or the Underwriter, at their respective addresses set forth on the
Information Sheet, and if to the Escrow Agent, at its address set forth above,
to the attention of the Trust Department.

12. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.

13. EXECUTION IN SEVERAL COUNTERPARTS. This Agreement may be executed
in several counterparts or by separate instruments, and all of such counterparts
and instruments shall constitute one agreement, binding on all of the parties
hereto.

14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings (written or oral) of the
parties in connection therewith.

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<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.

THE ISSUER:

[NAME OF ISSUER]

By:
-----------------------------
Name:
Title:

THE UNDERWRITER:

[NAME OF UNDERWRITER]

By:
-----------------------------
Name:
Title:

CONTINENTAL STOCK TRANSFER &
TRUST COMPANY

By:
-----------------------------
Name:
Title:

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<PAGE> 10
ESCROW AGREEMENT INFORMATION SHEET

1. THE ISSUER

Name:
-----------------------------------------------------------------
Address:
---------------------------------------------------------------
State of incorporation of organization:
--------------------------------
2. THE UNDERWRITER

3. THE SECURITIES

Description of the Securities to be offered (e.g., shares of or
warrants for common stock, debentures, units consisting of
shares and warrants, etc.):
----------------------------------
Par value, if any:
-----------------------------------------------------
Offering price per share/unit/other:
----------------------------------

4. MINIMUM AMOUNTS REQUIRED FOR DISBURSEMENT OF THE ESCROW ACCOUNT

Aggregate dollar amount which must be collected before the Escrow
Account may be disbursed to the issuer ("Minimum Dollar
Amount"): $
---------------

Total amount of securities which must be subscribed for before the
Escrow Account may be disbursed to the issuer ("Minimum
Securities Amount"): $
---------------

5. PLAN OF DISTRIBUTION OF THE SECURITIES

Offering Period: calendar/business days
---------------
Extension Period, if any: calendar/business days
---------------
Collection Period, if any: business days
---------------
6. TITLE OF ESCROW ACCOUNT

Continental Stock Transfer & Trust Company, Escrow Agent for the
offering by
----------------------------
7. ESCROW AGENT FEES

Amount due on execution of the Escrow Agreement: $
-----------
and upon completion of the escrow: $
-----------

Fee for each check disbursed pursuant to the terms of the Escrow
Agreement: $
-----------
Fee for each check returned pursuant to the terms of the Escrow
Agreement: $
-----------