Document:

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                                                                     EXHIBIT 4.8

                          [__] SUPPLEMENTAL INDENTURE

                                    BETWEEN

                           STERLING BANCSHARES, INC.

                                      AND

                             BANKERS TRUST COMPANY,
                                   AS TRUSTEE

                       DATED AS OF ____________, _______
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                               TABLE OF CONTENTS*

                                                              PAGE
                                                              ----

ARTICLE I DEFINITIONS..........................................  2

 Section 1.1  Definition of Terms..............................  2

ARTICLE II GENERAL TERMS AND CONDITIONS OF THE DEBENTURES......  4

 Section 2.1  Designation and Principal Amount.................  4
 Section 2.2  Maturity.........................................  4
 Section 2.3  Form and Payment.................................  4
 Section 2.4  Global Debenture.................................  5
 Section 2.5  Interest.........................................  6

ARTICLE III PREPAYMENT OF THE DEBENTURES.......................  7

 Section 3.1  Special Event Prepayment.........................  7
 Section 3.2  Optional Prepayment by Company...................  8
 Section 3.3  No Sinking Fund..................................  8

ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD................  8

 Section 4.1  Extension of Interest Payment Period.............  8
 Section 4.2  Notice of Extension..............................  9
 Section 4.3  Limitation of Transactions....................... 10

ARTICLE V CHANGE OF STATED MATURITY DATE....................... 10

 Section 5.1  Change of Stated Maturity Date................... 10
 Section 5.2  Notice of Change of Stated Maturity Date......... 11

ARTICLE VI EXPENSES............................................ 11

 Section 6.1  Payment of Expenses.............................. 11
 Section 6.2  Payment Upon Resignation or Removal.............. 12

ARTICLE VII COVENANT TO LIST ON EXCHANGE....................... 12

 Section 7.1  Listing on an Exchange........................... 12

ARTICLE VIII FORM OF DEBENTURE................................. 13

 Section 8.1  Form of Debenture................................ 13

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ARTICLE IX ORIGINAL ISSUE OF DEBENTURES............................ 13

 Section 9.1  Original Issue of Debentures......................... 13

ARTICLE X MISCELLANEOUS............................................ 13

 Section 10.1 Ratification of Indenture............................ 13
 Section 10.2 Trustee Not Responsible for Recitals................. 13
 Section 10.3 Governing Law........................................ 13
 Section 10.4 Counterparts......................................... 14

*THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE A PART OF
 THIS [__] SUPPLEMENTAL INDENTURE.

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                          [__] SUPPLEMENTAL INDENTURE
                                    BETWEEN
                           STERLING BANCSHARES, INC.
                                      AND
                             BANKERS TRUST COMPANY

     [__] SUPPLEMENTAL INDENTURE, dated as of _____________, _______ (the "[__]
Supplemental Indenture"), between Sterling Bancshares, Inc., a Texas corporation
(the "Company"), and Bankers Trust Company, a New York banking corporation, as
trustee (the "Trustee") under the Indenture dated as of ______________, 2001
between the Company and the Trustee (the "Indenture").

     WHEREAS, the Company executed and delivered the Indenture to the Trustee to
provide for the future issuance of the Company's unsecured junior subordinated
debentures to be issued from time to time in one or more series as might be
determined by the Company under the Indenture, in an unlimited aggregate
principal amount which may be authenticated and delivered as provided in the
Indenture;

     WHEREAS, pursuant to the terms of the Indenture, the Company desires to
provide for the establishment of a new series of such securities to be known as
its [__]% Junior Subordinated Debentures due [__] (the "Debentures"), the form
and substance of such Debentures and the terms, provisions and conditions
thereof to be set forth as provided in the Indenture and this [__] Supplemental
Indenture;

     WHEREAS, the Company and Sterling Capital Trust [__], a Delaware statutory
business trust (the "Trust"), has offered to the public $[__] aggregate
liquidation amount of its [__]% Trust Preferred Securities (the "Preferred
Securities"), representing preferred undivided beneficial interests in the
assets of the Trust, and proposes to invest the proceeds from such offering,
together with the proceeds of the issuance and sale by the Trust to the Company
of $[__] aggregate liquidation amount of its [__]% Trust Common Securities (the
"Common Securities"), in $[__] aggregate principal amount of the Debentures; and

     WHEREAS, the Company has requested that the Trustee execute and deliver
this [__] Supplemental Indenture and all requirements necessary to make this
[__] Supplemental Indenture a valid instrument in accordance with its terms, and
to make the Debentures, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company, have been
performed, and the execution and delivery of this [__] Supplemental Indenture
has been duly authorized in all respects.

     NOW THEREFORE, in consideration of the purchase and acceptance of the
Debentures by the Holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Debentures and the
terms, provisions and conditions thereof, the Company covenants and agrees with
the Trustee as follows:

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                                   ARTICLE I
                                  DEFINITIONS

Section 1.1  Definition of Terms.  Unless the context otherwise requires:

        (a) a term defined in the Indenture has the same meaning when used in
this [__] Supplemental Indenture;

        (b) a term defined anywhere in this [__] Supplemental Indenture has the
same meaning throughout;

        (c) the singular includes the plural and vice versa;

        (d) a reference to a Section or Article is to a Section or Article of
this [__] Supplemental Indenture;

        (e) headings are for convenience of reference only and do not affect
interpretation;

        (f) the following terms have the meanings given to them in the
Declaration:

                (i)   Administrative Trustee;

                (ii)  Delaware Trustee;

                (iii) Distributions;

                (iv)  Preferred Securities Guarantee;

                (v)   Property Trustee; and

                (vi)  Underwriting Agreement.

        (g) the following terms have the meanings given to them in this Section
1.1(g):

        "Additional Sums" shall have the meaning set forth in Section 2.5(c).

        "Compounded Interest" shall have the meaning set forth in Section 4.1.

        "Coupon Rate" shall have the meaning set forth in Section 2.5(a).

        "Declaration" means the [__] Amended and Restated Declaration of Trust
     of Sterling Capital Trust [__], a Delaware statutory business trust, dated
     as of [__].

        "Deferred Interest" shall have the meaning set forth in Section 4.1.

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          "Dissolution Event" means the dissolution of the Trust pursuant to the
     Declaration, and the distribution of the Debentures held by the Property
     Trustee pro rata to the holders of the Trust Securities in accordance with
     the Declaration.

          "Extended Interest Payment Period" shall have the meaning set forth in
     Section 4.1.

          "Federal Reserve" means the Board of Governors of the Federal Reserve
     System.

          "Global Debenture" shall have the meaning set forth in Section 2.4(a).

          "Holder" means any person in whose name at the time a Debenture is
     registered on the Securities Register.

          "Interest Payment Date" shall have the meaning set forth in Section
     2.5(a).

          "Initial Optional Prepayment Date" means [__].

          "Investment Company Event" means the receipt by the Trust and the
     Company of an opinion of counsel, rendered by a law firm experienced in
     such matters, to the effect that, as a result of a change in law or
     regulation or a change in the interpretation or application of law or
     regulation by a legislature body, court, governmental agency or regulatory
     authority, the Trust is or will be considered an "investment company" that
     is required to be registered under the Investment Company Act of 1940, as
     amended, which change becomes effective on or after the date of original
     issuance of the Preferred Securities of the Trust.

          "Non Book-Entry Preferred Securities" shall have the meaning set forth
     in Section 2.4(a).

          "Prepayment Price" shall have the meaning set forth in Section 3.1.

