Exhibit 1


                             DISTRIBUTION AGREEMENT

                            THE SERVICEMASTER COMPANY

                                  $300,000,000

                           MEDIUM-TERM NOTES, SERIES A

                  Due from 9 months or More from Date of Issue

                             Distribution Agreement

                                                                  April 18, 2000

J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260

Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004

Bank of America Securities LLC
100 North Tryon Street, 7th Floor
Charlotte, North Carolina 28255

Bank One Capital Markets, Inc.
1 Bank One Plaza
Suite IL1-0595
Chicago, Illinois 60670

Ladies and Gentlemen:
         The  ServiceMaster  Company,  a Delaware  corporation  (the "COMPANY"),
confirms its agreement  with each of you with respect to the issue and sale from
time to time by the Company of its Medium-Term Notes, Series A due from 9 months
or more from date of issue (the  "SECURITIES") in an aggregate  initial offering
price of up to  $300,000,000  (or the equivalent  thereof in one or more foreign
currencies  or  composite  currencies),  as such  amount  may be  reduced by the
aggregate  initial offering price of any other securities issued by the Company,
whether within or without the United States ("OTHER SECURITIES") pursuant to the
registration   statement  referred  to  below,  and  agrees  with  each  of  you
(individually,  an "AGENT",  and  collectively,  the "AGENTS",  which term shall
include any additional agents appointed pursuant to Section hereof) as set forth
in this  Agreement.  The  Securities  will be  issued  under an  indenture  (the
"INDENTURE")  dated as of November  18, 1999 among the Company,  as issuer,  and
Harris Trust and Savings Bank, as Trustee (the "TRUSTEE").  The Securities shall
have the maturities,  interest rates,  redemption provisions,  if any, and other
terms set forth in the  Prospectus  referred  to below as it may be  amended  or
supplemented from time to time. The Securities will be issued, and the terms and
rights thereof established,  from time to time by the Company in accordance with
the Indenture.

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         On the basis of the  representations  and warranties  herein contained,
but subject to the terms and conditions  stated herein and to the reservation by
the Company of the right to sell  Securities  directly to investors  (other than
broker-dealers) on its own behalf, the Company hereby (i) appoints the Agents as
the exclusive  agents of the Company for the purpose of soliciting and receiving
offers to purchase  Securities  from the  Company by others  pursuant to Section
hereof and (ii) agrees that, except as otherwise  contemplated herein,  whenever
it determines  to sell  Securities  directly to any Agent as principal,  it will
enter  into a separate  agreement  (each such  agreement  a "TERMS  AGREEMENT"),
substantially  in the  form of  Exhibit  A  hereto,  relating  to  such  sale in
accordance with Section hereof.

         The Company has  prepared  and filed with the  Securities  and Exchange
Commission  (the  "COMMISSION")  in accordance with the provisions of Securities
Act of 1933,  as  amended,  and the  rules  and  regulations  of the  Commission
thereunder  (collectively,  the "SECURITIES ACT"), a registration statement (the
file number of which is 333-91381)  on Form S-3,  relating to among other things
debt securities  (the "SHELF  SECURITIES") to be issued from time to time by the
Company.  The  Company  also has filed  with,  or  proposes  to file  with,  the
Commission pursuant to Rule 424 under the Securities Act a prospectus supplement
describing  certain  terms of the  Securities.  The  registration  statement  as
amended  to the  date  of  this  Agreement  is  hereinafter  referred  to as the
"REGISTRATION   STATEMENT"  and  the  related  prospectus   covering  the  Shelf
Securities  in the  form  first  used to  confirm  sales  of the  Securities  is
hereinafter  referred  to as the "BASIC  PROSPECTUS".  The Basic  Prospectus  as
supplemented  by  the  prospectus   supplement   specifically  relating  to  the
Securities  in the  form  first  used to  confirm  sales  of the  Securities  is
hereinafter  referred  to as the  "PROSPECTUS".  If the  Company  has  filed  an
abbreviated  registration statement pursuant to Rule 462(b) under the Securities
Act (the "RULE 462  REGISTRATION  STATEMENT"),  then any reference herein to the
term  "Registration  Statement"  shall  be  deemed  to  include  such  Rule  462
Registration  Statement.  Any  reference in this  Agreement to the  Registration
Statement,  the  Basic  Prospectus,   any  preliminary  form  of  Prospectus  (a
"PRELIMINARY  PROSPECTUS") previously filed with the Commission pursuant to Rule
424 or the  Prospectus  shall be deemed to refer to and  include  the  documents
incorporated  by  reference  therein  pursuant  to Item 12 of Form S-3 under the
Securities  Act which were filed under the  Securities  Exchange Act of 1934, as
amended,   and  the  rules  and   regulations  of  the   Commission   thereunder
(collectively,  the "EXCHANGE  Act"), on or before the date of this Agreement or
the date of the Basic Prospectus,  any preliminary prospectus or the Prospectus,
as the case may be; and any reference to "AMEND",  "AMENDMENT"  or  "SUPPLEMENT"
with  respect  to  the  Registration  Statement,   the  Basic  Prospectus,   any
preliminary  prospectus  or the  Prospectus,  including  any  supplement  to the
Prospectus  that  sets  forth  only  the  terms  of a  particular  issue  of the
Securities (a "PRICING SUPPLEMENT"), shall be deemed to refer to and include any
documents filed under the Exchange Act after the date of this Agreement,  or the
date of the Basic Prospectus,  any preliminary prospectus or the Prospectus,  as
the case may be, which are deemed to be incorporated by reference therein.

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         1. REPRESENTATIONS.  The Company represents and warrants to, and agrees
with, each Agent as of the  Commencement  Date (as hereinafter  defined),  as of
each  date on  which  the  Company  accepts  an  offer  to  purchase  Securities
(including any purchase by an Agent as principal  pursuant to a Terms  Agreement
or otherwise), as of each date the Company issues and sells Securities and as of
each  date  the   Registration   Statement  or  the  Prospectus  is  amended  or
supplemented,  as follows (it being  understood  that such  representations  and
warranties  shall be deemed to relate to the Registration  Statement,  the Basic
Prospectus  and the  Prospectus,  each as amended or  supplemented  to each such
date):

   (a) the Registration  Statement has been declared effective by the Commission
under the  Securities  Act; no stop order  suspending the  effectiveness  of the
Registration  Statement has been issued and no  proceeding  for that purpose has
been  instituted  or,  to  the  knowledge  of  the  Company,  threatened  by the
Commission;  and the  Registration  Statement  and  Prospectus  (as  amended  or
supplemented,  if applicable) comply, or will comply, as the case may be, in all
material  respects with the Securities Act and the Trust  Indenture Act of 1939,
as  amended,  and  the  rules  and  regulations  of  the  Commission  thereunder
(collectively,  the "TRUST  INDENTURE  ACT"), and do not and will not, as of the
applicable effective date as to the Registration  Statement and any amendment or
supplement  thereto and as of the date of the  Prospectus  and any  amendment or
supplement  thereto,  contain any untrue statement of a material fact or omit to
state any material fact  required to be stated  therein or necessary to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading;  except that the foregoing  representations and warranties shall
not apply to that  part of the  Registration  Statement  which  constitutes  the
Statement of Eligibility and Qualification  (Form T-1) under the Trust Indenture
Act of the Trustee, and statements or omissions in the Registration Statement or
the Prospectus made in reliance upon and in conformity with information relating
to any Agent furnished to the Company in writing by such Agent expressly for use
therein;
   (b) the  documents  incorporated  by reference in the  Prospectus,  when they
became  effective  or were  filed  with  the  Commission,  as the  case  may be,
conformed in all material  respects to the requirements of the Securities Act or
the Exchange Act, as applicable,  and none of such documents contained an untrue
statement of a material  fact or omitted to state a material fact required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances  under  which  they were made,  not  misleading;  and any  further
documents  so filed and  incorporated  by reference  in the  Prospectus,  or any
further amendment or supplement thereto, when such documents become effective or
are filed with the Commission,  as the case may be, will conform in all material
respects to the  requirements  of the  Securities  Act or the  Exchange  Act, as
applicable,  and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated  therein or necessary to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading;
   (c) the financial statements, and the related notes thereto, of ServiceMaster
included or  incorporated  by reference in the  Registration  Statement  and the
Prospectus  present fairly in all material  respects the consolidated  financial
position of  ServiceMaster  and its  consolidated  subsidiaries  as of the dates
indicated  and the  results  of  their  operations  and  the  changes  in  their
consolidated  cash flows for the periods  specified;  said financial  statements
have been prepared in conformity with generally accepted  accounting  principles
applied  on a  consistent  basis,  and  the  supporting  schedules  included  or
incorporated by reference in the  Registration  Statement  present fairly in all
material  respects the information  required to be stated  therein;  and the pro
forma financial information,  and the related notes thereto, if any, included or
incorporated by reference in the  Registration

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Statement and the Prospectus has been prepared in accordance with the applicable
requirements  of the  Securities  Act and the Exchange Act, as applicable and is
based upon good faith  estimates and  assumptions  believed by the Company to be
reasonable;
   (d)  since  the  respective  dates  as of which  information  is given in the
Registration  Statement  and the  Prospectus,  there  has not been any  material
change in the  capital  stock or  long-term  debt of the  Company  or any of its
significant subsidiaries (as defined in the Commission's Regulation S-X), or any
material  adverse change,  or any development  involving a prospective  material
adverse  change,  in or  affecting  the general  affairs,  business,  prospects,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries,  taken as a whole, otherwise than as set forth
or contemplated  in the  Prospectus;  and except as set forth or contemplated in
the Prospectus  neither the Company nor any of its subsidiaries has entered into
any transaction or agreement (whether or not in the ordinary course of business)
material to the Company and its  subsidiaries  taken as a whole;
   (e) the  Company  has been duly  incorporated  and is validly  existing  as a
corporation   in  good  standing   under  the  laws  of  its   jurisdiction   of
incorporation,  with  power  and  authority  (corporate  and  other)  to own its
properties and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign  corporation  for the transaction of business and is
in good standing under the laws of each other  jurisdiction  in which it owns or
leases   properties,   or  conducts  any   business,   so  as  to  require  such
qualification,  other  than  where the  failure  to be so  qualified  or in good
standing  would  not have a  material  adverse  effect  on the  Company  and its
subsidiaries   taken  as  a  whole;
   (f)  each  of the  Company's  significant  subsidiaries  (as  defined  in the
Commission's  Regulation  S-X) has been duly  incorporated  or organized  and is
validly  existing  as  a  corporation,  limited  liability  company  or  limited
partnership under the laws of its jurisdiction of incorporation or organization,
with  power  and  authority  (corporate  or  partnership  or  other)  to own its
properties  and conduct its business,  as described in the  Prospectus,  and has
been duly  qualified  as a foreign  corporation,  limited  liability  company or
limited  partnership  for the  transaction  of business and is in good  standing
under the laws of each  jurisdiction in which it owns or leases  properties,  or
conducts any business so as to require such qualification,  other than where the
failure to be so qualified or in good standing would not have a material adverse
effect  on the  Company  and its  subsidiaries  taken  as a  whole;  and all the
outstanding  shares of capital stock,  limited  liability  company  interests or
partnership interests, as the case may be, of each significant subsidiary of the
Company  have been duly  authorized  and  validly  issued,  are  fully-paid  and
non-assessable,  and (except as  described in the  Prospectus)  are owned by the
Company,  directly  or  indirectly,  free and clear of all liens,  encumbrances,
security  interests  and  claims;
   (g) each of this Agreement and any other  applicable Terms Agreement has been
duly authorized,  executed and delivered by the Company;
   (h)  the  Securities   have  been  duly   authorized,   and,  when  executed,
authenticated  and issued under the  Indenture  and delivered to and paid for by
the  purchasers  thereof in accordance  with this  Agreement and any  applicable
Terms  Agreement,  will have been duly  executed,  issued and  delivered  by the
Company  and will  constitute  valid  and  binding  obligations  of the  Company
entitled to the benefits provided by the Indenture;  the Indenture has been duly
authorized,  executed and delivered by the Company and qualified under the Trust
Indenture Act and constitutes a

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valid and binding instrument;  and the Indenture conforms, and the Securities of
any particular issuance of Securities will conform, to the descriptions  thereof
in the  Prospectus  as amended or  supplemented  to relate to such  issuance  of
Securities;
   (i) neither the Company nor any of its subsidiaries is, or with the giving of
notice or lapse of time or both would be, in violation  of or in default  under,
its Certificate of Incorporation or By-Laws or agreement of limited  partnership
or  other  organizational  document,  as the  case  may  be,  or any  indenture,
mortgage,  deed of trust,  loan  agreement or other  agreement or  instrument to
which the Company or any of its subsidiaries is a party or by which it or any of
them or any of their respective  properties is bound,  except for violations and
defaults  which  individually  and in the  aggregate  would  not  reasonably  be
expected to have a material  adverse effect on the Company and its  subsidiaries
taken as a whole;  the issue and sale of the Securities  and the  performance by
the Company of all of its obligations under the Securities,  the Indenture, this
Agreement and any Terms  Agreement,  and the  consummation  of the  transactions
herein and therein  contemplated will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage,  deed of trust,  loan  agreement or other  agreement or  instrument to
which the Company or any of its  subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the  Company or any of its  subsidiaries  is subject,  that is material  for the
Company and its  subsidiaries  taken as a whole,  nor will such action result in
any  violation of the  provisions of the  Certificate  of  Incorporation  or the
By-Laws of the Company or any  applicable  law or statute or any order,  rule or
regulation of any court or governmental  agency or body having jurisdiction over
the Company, its subsidiaries or any of their respective properties except where
such  would  not  have  a  material  adverse  effect  on  the  Company  and  its
Subsidiaries  taken as a whole (a "MATERIAL  ADVERSE  EFFECT");  and no consent,
approval,  authorization,  order,  license,  registration or qualification of or
with any such court or governmental agency or body is required for the issue and
sale of the Securities or the  consummation  by the Company of the  transactions
contemplated by this Agreement, any applicable Terms Agreement or the Indenture,
except such as have been, or will have been prior to the  Commencement  Date (as
defined in  Section  hereof),  obtained  under the  Securities  Act or the Trust
Indenture Act and such consents,  approvals,  authorizations,  orders, licenses,
registrations or  qualifications  as have been obtained under the Securities Act
or the Trust Indenture Act and as may be required under state securities or Blue
Sky laws in connection with the offer and sale of the Securities;
   (j) other than as set forth or contemplated  in the Prospectus,  there are no
legal or governmental investigations,  actions, suits or proceedings pending or,
to the knowledge of the Company,  threatened against or affecting the Company or
any of its  subsidiaries or any of their  respective  properties or to which the
Company or any of its subsidiaries is or may be a party or to which any property
of the Company or any of its  subsidiaries  is or may be the subject  which,  if
determined  adversely  to  the  Company  or  any  of  its  subsidiaries,   could
individually  or in the  aggregate  reasonably  be expected to have,  a material
adverse  effect  on  the  general  affairs,  business,  prospects,   management,
financial position, stockholders' equity or results of operations of the Company
and  its  subsidiaries  taken  as a whole  and,  to the  best  of the  Company's
knowledge,  no such  proceedings  are threatened or contemplated by governmental
authorities  or  threatened by others;  and there are no statutes,  regulations,
contracts or other  documents that are required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration Statement
or the Prospectus which are not filed or described as required;