          "Regulatory Capital Event" means that the Company shall have received
     an opinion of independent bank regulatory counsel experienced in such
     matters to the effect that, as a result of (a) any amendment to, or change
     (including any announced prospective change) in, the laws (or any
     regulations thereunder) of the United States or any rules, guidelines or
     policies of the Federal Reserve or any rules, guidelines or policies of any
     regulatory authority applicable to the Company, or (b) any official
     administrative pronouncement or judicial decision interpreting or applying
     such laws or regulations, which amendment or change is effective or such
     pronouncement or decision is announced on or after the date of original
     issuance of the Debentures, the Preferred Securities do not constitute, or
     within 90 days of the date thereof, will not constitute, Tier 1 Capital (or
     its equivalent) for purposes of the Federal Reserve's capital guidelines
     for bank holding companies; provided, however, that the distribution of the
     Debentures in connection with the liquidation of the Trust by the Company,
     as sponsor, and the treatment thereafter of the Debentures as other than
     Tier 1 Capital shall not in and of itself constitute a Regulatory Capital
     Event unless such liquidation shall have occurred in connection with a Tax
     Event.

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          "Special Event" means an Investment Company Event, Tax Event or a
     Regulatory Capital Event, as the case may be.

          "Stated Maturity Date" means the date on which the Debentures mature
     and on which the principal shall be due and payable, together with all
     accrued and unpaid interest thereon including Compounded Interest and
     Additional Sums, if any, which date shall be [__].

          "Tax Event" means that the Trust and the Company shall have received
     an opinion of counsel experienced in such matters to the effect that, as a
     result of (a) any amendment to, or change (including any announced
     prospective change) in, the laws or any regulations thereunder of the
     United States or any political subdivision or taxing authority thereof or
     therein, or (b) any official administrative pronouncement or judicial
     decision interpreting or applying such laws or regulations, which amendment
     or change is effective or which pronouncement or decision is announced on
     or after the date of the original issuance of the Debentures, there is more
     than an insubstantial risk that (i) the Trust is, or will be within 90 days
     of the date of such opinion, subject to United States federal income tax
     with respect to income received or accrued on the Debentures, (ii) interest
     payable by the Company on the Debentures is not, or within 90 days of the
     date thereof will not be, deductible by the Company, in whole or in part,
     for United States federal income tax purposes, or (iii) the Trust is, or
     will be within 90 days of the date of such opinion, subject to more than a
     de minimis amount of other taxes, duties or other governmental charges.

                                  ARTICLE II

                GENERAL TERMS AND CONDITIONS OF THE DEBENTURES

     Section 2.1  Designation and Principal Amount.

     There is hereby authorized a series of Securities designated the "[__]%
Junior Subordinated Debentures due [__]", limited in aggregate principal amount
to $[__] which amount shall be as set forth in any written order of the Company
for the authentication and delivery of Debentures pursuant to Section 2.4 of the
Indenture.

     Section 2.2  Maturity.

     The Debentures shall mature on [__] (the "Stated Maturity Date").

     Section 2.3  Form and Payment.

     Except as provided in Section 2.4, the Debentures shall be issued in fully
registered certificated form without interest coupons. Principal and interest on
the Debentures issued in certificated form will be payable, the transfer of such
Debentures will be registrable and such Debentures will be exchangeable for
Debentures bearing identical terms and provisions at the office or agency of the
Company maintained for such purpose pursuant to Section 3.2 of the Indenture;
provided, however, that payment of interest with respect to Debentures (other
than a Global Debenture) may be made at the option of the Company (i) by check
mailed to the Holder

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entitled thereto at such address as shall appear in the Securities Register or
(ii) by wire transfer to an account appropriately designated by the Holder,
entitled thereto, provided that proper transfer instructions have been received
in writing by the relevant record date. Notwithstanding the foregoing, so long
as the Holder of any Debentures is the Property Trustee, the payment of the
principal of and interest (including Compounded Interest and Additional Sums, if
any) on such Debentures held by the Property Trustee will be made at such place
and to such account as may be designated by the Property Trustee.

     Section 2.4  Global Debenture.

        (a)  In connection with a Dissolution Event,

                (i) if any Preferred Securities are held in book-entry form, the
        related Debentures in certificated form shall be presented to the
        Trustee (if an arrangement with the Depositary has been maintained) by
        the Property Trustee in exchange for one or more global Debentures in an
        aggregate principal amount equal to the aggregate principal amount of
        all outstanding Debentures (a "Global Debenture"), to be registered in
        the name of the Depositary, or its nominee, and delivered by the Trustee
        to the Depositary for crediting to the accounts of its participants
        pursuant to the instructions of the Administrative Trustees. The Company
        upon any such presentation shall execute one or more Global Debentures
        in such aggregate principal amount and deliver the same to the Trustee
        for authentication and delivery in accordance with the Indenture and
        this [__] Supplemental Indenture. Payments on the Debentures issued as a
        Global Debenture will be made to the Depositary; and

                (ii) if any Preferred Securities are held in non book-entry
        certificated form, the related Debentures in certificated form may be
        presented to the Trustee by the Property Trustee and any certificate
        which represents Preferred Securities other than Preferred Securities in
        book-entry form held by the Depositary or its nominee ("Non Book-Entry
        Preferred Securities") will be deemed to represent beneficial interests
        in Debentures presented to the Trustee by the Property Trustee having an
        aggregate principal amount equal to the aggregate liquidation amount of
        the Non Book-Entry Preferred Securities until such Preferred Security
        certificates are presented to the Security Registrar for transfer or
        reissuance, at which time such Preferred Security certificates will be
        canceled and a Debenture, registered in the name of the holder of the
        Preferred Security certificate or the transferee of the holder of such
        Preferred Security certificate, as the case may be, with an aggregate
        principal amount equal to the aggregate liquidation amount of the
        Preferred Security certificate canceled, will be executed by the Company
        and delivered to the Trustee for authentication and delivery in
        accordance with the Indenture and this [__] Supplemental Indenture. Upon
        issue of such Debentures, Debentures with an equivalent aggregate
        principal amount that were presented by the Property Trustee to the
        Trustee will be deemed to have been canceled.

        (b) A Global Debenture shall represent the aggregate amount of
outstanding Debentures from time to time endorsed thereon; provided, that the
aggregate amount of
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outstanding Debentures represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges or redemptions. Any endorsement
of a Global Debenture to reflect the amount of any increase or decrease in the
amount of outstanding Debentures represented thereby shall be made by the
Trustee, in accordance with instructions given by the Company as required by
this Section 2.4.

        (c) A Global Debenture may be transferred, in whole but not in part,
only to another nominee of the Depositary, or to a successor Depositary selected
or approved by the Company or to a nominee of such successor Depositary.

        (d) If (i) at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
for such series shall no longer be registered or in good standing under the
Exchange Act, or other applicable statute or regulation, and a successor
Depositary for such series is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such condition, as the case
may be, (ii) the Company at any time determines that the Debentures shall no
longer be solely represented by a Global Debenture or (iii) there shall have
occurred an Event of Default, then the Company shall execute, and, subject to
Article II of the Indenture, the Trustee, upon written notice from the Company,
shall authenticate and deliver the Debentures in definitive registered form
without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Debenture, in exchange for
such Global Debenture. In such event the Company shall execute, and, subject to
Section 2.6 of the Indenture, the Trustee, upon receipt of an Officers'
Certificate evidencing such determination by the Company and a Company Order,
shall authenticate and make available for delivery the Debentures in definitive
registered form without coupons, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global
Debenture, in exchange for such Global Debenture. Upon the exchange of the
Global Debenture for such Debentures in definitive registered form without
coupons, in authorized denominations, the Global Debenture shall be canceled by
the Trustee. Such Debentures in definitive registered form issued in exchange
for the Global Debenture shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. The
Trustee shall deliver such Securities to the Depositary for delivery to the
Persons in whose names such Securities are so registered.

     Section 2.5  Interest.

        (a) Each Debenture will bear interest at the rate of [__]% per annum
(the "Coupon Rate") from the most recent date to which interest has been paid or
duly provided for or, if no interest has been paid or duly provided for, from
the original date of issuance until the principal thereof becomes due and
payable, and on any overdue principal and, to the extent that payment of such
interest is enforceable under applicable law, on any overdue installment of
interest at the Coupon Rate, compounded quarterly, payable quarterly in arrears
on the first day of March, June, September and December of each year and on the
Stated Maturity Date (each, an "Interest Payment Date"), commencing on [__], to
the Person in whose name such Debenture or any predecessor Debenture is
registered at the close of business on the relevant record date, which will be
the 15th day of the month immediately preceding the month in which the relevant

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Interest Payment Date occurs, except as otherwise provided pursuant to the
provisions of Article IV hereof.

        (b) The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full calendar month for which interest is computed, will be computed on the
basis of the actual number of days elapsed calendar month. In the event that any
Interest Payment Date falls on a day that is not a Business Day, then payment of
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date that such
interest otherwise would have been payable.

        (c) During such time as the Property Trustee is the holder of any
Debentures, the Company shall pay any additional amounts on the Debentures as
may be necessary in order that the amount of Distributions then due and payable
by the Trust on the outstanding Trust Securities shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event ("Additional Sums").
Whenever in the Indenture, this [__] Supplemental Indenture, or the Debentures
there is a reference in any context to the payment of principal of or interest
on the Debentures, such mention shall be deemed to include mention of the
payments of the Additional Sums provided for in this paragraph to the extent
that, in such context, Additional Sums are, were or would be payable in respect
thereof pursuant to the provisions of this paragraph and express mention of the
payment of Additional Sums (if applicable) in any provisions hereof shall not be
construed as excluding Additional Sums in those provisions hereof where such
express mention is not made; provided, however, that the deferral of the payment
of interest pursuant to Section 4.1 or the provisions of the Debentures shall
not defer the payment of any Additional Sums that may be due and payable.

                                  ARTICLE III
                         PREPAYMENT OF THE DEBENTURES

     Section 3.1  Special Event Prepayment.

     If, prior to the Initial Optional Prepayment Date, a Special Event has
occurred and is continuing, then notwithstanding Section 3.2(a) but subject to
Section 3.2(c), the Company shall have the right, at any time within 180 days
following the occurrence of such Special Event, upon (i) not less than 45 days
prior written notice to the Trustee, and (ii) not less than 30 days nor more
than 60 days prior written notice to the Holders, to prepay the Debentures, in
whole (but not in part), at a prepayment price equal to 100% of the principal
amount of the Debenture, plus accrued and unpaid interest thereon (including
Compounded Interest), if any, and Additional Sums, if any, to the applicable
date of prepayment (the "Prepayment Price").  The Prepayment Price shall be paid
prior to 12:00 noon, New York City time, on the date of such prepayment or such
earlier time as the Company determines, provided that the Company shall deposit
with the

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Trustee an amount sufficient to pay the Prepayment Price by 10:00 a.m.,
New York City time, on the date such Prepayment Price is to be paid.

     Section 3.2  Optional Prepayment by Company.

        (a) Subject to the provisions of this Article III, the Company shall
have the right to prepay the Debentures, in whole or in part, from time to time,
on or after the Initial Optional Prepayment Date, at the Prepayment Price.

     If the Debentures are only partially prepaid pursuant to this Section 3.2,
the Debentures to be prepaid shall be selected on a pro rata basis not more than
60 days prior to the date fixed for prepayment from the outstanding Debentures
not previously called for prepayment, provided, however, that any such proration
may be made on the basis of the aggregate principal amount of Debentures held by
each Holder and may be made by making such adjustments as the Company deems fair
and appropriate in order that only Debentures in denominations of $25 or
integral multiples thereof shall be prepaid.  The Prepayment Price shall be paid
prior to 12:00 noon, New York time, on the date of such prepayment or at such
earlier time as the Company determines, provided further that the Company shall
deposit with the Trustee an amount sufficient to pay the Prepayment Price by
10:00 a.m., New York City time, on the date such Prepayment Price is to be paid.

        (b) Notwithstanding the first sentence of Section 3.2, upon the entry of
an order for dissolution of the Trust by a court of competent jurisdiction, the
Debentures thereafter will be subject to prepayment, in whole only, but not in
part, at the option of the Company, on or after the Initial Optional Prepayment
Date, at the Prepayment Price, and otherwise in accordance with this Article
III.

        (c) Any prepayment of Debentures pursuant to Section 3.1 or Section 3.2
shall be subject to the Company obtaining the prior approval of the Federal
Reserve, if such approval is then required under applicable capital guidelines
or policies of the Federal Reserve, and any other required regulatory approvals.

        (d) If a prepayment of some but not all of the Debentures would result
in the Preferred Securities ceasing to be quoted on the NASDAQ Stock Market or
any successor thereto or result in a delisting of the Preferred Securities from
any national securities exchange on which the Preferred Securities are then
listed, the Debentures will be subject to prepayment, in whole only, but not in
part, by the Company.

     Section 3.3  No Sinking Fund.

     The Debentures are not entitled to the benefit of any sinking fund.

                                  ARTICLE IV

                     EXTENSION OF INTEREST PAYMENT PERIOD

     Section 4.1 Extension of Interest Payment Period. So long as no Event of
Default has occurred and is continuing, the Company shall have the right, at any
time and from time to time

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during the term of the Debentures, to defer payments of interest by extending
the interest payment period of such Debentures for a period not exceeding 20
consecutive quarterly periods, including the first such quarterly period during
such extension period (the "Extended Interest Payment Period"), during which
Extended Interest Payment Period no interest shall be due and payable; provided
that no Extended Interest Payment Period shall end on a date other than an
Interest Payment Date or extend beyond the Stated Maturity Date. To the extent
permitted by applicable law, interest, the payment of which has been deferred
because of the extension of the interest payment period pursuant to this Section
4.1, will bear interest thereon at the Coupon Rate compounded quarterly for each
quarterly period of the Extended Interest Payment Period ("Compounded
Interest"). At the end of the Extended Interest Payment Period, the Company
shall pay all interest accrued and unpaid on the Debentures, including any
Additional Sums and Compounded Interest (together, "Deferred Interest") that
shall be payable to the Holders of the Debentures in whose names the Debentures
are registered in the Securities Register on the first record date preceding the
end of the Extended Interest Payment Period. Before the termination of any
Extended Interest Payment Period, the Company may further defer payments of
interest by further extending such period, provided that such period, together
with all such previous and further extensions within such Extended Interest
Payment Period, shall not exceed 20 consecutive quarterly periods, including the
first such quarterly period during such Extended Interest Payment Period, end on
a date other than an Interest Payment Date or extend beyond the Stated Maturity
Date. Upon the termination of any Extended Interest Payment Period and the
payment of all Deferred Interest then due, the Company may commence a new
Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof, but the Company may prepay at any time all or any
portion of the interest accrued during an Extended Interest Payment Period.

     Section 4.2  Notice of Extension.

        (a) If the Property Trustee is the only registered holder of the
Debentures at the time the Company selects an Extended Interest Payment Period,
the Company shall give written notice to the Administrative Trustees, the
Property Trustee and the Trustee of its selection of such Extended Interest
Payment Period five Business Days before the earlier of (i) the next succeeding
date on which Distributions on the Trust Securities issued by the Trust are
payable, and (ii) the date the Trust is required to give notice of the record
date, or the date such Distributions are payable, to any national securities
exchange or to holders of the Preferred Securities issued by the Trust, but in
any event at least five Business Days before such record date.

        (b) If the Property Trustee is not the only holder of the Debentures at
the time the Company selects an Extended Interest Payment Period, the Company
shall give the Holders of the Debentures and the Trustee written notice of its
selection of such Extended Interest Payment Period at least 10 Business Days
before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the
date the Company is required to give notice of the record or payment date of
such interest payment to any national securities exchange.

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        (c) The quarterly period in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20
quarterly periods permitted in the maximum Extended Interest Payment Period
permitted under Section 4.1.

     Section 4.3  Limitation of Transactions.