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   (k)  immediately  after any sale of  Securities  by the Company  hereunder or
under any applicable Terms  Agreement,  the aggregate amount of Securities which
shall have been  issued  and sold by the  Company  hereunder  or under any Terms
Agreement  taken  together with any other  securities of the Company (other than
the  Securities)   that  shall  have  been  issued  and  sold  pursuant  to  the
Registration Statement will not exceed the amount of securities registered under
the Registration Statement;
   (l) Arthur Andersen LLP, who have certified certain  financial  statements of
the Company and its subsidiaries are independent  public accountants as required
by the  Securities  Act;
   (m) the Company and its  subsidiaries  have good and marketable  title in fee
simple  to all  items of real  property  and good  and  marketable  title to all
personal  property  owned by them,  in each case  free and  clear of all  liens,
encumbrances  and  defects  except such as are  described  or referred to in the
Prospectus or such as do not materially  affect the value of such property or do
not  interfere  with the use made or proposed to be made of such property by the
Company and its  subsidiaries;  and any real property and  buildings  held under
lease by the Company and its subsidiaries are held by them under valid, existing
and  enforceable  leases  with such  exceptions  as are not  material  or do not
interfere  with  the use  made or  proposed  to be  made  of such  property  and
buildings by the Company or its subsidiaries;
   (n) the Company is not and,  after giving  effect to the offering and sale of
the  Securities,  will  not be an  "investment  company"  or,  to the  Company's
knowledge,  an entity "controlled" by an "investment company", as such terms are
defined in the  Investment  Company  Act of 1940,  as amended  (the  "INVESTMENT
COMPANY  ACT");
   (o) the Company has complied with all provisions of Section 517.075,  Florida
Statutes  (Chapter 92-198,  Laws of Florida) relating to doing business with the
Government  of Cuba or with any person or  affiliate  located  in Cuba;
   (p) the  Company  and its  subsidiaries  have  filed  all  federal,  state or
material  local and foreign tax returns which have been required to be filed and
have paid all taxes shown thereon and all assessments received by them or any of
them to the extent that such taxes have  become due and are not being  contested
in good faith;  and, except as disclosed in the  Registration  Statement and the
Prospectus,  there is no tax  deficiency  which has been or might  reasonably be
expected  to be  asserted  or  threatened  against  the  Company  or  any of its
subsidiaries;
   (q) each of the Company and its subsidiaries owns,  possesses or has obtained
all  licenses,  permits,  certificates,  consents,  orders,  approvals and other
authorizations  from,  and has made  all  declarations  and  filings  with,  all
federal,  state,  local and other  governmental  authorities  (including foreign
regulatory agencies), all self-regulatory organizations and all courts and other
tribunals,  domestic or foreign,  necessary to own or lease, as the case may be,
and to operate its  properties  and to carry on its  business as conducted as of
the date hereof,  except where such would not cause a Material  Adverse  Effect,
and neither the Company nor any such  subsidiary  has received any actual notice
of any proceeding  relating to revocation or  modification  of any such license,
permit, certificate, consent, order, approval or other authorization,  except as
described in the  Registration  Statement  and the  Prospectus;  and each of the
Company and its subsidiaries is in compliance in all material  respects with all
laws and regulations  relating to the conduct of its business as conducted as of
the date hereof;

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   (r)  there  are  no  existing  or,  to the  best  knowledge  of the  Company,
threatened  labor  disputes  with the  employees  of the  Company  or any of its
subsidiaries  which would  reasonably  be  expected  to have a material  adverse
effect on the Company and its subsidiaries taken as a whole;
   (s) the Company and its  subsidiaries  (i) are in compliance with any and all
applicable foreign,  federal,  state and local laws and regulations  relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes,  pollutants or contaminants  ("ENVIRONMENTAL  LAWS"), (ii)
have received all permits,  licenses or other  approvals  required of them under
applicable  Environmental Laws to conduct their respective  businesses and (iii)
are in compliance  with all terms and conditions of any such permit,  license or
approval,  except where such noncompliance  with Environmental  Laws, failure to
receive required permits,  licenses or other approvals or failure to comply with
the terms and  conditions  of such  permits,  licenses or  approvals  would not,
singly or in the  aggregate,  reasonably be expected to have a material  adverse
effect  on the  Company  and its  subsidiaries,  taken  as a  whole;
   (t) in the ordinary course of its business,  the Company  conducts a periodic
review of the  effect of  Environmental  Laws on the  business,  operations  and
properties  of the  Company  and its  subsidiaries,  in the  course  of which it
identifies and evaluates  associated costs and liabilities  (including,  without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with  Environmental  Laws or any permit,  license or
approval,  any related  constraints  on operating  activities  and any potential
liabilities  to third  parties).  On the  basis of such  review  and  except  as
disclosed  in the  most  recent  Form  10-K  of the  Company,  the  Company  has
reasonably  concluded  that such  associated  costs and  liabilities  would not,
singly or in the  aggregate,  reasonably be expected to have a material  adverse
effect on the Company and its subsidiaries,  taken as a whole;
   (u) each  employee  benefit  plan,  within the meaning of Section 3(3) of the
Employee  Retirement Income Security Act of 1974, as amended ("ERISA"),  that is
maintained,  administered  or  contributed  to by  the  Company  or  any  of its
affiliates  for employees or former  employees of the Company and its affiliates
has been  maintained in  compliance in all material  respects with its terms and
the  requirements of any applicable  statutes,  orders,  rules and  regulations,
including  but not limited to ERISA and the Internal  Revenue  Code of 1986,  as
amended ("CODE"). No prohibited  transaction,  within the meaning of Section 406
of ERISA or Section 4975 of the Code has occurred  with respect to any such plan
excluding  transactions  effected  pursuant  to a  statutory  or  administrative
exemption.  For each such plan which is subject to the funding  rules of Section
412 of the Code or Section 302 of ERISA no "accumulated  funding  deficiency" as
defined in Section 412 of the Code has been incurred, whether or not waived, and
the fair  market  value of the  assets of each such  plan  (excluding  for these
purposes  accrued but unpaid  contributions)  exceeded the present  value of all
benefits  accrued  under  such  plan  determined   using  reasonable   actuarial
assumptions.
   (v)  Each of the  Company  and its  subsidiaries  owns or  possesses,  or can
acquire,  or reasonably  believes it can acquire,  on reasonable  terms,  rights
adequate to the present  operations of the  businesses  now operated by it under
the  patents,  patent  rights,  licenses,   inventions,   copyrights,   know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures),  trademarks, service marks and
trade names (collectively, the "INTELLECTUAL PROPERTY") presently employed by it
in connection  with the businesses now operated by it, except to the extent that
the failure to own,  possess or acquire such rights would not,  singly or in the
aggregate,  reasonably  be  expected  to have a material  adverse  effect on the
Company and its  subsidiaries  taken as a whole, and neither the Company nor any
of

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its  subsidiaries  has received any notice of  infringement  of or conflict with
asserted rights of others with respect to any of the foregoing.

     2        . SOLICITATIONS AS AGENT; PURCHASES AS PRINCIPAL.
(a) SOLICITATIONS AS AGENT. On the basis of the  representations  and warranties
herein contained, but subject to the terms and conditions herein set forth, each
of the Agents hereby severally and not jointly agrees,  as agent of the Company,
to use its reasonable  efforts to solicit offers to purchase the Securities from
the Company upon the terms and conditions set forth in the Prospectus as amended
or  supplemented  from time to time. So long as this  Agreement  shall remain in
effect with respect to any Agent,  the Company shall not, without the consent of
such Agent (which consent shall not be unreasonably withheld), solicit or accept
offers to purchase, or sell,  Securities or any other similar,  medium-term debt
securities with a maturity at the time of original  issuance of 9 months or more
except pursuant to this Agreement and any Terms Agreement, or except pursuant to
a private  placement not constituting a public offering under the Securities Act
or except in  connection  with a firm  commitment  underwriting  pursuant  to an
underwriting  agreement  that does not  provide  for a  continuous  offering  of
medium-term  debt securities.  However,  the Company reserves the right to sell,
and may solicit and accept  offers to purchase,  Securities  directly on its own
behalf to investors (other than broker-dealers).

         The Company reserves the right, in its sole discretion, to instruct the
Agents to  suspend  at any time,  for any  period  of time or  permanently,  the
solicitation  of offers to  purchase  Securities.  Upon  receipt of at least one
business  day's  prior  notice  from  the  Company,   each  Agent  will  suspend
solicitation  of offers to purchase  Securities from the Company until such time
as the Company has advised  such Agent or Agents that such  solicitation  may be
resumed.  During the period of time that such  solicitation  is  suspended,  the
Company shall not be required to deliver any opinions,  letters or  certificates
in  accordance  with Sections , and hereof;  PROVIDED  that if the  Registration
Statement  or  Prospectus  is  amended  or  supplemented  during  the  period of
suspension  (other than by an amendment  or  supplement  providing  solely for a
change in the interest rates,  redemption provisions,  amortization schedules or
maturities offered for the Securities or for a change that the Agents deem to be
immaterial),  no Agent shall be required to resume soliciting offers to purchase
Securities   until  the  Company  has  delivered  such  opinions,   letters  and
certificates as such Agent may reasonably request.

         The Company agrees to pay each Agent, as consideration  for the sale of
each  Security  resulting  from a  solicitation  made or an  offer  to  purchase
received by such Agent, a commission in the form of a discount from the purchase
price of such Security in an amount equal to the following applicable percentage
of the principal amount of such Security sold:



                                       8
<PAGE>

(

            RANGE OF MATURITIES                         COMMISSION (PERCENTAGE
                                                        OF AGGREGATE PRINCIPAL
                                                      AMOUNT OF SECURITIES SOLD)

   From 9 months to less than 1 year                                    .125%
   From 1 year to less than 18 months                                    .15%
   From 18 months to less than 2 years                                   .20%
   From 2 years to less than 3 years                                     .25%
   From 3 years to less than 4 years                                     .35%
   From 4 years to less than 5 years                                     .45%
   From 5 years to less than 6 years                                     .50%
   From 6 years to less than 7 years                                     .55%
   From 7 years to less than 10 years                                    .60%
   From 10 years to less than 15 years                                  .625%
   From 15 years to less than 20 years                                   .70%
   20 years and more                                                     .75%


                           The  Agents  are  authorized  to  solicit  offers  to
                  purchase  Securities  only in the  principal  amount of $1,000
                  (or,  in the  case  of  Securities  not  denominated  in  U.S.
                  dollars,  the  equivalent  thereof in the  applicable  foreign
                  currency or  composite  currency,  rounded down to the nearest
                  1,000 units of such foreign currency or composite currency) or
                  any amount in excess thereof which is an integral  multiple of
                  $1,000 (or, in the case of Securities not  denominated in U.S.
                  dollars,  1,000 units of such  foreign  currency or  composite
                  currency). Each Agent shall communicate to the Company, orally
                  or in writing,  each offer to purchase  Securities received by
                  such Agent as agent that in its judgment  should be considered
                  by the  Company.  The  Company  shall  have the sole  right to
                  accept  offers to purchase the  Securities  and may reject any
                  such  offer in whole or in part.  Each  Agent  shall  have the
                  right, in its sole discretion, to reject any offer to purchase
                  Securities,  as a whole or in part,  that it  considers  to be
                  unacceptable  and any such  rejection  shall  not be  deemed a
                  breach of its  agreements  herein  contained.  The  procedural
                  details  relating to the issue and delivery of Securities sold
                  by an Agent as agent and the payment therefor are set forth in
                  the Administrative Procedures (as hereinafter defined).