     If (i) the Company shall exercise its right to defer payment of interest as
provided in Section 4.1 and the Extended Interest Payment Period is continuing,
(ii) there shall have occurred any event, of which the Company has actual
knowledge that (a) is, or with the giving of notice or the lapse of time, or
both, would constitute, an Event of Default and (b) in respect of which the
Company shall not have taken reasonable steps to cure, or (iii) the Debentures
are held by the Property Trustee and the Company shall be in default with
respect to its payment obligations under the Preferred Securities Guarantee,
then the Company will not: (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Company's capital stock (which includes common and preferred stock)
(other than (1) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock of the Company, (2)
any declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (3)
as a result of a reclassification of any class or series of the Company's
capital stock solely into another class or series of the Company's capital
stock, (4) the purchase of fractional shares resulting from such
reclassification or pursuant to the conversion or exchange provisions of such
capital stock or any security convertible or exchangeable into shares of the
Company's capital stock, and (5) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's benefit plans for
its directors, officers or employees or any of the Company's dividend
reinvestment plans); (ii) make any payment of principal, premium, if any, or
interest on or repay or repurchase or redeem any debt securities of the Company
(including Other Debentures) that rank pari passu with or junior in right of
payment to the Debentures; or (iii) make any guarantee payments (other than
payments under the Preferred Securities Guarantee) with respect to any guarantee
by the Company of the debt securities of any Subsidiary of the Company
(including Other Guarantees) if such guarantee ranks pari passu or junior in
right of payment to the Debentures.

                                   ARTICLE V

                        CHANGE OF STATED MATURITY DATE

     Section 5.1  Change of Stated Maturity Date.

     So long as no Event of Default has occurred and is continuing and subject
to Section 5.2(c), the Company shall have the right, at any time, but only once,
during the term of the Debentures, to reduce the term of the Debentures by
selecting a date, not earlier than the Initial Optional Prepayment Date, as the
new "Stated Maturity Date" for the purposes of this [__] Supplemental Indenture
and the Debentures; provided that such new "Stated Maturity Date" is an Interest
Payment Date and provided further that such new "Stated Maturity Date" shall not
be later than [________] or be earlier than any date that has occurred.

                                      10
<PAGE>

     Section 5.2  Notice of Change of Stated Maturity Date.

        (a) If the Property Trustee is the only registered holder of the
Debentures at the time the Company designates a new "Stated Maturity Date"
pursuant to Section 5.1, the Company shall give written notice to the
Administrative Trustees, the Property Trustee and the Trustee of its selection
of such new "Stated Maturity Date" five Business Days before the earlier of (i)
the next succeeding date on which Distributions on the Trust Securities issued
by the Trust are payable, and (ii) the date the Trust is required to give notice
of the record date, or the date such Distributions are payable, to any national
securities exchange or to holders of the Preferred Securities issued by the
Trust, but in any event at least five Business Days before such record date.

        (b) If the Property Trustee is not the only holder of the Debentures at
the time the Company selects a new "Stated Maturity Date" pursuant to Section
5.1, the Company shall give the Holders of the Debentures and the Trustee
written notice of its selection of such new "Stated Maturity Date" at least 10
Business Days before the earlier of (i) the next succeeding Interest Payment
Date, or (ii) the date the Company is required to give notice of the record or
payment date of such interest payment to any national securities exchange.

        (c) It is a condition precedent to the exercise of the Company's right
under Section 5.1 that the Company shall have obtained the approval of the
Federal Reserve for such exercise, if such approval is then required for such
exercise under applicable laws, regulations, capital guidelines or policies of
the Federal Reserve, and any other regulatory approval required for such
exercise.

        (d) Any selection of a new "Stated Maturity Date" shall have no effect
under this [__] Supplemental Indenture unless and until the Company and the
Trustee have given the written notices required by Section 5.2(a) or (b). If all
such notices have been given in accordance with Section 5.2 (a) or (b), then the
new "Stated Maturity Date" selected in accordance with Section 5.1 shall become
the Stated Maturity Date for the Debentures with effect from the date specified
in such notices.

                                  ARTICLE VI

                                   EXPENSES

     Section 6.1  Payment of Expenses.

     In connection with the offering, sale and issuance of the Debentures to the
Property Trustee and in connection with the sale of the Trust Securities by the
Trust, the Company, in its capacity as borrower with respect to the Debentures,
shall:

        (a) pay all costs and expenses relating to the offering, sale and
issuance of the Debentures, including commissions to the underwriter payable
pursuant to the Underwriting Agreement and compensation of the Trustee under the
Indenture in accordance with the provisions of Section 6.6 of the Indenture;

                                      11
<PAGE>

        (b) pay all costs and expenses of the Trust (including, but not limited
to, costs and expenses relating to the organization of the Trust), the offering,
sale and issuance of the Trust Securities (including commissions to the
underwriters in connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses relating to the
operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of assets of the Trust;

        (c) be primarily and fully liable for any indemnification obligations
arising with respect to the Declaration;

        (d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust; and

        (e) pay all other fees, expenses, debts and obligations (other than in
respect of the Trust Securities).

     The provisions of this Section shall survive the termination of this [__]
Supplemental Indenture.

     Section 6.2  Payment Upon Resignation or Removal.

     Upon termination of this [__] Supplemental Indenture or the Indenture or
the removal or resignation of the Trustee, unless otherwise stated, the Company
shall pay to the Trustee all amounts accrued to the date of such termination,
removal or resignation that are payable pursuant to Section 6.6 of the
Indenture.  Upon termination of the Declaration or the removal or resignation of
the Delaware Trustee or the Property Trustee, as the case may be, pursuant to
Section 5.7 of the Declaration, the Company shall pay to the Delaware Trustee or
the Property Trustee, as the case may be, all amounts accrued to the date of
such termination, removal or resignation.

                                  ARTICLE VII

                         COVENANT TO LIST ON EXCHANGE

     Section 7.1  Listing on an Exchange.

     If the Debentures are distributed to the holders of the Securities issued
by the Trust, and the Preferred Securities are then so listed, the Company will
use its best efforts to list such Debentures on the NASDAQ Stock Market or on
such other exchange as the Preferred Securities are then listed.

                                      12
<PAGE>

                                 ARTICLE VIII

                               FORM OF DEBENTURE

     Section 8.1  Form of Debenture.

     The Debentures and the Trustee's Certificate of Authentication to be
endorsed thereon shall be substantially in the form of Exhibit A, the terms of
which are incorporated in and made a part of this [__] Supplemental Indenture.

                                  ARTICLE IX

                         ORIGINAL ISSUE OF DEBENTURES

     Section 9.1  Original Issue of Debentures.

     Debentures in the aggregate principal amount of $[__], may, upon execution
of this [__] Supplemental Indenture or upon any written order of the Company
setting forth the amount therefor, be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Debentures to or upon the written order of the Company, signed by
its Chairman, its President, or any Vice President and its Treasurer, its
Secretary, any Assistant Treasurer, or any Assistant Secretary, without any
further action by the Company.

                                   ARTICLE X

                                 MISCELLANEOUS

     Section 10.1  Ratification of Indenture.

     The Indenture, as supplemented by this [__] Supplemental Indenture, is in
all respects ratified and confirmed, and this [__] Supplemental Indenture shall
be deemed part of the Indenture in the manner and to the extent herein and
therein provided.

     Section 10.2  Trustee Not Responsible for Recitals.

     The recitals herein contained are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
[__] Supplemental Indenture.

     Section 10.3  Governing Law.

     This [__] Supplemental Indenture and each Debenture shall be deemed to be a
contract made under the internal laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of said State.

                                      13
<PAGE>

     Section 10.4  Counterparts.

     This [__] Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this [__] Supplemental
Indenture to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.

[Seal]                              STERLING BANCSHARES, INC.