   (b)        PURCHASE AS  PRINCIPAL.  Each sale of  Securities  to any Agent as
principal  shall be made in  accordance  with the  terms of this  Agreement  and
(unless such Agent shall  otherwise  agree) a Terms Agreement which will provide
for the sale of such  Securities to, and the purchase  thereof by, such Agent. A
Terms  Agreement will be  substantially  in the form of Exhibit A hereto but may
take the form of an exchange of any standard  form of written  telecommunication
between  an Agent  and the  Company  and may  also  specify  certain  provisions
relating to the reoffering of such  Securities by

                                       9
<PAGE>

such Agent, as mutually agreed by the Company and such Agent.  The commitment of
any Agent to purchase  securities  as principal,  whether  pursuant to any Terms
Agreement  or  otherwise,  shall be deemed to have been made on the basis of the
representations  and  warranties  of the Company  herein  contained and shall be
subject to the terms and conditions herein and in the applicable Terms Agreement
set forth.  Each  agreement  by an Agent to  purchase  Securities  as  principal
(pursuant to a Terms Agreement or otherwise)  shall specify the principal amount
of Securities to be purchased by such Agent  pursuant  thereto,  the price to be
paid to the Company for such  Securities,  the maturity date of such Securities,
the interest rate or interest rate basis, if any, applicable to such Securities,
any other terms of such  Securities,  the time and date and place of delivery of
and payment for such Securities (the time and date of any and each such delivery
and payment, the "TIME OF DELIVERY"),  any provisions relating to rights of, and
default by,  underwriters  acting  together with such Agent in the reoffering of
Securities,  and shall also  specify any  requirements  for opinions of counsel,
accountants'  letters and  officers'  certificates  pursuant to Section  hereof.
Unless otherwise specified in a Terms Agreement, the procedural details relating
to the issue and delivery of  Securities  purchased by an Agent as principal and
the payment therefore shall be as set forth in the Administrative Procedures.
          (c) OBLIGATIONS SEVERAL. The Company acknowledges that the obligations
of the Agents are several and not joint and,  subject to the  provisions of this
Section , each Agent shall have complete discretion as to the manner in which it
solicits purchasers for the Securities and as to the identity thereof.
          (d)  ADMINISTRATIVE  PROCEDURES.  The Agents and the Company  agree to
perform their  respective  duties and  obligations  specifically  provided to be
performed   in   the   Medium-Term   Notes   Administrative    Procedures   (the
"ADMINISTRATIVE  PROCEDURES")  attached  hereto as Exhibit B, as the same may be
amended from time to time. The Administrative  Procedures may be amended only by
written agreement of the Company and the Agents.
          (e) OTHER  SECURITIES.  The  Company  agrees to notify  each  Agent in
writing of sales by the Company of Other Securities.  2. COMMENCEMENT  DATE. The
documents   required  to  be  delivered   pursuant  to  Section  hereof  on  the
Commencement  Date (as defined  below)  shall be  delivered to the Agents at the
offices of Davis Polk & Wardwell,  450 Lexington Avenue,  New York, New York, at
11:00 a.m.,  New York City time, on the date of this  Agreement,  which date and
time of such  delivery may be postponed by agreement  between the Agents and the
Company  but in no event  shall be later than the day prior to the date on which
solicitation of offers to purchase  Securities is commenced or the first date on
which the  Company  accepts  an offer by any  Agent to  purchase  Securities  as
principal  (such time and date  being  referred  to herein as the  "COMMENCEMENT
DATE").

2.  COVENANTS OF THE COMPANY.  The Company covenants and agrees with each Agent:
   (a)   to make no amendment or supplement to the Registration Statement or the
Prospectus  prior to the termination of the offering of the Securities  pursuant
to this Agreement or any Terms Agreement which shall be disapproved by any Agent
after reasonable  opportunity to comment thereon,  PROVIDED,  HOWEVER,  that the
foregoing  shall not apply to any of the  Company's  periodic  filings  with the
Commission described in clause below; subject to the foregoing clause , promptly
to cause each  supplement to the Prospectus to be filed with or transmitted  for
filing to the Commission in accordance with Rule 424(b) under the Securities Act
and to prepare,  with  respect to any  Securities  to be sold through or to such
Agent  pursuant to this  Agreement,  a Pricing  Supplement  with respect to such
Securities in a form previously  approved by such Agent and to file

                                       10
<PAGE>
such Pricing Supplement in accordance with Rule 424(b) under the Securities Act;
and  promptly  to file all  reports  and any  definitive  proxy  or  information
statements  required to be filed by the Company with the Commission  pursuant to
Section  13(a),  13(c),  14 or  15(d)  of the  Exchange  Act  for so long as the
delivery of a prospectus is required in connection  with the offering or sale of
the Securities. The Company will promptly advise each Agent of the filing of any
amendment  or  supplement  to  the  Basic  Prospectus  or any  amendment  to the
Registration  Statement and of the  effectiveness  of any such  amendment to the
Registration  Statement,  of the  issuance by the  Commission  of any stop order
suspending  the  effectiveness  of  the  Registration  Statement  or  any  order
preventing or suspending the use of any prospectus relating to the Securities or
the initiation or  threatening  of any  proceeding  for that purpose,  or of any
request by the  Commission  for any amendment or supplement of the  Registration
Statement or Prospectus or for additional information; and of the receipt by the
Company of any notification  with respect to any suspension of the qualification
of the Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceeding for any such purpose. The Company agrees to use
its reasonable best efforts to prevent the issuance of any such stop order or of
any such order preventing or suspending the use of any such prospectus or of any
notification  suspending any such  qualification and, if issued, to use promptly
its reasonable best efforts to obtain withdrawal thereof as soon as possible. If
the Basic  Prospectus is amended or supplemented as a result of the filing under
the Exchange Act of any document incorporated by reference in the Prospectus, no
Agent shall be obligated to solicit offers to purchase  Securities so long as it
is not  reasonably  satisfied  with such  document  from a legal  compliance  or
disclosure adequacy perspective;
          (b) to endeavor to qualify the Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Agents shall reasonably
request  and to  continue  such  qualification  in effect so long as  reasonably
required in connection with the  distribution  of the Securities;  PROVIDED that
the  Company  shall not be  required  to file a general  consent  to  service of
process in any jurisdiction;
          (c) to furnish each Agent and counsel to the Agents, at the expense of
the Company,  a signed copy of the Registration  Statement (as originally filed)
and each  amendment  thereto,  in each case  including  exhibits  and  documents
incorporated by reference  therein and,  during the period  mentioned in Section
below,  to furnish each Agent as many copies of the  Prospectus  (including  all
amendments  and  supplements  thereto) and documents  incorporated  by reference
therein as such Agent may reasonably request;
          (d) if at any time when a  prospectus  relating to the  Securities  is
required to be delivered  under the  Securities  Act, any event shall occur as a
result of which the Prospectus,  as then amended or supplemented,  would include
an  untrue  statement  of a  material  fact or omit to state any  material  fact
necessary  in  order  to  make  the  statements  therein,  in the  light  of the
circumstances when such Prospectus is delivered to a purchaser,  not misleading,
or, if in the opinion of the Agents or the Company,  it is necessary at any time
to amend or supplement the Prospectus to comply with law, to immediately  notify
the Agents by telephone (with confirmation in writing) and request each Agent in
its  capacity  as agent of the  Company,  to suspend  solicitation  of offers to
purchase  Securities  from the Company (and,  if so notified by telephone,  such
Agent shall cease such  solicitations  and cease using the Prospectus as soon as
practicable,  but in any event not later than one  business  day later);  and to
cease  sales of any  Securities  such  Agent may then own as  principal.  If the
Company shall decide to amend or supplement  the  Registration  Statement or the
Prospectus,  as then  amended  or

                                       11
<PAGE>

supplemented,  it shall  so  advise  each  Agent  promptly  by  telephone  (with
confirmation  in writing)  and, at its  expense,  shall  prepare and cause to be
filed   promptly  with  the   Commission  an  amendment  or  supplement  to  the
Registration Statement or the Prospectus, as then amended or supplemented,  that
will  correct  such  statement  or omission or effect such  compliance  and will
supply such amended or supplemented  Prospectus to the Agents in such quantities
as  they  may  reasonably  request.  If such  amendment  or  supplement  and the
documents,  opinions,  letters and certificates furnished to the Agents pursuant
to Sections, and in connection with the preparation and filing of such amendment
or supplement are reasonably  satisfactory  in all respects to the Agents,  then
upon the filing with the  Commission  of such  amendment  or  supplement  to the
Prospectus  or  upon  the  effectiveness  of an  amendment  to the  Registration
Statement,  the  Agents  will  resume  the  solicitation  of offers to  purchase
Securities  hereunder.  Notwithstanding any other provision of this Section , if
during  the  period an Agent  continues  to own  Securities  purchased  from the
Company by such Agent as principal or in the event such Agent, in the opinion of
its  counsel,  is  otherwise  required to deliver a  prospectus  in respect of a
transaction in the Securities, if any event described in this Section occurs the
Company will, at its own expense,  promptly prepare and file with the Commission
an  amendment or  supplement,  reasonably  satisfactory  in all respects to such
Agent,  that will correct such statement or omission or effect such  compliance,
will  supply  such  amended  or  supplemented  Prospectus  to such Agent in such
quantities as such Agent may reasonably  request and shall furnish to such Agent
pursuant to Sections , , and such documents, certificates,  opinions and letters
as it may  request  in  connection  with  the  preparation  and  filing  of such
amendment or supplement;

          (e) to furnish to the Agents  during the term of this  Agreement  such
relevant  documents and  certificates of officers of the Company relating to the
business, operations and affairs of the Company, the Registration Statement, the
Basic  Prospectus,  any amendments or supplements  thereto,  the Indenture,  the
Securities,  this Agreement, the Administrative Procedures, any applicable Terms
Agreement and the  performance  by the Company of its  obligations  hereunder or
thereunder  as the Agents  may from time to time  reasonably  request  and shall
notify the Agents promptly in writing of any  downgrading,  or of its receipt of
any notice of any  intended or potential  downgrading  or any review or possible
change  that does not  indicate an  improvement  in the rating  accorded  any of
securities  of, or  guaranteed  by, the  Company by any  "nationally  recognized
statistical rating  organization",  as such term is defined for purposes of Rule
436(g)(2) under the Securities Act;
          (f) to make  generally  available to its  security  holders and to the
Agents as soon as  practicable  earnings  statements  which  shall  satisfy  the
provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission
promulgated  thereunder  covering periods of at least twelve months beginning in
each case with the first  fiscal  quarter  of the  Company  occurring  after the
"effective  date" (as defined in Rule 158) of the  Registration  Statement  with
respect to each sale of Securities;
          (g) so long as any Securities are outstanding, to furnish upon request
to such Agent copies of all reports or other communications (financial or other)
furnished  to holders of  Securities  and copies of any  reports  and  financial
statements  furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed;
          (h) that,  from the date of any  applicable  Terms  Agreement  with an
Agent or other  agreement by an Agent to purchase  Securities  as principal  and
continuing  to and  including  the  business day  following  the related Time of
Delivery,  not to offer, sell, contract to sell or otherwise dispose of any debt
securities of

                                       12
<PAGE>

or guaranteed by the Company which are substantially  similar to the Securities,
without the prior written consent of such Agent;
          (i) that each time the Registration  Statement or the Prospectus shall
be amended or supplemented  (other than by an amendment or supplement  providing
solely for a change in the interest rates,  redemption provisions,  amortization
schedules  or  maturities  offered on the  Securities  or for a change which the
Agents deem to be immaterial) and each time the Company sells Securities to such
Agent as principal  pursuant to a Terms  Agreement or other  agreement  and such
Terms  Agreement or other  agreement  specifies the delivery of an opinion under
this Section as a condition to the purchase of Securities pursuant to such Terms
Agreement or other agreement, the Company shall furnish or cause to be furnished
forthwith to such Agent written  opinions of the General Counsel of the Company,
and Kirkland & Ellis,  counsel to the Company,  or other counsel for the Company
satisfactory to such Agent,  dated the date of such amendment or supplement,  or
the related Time of Delivery  relating to such sale, as the case may be, in form
and  substance  satisfactory  to such Agent,  of the same tenor as the  opinions
referred to in Sections and , respectively, hereof but modified to relate to the
Registration  Statement and the  Prospectus as amended and  supplemented  to the
date  of such  opinion,  or,  in  lieu of  either  such  opinion,  counsel  last
furnishing  such an  opinion,  may  furnish to the Agents a letter to the effect
that such Agent may rely on the opinion of such counsel which was last furnished
to such Agent to the same extent as though it were dated the date of such letter
(except that the  statements  in such last opinion  shall be deemed to relate to
the Registration Statement and the Prospectus as amended or supplemented to date
of delivery of such letter);
          (j) that each time the Registration  Statement or the Prospectus shall
be amended or  supplemented  to include or incorporate  amended or  supplemented
financial  information and each time the Company sells  Securities to such Agent
as principal  pursuant to a Terms  Agreement or other  agreement  and such Terms
Agreement  or other  agreement  specifies  the  delivery of a letter  under this
Section as a  condition  to the  purchase of  Securities  pursuant to such Terms
Agreement or other agreement,  the Company shall cause the independent certified
public  accountants  who have certified the financial  statements of the Company
and its subsidiaries  included or incorporated by reference in the Registrations
Statement  forthwith  to  furnish  such  Agent a letter,  dated the date of such
amendment or supplement  or the related Time of Delivery  relating to such sale,
as the case may be, in form and  substance  satisfactory  to such Agent,  of the
same tenor as the letter referred to in Section hereof but modified to relate to
the Registration  Statement and the Prospectus as amended or supplemented to the
date of such  letter  with such  changes as may be  necessary  to  reflect  such
amended or  supplemented  financial  information  included  or  incorporated  by
reference  in  the  Registration  Statement  or the  Prospectus  as  amended  or
supplemented, PROVIDED, HOWEVER, that, with respect to any financial information
or other matter,  such letter may reconfirm as true and correct at such date, as
though made at and as of such date,  rather than repeat  statements with respect
to such financial information or other matters made in the letter referred to in
Section hereof which was last furnished to such Agent;
          (k) that each time the Registration  Statement or the Prospectus shall
be amended or supplemented  (other than by an amendment or supplement  providing
solely for a change in the interest rates,  redemption provisions,  amortization
schedules  or  maturities  offered on the  Securities  or for a change which the
Agents deem to be  immaterial),  and each time the Company  sells  Securities to
such Agent as principal and the applicable  Terms  Agreement or other  agreement
specifies the delivery of a certificate under this Section as a condition to the
purchase of Securities pursuant to such Terms Agreement or other agreement,  the
Company  shall  furnish  or

                                       13
<PAGE>

cause  to be  furnished  forthwith  to such  Agent a  certificate  signed  by an
executive officer of the Company, dated the date of such amendment or supplement
or the related  Time of Delivery  relating to such sale,  as the case may be, in
form satisfactory to such Agent, of the same tenor as the certificates  referred
to in Section  but  modified  to relate to the  Registration  Statement  and the
Prospectus  as  amended  and  supplemented  to the  date  of  delivery  of  such
certificate  or to the effect that the statements  contained in the  certificate
referred to in Section  hereof  which was last  furnished to such Agent are true
and correct at such date as though made at and as of such date (except that such
statements  shall be  deemed to relate  to the  Registration  Statement  and the
Prospectus as amended or supplemented to such date).
          5.    COSTS AND EXPENSES.  The Company  covenants and agrees with each
Agent  that  the  Company  will,  whether  or not  any  sale  of  Securities  is
consummated,  pay all costs and  expenses  incident  to the  performance  of its
obligations  hereunder  and  under any  applicable  Terms  Agreement,  including
without  limiting the generality of the foregoing,  all costs and expenses:  (i)
incident to the preparation, issuance, execution, authentication and delivery of
the  Securities,  including  any expenses of the Trustee,  (ii)  incident to the
preparation,  printing and filing under the Securities  Act of the  Registration
Statement, the Prospectus and any preliminary prospectus (including in each case
all exhibits,  amendments and supplements thereto), (iii) incurred in connection
with the  registration or  qualification  and  determination  of eligibility for
investment of the Securities under the laws of such  jurisdictions as the Agents
(or in connection with any Terms Agreement,  the applicable Agent) may designate
(including  reasonable  fees of counsel for the Agents (or such Agent) and their
disbursements),  (iv) in  connection  with the listing of the  Securities on any
stock  exchange,  (v)  related  to  any  filing  with  National  Association  of
Securities  Dealers,  Inc., (vi) in connection with the printing (including word
processing  and  duplication  costs) and delivery of this  Agreement,  any Terms
Agreement the Indenture,  any Blue Sky Memoranda and any Legal Investment Survey
and the  furnishing  to the  Agents and  dealers  of copies of the  Registration
Statement  and  the  Prospectus,  including  mailing  and  shipping,  as  herein
provided,  (vii) payable to rating agencies in connection with the rating of the
Securities,  (viii) the  reasonable  fees and  disbursements  of counsel for the
Agents  incurred in  connection  with the offering  and sale of the  Securities,
including  any  opinions to be rendered by such counsel  hereunder  and (ix) any
advertising and out-of-pocket expenses incurred by the Agents in connection with
the offering and sale of the Securities.

 1.          CONDITIONS.  The obligation of any Agent,  as agent of the Company,
at any time ("SOLICITATION  TIME") to solicit offers to purchase the Securities,
the obligation of any Agent to purchase  Securities as principal pursuant to any
Terms  Agreement or  otherwise,  and the  obligation  of any other  purchaser to
purchase  Securities shall in each case be subject (1) to the condition that all
representations  and  warranties  of the Company  herein and all  statements  of
officers  of the  Company  made in any  certificate  furnished  pursuant  to the
provisions hereof are true and correct (i) in the case of an Agent's  obligation
to solicit offers to purchase  Securities,  at and as of such  Solicitation Time
and (ii) in the case of any  Agent's  or any  other  purchaser's  obligation  to
purchase  Securities,  at and as of the time the  Company  accepts  the offer to
purchase such  Securities and, as the case may be, at and as of the related Time
of Delivery or time of purchase;  (2) to the condition  that at or prior to such
Solicitation Time, time of acceptance,  Time of Delivery or time of purchase, as
the case may be, the Company shall have  complied in all material  respects with
all its  agreements  and all conditions on its part to be performed or satisfied
hereunder; and (3) to the following additional conditions when and as specified:

                                       14
<PAGE>


     (a)       Prior to such Solicitation Time or corresponding Time of Delivery
or time of purchase, as the case may be:
     (i) the Prospectus as amended or  supplemented  (including,  if applicable,
the Pricing  Supplement)  with respect to such Securities  shall have been filed
with the Commission  pursuant to Rule 424(b) under the Securities Act within the
applicable  time period  prescribed for such filing by the rules and regulations
under the  Securities  Act; no stop order  suspending the  effectiveness  of the
Registration  Statement  shall be in effect and no  proceeding  for that purpose
shall have been initiated or threatened by the Commission;  and all requests for
additional  information on the part of the  Commission  shall have been complied
with to the reasonable satisfaction of such Agent;
            (ii) there shall not have  occurred any  downgrading,  nor shall any
notice have been given of downgrading,  any intended or potential downgrading or
any review or possible  change that does not  indicate  an  improvement,  in the
rating  accorded  any  securities  of  or  guaranteed  by  the  Company  by  any
"nationally recognized statistical rating organization", as such term is defined
by the Commission for purposes of Rule 436(g)(2) under the Securities Act;
            (iii)  there  shall not have been since the  respective  dates as to
which information is given in the Prospectus, any material change in the capital
stock or long-term  debt of the Company or any of its  significant  subsidiaries
(as defined in the  Commission's  Regulation S-X) or any material adverse change
or any  development  involving a material  adverse  change,  in or affecting the
general  affairs,   business,   prospects,   management,   financial   position,
stockholders'   equity  or  results  of   operations  of  the  Company  and  its
subsidiaries,  taken as a whole,  the  effect  of which in the  judgment  of the
applicable  Agent makes it  impracticable  or  inadvisable  to proceed  with the
solicitation by such Agent of offers to purchase  Securities from the Company or
the purchase by such Agent of Securities  from the Company as principal,  as the
case may be, on the terms and in the manner  contemplated in the Prospectus,  as
so amended or supplemented;  and neither the Company nor any of its subsidiaries
has sustained since the date of the latest audited financial statements included
or incorporated by reference in the Prospectus any material loss or interference
with its business from fire, explosion,  flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree,  otherwise than as set forth or contemplated in the Prospectus;
and
            (iv) trading  generally  shall not have been suspended or materially
limited on or by, as the case may be, any of the New York  Stock  Exchange,  the
American Stock Exchange,  the National Association of Securities Dealers,  Inc.,
the Chicago  Board  Options  Exchange,  the Chicago  Mercantile  Exchange or the
Chicago  Board of Trade,  (B) trading of any  securities of or guaranteed by the
Company shall not have been suspended on any exchange or in any over-the-counter
market,  (C) a general  moratorium on commercial  banking activities in New York
shall not have been declared by either Federal or New York State authorities, or
(D) there shall not have occurred any outbreak or escalation of  hostilities  or
any change in financial  markets or any calamity or crisis that, in the judgment
of such Agent or Agents or of such other purchaser,  is material and adverse and
which in the  judgment  of such Agent or Agents or of other  purchaser  makes it
impracticable  to  proceed  with the  solicitation  by such  Agent of  offers to
purchase Securities from the Company or the purchase by such Agent of Securities
from the  Company  as  principal,  as the case may be,  on the  terms and in the
manner  contemplated  in  the  Prospectus  as  amended  or  supplemented  at the
Solicitation Time or at the time such offer to purchase was made.

                                       15
<PAGE>

            (b)     On the  Commencement  Date,  and in the  case of a  purchase
of  Securities  by an  Agent  as  principal  pursuant  to a Terms  Agreement  or
otherwise,  if called for by the applicable  Terms Agreement or other agreement,
at the corresponding Time of Delivery, the General Counsel of the Company, shall
have  furnished to the relevant Agent or Agents his written  opinion,  dated the
Commencement Date or Time of Delivery, as the case may be, in form and substance
satisfactory to such Agent or Agents, to the effect that:
            (i)     the Company is validly existing as a corporation in good
standing under the laws of its jurisdiction of  incorporation;
           (ii) the Company has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any business, so
as to  require  such  qualification,  other  than  where  the  failure  to be so
qualified or in good standing  would not have a material  adverse  effect on the
Company and its subsidiaries taken as a whole;
            (iii)  each of the  subsidiaries  of the  Company  which  constitute
"significant   subsidiaries"   within  the   meaning  of  that  term  under  the
Commission's  Regulation  S-X (the  "SUBSIDIARIES")  is a  partnership,  limited
liability company or corporation existing and in good standing under the laws of
its respective jurisdiction of organization or incorporation. Each Subsidiary is
qualified  to do business and is in good  standing  under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any business, so
as to  require  such  qualification,  other  than  where  the  failure  to be so
qualified and in good standing  would not have a material  adverse effect on the
Company and its  subsidiaries  taken as a whole;  and all of the equity or other
ownership  interests of each of the Subsidiaries is owned directly or indirectly
by the Company, except as specified in such opinion;
            (iv)  the  Company  and  each  of the  Subsidiaries  has  the  power
(corporate,  limited liability company or partnership or other) to own and lease
its properties and to conduct its business as described in the Prospectus;
            (v) after due  inquiry,  such  counsel (A) has no  knowledge  of any
legal action or governmental  investigation,  action, suit or proceeding that is
pending or threatened  against the Company or any of its  subsidiaries  that has
caused such counsel to conclude that such  proceeding is required by Item 103 of
Regulation S-K to be described in the Prospectus and is not so described and (B)
has no knowledge of any contract,  document, or court order to which the Company
is a party or to which any of the  properties of the Company is subject that has
caused such counsel to conclude that such  contract,  document or court order is
required to be filed as an exhibit to the Registration  Statement or required to
be described in the Registration Statement or the Prospectus which are not filed
or described as required;
            (vi) the execution and delivery of this  Agreement,  any  applicable
Terms  Agreement  or other  agreement  pursuant  to  which  an  Agent  purchases
Securities as principal,  the Indenture,  the supplemental indenture relating to
the  Securities,  if any, and the  Securities  (collectively,  the  "TRANSACTION
DOCUMENTS") have been duly authorized by all necessary actions by the Company;
            (vii)  neither the Company nor any of its  Subsidiaries  is, or with
the  giving of notice or lapse of time or both would be, in  violation  of or in
default  under,  its  Certificate  of  Incorporation  or By-Laws or agreement of
limited  partnership  or  limited  liability  company,  as the case may be.  The
execution and delivery by the Company of this  Agreement,  any applicable  Terms
Agreement or other agreement pursuant to which an Agent purchases  Securities as
principal,  the performance of the Company's  obligations  under the Transaction
Documents  and the  Company's  sale of

                                       16
<PAGE>

the Securities do not (i) violate the Certificate of Incorporation or By-Laws of
the  Company or (ii)  constitute  a violation  by the Company of any  applicable
provision of any law, statute,  rule regulation or court order (except that such
counsel  need  express  no opinion as to (A) any  prohibition  against  fraud or
misrepresentation   or  (B)  whether   performance  of  the  indemnification  or
contribution  provisions in this Agreement  would be permitted or (C) compliance
with any disclosure  requirement)  or (iii)  materially  breach,  or result in a
material  default  under,  any existing  obligation of the Company or any of its
subsidiaries under any of the agreements with which such counsel is familiar;
            (viii) the Company was not required to obtain any consent, approval,
authorization  or order, of any governmental  agency for the issuance,  delivery
and sale of the Securities under this Agreement,  any applicable Terms Agreement
or other agreement pursuant to which an Agent purchases Securities as principal,
except for the order by the  Commission  declaring  the  Registration  Statement
effective and such as may be required under state securities or Blue Sky laws in
connection  with  offers and sales of the  Securities  from the Company and with
purchasers of Securities;
            (ix) the  Registration  Statement has been declared  effective under
the  Securities  Act and such  counsel  has no  knowledge  that  any stop  order
suspending its  effectiveness  has been issued or that any  proceedings for that
purpose are pending before,  or overtly  threatened by, the Commission.  Section
309(a) of the Trust Indenture Act provides that the Indenture shall be deemed to
have  been  qualified  under  that Act when the  Registration  Statement  became
effective under the Securities Act;
            (x) The  statements  under Item 3 in the most recently  filed Annual
Report on Form 10-K incorporated by reference in the Registration  Statement and
the Prospectus were correct in all material respects on the date that the Annual
Report was filed with the  Commission.  Insofar as the  statements  constitute a
summary of the legal matters, documents or proceedings referred to therein, such
statements  adequately  present the information  called for with respect to such
legal matters, documents or proceedings;
            (xi) Nothing has come to such  counsel's  attention  that has caused
such counsel to conclude  that the Company or any of its  subsidiaries  (a) does
not own or have the rights  under any  license,  permit,  certificate,  consent,
order,  approval or other  authorization from or has not made any declaration or
filing  with,  any  federal,   state,  local  or  other  governmental  authority
(including  foreign regulatory  agencies) or any court or tribunal,  domestic or
foreign,  necessary  to own or lease,  as the case may be,  and to  operate  its
properties  and to carry on its business as conducted as of the date hereof;  or
(b) has received any actual notice of any  proceeding  relating to revocation or
modification of any license,  permit,  certificate,  consent, order, approval or
other authorization  cited in immediately  preceding clause (a); or (c) does not
have any material right required to use the Intellectual Property employed by it
in connection  with the business  conducted by it as of the date hereof;  or (d)
is, or with the giving of notice or lapse of time or both would be, in violation
of or in default under any material  indenture,  mortgage,  deed of trust,  loan
agreement or other  material  agreement or  instrument  known to me to which the
Company or any of its subsidiaries,  is a party or by which it or any of them or
any of their respective subsidiaries is bound.
            (xii) such counsel is of the opinion that each document incorporated
by reference in the  Registration  Statement  and the  Prospectus  as amended or
supplemented  (except for the  financial  statements  and related  schedules and
other financial and statistical  information  therein,  as to which such counsel
need express no opinion)  complied as to form when filed with the  Commission in
all material  respects with the Exchange Act, and the rules and  regulations  of
the Commission thereunder, (B) nothing has come to the attention of such counsel
that  has  caused  such  counsel  to