Attest:

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

                                    BANKERS TRUST COMPANY, as Trustee

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

                                      14

<PAGE>

STATE OF TEXAS      (S)
                    (S)
COUNTY OF HARRIS    (S)

          On the ____ day of _____________ before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that he resides in Houston, Texas; that he is __________________________ of
Sterling Bancshares, Inc., one of the corporations described in and which
executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to the said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.

                                               -------------------------------
                                               NOTARY PUBLIC, STATE OF TEXAS

[seal]                                         Commission expires:
                                                                  ------------

                                      15
<PAGE>

                                   EXHIBIT A

                          (FORM OF FACE OF DEBENTURE)

No. __________                                  Principal Amount: $____________
                                                   CUSIP No.___________________

     [IF THE DEBENTURE IS A GLOBAL DEBENTURE, INSERT:  THIS DEBENTURE IS A
GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS
DEBENTURE IS EXCHANGEABLE FOR DEBENTURES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS DEBENTURE (OTHER THAN A
TRANSFER OF THIS DEBENTURE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

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

                                      A-1
<PAGE>

                           STERLING BANCSHARES, INC.

      [__%] SERIES [__] JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
                                  DUE [______]

     Sterling Bancshares, Inc., a Texas corporation (the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to _______ or registered assigns, [the
principal sum of] [$___________ Dollars]/1/ [specified on Schedule A attached
hereto]/2/ on [___________] (subject to no earlier date having been designated
in accordance with Article V of the [__] Supplemental Indenture to the
Indenture, the "Stated Maturity Date"), unless previously prepaid or redeemed,
and to pay interest on the outstanding principal amount hereof from
[__________], or from the most recent Interest Payment Date (as defined below)
to which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on the first day of March, June,
September and December of each year, commencing [______], and on the Stated
Maturity Date (each such date, an "Interest Payment Date") at the rate of [__]%
per annum until the principal hereof shall have become due and payable, and on
any overdue principal and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded quarterly. The amount of interest
payable on any Interest Payment Date shall be computed on the basis of a 360-day
year of twelve 30-day months and, for any period less than a full calendar
month, the number of days elapsed in such month. In the event that any date on
which the principal of, or interest on this Debenture is payable is not a
Business Day, then the payment payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that if such next succeeding Business Day
falls in the next calendar year, then such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. Pursuant to the [__] Supplemental Indenture to the
Indenture, in certain circumstances the Company will be required to pay
Additional Sums and Compounded Interest (each as defined in the [__]
Supplemental Indenture to the Indenture) with respect to this Debenture.

     The interest installment so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid to
the Person in whose name this Debenture (or one or more Predecessor Securities,
as defined in said Indenture) is registered at the close of business on the
regular record date for such interest installment, which shall be at the close
of business on the 15th day of the month preceding the month in which the
relevant Interest Payment Date falls.  Payments of interest may be deferred by
the Company pursuant to the provisions of Article IV of the [__] Supplemental
Indenture to the Indenture.  Any such interest installment not punctually paid
or duly provided for shall forthwith cease to be payable to the Holders on such
regular record date and may be paid to the Person in whose name this Debenture
(or one or more Predecessor Securities) is registered at the close of business
on a special record date to be fixed by the Trustee for the payment of such
defaulted interest, notice

-----------------
/1/ Insert in Definitive Securities only.
/2/ Insert in Global Securities only.

                                      A-2
<PAGE>

whereof shall be given to the Holders of this series of Debentures not less than
10 days prior to such special record date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Debentures may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.

     The principal of and interest (including Compounded Interest and Additional
Sums, if any) on this Debenture shall be payable at the office or agency of the
Trustee maintained for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that, payment of interest may be made at the
option of the Company by (i) check mailed to the Holder at such address as shall
appear in the Securities Register or (ii) by transfer to an account maintained
by the Person entitled thereto, provided that proper written transfer
instructions have been received by the relevant record date.  Notwithstanding
the foregoing, so long as the Holder of this Debenture is the Property Trustee,
the payment of the principal of and interest (including Compounded Interest and
Additional Sums, if any,) on this Debenture will be made at such place and to
such account as may be designated by the Property Trustee.

     So long as no Event of Default has occurred and is continuing, and subject
to the Company having received prior approval of the Federal Reserve if then
required under applicable capital guidelines, policies or regulations of the
Federal Reserve the Company shall have the right, at any time, but only once,
during the term of the Debentures, to reduce the term of the Debentures by
selecting a date, not earlier than the Initial Optional Prepayment Date, as the
new "Stated Maturity Date"; provided that such new "Stated Maturity Date" is an
Interest Payment Date and provided further that such new "Stated Maturity Date"
shall not be later than [__________] or be earlier than any date that has
occurred.

     The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness, and this Debenture is issued subject to the
provisions of the Indenture with respect thereto.  Each Holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her attorney-in-
fact for any and all such purposes.  Each Holder hereof, by his or her
acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each Holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such Holder upon said provisions.

     This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.

                                      A-3
<PAGE>

     The provisions of this Debenture are continued on the reverse side hereof
and such provisions shall for all purposes have the same effect although fully
set forth at this place.

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and sealed.

     Dated: ____________, _____________

                                    STERLING BANCSHARES, INC.

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

Attest:

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

                                      A-4
<PAGE>

                    (FORM OF CERTIFICATE OF AUTHENTICATION)

                         CERTIFICATE OF AUTHENTICATION

     Dated:  [______]

     This is one of the Securities referred to in the within-mentioned Indenture
and [________] Supplemental Indenture.

BANKERS TRUST COMPANY,
as Trustee

By
   ------------------------------
        Authorized Signatory

                                      A-5
<PAGE>

                         (FORM OF REVERSE OF SECURITY)

     This Debenture is one of the series of Debentures of the Company (herein
sometimes referred to as the "Debentures"), specified in the Indenture, all
issued or to be issued in one or more series under and pursuant to an Indenture,
dated as of [_____], duly executed and delivered between the Company and Bankers
Trust Company, as Trustee (the "Trustee"), as supplemented by the [__]
Supplemental Indenture dated as of [_____] between the Company and the Trustee
(the Indenture, as so supplemented, being referred to as the "Indenture") to
which Indenture reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the Holders of the Debentures.  By the terms of the
Indenture, the Debentures are issuable in series that may vary as to amount,
date of maturity, rate of interest and in other respects as provided in the
Indenture.  This series of Debentures is limited in aggregate principal amount
as specified in the [__] Supplemental Indenture.

     Upon the occurrence and continuation of a Special Event, as defined in the
[_______] Supplemental Indenture, prior to [___] (the "Initial Optional
Prepayment Date"), the Company shall have the right, at any time within 180 days
following the occurrence of such Special Event, to prepay this Debenture in
whole (but not in part) at the Prepayment Price. "Prepayment Price" shall mean
an amount in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest on the Debenture to be so prepaid (including Compounded Interest
and Additional Sums, if any) to the date of such prepayment.

     In addition, subject to the Company having received the prior approval of
the Federal Reserve System (the "Federal Reserve"), if then required under
applicable guidelines or policies of the Federal Reserve, and any other required
regulatory approvals, the Company shall have the right to prepay this Debenture,
in whole or in part, at any time on or after the Initial Optional Prepayment
Date at the Prepayment Price.

     The Prepayment Price shall be paid prior to 12:00 noon, New York City time,
on the date of such prepayment or at such earlier time as the Company
determines, provided, that the Company shall deposit with the Trustee an amount
sufficient to pay the applicable Prepayment Price by 10:00 a.m., New York City
time, on the date such Prepayment Price is to be paid.  Any prepayment pursuant
to this paragraph will be made upon not less than 30 days or more than 60 days
notice.  If the Debentures are only partially prepaid by the Company pursuant to
an Optional Prepayment, the particular Debentures to be prepaid shall be
selected on a pro rata basis not more than 60 days prior to the date fixed for
prepayment from the outstanding Debentures not previously called for prepayment,
provided, however, that any such proration may be made on the basis of the
aggregate principal amount of Debentures held by each Holder thereof and may be
made by making such adjustments as the Company deems fair and appropriate in
order that only Debentures in denominations of $25 or integral multiples thereof
shall be prepaid.

     In the event of prepayment of this Debenture in part only, a new Debenture
or Debentures for the portion hereof that has not been prepaid will be issued in
the name of the Holder hereof upon the cancellation hereof.

                                      A-6
<PAGE>

     Notwithstanding the foregoing, any prepayment of Debentures by the Company
shall be subject to the prior approval of the Federal Reserve, if such approval
is then required under applicable capital guidelines or policies of the Federal
Reserve, and the receipt of any other required regulatory approvals.

     In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.

     The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of a majority in aggregate principal amount of
the Debentures of each series affected at the time outstanding, as defined in
the Indenture, to execute supplemental indentures for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or of modifying in any manner the
rights of the Holders of the Debentures; provided, however, that no such
supplemental indenture shall, without the consent of each Holder of Debentures
then outstanding and affected thereby, (i) extend or change the Stated Maturity
Date of any Debentures (except as expressly permitted in accordance with the
terms of any supplemental indenture establishing such series of Debentures in
accordance with Section 2.2 of the Indenture), or reduce the principal amount
thereof, or reduce any amount payable on redemption thereof, or reduce the rate
of interest thereon, or extend the time of payment of interest thereon (except
as expressly permitted in accordance with the terms of any supplemental
indenture establishing such series of Debentures in accordance with Section 2.2
of the Indenture), or make the principal of, or interest on, the Debentures
payable in any coin or currency other than U.S. dollars, or impair or affect the
right of any holder of Debentures to institute suit for the payment thereof, or
(ii) reduce the aforesaid percentage amount of Debentures, the Holders of which
are required to consent to any such supplemental indenture.  The Indenture also
contains provisions permitting the Holders of a majority in aggregate principal
amount of the Debentures of any series at the time outstanding affected thereby,
on behalf of all of the Holders of the Debentures of such series, to waive any
past default in the performance of any of the covenants contained in the
Indenture, or established pursuant to the Indenture with respect to such series,
and its consequences, except a default in the payment of the principal of or
interest on any of the Debentures or a default in respect of any covenant or
provision under which the Indenture cannot be modified or amended without the
consent of each Holder of Debentures affected thereby.  Any such consent or
waiver by the holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
holders and owners of this Debenture and of any Debenture issued in exchange
herefor or in place hereof, irrespective of whether or not any notation of such
consent or waiver is made upon this Debenture.

     No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest (including
Compounded Interest and Additional Sums, if any) on this Debenture at the time
and place and at the rate and in the money herein prescribed.

                                      A-7
<PAGE>

     So long as no Event of Default shall have occurred and be continuing, the
Company shall have the right, at any time and from time to time during the term
of the Debentures, to defer payments of interest by extending the interest
payment period of such Debentures for a period not exceeding 20 consecutive
quarterly periods, including the first such quarterly period during such
extension period, and not extending beyond the Stated Maturity Date of the
Securities (an "Extended Interest Payment Period") or ending on a date other
than an Interest Payment Date, at the end of which period the Company shall pay
all interest then accrued and unpaid (together with interest thereon at the rate
specified for the Debentures to the extent that payment of such interest is
enforceable under applicable law).  Before the termination of any such Extended
Interest Payment Period, the Company may further defer payments of interest by
further extending such Extended Interest Payment Period, provided that such
Extended Interest Payment Period, together with all such previous and further
extensions within such Extended Interest Payment Period, (i) shall not exceed 20
consecutive quarterly periods, including the first quarterly period during such
Extended Interest Payment Period, (ii) shall not end on any date other than an
Interest Payment Date, and (iii) shall not extend beyond the Stated Maturity
Date of the Debentures.  Upon the termination of any such Extended Interest
Payment Period and the payment of all accrued and unpaid interest and any
additional amounts then due, the Company may commence a new Extended Interest
Payment Period, subject to the foregoing requirements.

     The Company has agreed that it will not: (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock) (other than (a) dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of, Common Stock
of the Company, (b) any declaration of a dividend in connection with the
implementation of a stockholder's rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) as a result of a reclassification of any class or series
of the Company's capital stock solely into another class or series of the
Company's capital stock, (d) the purchase of fractional shares resulting from
such a reclassification or pursuant to the conversion or exchange provisions of
such capital stock or any security convertible or exchangeable into shares of
the Company's capital stock, and (e) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's benefit plans for
its directors, officers or employees or any of the Company's dividend
reinvestment plans); (ii) make any payment of principal, interest on or repay or
prepay or repurchase or redeem any debt securities of the Company that rank pari
passu with or junior in right of payment to the Debentures; or (iii) make any
guarantee payments with respect to any guarantee (other than payments under the
Preferred Securities Guarantee) by the Company of the debt securities of any
Subsidiary of the Company if such guarantee ranks pari passu or junior in right
of payment to the Debentures, if at such time (1) there shall have occurred any
event of which the Company has actual knowledge that (a) is or, with the giving
of notice or the lapse of time, or both, would be, an Event of Default and (b)
in respect of which the Company shall not have taken reasonable steps to cure,
(2) the Company shall be in default with respect to its payment obligations
under the Preferred Securities Guarantee or (3) the Company shall have given
notice of its election of the exercise of its right to extend the interest
payment period and any such extension shall be continuing.

     Subject to (i) the prior approval of the Federal Reserve, if such approval
is then required under applicable capital guidelines or policies of the Federal
Reserve and the receipt of any other

                                      A-8
<PAGE>

required regulatory approval, and (ii) the receipt by the Company of an opinion
of counsel to the effect that such distribution will not be a taxable event to
holders of Preferred Securities, the Company will have the right at any time to
liquidate the Trust and cause the Debentures to be distributed to the holders of
the Trust Securities in liquidation of the Trust.

     The Debentures of this series are issuable only in registered form without
coupons in denominations of $25 and any integral multiple thereof.  As provided
in the Indenture and subject to the transfer restrictions limitations as may be
contained herein and therein from time to time, this Debenture is transferable
by the holder hereof on the Securities Register of the Company, upon surrender
of this Debenture for registration of transfer at the office or agency of the
Company in the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee duly
executed by the holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures of authorized denominations and for the
same aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such
registration of transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.

     Prior to due presentment for registration of transfer of this Debenture,
the Company, the Trustee, any authenticating agent, any paying agent, any
transfer agent and the registrar may deem and treat the registered holder hereof
as the absolute owner hereof (whether or not this Debenture shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than the Security Registrar) for the purpose of receiving payment of or on
account of the principal hereof and (subject to the Indenture) interest due
hereon and for all other purposes, and neither the Company nor the Trustee nor
any authenticating agent nor any paying agent nor any transfer agent nor any
registrar shall be affected by any notice to the contrary.

     No recourse shall be had for the payment of the principal of, or interest
on this Debenture, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture, against any incorporator,
stockholder, officer or director, past, present or future, as such, of the
Company or of any predecessor or successor Person, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly waived and
released.

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

     THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PROVISIONS THEREOF.

                                      A-9
<PAGE>

                                   SCHEDULE A

     The initial aggregate principal amount of Debentures evidenced by the
Certificate to which this Schedule is attached is ____________________ (having
an aggregate liquidation amount of __________________).  The notations in the
following table evidence decreases and increases in the aggregate principal
amount of the Debentures evidenced by such Certificate.

<TABLE>
<CAPTION>
Decrease in aggregate     Increase in aggregate      Aggregate principal
 principal amount of       principal amount of      amount of Debentures
     Debentures                Debentures           remaining after such
                                                    decrease or increase      Notation by Registrar
----------------------------------------------------------------------------------------------------
<S>                       <C>                       <C>                       <C>

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

     * Append to Global Debentures only.