                                       17
<PAGE>

believe  that  (except for the  financial  statements  and  schedules  and other
financial and statistical  information included therein as to which such counsel
need express no belief) each part of the Registration  Statement  (including the
documents  incorporated by reference therein) filed with the Commission pursuant
to the  Securities  Act  relating  to the  Securities,  when  such  part  became
effective contained and, as of the date such opinion is delivered contains,  any
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  (C) such counsel is of the opinion that Registration  Statement and
the  Prospectus  and any  amendments  and  supplements  thereto  (except for the
financial   statements  and  schedules  and  other   financial  and  statistical
information  included  therein as to which such counsel need express no opinion)
comply  as to  form  in all  material  respects  with  the  requirements  of the
Securities  Act and the  Trust  Indenture  Act and (D)  nothing  has come to the
attention  of such  counsel that has caused such counsel to believe that (except
for the financial  statements and schedules and other  financial and statistical
information  included  therein as to which such  counsel need express no belief)
the Registration  Statement and the Prospectus,  as amended or supplemented,  if
applicable,  as of the date  such  opinion  is  delivered  contains  any  untrue
statement  of a material  fact or omits to state a material  fact  necessary  in
order to make the statements  therein,  in the light of the circumstances  under
which they were made,  not  misleading;  PROVIDED that in the case of an opinion
delivered on the Commencement Date or pursuant to Section 4(i) , the opinion and
belief set forth in  clauses 6 (b) (xii) (c) and 6 (b) (xii) (o) above  shall be
deemed not to cover information  concerning an offering of particular Securities
to the extent such  information  will be set forth in a supplement  to the Basic
Prospectus;
            (c) On the  Commencement  Date,  and in the  case of a  purchase  of
Securities by an Agent as principal  pursuant to a Terms Agreement or otherwise,
if called for by the  applicable  Terms  Agreement  or other  agreement,  at the
corresponding Time of Delivery, Kirkland & Ellis, counsel for the Company, shall
have furnished to the relevant Agent or Agents their written opinion,  dated the
Commencement Date or Time of Delivery, as the case may be, in form and substance
satisfactory  to such Agent or Agents,  to the effect set forth in clauses (i) ,
(iv) (as to the Company only),  (v), (viii),  (ix) and (xii) (B), (C) and (D) of
paragraph (b) above and to the further effect that:

            (i)  this Agreement or the applicable Terms Agreement have been duly
authorized, executed and delivered by the Company;
            (ii) the Securities have been duly authorized and, when executed and
authenticated in accordance with the terms of the Indenture and delivered to and
paid for by any  purchaser of  Securities  sold through an Agent as agent or any
Agent as  principal  pursuant to any Terms  Agreement or other  agreement,  will
constitute valid and binding obligations of the Company entitled to the benefits
provided by the Indenture,  enforceable  against the Company in accordance  with
their terms, except as the enforceability  thereof may be limited by bankruptcy,
insolvency  or other  similar  laws now or  hereafter  in effect  relating to or
affecting the enforcement of creditors rights generally and by general equitable
principles;
            (iii) the Indenture has been duly authorized, executed and delivered
by the Company and  (assuming  the due  authorization,  execution  and  delivery
thereof  by the  Trustee)  constitutes  a valid and  binding  instrument  of the
Company, enforceable against the Company in accordance with its terms, except as
the  enforceability  thereof may be limited by  bankruptcy,  insolvency or other
similar laws now or hereafter in effect relating to or affecting the enforcement
of creditors rights generally and by general equitable  principles;  and Section
309(a) of the TIA provides

                                       18
<PAGE>

that the  Indenture  was  deemed to have been  qualified  under the Act when the
Registration Statement became effective under the Securities Act;
            (iv) the Company is not and, after giving effect to the offering and
sale of the  Securities,  will not be an "investment  company",  as such term is
defined in the Investment Company Act;

            (v)  such counsel is of the opinion ascribed to it in the Prospectus
under the caption "Tax Considerations", if any;
            (vi) the  execution  and delivery by the Company of this  Agreement,
any applicable  Terms  Agreement or other  agreement  pursuant to which an Agent
purchases Securities as principal,  the performance of the Company's obligations
under the Transaction  Documents and the Company's sale of the Securities do not
(i) violate the Certificate of  Incorporation  or By-Laws of the Company or (ii)
constitute  a violation by the Company of any  applicable  provision of any law,
statute, rule or regulation (except that such counsel expresses no opinion as to
compliance with any disclosure  requirement or any prohibition  against fraud or
misrepresentation  or  as to  whether  performance  of  the  indemnification  or
contribution   provisions  in  this  Agreement  would  be  permitted)  or  (iii)
constitute  a breach by the Company or any of its  subsidiaries,  or result in a
default by the Company or any of its subsidiaries under, any existing obligation
under any of the  agreements  listed on a schedule to such opinion (such opinion
to state that  representatives of the Company have advised such counsel that the
agreements  included in such schedule  include all material debt  agreements and
instruments  of or binding  on the  Company  or any of its  subsidiaries).  Such
counsel may also state that the agreements  listed in such schedule contain debt
incurrence  tests and other  financial  covenants  and tests and,  although such
counsel  has  not  attempted  to   independently   apply  any  of  these  tests,
representatives  of the Company have advised such counsel that they have applied
all of these tests and covenants and have determined that none of these tests or
covenants  will be breached by the Company's sale of the Securities or by any of
the other actions cited at the beginning of this  paragraph  (vi), and that such
counsel has assumed without  investigation  that such advice and  determinations
are correct; and
            (vii)  the   statements  in  the   Prospectus   under  the  captions
"Description of Debt  Securities" and  "Description of Notes" and the statements
in Item 15 of the  Registration  Statement,  to the extent that those statements
summarize laws,  governmental rules or regulations or documents,  are correct in
all material respects.
                           In rendering the opinions set forth in paragraphs (b)
                  and  (c)  above,  such  counsel  may  rely  (A) as to  matters
                  involving the  application  of laws other than the laws of the
                  United States and the States of Delaware and Illinois,  to the
                  extent such counsel  deems proper and to the extent  specified
                  in such  opinion,  if at all,  upon an opinion or opinions (in
                  form and  substance  reasonably  satisfactory  to the  Agents'
                  counsel) of other counsel reasonably acceptable to the Agents'
                  counsel,  familiar  with the  applicable  laws;  and (B) as to
                  matters of fact, to the extent such counsel  deems proper,  on
                  certificates  of  responsible  officers  of  the  Company  and
                  certificates  or other  written  statements  of  officials  of
                  jurisdictions  having  custody  of  documents  respecting  the
                  corporate  existence  or good  standing  of the  Company.  The
                  opinions of such counsel for the Company  shall state that the
                  opinion of any such other counsel upon which they relied is in
                  form  satisfactory  to such  counsel  and,  in such  counsel's
                  opinion, the Agents and they are justified in relying thereon.
                  With  respect to the matters to be covered in clause  (xii) of
                  paragraph  (b) above,  counsel  may state  their  opinion  and
                  belief is

                                       19
<PAGE>

                  basedupon their  participation in the preparation of the
                  Registration  Statement  and the  Prospectus  and any
                  amendment  or  supplement  thereto  (other  than,  in the
                  case of the opinion  delivered  pursuant to paragraph  (c)
                  above,  the  documents   incorporated  by  reference  therein)
                  and review and discussion of the contents thereof (including,
                  in the case of the  opinion  delivered  pursuant  to
                  paragraph (c) above,  the documents  incorporated  by
                  reference  therein) but is without  independent check or
                  verification except as specified.

               (d) On the  Commencement  Date,  and in the case of a purchase of
Securities by an Agent as principal  pursuant to a Terms Agreement or otherwise,
if called for by the  applicable  Terms  Agreement  or other  agreement,  at the
corresponding  Time of Delivery,  Davis Polk & Wardwell,  counsel to the Agents,
shall have  furnished to the relevant  Agent or Agents such opinion or opinions,
dated  the  Commencement  Date or Time of  Delivery,  as the case  may be,  with
respect to the  validity of the  Indenture,  the  Securities,  the  Registration
Statement,  the Prospectus as amended or supplemented  and other related matters
as such Agent or Agents may  reasonably  request,  and in each case such counsel
shall have received such papers and  information as they may reasonably  request
to enable them to pass upon such matters.
               (e) On the  Commencement  Date,  and in the case of a purchase of
Securities by an Agent as principal  pursuant to a Terms Agreement or otherwise,
if called for by the  applicable  Terms  Agreement  or other  agreement,  at the
corresponding  Time of Delivery,  the  Company's  independent  certified  public
accountants  who have certified the financial  statements of the Company and its
subsidiaries included or incorporated by reference in the Registration Statement
and  Prospectus,  as then amended or  supplemented,  shall have furnished to the
relevant  Agent or  Agents a  letter,  dated  the  Commencement  Date or Time of
Delivery,  as the case may be, in form and substance  satisfactory to such Agent
or Agents a letter, containing statements and information of the type ordinarily
included in accountants'  "comfort  letters" to underwriters with respect to the
financial  statements and certain financial  information relating to the Company
contained in or incorporated by reference in the Registration  Statement and the
Prospectus, as then amended or supplemented.
               (f) On the  Commencement  Date,  and in the case of a purchase of
Securities by an Agent as principal  pursuant to a Terms Agreement or otherwise,
if called for by the  applicable  Terms  Agreement  or other  agreement,  at the
corresponding Time of Delivery, the relevant Agent or Agents shall have received
a certificate  or  certificates  signed by an executive  officer of the Company,
dated  the  Commencement  Date or Time of  Delivery,  as the case may be, to the
effect set forth in Sections  and above and to the  further  effect that (1) the
representations  and  warranties  of the Company  contained  herein are true and
correct on and as of the Commencement Date or Time of Delivery,  as the case may
be, as if made on and as of such  date,  (2) the  Company  has  complied  in all
material  respects  with all  agreements  and all  conditions  on its part to be
performed or  satisfied  hereunder or under the  applicable  Terms  Agreement or
other agreement at or prior to the Commencement Date or Time of Delivery, as the
case may be, and (3) there has not been any material change in the capital stock
or  long-term  debt of the Company or any of its  Subsidiaries  or any  material
adverse change,  or any development  involving a material adverse change,  in or
affecting  the  general  affairs,  business,  prospects,  management,  financial
position,  stockholders'  equity or results of operations of the Company and its
subsidiaries  taken as a whole  from  that set forth in or  contemplated  by the
Registration Statement or the Prospectus.


                                       20
<PAGE>

               (g) On the  Commencement  Date and at each Time of Delivery,  the
Company  shall have  furnished  to the  relevant  Agent or Agents  such  further
certificates,  information  and documents as such Agent or Agents may reasonably
request.
           7.      INDEMNIFICATION AND CONTRIBUTION.   (a) The Company agrees to
indemnify  and hold  harmless  each Agent and each person,  if any, who controls
such  Agent,  each  affiliate  of any  Agent  which  assists  such  Agent in the
distribution  of the  Securities  within the meaning of either Section 15 of the
Securities  Act or Section 20 of the Exchange  Act, from and against any and all
losses,  claims,  damages and  liabilities  (including  without  limitation  the
reasonable  legal fees and other expenses  incurred in connection with any suit,
action or proceeding or any claim  asserted)  caused by any untrue  statement or
alleged  untrue  statement  of a material  fact  contained  in the  Registration
Statement or any amendment thereof or the Prospectus (as amended or supplemented
if the Company shall have furnished any  amendments or  supplements  thereto) or
any  preliminary  prospectus  or caused by any  omission or alleged  omission to
state therein a material fact required to be stated therein or necessary to make
the statements  therein not misleading,  except insofar as such losses,  claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue  statement  or omission  made in  reliance  upon and in  conformity  with
information  relating to any Agent  furnished  to the Company in writing by such
Agent  expressly for use therein;  PROVIDED that the  foregoing  indemnity  with
respect  to any  preliminary  prospectus  shall not inure to the  benefit of any
Agent (or to the  benefit of any person  controlling  such  Agent) from whom the
person  asserting  any such losses,  claims,  damages or  liabilities  purchased
Securities if such untrue  statement or omission or alleged untrue  statement or
omission  made in such  preliminary  prospectus is eliminated or remedied in the
Prospectus (as amended or  supplemented  if the Company shall have furnished any
amendments  or  supplements  thereto)  and if a copy  of the  Prospectus  (as so
amended or supplemented,  but excluding the documents  incorporated by reference
therein),  if required by law to have been  furnished to such person at or prior
to the written confirmation of the sale of such Securities to such person, shall
not have been so furnished.
                (b) Each Agent agrees,  severally and not jointly,  to indemnify
and  hold  harmless  the  Company,  its  directors,  its  officers  who sign the
Registration  Statement  and each person who  controls  the  Company  within the
meaning of Section 15 of the  Securities Act and Section 20 of the Exchange Act,
to the same extent as the  foregoing  indemnity  from the Company to each Agent,
but only with reference to information  relating to such Agent  furnished to the
Company  in  writing  by  such  Agent  expressly  for  use in  the  Registration
Statement,  the  Prospectus,   any  amendment  or  supplement  thereto,  or  any
preliminary prospectus.
                (c) If any suit,  action,  proceeding  (including any
governmental or regulatory  investigation),  claim or demand shall be brought or
asserted against any person in respect of which indemnity may be sought pursuant
to  either  of the two  preceding  paragraphs,  such  person  (the  "INDEMNIFIED
PERSON")  shall  promptly  notify the person  against whom such indemnity may be
sought (the "INDEMNIFYING PERSON") in writing, and the Indemnifying Person, upon
request of the Indemnified Person, shall retain counsel reasonably  satisfactory
to the Indemnified Person to represent the Indemnified Person and any others the
Indemnifying  Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel,  but the fees
and expenses of such counsel shall be at the expense of such Indemnified  Person
unless (i)the Indemnifying Person and the