                                  Schedule AESCROW AGREEMENT (PUBLIC OFFERING)

         AGREEMENT made this 2nd day of January, 2001 and among the Issuer whose
name and address appears on the Information Sheet (as defined herein) attached
to this Agreement, and Fleet Bank, 335 Adams Street, Brooklyn, New York (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 (collectively,
the "Securities", and individually, a "Share") as described on the Information
Sheet; and

          WHEREAS, the Issuer proposes to offer the Securities, as agent for the
Issuer, for sale to the public on a "best efforts, all or none basis" at the
price per Share all as set forth on the Information Sheet; and

          WHEREAS, the Issuer proposes to establish an escrow account with the
Escrow Agent in connection with such public offering and the Escrow Agent is
willing to establish such escrow account on the terms and subject to the
conditions hereinafter set forth;

          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 Escrow Account.

          2.1 The parties hereto shall establish a non- interest-bearing escrow
account at the office of the Escrow Agent, and bearing the designation, set
forth on the Information Sheet (the "Escrow Account").

          2.2 On or before the date of the initial deposit in the Escrow Account
pursuant to this Agreement, the Issuer 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
amount for deposit in the Escrow 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 the 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." After the
Termination Date, the Issuer shall not deposit, and the Escrow Agent shall not
accept, any additional amounts representing payments by prospective purchasers.

                                       1

<PAGE>

          3.     Deposits in the Escrow Account.

          3.1 Upon receipt, the Issuer shall promptly deposit all monies
received from investors to the Escrow Agent. All of these deposited proceeds
(the "Deposited Proceeds") shall be in the form of checks or money orders. All
checks or money orders deposited into the Escrow Account shall be made payable
to "Lorelei Corp. and Fleet Bank, as Escrow Agent." Any check or money order
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 Issuer (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. The Deposited Proceeds and interest or dividends
thereon, if any, shall be held for the sole benefit of the purchasers of the
securities.

          3.2  The Deposited Proceeds shall be invested in either

               (a) an obligation that constitutes a "deposit" as that term is
defined in Section (3)(1) of the Federal Deposit Insurance Act;

               (b) securities of any open-end investment company registered
under the Investment Company Act of 1940 that holds itself out as a money market
fund meeting the conditions of paragraphs (c)(2), (c) (3), and (c)(4) of Rule
2a-7 under the Investment Company Act; or

               (c) securities that are direct obligations of, or obligations
guaranteed as to principal or interest by, the United States.

          3.3 Simultaneously with each deposit into the Escrow Account, the
Issuer shall inform the Escrow Agent by confirmation slip or other writing of
the name and address of the prospective purchaser, the number of Securities
subscribed for by such purchaser, and the aggregate dollar amount of such
subscription (collectively, the "Subscription Information").

          3.4 The Escrow Agent shall not be required to accept for deposit into
the Escrow Account checks which are not accompanied by the appropriate
Subscription Information. Checks and money orders 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.

          3.5 The Escrow Agent shall not be required to accept any amounts
representing payments by prospective purchasers, whether by check or money
order, except during the Escrow Agent's regular banking hours. Any check, money
order or cash not received prior to 1:00 P.M. shall be deposited the following
business day.

                                       2

<PAGE>

          3.6  Interest or dividends earned on the Deposited Proceeds, if
any, shall be held in the Escrow Account until the Deposited Proceeds are
released in accordance with the provisions of Section 4 of the Escrow Agreement.
If the Deposited Proceeds are released to a purchaser of the securities, the
purchaser shall receive interest or dividends earned, if any, on such Deposited
Proceeds up to the date of release. If the Deposited Proceeds held in the Escrow
Account are released to the Company, any interest or dividends earned on such
funds up to the date of release may be released to the Company.

          3.7  The Issuer shall deposit the Securities directly into the
Escrow Account promptly upon issuance (the "Deposited Securities"). The identity
of the purchaser of the Securities shall be included on the Common Stock and
Warrant certificates.

          3.8 The Deposited Securities shall be held for the sole benefit of the
purchasers. No transfer or other disposition of Securities held in the Escrow
Account or any interest related to such Securities shall be permitted other than
by will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act, or the rules
thereunder.

          3.9 The Escrow Agent shall refund any portion of the Deposited
Proceeds prior to disbursement of the Deposited Proceeds in accordance with
Section 4 hereof upon instructions in writing signed by the Issuer.

          4.     Disbursement from the Escrow Account.

          4.1 The Deposited Proceeds may be released to the Company and the
Securities delivered to the purchaser or other registered holder only at the
same time as or after:

               (a)  the Escrow Agent has received a signed representation
from the Company, together with an opinion of counsel that the following events
have already occurred and the following requirements have already been met:

                    (1) Upon execution of an agreement(s) for the acquisition(s)
of a business(es) or assets that will constitute the business (or a line of
business) of the Company and for which the fair value of the business(es) or net
assets to be acquired represents at least 80 percent of the maximum offering
proceeds, including proceeds received or to be received upon the exercise or
conversion of the Securities offered, but excluding amounts payable to
non-affiliates for underwriting commissions, underwriting expenses, and dealer
allowances, if any, the Company filed a post-effective amendment that:

     (i) Discloses the information specified by the SB-2 registration statement
form and Industry Guides, including financial statements of the Company and the
company or business with which it plans to merge or acquire (the "Target
Company"), and pro forma financial information required by the SB-2 and
applicable rules and regulations;

                                       3
<PAGE>

     (ii) Discloses the results of the initial offering, including but not
limited to:

          (A) The gross offering proceeds received to date, specifying the
amounts paid for underwriter commissions, underwriting expenses and dealer
allowances, if any, amounts disbursed to the Company, and amounts remaining in
the Escrow Account; and

          (B) The specific amount, use and application of funds disbursed to the
Company to date, including, but not limited to, the amounts paid to officers,
directors, promoters, controlling shareholders or affiliates, either directly or
indirectly specifying the amounts and purposes of such payments; and

     (iii) Discloses the terms of the offering as described pursuant to
Section 4 of this Escrow Agreement.

                    (2)  The terms of the offering provided, and the Company
satisfied, the following conditions:

     (i) Within five business days after the effective date of the
post-effective amendment(s), the Company shall send by first class mail or other
equally prompt means, to each purchaser of securities held in escrow, a copy of
the prospectus contained in the post-effective amendment and any amendment or
supplement thereto;

     (ii) Each purchaser shall have no fewer than 20 business days and no
more than 45 business days from the effective date of the post-effective
amendment to notify the Company in writing that the purchaser elects to remain
an investor. If the Company has not received such written notification by the
45th business day following the effective date of the post-effective amendment,
funds and interest or dividends, if any, held in the Escrow Account shall be
sent by first class mail or other equally prompt means to the purchaser within
five business days;

     (iii) The acquisition(s) meeting the criteria set forth in paragraph (a)
(1) of this Section 4 will be consummated if a sufficient number of purchasers
confirm their investments; and

     (iv) If a consummated acquisition(s) meeting the requirements of this
section has not occurred by a date 18 months after the Effective Date, the
Deposited Funds shall be returned by first class mail or equally prompt means to
the purchaser within five business days following that date.

     (b) Funds held in the Escrow Account may be released to the Company and
securities may be delivered to the purchaser or other registered holder
identified on the deposited securities only at the same time as or after
consummation of an acquisition(s) meeting the requirements set forth in Section
4.1(a)(1)(iii) of this Escrow Agreement.

          4.2 In the event that at the close of regular banking hours on the
Termination Date less than all of the Shares have been sold, the Escrow Agent
shall promptly refund to each prospective purchaser the amount of payment
received from such purchaser held in Escrow without interest thereon or
deduction therefrom, and the Escrow Agent shall notify the Issuer of its
distribution of the Deposited Proceeds.