                                       21
<PAGE>

Indemnified  Person  shall  have  mutually  agreed  to the  contrary,  (ii)  the
Indemnifying  Person  has  failed  within a  reasonable  time to retain  counsel
reasonably  satisfactory to the Indemnified Person or (iii) the named parties in
any  such  proceeding   (including  any  impleaded  parties)  include  both  the
Indemnifying  Person  and the  Indemnified  Person  and  representation  of both
parties by the same counsel  would be  inappropriate  due to actual or potential
differing  interests between them. It is understood that the Indemnifying Person
shall not, in connection  with any proceeding or related  proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local  counsel) for all  Indemnified  Persons,  and that all
such  fees and  expenses  shall be  reimbursed  as they are  incurred.  Any such
separate  firm for the Agents,  each  affiliate of any Agent which  assists such
Agent in the  distribution  of the  Securities  and such control  persons of the
Agents shall be designated in writing by J.P. Morgan Securities Inc. or, if J.P.
Morgan  Securities  Inc.  is not an  Indemnified  Party by the  Agents  that are
Indemnified  Parties and any such separate firm for the Company,  its directors,
its officers who sign the Registration Statement and such control persons of the
Company or  authorized  representatives  shall be  designated  in writing by the
Company.  The Indemnifying  Person shall not be liable for any settlement of any
proceeding  effected  without  its  written  consent,  but if settled  with such
consent or if there be a final  judgment  for the  plaintiff,  the  Indemnifying
Person agrees to indemnify any  Indemnified  Person from and against any loss or
liability  by  reason  of  such  settlement  or  judgment.  Notwithstanding  the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for fees and expenses of
counsel  as  contemplated   by  the  third  sentence  of  this  paragraph,   the
Indemnifying  Person  agrees that it shall be liable for any  settlement  of any
proceeding  effected  without  its  written  consent if (i) such  settlement  is
entered into more than 60 days after receipt by such Indemnifying  Person of the
aforesaid  request and (ii) such  Indemnifying  Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement (or delivered a notice to such  Indemnified  Person setting forth its
good faith  objection to such request's  conformity  with the provisions of this
Section). No Indemnifying Person shall, without the prior written consent of the
Indemnified  Person,   effect  any  settlement  of  any  pending  or  threatened
proceeding  in respect of which any  Indemnified  Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement  includes an  unconditional  release of such  Indemnified
Person  from all  liability  on  claims  that  are the  subject  matter  of such
proceeding.
          (d) If the  indemnification  provided for in Section or is unavailable
to an  Indemnified  Person or  insufficient  in respect of any  losses,  claims,
damages or  liabilities  referred to herein in  connection  with any offering of
Securities,  then each  Indemnifying  Person  under such  paragraph,  in lieu of
indemnifying such Indemnified Person thereunder,  shall contribute to the amount
paid or payable by such Indemnified  Person as a result of such losses,  claims,
damages or liabilities  (i) in such  proportion as is appropriate to reflect the
relative  benefits received by the Company on the one hand and each Agent on the
other from the offering of the Securities or (ii) if the allocation  provided by
clause (i) above is not  permitted by applicable  law, in such  proportion as is
appropriate to reflect not only the relative  benefits referred to in clause (i)
above but also the relative  fault of the Company on the one hand and each Agent
on the other in connection  with the  statements  or omissions  that resulted in
such  losses,  claims,  damages or  liabilities,  as well as any other  relevant
equitable  considerations.  The relative benefits received by the Company on the
one hand and each Agent on the other in  connection  with the  offering  of such
Securities

                                       22
<PAGE>

shall be deemed to be in the same respective proportion as the net proceeds from
the offering of such  Securities  (before  deducting  expenses)  received by the
Company  and the total  discounts  and  commissions  received  by each  Agent in
respect  thereof bear to the aggregate  offering price of such  Securities.  The
relative  fault of the  Company  on the one hand and of each  Agent on the other
shall be determined  by reference to, among other things,  whether the untrue or
alleged untrue  statement of a material fact or the omission or alleged omission
to state a material  fact relates to  information  supplied by the Company or by
such Agent and the parties'  relative intent,  knowledge,  access to information
and opportunity to correct or prevent such statement or omission.
         The  Company  and  each  Agent  agrees  that it  would  not be just and
equitable if  contribution  pursuant to this Section 7(d) were determined by PRO
RATA allocation (even if all Agents were treated as one entity for such purpose)
or by any other method of allocation that does not take account of the equitable
considerations  referred  to above in this  Section 7 (d) . The  amount  paid or
payable by an Indemnified Person as a result of the losses,  claims, damages and
liabilities  referred  to above in this  Section 7 shall be  deemed to  include,
subject  to the  limitations  set forth  above,  any  reasonable  legal or other
expenses incurred by such Indemnified Person in connection with investigating or
defending  any such  action or claim.  Notwithstanding  the  provisions  of this
Section 7, in no event shall an Agent be required  to  contribute  any amount in
excess of the amount by which the total price at which the  Securities  referred
to in Section 7 (d) that were sold by or through  such Agent  exceeds the amount
of any damages that such Agent has  otherwise  been required to pay by reason of
such untrue or alleged  untrue  statement  or omission or alleged  omission.  No
person  guilty of  fraudulent  misrepresentation  (within the meaning of Section
11(f) of the Securities Act) shall be entitled to  contribution  from any person
who was not guilty of such fraudulent misrepresentation.  The obligation of each
Agent to contribute  pursuant to this Section is several (in the proportion that
the  principal  amount of the  Securities  the sale of which by or through  such
Agent gave rise to such  losses,  claims,  damages or  liabilities  bears to the
aggregate principal amount of the Securities the sale of which by or through any
Agent  gave rise to such  losses,  claims,  damages or  liabilities)  and is not
joint.

            (e) The  indemnity  and  contribution  agreements  contained in this
Section 7 are in addition to any liability  which the  Indemnifying  Persons may
otherwise have to the Indemnified Persons referred to above.

             8.  TERMINATION.  (a) This  Agreement may be terminated at any time
(ii) by the  Company  with  respect  to any or all of the  Agents or (ii) by any
Agent  with  respect  to itself  only,  in each case upon the  giving of written
notice of such termination to each other party hereto. Any Terms Agreement shall
be subject to termination in the absolute discretion of the Agent or Agents that
are parties thereto on the terms set forth or incorporated by reference therein.
The termination of this Agreement shall not require termination of any agreement
by an Agent to purchase  Securities  as principal  (whether  pursuant to a Terms
Agreement or  otherwise)  and the  termination  of such an  agreement  shall not
require termination of this Agreement. In the event this Agreement is terminated
with  respect to any Agent,  (x) this  Agreement  shall remain in full force and
effect with respect to any Agent as to which such  termination has not occurred,
(y) this  Agreement  shall  remain in full force and effect with  respect to the
rights  and  obligations  of any party  which have  previously  accrued or which
relate  to  Securities  which  are  already  issued,  agreed to be issued or the
subject of a pending offer at the time of such termination and (z) in any event,
the provisions of the fourth  paragraph of Section 2(a) , Section 2(c), the last
sentence of Section 4(d) and Sections 4(f),  4(g),  5,7,9,10,11,12  and 15 shall
survive;  PROVIDED  that if at the time of

                                       23
<PAGE>

termination an offer to purchase Securities has been accepted by the Company but
the time of delivery to the  purchaser or its agent of such  Securities  has not
yet occurred,  the provisions of Sections 2(b),  2(d), 4(a) through , 4(e), 4(h)
through 4(k) and 6 shall also survive until such time of delivery.  If any Terms
Agreement is terminated, the provisions of the last sentence of Section 4(d) and
Sections 2(b), 2(d), 4(a), 4(b), 4(e) through  4(k),5,6,7,8 (b), 10,11,12 and 15
(which shall have been  incorporated by reference in such Terms Agreement) shall
survive.
            (b) If any Terms Agreement shall be terminated by an Agent or Agents
because of any  failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the  conditions of any Terms  Agreement or if for any
reason the Company  shall be unable to perform its  obligations  under any Terms
Agreement or any condition of any Agent's  obligations cannot be fulfilled,  the
Company  agrees to  reimburse  each Agent or such Agents as have so  terminated,
severally,  for all out-of-pocket  expenses  (including the fees and expenses of
their counsel)  reasonably  incurred by such Agent or Agents in connection  with
the respective offering of Securities.
            9.  POSITION OF THE  AGENTS.  Each Agent,  in  soliciting  offers to
purchase  Securities from the Company and in performing the other obligations of
such Agent  hereunder  (other  than in respect  of any  purchase  by an Agent as
principal,  pursuant to a Terms  Agreement or  otherwise),  is acting  solely as
agent for the Company and not as  principal  and does not assume any  obligation
towards or  relationship  of agency or trust with any  purchaser of  Securities.
Each Agent will make  reasonable  efforts  to assist  the  Company in  obtaining
performance  by each  purchaser  whose  offer to  purchase  Securities  from the
Company was  solicited by such Agent and has been  accepted by the Company,  but
such  Agent  shall not have any  liability  to the  Company  in the  event  such
purchase is not consummated for any reason.  If the Company shall default on its
obligation to deliver  Securities to a purchaser  whose offer it has accepted in
accordance with the  Administrative  Procedures,  the Company shall (i) hold the
relevant Agent harmless  against any loss,  claim,  damage or liability  arising
from or as a result of such default by the Company and (ii) notwithstanding such
default,  pay to the Agent that  solicited such offer any commission to which it
would be entitled in connection with such sale.
            10.  REPRESENTATIONS  AND  INDEMNITIES  TO SURVIVE.  The  respective
indemnities and contribution  agreements,  representation,  warranties and other
statements  of the  Company,  its  officers  and the Agents set forth in or made
pursuant to this  Agreement or any agreement by an Agent to purchase  Securities
as principal shall remain in full force and effect regardless of any termination
of this Agreement or any such agreement,  any investigation made by or on behalf
of any Agent or any  controlling  person of any Agent,  or the  Company,  or any
officer or director or any controlling person of the Company,  and shall survive
each delivery of and payment for any of the Securities.
            11.  NOTICES.  Except as otherwise specifically provided herein or
in the Administrative Procedures, all statements,  requests, notices and advices
hereunder  shall  be in  writing  and  effective  only on  receipt,  and will be
delivered by hand, by mail (postage  prepaid),  by telegram (charges prepaid) or
by telex.  Communications to the Agents will be sent, in the case of J.P. Morgan
Securities  Inc.,  to 60 Wall  Street,  New York,  New York  10260  (Fax:  (212)
648-5909) Attention:  Medium-Term Note Department, in the case of Goldman, Sachs
& Co.,  to 85 Broad  Street,  New York,  New York 10004  (Fax:  (212)  902-0658)
Attention:  Medium Term Note Trading;  in the case of Banc of America Securities
LLC, to 100 North Tryon Street, 7th Floor, Charlotte, North Carolina 28255 (Fax:
(704)  388-9939)  Attention:  Lynn  McConnell;  in the case of Banc One  Capital
Markets,  Inc., to 1 Bank One Plaza,  Suite  IL1-0595,  Chicago,  Illinois

                                       24
<PAGE>

60670  (Fax:  (312)  732-4773)  Attention:  Evonne W. Taylor and, if sent to the
Company,  to it at One  ServiceMaster  Way, Downers Grove,  Illinois 60515 (Fax:
(630)  271-5870);  Attention:  General Counsel,  and Attention:  Treasurer (Fax:
(630) 271-5604.)
            12.  SUCCESSORS.  This Agreement and any Terms Agreement shall be
binding  upon,  and inure  solely to the benefit of, each Agent and the Company,
and their  respective  successors  and the officers,  directors and  controlling
persons referred to in Section and (to the extent expressly  provided in Section
) the  purchasers of  Securities,  and no other person shall acquire or have any
right or obligation under or by virtue of this Agreement or any Terms Agreement.
            13.  AMENDMENTS.  This Agreement may be amended or supplemented if,
but only if, such  amendment  or  supplement  is in writing and is signed by the
Company and each  Agent;  PROVIDED  that the  Company may from time to time,  on
written  notice to the Agents but without  the consent of any Agent,  amend this
Agreement to add as a party hereto one or more additional firms registered under
the Exchange Act,  whereupon  each such firm shall become an Agent  hereunder on
the same terms and conditions as the other Agents that are parties  hereto.  The
Agents shall sign any amendment or  supplement  giving effect to the addition of
any such firm as an Agent under this Agreement.

            14.  BUSINESS DAY.  Time shall be of the essence in this Agreement
and any Terms Agreement.  As used herein, the term "BUSINESS DAY" shall mean any
day which is not a Saturday  or Sunday or legal  holiday or a day on which banks
in New York City are required or authorized by law or executive  order to close.
            15.  APPLICABLE  LAW. This Agreement and any Terms  Agreement shall
be governed by, and construed in accordance  with,  the laws of the State of New
York,  without giving effect to the conflict of laws provisions  thereof.

            16.  COUNTERPARTS.   This  Agreement  and  any  Terms  Agreement
may be signed in  counterparts,  each of which shall be an original,  and all of
which together shall constitute one and the same instrument.

            17.  HEADINGS. The headings of the sections of this Agreement have
been inserted for  convenience  of reference only and shall not be deemed a part
of this Agreement.


                                       25
<PAGE>

If the  foregoing  is in  accordance  with your  understanding,  please sign and
return to us 5 counterparts hereof,  whereupon this letter and the acceptance by
each of you thereof shall constitute a binding agreement between the Company and
each of you in accordance with its terms.




                                Very truly yours,

                                The ServiceMaster Company

                                By:   /S/ ERIC R. ZARNIKOW
                                     ------------------------
                                      Name:    Eric R. Zarnikow
                                      Title:   Senior Vice President & Treasurer

Accepted in New York, New York,
as of the date first above written:

J.P. Morgan Securities Inc.


By:      /S/ DIANE FRAIL
   -------------------------------
      Name:    Diane Frail
      Title:   Vice President

Goldman, Sachs & Co.


By:      /S/ GOLDMAN, SACHS & CO.
      ---------------------------
      Name:     Goldman, Sachs & Co.
      Title:

Banc of America Securities LLC

By:      /S/ LYNN T. MCCONNELL
   -------------------------------
      Name:    Lynn T. McConnell
      Title:   Managing Director

Banc One Capital Markets, Inc.


By:    /S/ KATHERINE COKIC
   ------------------------------
      Name:    Katherine Cokic
      Title:   Vice President



                                       26
<PAGE>



                                                                       EXHIBIT A

                            THE SERVICEMASTER COMPANY

                           MEDIUM TERM NOTES, SERIES A

                                 TERMS AGREEMENT

-----\-------, ----


The ServiceMaster Company
One ServiceMaster Way
Downers Grove, Illinois 60515

Attention:  ___________________

         Re:DISTRIBUTION AGREEMENT DATED AS OF APRIL 18, 2000 (THE DISTRIBUTION
             AGREEMENT")

         The undersigned  agrees to purchase your  Medium-Term  Notes,  Series A
having the following terms:

Specified Currency:
Principal Amount:
Original Issue Date:
Settlement Date, Time and Place:
Maturity Date:
Purchase Price:                  [     ]% of Principal Amount, plus accrued
                                 interest, if any, from Settlement Date
Price to Public:                 [     ]% of Principal Amount, plus accrued
                                 interest, if any, from Settlement Date
Redemption Date(s):              [                       ], commencing
Initial Redemption Price:
Annual Redemption Price Decrease:
Repayment Date(s):
Repayment Price:
Initial Accrual Period OID:
Original Yield to Maturity


                                       27
<PAGE>


                             (For Fixed Rate Notes)
Interest Rate:
Applicability of modified payment upon
acceleration:
If yes, state issue price:

Amortization Schedule:
                                                                               ]
                           [(For Floating Rate Notes)
Initial Interest Rate:
Interest Rate Basis (Commercial paper,
LIBOR,  Treasury,  Prime,  Federal Funds,
_________):
Index Maturity (30, 60, 90 days,
 6 months, 1 year, other):
Interest Reset Period (monthly,
quarterly,  semiannually,  annually):
Interest payment Period (monthly,
quarterly, semiannually, annually):
Spread:

Spread Multiplier:                                                  Points (+/-)
Maximum Interest Rate:                                                         %
Minimum Interest Rate:                                                         %
                                                                               %


Initial Interest Reset Date:
Interest Reset Dates:
Interest Determination Dates:
Interest Payment Dates:
Calculation Agent:                                                             ]
Other terms of Securities:

Provisions relating to underwriter
default; if any:

         The   provisions  of  Sections  1,2  (b),  and  2  (d)  and  4  through
8,10,11,12,13 and 15 of the Distribution  Agreement and the related  definitions
are  incorporated by reference herein and shall be deemed to have the same force
and effect as if set forth in full herein.

         This Agreement is subject to termination in our absolute  discretion on
the terms incorporated by referenced herein. If this Agreement is so terminated,
the  provisions  set  forth  in  the  last  sentence  of  Section  8 (a)  of the
Distribution Agreement shall survive for the purpose of this Agreement.


                                       28
<PAGE>


         [The  certificate  referred  to in  Section  4(k)  of the  Distribution
Agreement,  the  opinions  referred  to in  Section  4(i)  of  the  Distribution
Agreement  and  the  accountants'  letter  referred  to in  Section  4(j) of the
Distribution Agreement will be required.]


                                            [Agent]



                                            By:______________________________
                                                  Name:
                                                  Title:
Accepted:
THE SERVICEMASTER COMPANY


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



                                       29
<PAGE>

                                                                       EXHIBIT B

                            ADMINISTRATIVE PROCEDURES

      The Medium-Term Notes, Series A, due more than nine months from their date
of  issue  (the  "Notes")  are  to be  offered  on a  continuing  basis  by  The
ServiceMaster Company ("Issuer").  J.P. Morgan Securities Inc., Goldman, Sachs &
Co.,  Banc of America  Securities  LLC, and Banc One Capital  Markets,  Inc., as
agents (individually,  an "Agent" and collectively, the "Agents") have agreed to
use their reasonable best efforts to solicit  purchases of the Notes. The Issuer
reserves  the right to sell Notes  directly or  indirectly  on its own behalf to
investors  (other than  broker-dealers).  An Agent will not be obligated to, but
may from time to time,  purchase  Notes as principal  for its own  account.  The
Notes are being sold pursuant to a Distribution  Agreement  dated April 18, 2000
(the "Agency Agreement"),  between the Issuer and the Agents, and will be issued
pursuant  to an  indenture  dated as of  November  18,  1999 (the  "Indenture"),
between  the  Company  and  Harris  Trust and  Savings  Bank,  as  trustee  (the
"Trustee").  Capitalized terms used herein and not defined herein shall have the
meanings  ascribed  to such terms in the Agency  Agreement.  The Notes have been
registered under the Securities Act of 1933 (the "Act").

      Each Note will be represented  by either a Global  Security (as defined in
the Indenture),  such Global Security,  for purposes hereof either a global note
(a "Global Note") or a master note (a "Master Note"),  registered in the name of
a nominee of The Depository Trust Company,  as Depositary ("DTC") (a "Book-Entry
Note"), or a certificate  issued in definitive form (a "Certificated  Note"). It
is currently  contemplated that both Notes that bear interest at a fixed rate (a
"Fixed Rate Note") and Notes that bear  interest at a variable rate (a "Floating
Rate Note") and that are denominated  and payable in U.S.  dollars may be issued
as Book-Entry Notes.

      Administrative procedures and specific terms of the offering are explained
below.  The Issuer will advise the Agents in writing of those  persons  handling
administrative   responsibilities  with  whom  the  Agents  are  to  communicate
regarding   offers  to  purchase  Notes  and  the  details  of  their  delivery.
Administrative  procedures may be modified from time to time as reflected in the
applicable Pricing Supplement (as defined below) or elsewhere.


                                       30
<PAGE>


PART I:      ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES AND GENERALLY
                          APPLICABLE ADMINISTRATIVE PROCEDURES

ISSUE/
AUTHENTICATION DATE:        Each  Note  shall  be  dated  as of the  date of its
                            authentication  by the Trustee.  Each Note will also
                            bear an  original  issue  date  (the  "Issue  Date")
                            which,   with   respect  to  any  Note  (or  portion
                            thereof),  shall  mean  the  date  of  its  original
                            issuance  (i.e.,  the settlement  date) and shall be
                            specified  therein.  The issue date will  remain the
                            same  for  all  Notes   subsequently   issued   upon
                            transfer,  exchange or  substitution  of an original
                            Note regardless of their dates of authentication.

MATURITIES:                 Each Note shall mature on a Business  Day,  selected
                            by the purchaser and agreed to by the Issuer,  which
                            shall be nine months or more from the date of issue.

PRICE TO PUBLIC:            Each  Note  shall  be  issued  at 100% of  principal
                            amount unless otherwise specified in a supplement to
                            the Prospectus (a "Pricing Supplement").

DENOMINATIONS:              The  denominations  of the Notes shall be $1,000 and
                            integral multiples of $1,000 in excess thereof. (Any
                            Notes denominated other than in U.S. dollars will be
                            issuable  in  denominations  as set  forth  in  such
                            Notes.)

REGISTRATION:               Notes shall be issued only in fully registered form.

MINIMUM PURCHASE:           The minimum  aggregate  amount of Notes  denominated
                            and payable in U.S.  dollars which may be offered to
                            any purchaser will be $1,000.

INTEREST:                   Each Note shall bear interest in accordance with its
                            terms, as described in the Prospectus Supplement (as
                            defined in the Agency Agreement), as supplemented by
                            the applicable Pricing Supplement.

CALCULATION OF INTEREST:    Interest on Fixed Rate Notes and  interest  rates on
                            Floating  Rate Notes will be determined as set forth
                            in the form of Notes.  With respect to Floating Rate
                            Notes,  the  Calculation  Agent shall  determine the
                            interest  rate  for  each  Interest  Reset  Date and
                            communicate  such interest  rate to the Issuer,  and
                            the Issuer will promptly  notify the Trustee and the
                            Paying Agent of each such determination.


                                       31
<PAGE>


PAYMENTS OF INTEREST
AND PRINCIPAL:              All interest payments  (excluding  interest payments
                            made at  maturity)  will be made by check  mailed to
                            the person entitled thereto; provided, however, that
                            if a holder of one or more  Notes of like  tenor and
                            terms with an aggregate principal amount equal to or
                            greater than U.S.  $10,000,000 or such lesser amount
                            in the  discretion of the Company (or the equivalent
                            thereof in foreign  currencies  or  currency  units)
                            shall  designate  in writing to the Paying  Agent at
                            its  corporate  trust office in The City of New York
                            on or prior to the Regular  Record Date  relating to
                            the  Interest  Payment Date an  appropriate  account
                            with a bank,  the  Paying  Agent  will,  subject  to
                            applicable   laws  and   regulations  and  until  it
                            receives  notice to the contrary,  make such payment
                            and all  succeeding  payments to such person by wire
                            transfer  to the  designated  account.  If a payment
                            cannot  be  made  by  wire   transfer   because  the
                            information   received   by  the  Paying   Agent  is
                            incomplete, a notice will be mailed to the holder at
                            its registered  address requesting such information.
                            Upon  presentation of the relevant Note, the Trustee
                            (or any duly  appointed  Paying  Agent)  will pay in
                            immediately  available funds the principal amount of
                            such Note at maturity and accrued interest,  if any,
                            due at maturity; provided that the Note is presented
                            to the Trustee  (or any such  Paying  Agent) to make
                            payments in accordance  with its normal  procedures.
                            The Issuer will  provide  the Trustee  (and any such
                            Paying Agent) with funds available for such purpose.
                            Notes  presented  to the  Trustee  at  maturity  for
                            payment  will  be  canceled  and  destroyed  by  the
                            Trustee and a  certificate  of  destruction  will be
                            delivered to the Issuer.  On the fifth  Business Day
                            (as  defined  below)   immediately   preceding  each
                            interest  payment date,  the Trustee will furnish to
                            the Issuer a statement  showing the total  amount of
                            the  interest  payments to be made on such  interest
                            payment  date.  The Trustee will provide  monthly to
                            the Issuer a list of the  principal  and interest to
                            be paid on Notes maturing in the next succeeding six
                            months.  The Trustee will assume  responsibility for
                            withholding  taxes on  interest  paid as required by
                            law.


                                       32
<PAGE>

ACCEPTANCE OF OFFERS:       Agent will  promptly  advise the Issuer of each
                            reasonable  offer to purchase  Notes received by it,
                            other than those  rejected  by the Agent.  The Agent
                            may, in its discretion reasonably exercised, without
                            notice to the Issuer,  reject any offer  received by
                            it, in whole or in part.  The  Issuer  will have the
                            sole right to accept  offers to  purchase  Notes and
                            may reject any such offer,  in whole or in part.  If
                            the  Issuer  rejects  an  offer,   the  Issuer  will
                            promptly notify the applicable Agent.

SETTLEMENT:                 All offers accepted by the Issuer will be settled on
                            the third  Business Day next  succeeding the date of
                            acceptance unless otherwise agreed by any purchaser,
                            the applicable Agent and the Issuer.  The settlement
                            date shall be  specified  upon  receipt of an offer.
                            Prior to 3:00  p.m.,  New  York  City  time,  on the
                            business  day  prior  to the  settlement  date,  the
                            Issuer will instruct the Trustee to authenticate and
                            deliver the Notes pursuant to the terms communicated
                            by the Presenting  Agent (as defined below) pursuant
                            to the next  succeeding  section  no later than 2:15
                            p.m., New York City time, on that day.

DETAILS FOR SETTLEMENT:     For each offer accepted by the Issuer, the Agent who
                            presented the offer (the  "PRESENTING  AGENT") shall
                            communicate  to  the  Issuer,  Attention:  Treasurer
                            (Fax: (630) 271-5604) who will provide a copy to the
                            Trustee, Attention: Carolyn Potter, Harris Trust and
                            Savings  Bank (Fax:  (312)  461-3525)  by  facsimile
                            transmission or other acceptable means the following
                            information (the "PURCHASE INFORMATION"):

             1.           Exact name in which the Note or Notes are to be
                          registered ("REGISTERED OWNER").

             2.           Exact address of registered owner.

             3.           Taxpayer identification number of registered
                          owner.

             4.           Principal amount of each Note to be delivered to
                          the registered owner.

             5.           Specified Currency and, if other than U.S.
                          dollar, denominations.

             6.           In the case of a Fixed Rate Note, the interest
                          rate or, in the case of a Floating Rate Note, the
                          interest rate formula, the Initial Interest Rate
                          (if known at such

                                       33
<PAGE>

                          time),  Index  Maturity,  Interest  Reset Period,
                          Interest Reset Dates, Spread or Spread Multiplier (if
                          any),  minimum  interest rate (if any) and maximum
                          interest rate (if any).

             7.           Interest Payment Period and Interest Payment
                          Dates.

             8.           Maturity Date of Notes.

             9.           Issue Price of Notes.

             10.          Settlement date for Notes.

             11.          Presenting Agent's commission (to be paid in the
                          form of a discount from the proceeds remitted to
                          the Issuer upon settlement).