          4.3 In the event that at any time up to the close of banking hours on
the Termination Date all of the Shares have been sold, the Escrow Agent shall
notify the Issuer of such fact in writing within a reasonable time thereafter.
The Escrow Agent shall hold the Deposited Proceeds until the events described in
Section 4.1 of this Escrow Agreement take place.

          4.4 Upon disbursement of the Deposited Proceeds pursuant to the terms
of this Section 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 Deposited Proceeds.

          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:

                                       4
<PAGE>

          5.1 The Escrow Agent shall not be responsible for the performance by
the Issuer of its obligations under this Agreement.

          5.2 The Escrow Agent shall not be required to accept from the Issuer
any Subscription Information pertaining to prospective purchasers unless such
Subscription Information is accompanied by checks or money orders representing
the payment of money, nor shall the Escrow Agent be required to keep records of
any information with respect to payments deposited by the Issuer except as to
the amount of such payments; however, the Escrow Agent shall notify the Issuer
within a reasonable time of any discrepancy between 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.

          5.3 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 Issuer any check received which is
dishonored, together with the Subscription Information, if any, which
accompanied such check.

          5.4 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. The Escrow Agent
must, however, determine for itself whether the conditions permitting the
release of the funds in the Escrow Account have been met.

          5.5  In the event that the Escrow Agent shall be uncertain as to
its duties or rights hereunder or shall receive instructions with respect to the
Escrow Account or the Deposited Proceeds which, in its sole determination, are
in conflict either with other instructions received by it or with any provision
of this Agreement, the Escrow Agent, at its sole option, may deposit the
Deposited Proceeds (and any other amounts that thereafter become part of the
Deposited Proceeds) with the registry 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 Deposited Proceeds with the registry
of any court, the Escrow Agent shall be relieved of all further obligations and
released from all liability hereunder.

          5.6 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. 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.

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

          5.8 The Escrow Agent shall determine whether or not the Offering has
been successful, and if it determines that less than all of the
Securities being offered have been sold, thus rendering the Offering
unsuccessful, the Escrow Agent shall return the proceeds of the Offering to the
investors on a pro-rata basis.

                                       5
<PAGE>

          6.     Amendment; Resignation.  This Agreement may be altered or
amended only with the written consent of the Issuer and the Escrow Agent.
The Escrow Agent may resign for any reason upon seven (7) business days written
notice to the Issuer. 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 Deposited Proceeds, but its only duty shall be to hold the
Deposited Proceeds for a period of not more than ten (10) 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 and such successor escrow
agent, the resigning Escrow Agent shall pay over to the successor escrow agent
the Deposited Proceeds, 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 and a successor escrow agent,
then the resigning Escrow Agent shall promptly refund the amount in the
Deposited Proceeds to each prospective purchaser without interest thereon or
deduction therefrom, and the resigning Escrow Agent shall notify the Issuer in
writing of its liquidation and distribution of the Deposited Proceeds;
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 for any expenses incurred in connection
with its resignation, transfer of the Deposited Proceeds to a successor Escrow
Agent or distribution of the Deposited Proceeds pursuant to this Section 6.

          7.     Representations and Warranties.  The Issuer hereby
represents and warrants to the Escrow Agent that:

          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
Deposited Proceeds 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 Deposited Proceeds 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 Deposited
Proceeds, be deemed a representation and warranty that such deposit
represents a bona fide sale to the purchaser described therein of 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 Deposited
Proceeds, true and correct.

          8.     Fees and Expenses.  The Escrow Agent shall be entitled to
the Escrow Agent Fee set forth in the Information Sheet, payable upon execution
of this Agreement. In addition, the Issuer agrees to reimburse the Escrow Agent
for any reasonable expenses incurred in connection with this Agreement,
including, but not limited to, reasonable counsel fees, but not including the
review of this Agreement.

                                       6
<PAGE>

          9.     Indemnification and Contribution.

          9.1 The Issuer (referred to as the "Indemnitor") agrees to indemnify
the Escrow Agent and its officers, directors, employees, agents and shareholders
(jointly and severally 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 of the Indemnitees.

          9.2 If the indemnification provided for in this Section 9 is
applicable, but for any reasons held to be unavailable, the Indemnitor 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 Indemnitor.

          9.3 Any Indemnitee which proposes to assert the right to be
indemnified under this Section 9, promptly after receipt of notice of
commencement of any action, suit or proceeding against such Indemnitee in
respect of which a claim is to be made against the Indemnitor under this Section
9, will notify the Indemnitor of the commencement of such action,
suit or proceeding, enclosing a copy of all papers served, but the omission so
to notify the Indemnitor of any such action, suit or proceeding shall not
relieve the Indemnitor from any liability which they may have to any Indemnitee
otherwise than under this Section 9. In case any such action, suit or proceeding
shall be brought against any Indemnitee and it shall notify the Indemnitor of
the commencement thereof, the Indemnitor shall be entitled to participate in
and, to the extent that they shall wish, to assume the defense thereof, with
counsel satisfactory to such Indemnitee. The Indemnitee shall have the right to
employ its counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such Indemnitee unless (i)the employment of counsel
by such Indemnitee has been authorized by the Indemnitor, (ii) the Indemnitee
shall have concluded reasonably that there may be a conflict of interest among
the Indemnitor and the Indemnitee in the conduct of the defense of such action
(in which case the Indemnitor shall not have the right to direct the defense of
such action on behalf of the Indemnitee) or (iii) the Indemnitor in fact shall
not have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of counsel shall be borne by the Indemnitor.

          9.4 The Indemnitor agrees to provide the Indemnitees with copies of
all registration statements pre- and post-effective amendments to such
registration statements including exhibits, whether filed with the SEC prior to
or subsequent to the disbursement of the Deposited Proceeds.

          9.5 The provisions of this Section 9 shall survive any termination of
this Agreement, whether by disbursement of the Deposited Proceeds, 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 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 Deposited
Proceeds shall be void as against the Escrow Agent unless:

                                       7
<PAGE>

          (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 Issue, at its address set forth on the Information Sheet, and if to the
Escrow Agent, Atlantic Liberty Savings, Attention:  Trust Department.

          12. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be determined to be
unpaid 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.  Closing.  The closing shall take place within 90 days of the
Effective Date unless an additional 90 days is approved by the Company, but
in no instance later than 180 days after the Effective Date.

          14.     Pronouns.  All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular, or plural as
the context may require.

          15.     Captions.  All captions are for convenience only and shall
not limit or define the term thereof.

          16.     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 herein.

          17.     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 herewith.

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

                         THE ISSUER: LORELEI CORPORATION

                              By:

                            ESCROW AGENT: FLEET BANK

                              By:

                                       8
<PAGE>

FLEET BANK

ESCROW AGREEMENT INFORMATION SHEET

1.   The Company
     Lorelei Corporation
     49 Poplar Avenue
     Oradell, New Jersey  07469

State of incorporation or organization: Delaware

2.   The Underwriter
     Self-Underwriting

3.   Description of the Securities to be offered:
     Shares of Common Stock.

4.   Type of Offering
     Registration Statement filed on form  SB-2
     Offering Statement filed pursuant to Regulation C of the General Rules and
     Regulations under the Securities Act of 1933.

5.     Offering Amount:  $ 35,000

6.   Plan of Distribution of the Securities
     Offering Period:   90 (calendar days)
     Extension Period:  90 (calendar days)
     Collection Period, if any: -0- (calendar days)

7.   The Escrow Account
     Title of the Escrow Account: THE LORELEI CORPORATION ESCROW ACCOUNT.

8.     Escrow Account Fee
     Amount due on execution of the Escrow Agreement: $0
     Fee for each check disbursed pursuant to the terms of the
     Escrow Agreement (unsuccessful offering): $0
     Fee for each subscriber in excess of the first fifty subscribers:
     $ 0 Fee for each check returned pursuant to the terms of the
     Escrow Agreement: $ 0

     All other fees will be negotiated on the basis of service requirements.

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