             12.          Redemption provisions, if any.

             13.          Repayment provisions, if any.

             14.          Original issue discount provisions, if any.

             15.          In the case of Currency Indexed Notes, the
                          above-listed information, as applicable and the
                          Base Exchange Rate(s), Base Interest Rate and
                          Indexed Currencies.

             16.          In the case of Dual Currency Notes, the
                          above-listed information, as applicable, and the
                          Optional Payment Currency, Designated Exchange
                          Rate and Option Election Dates.

                          The issue date of, and the settlement  date for, Notes
                          will be the same.  Before  accepting  any offer to
                          purchase  Notes to be settled in less than three days,
                          the Issuer shall verify that the Trustee will have
                          adequate time to prepare and authenticate the Notes.
                          Prior to preparing the Notes for delivery, the Trustee
                          will confirm the Purchase Information by telephone
                          with the Presenting Agent and the Issuer.

                                       34
<PAGE>


CONFIRMATION:               For each accepted offer,  the Presenting  Agent will
                            issue a confirmation, in writing,  telephonically or
                            through   any   other   commonly   used   method  of
                            communication to the purchaser and a confirmation to
                            the  Issuer,   Attention:   Treasurer  (Fax:   (630)
                            271-5604).


NOTE DELIVERIES AND
CASH                        PAYMENT:    Upon   the   receipt   of    appropriate
                            documentation  and instructions  from the Issuer and
                            verification  thereof,  the  Trustee  will cause the
                            Notes to be prepared and  authenticated and hold the
                            Notes for delivery against payment.

                            The Trustee  will deliver the Notes,  in  accordance
                            with instructions from the Issuer, to the Presenting
                            Agent, as the Issuer's agent, for the benefit of the
                            purchaser   only  against   payment  in  immediately
                            available  funds  in an  amount  equal  to the  face
                            amount  of the  Notes  less the  Presenting  Agent's
                            commission  plus any  premium or less any  discount;
                            PROVIDED,  HOWEVER,  that the  Trustee  may  deliver
                            Notes  to  the  Presenting   Agent  against  receipt
                            therefor  and,  later the same day,  receipt of such
                            funds in such amount.  Upon receipt of such payment,
                            the  Trustee  shall pay  promptly  an  amount  equal
                            thereto to the Issuer in immediately available funds
                            by  wire  transfer  to the  account  of  the  Issuer
                            maintained  at Bank  One,  N.A.,  1 Bank One  Plaza,
                            Chicago,  Illinois 60670, (312) 732-2100, ABA Number
                            071000013, Account Number 51-24093.

                            The Presenting  Agent, as the Issuer's  agent,  will
                            deliver  the Notes  (with the  written  confirmation
                            provided for above) to the purchaser thereof against
                            payment by such purchaser in  immediately  available
                            funds.  Delivery of any confirmation or Note will be
                            made in  compliance  with  "Delivery of  Prospectus"
                            below.

FAILS:                      In the event that a  purchaser  shall fail to accept
                            delivery  of and  make  payment  for a  Note  on the
                            settlement  date, the  Presenting  Agent will notify
                            the Trustee and the Issuer, by telephone,  confirmed
                            in writing.  If the Note has been  delivered  to the
                            Presenting   Agent,  as  the  Issuer's  agent,   the
                            Presenting  Agent  shall  return  such  Note  to the
                            Trustee.   If  funds  have  been  advanced  for  the
                            purchase of such Note, the Trustee will, immediately
                            upon receipt of such Note contact the Issuer (to the
                            attention  of  Treasurer   (Fax:(630)

                                       35
<PAGE>

                            271-5604)  advising the Issuer of such  failure.  At
                            such  time,  the  Issuer  will  refund  the  payment
                            previously   made  by  the   Presenting   Agent   in
                            immediately  available funds.  Such payments will be
                            made on the settlement date, if possible, and in any
                            event not later than the business day  following the
                            settlement date. If such failure shall have occurred
                            for  any  reason  other  than  the  failure  of  the
                            Presenting Agent to provide the Purchase Information
                            to the  Issuer or to provide a  confirmation  to the
                            purchaser,  the Issuer will reimburse the Presenting
                            Agent on an equitable  basis for its loss of the use
                            of funds  during the period when they were  credited
                            to the account of the Issuer.

                            Immediately  upon  receipt of the Note in respect of
                            which the failure  occurred,  the Trustee will cause
                            the Security  Registrar to make appropriate  entries
                            to reflect  the fact that the Note was never  issued
                            and will destroy the Note.

PROCEDURE FOR
RATE CHANGES:               The Issuer and the Agent will  discuss  from time to
                            time the price of, and the rates to be borne by, the
                            Notes   that  may  be  sold  as  a  result   of  the
                            solicitation of offers by the Agent.  Once the Agent
                            has  recorded  any  indication  of interest in Notes
                            upon  certain  terms,  and  communicated   with  the
                            Issuer,  if the  Issuer  plans to accept an offer to
                            purchase  Notes upon such terms,  it will  prepare a
                            Pricing  Supplement  to  the  Prospectus,   as  then
                            amended  or  supplemented,  reflecting  the terms of
                            such Notes and will arrange to transmit such Pricing
                            Supplement   to  the   Commission   for   filing  in
                            accordance  with and within the time  prescribed  by
                            the  applicable  paragraph  of Rule 424(b) under the
                            Act.  The Issuer  will supply at least two copies of
                            the Prospectus as then amended or supplemented,  and
                            bearing such Pricing  Supplement,  to the Presenting
                            Agent.  No  settlements  with  respect to Notes upon
                            such terms may occur prior to such  transmitting and
                            the Agent will not, prior to such transmitting, mail
                            confirmations  to  customers  who  have  offered  to
                            purchase   Notes   upon  such   terms.   After  such
                            transmitting,  sales,  mailing of confirmations  and
                            settlements  may occur  with  respect  to Notes upon
                            such terms,  subject to the  provisions of "Delivery
                            of Prospectus" below.


                                       36
<PAGE>


                            Outdated  Pricing  Supplements  and  copies  of  the
                            Prospectus  to which they are  attached  (other than
                            those retained for files), will be destroyed.

SUSPENSION OF SOLICITATION;
AMENDMENT OR
SUPPLEMENT:                 As provided in the Agency Agreement,  the Issuer may
                            suspend  solicitation  of purchases at any time and,
                            upon  receipt of notice from the Issuer,  the Agents
                            will,  as promptly as  practicable,  but in no event
                            later than one business day  following  such notice,
                            suspend  solicitation  until such time as the Issuer
                            has advised them that  solicitation of purchases may
                            be resumed.

                            If the Agents  receive  the  notice  from the Issuer
                            contemplated   by   Section   2(a)  of  the   Agency
                            Agreement,  they will promptly suspend  solicitation
                            and will only resume solicitation as provided in the
                            Agency Agreement.  If the Issuer decides to amend or
                            supplement   the   Registration   Statement  or  the
                            Prospectus  relating to the Notes,  it will promptly
                            advise the Agents and will  furnish  each Agent with
                            the proposed  amendment or  supplement in accordance
                            with the terms of the Agency  Agreement.  The Issuer
                            will  promptly  file or mail to the  Commission  for
                            filing such  amendment  or  supplement,  provide the
                            Agents  with  copies  of  any  such   amendment   or
                            supplement,   confirm  to  the   Agents   that  such
                            amendment  or  supplement  has been  filed  with the
                            Commission  and advise the Agents that  solicitation
                            may be resumed. Any such suspension shall not affect
                            the Issuer's obligations under the Agency Agreement;
                            and  in  the  event  that  at the  time  the  Issuer
                            suspends  solicitation  of purchases  there shall be
                            any   offers   already   accepted   by  the   Issuer
                            outstanding for settlement, the Issuer will have the
                            sole responsibility for fulfilling such obligations;
                            the applicable Agent will make reasonable efforts to
                            assist the Issuer to fulfill such  obligations,  but
                            the  applicable  Agent  will  not  be  obligated  to
                            fulfill  such   obligations.   The  Issuer  will  in
                            addition  promptly  advise the applicable  Agent and
                            the Trustee if such offers are not to be settled and
                            if copies of the Prospectus as in effect at the time
                            of the suspension may not be delivered in connection
                            with the settlement of such offers.

DELIVERY OF PROSPECTUS:     A copy of the Prospectus,  as most recently  amended
                            or  supplemented  on the  date of  delivery  thereof
                            (except as provided  below),  must be delivered to a
                            purchaser  prior to or together  with the earlier of
                            delivery  of (i) the written

                                       37
<PAGE>


                            confirmation  provided for above,  and (ii) any Note
                            purchased  by  such   purchaser  at  the   following
                            address:  if to J.P. Morgan  Securities  Inc., to 60
                            Wall Street,  New York, N.Y. 10260,  Telecopy Number
                            (212)  648-5151,  Attention:  Transaction  Execution
                            Group;  if to  Goldman,  Sachs  & Co.,  to 85  Broad
                            Street,  New York, New York 10004,  Telecopy  Number
                            (212) 902-0658, Attention: Medium Term Note Trading;
                            if to Banc of America  Securities  LLC, to 100 North
                            Tryon Street, 7th Floor,  Charlotte,  North Carolina
                            28255,  Telecopy Number (704)  388-9939,  Attention:
                            Lynn McConnell;  and if to Banc One Capital Markets,
                            Inc., to 1 Bank One Plaza, Suite IL1-0595,  Chicago,
                            Illinois  60670,  Telecopy  Number  (312)  732-4773,
                            Attention: Evonne W. Taylor. The Issuer shall ensure
                            that the  Presenting  Agent  receives  copies of the
                            Prospectus and each amendment or supplement  thereto
                            (including  appropriate Pricing Supplements) in such
                            quantities  and  within  such  time  limits  as will
                            enable  the   Presenting   Agent  to  deliver   such
                            confirmation  or Note to a purchaser as contemplated
                            by  these  procedures  and in  compliance  with  the
                            preceding sentence. If, since the date of acceptance
                            of a purchaser's  offer,  the Prospectus  shall have
                            been  supplemented  solely  to  reflect  any sale of
                            Notes  on  terms  different  from  those  agreed  to
                            between the Issuer and such purchaser or a change in
                            posted rates not applicable to such purchaser,  such
                            purchaser   shall  not  receive  the  Prospectus  as
                            supplemented  by  such  new  supplement,  but  shall
                            receive the  Prospectus as  supplemented  to reflect
                            the  terms  of the  Notes  being  purchased  by such
                            purchaser and otherwise as most recently  amended or
                            supplemented   on  the  date  of   delivery  of  the
                            Prospectus.

AUTHENTICITY OF SIGNATURES: The  Issuer  will cause the  Trustee to furnish  the
                            Agents   from  time  to  time   with  the   specimen
                            signatures  of  each  of  the  Trustee's   officers,
                            employees or agents who have been  authorized by the
                            Trustee to authenticate  Notes,  but the Agents will
                            have no obligation or liability to the Issuer or the
                            Trustee  in  respect  of  the  authenticity  of  the
                            signature of any  officer,  employee or agent of the
                            Issuer or the Trustee on any Note.

ADVERTISING COST:           The Issuer will determine with the Agents the amount
                            of  advertising  that may be appropriate in offering
                            the Notes.

                                       38
<PAGE>


 BUSINESS DAY:              "BUSINESS  DAY" means any day (other than a Saturday
                            or Sunday) on which banking institutions in The City
                            of New York are open  for  business  (and,  (i) with
                            respect to LIBOR  Notes which is also a day on which
                            dealings in deposits in U.S.  dollars are transacted
                            in  the  London  interbank  market,  and  (ii)  with
                            respect to Notes denominated in a Specified Currency
                            other   than   U.S.   dollars,   on  which   banking
                            institutions  in the principal  financial  center of
                            the country of the  Specified  Currency are open for
                            business).


PART II: ADMINISTRATIVE PROCEDURES FOR GLOBAL NOTE METHOD OF BOOK-ENTRY NOTES

         The following  explains the  administrative  procedures  for the Global
Note method of the DTC book-entry system. Any reference to "Book-Entry Notes" in
this Part II refers to the Global Note method  (for a  discussion  of the Master
Note method of the DTC book-entry system, see Part III below). Certain generally
applicable  administrative  procedures  are  set  forth  in  Part I  above  (See
"Issue/Authentication    Date",   "Price   to   Public",   "Minimum   Purchase",
"Authenticity  of  Signatures",  "Advertising  Cost",  and "Business  Day").  In
connection with the qualification of the Book-Entry Notes for eligibility in the
book-entry  system  maintained  by DTC, the Trustee will perform the  custodial,
document  control and  administrative  functions  described below, in accordance
with its respective obligations under a Letter of Representations (the "LETTER")
from the  Issuer  and the  Trustee  to DTC  dated as of the date  hereof,  and a
Medium-Term  Note  Certificate  Agreement  between  the  Trustee and DTC and its
obligations as a participant in DTC,  including DTC's Same-Day Funds  Settlement
System ("SDFS").  Both Fixed and Floating Rate Notes  denominated and payable in
U.S. dollars may be issued in book-entry form.  Single and  Multi-Indexed  Notes
may also be issued in book-entry form.

ISSUANCE:                   On  any  date  of   settlement   (as  defined  under
                            "Settlement"  below)  for  one  or  more  Book-Entry
                            Notes,   the  Issuer  will  issue  a  single  global
                            security in fully registered form without coupons (a
                            "Global  Note")   representing  up  to  $300,000,000
                            principal  amount  of all such  Notes  that have the
                            same Stated Maturity, redemption provisions, if any,
                            repayment  provisions,   if  any,  Interest  Payment
                            Dates,  Original Issue Date, original issue discount
                            provisions,  if any,  and, in the case of Fixed Rate
                            Notes,  interest  rate,  or in the case of  Floating
                            Rate Notes, interest rate formula,  initial interest
                            rate,   Index   Maturity,   Interest  Reset  Period,
                            Interest  Reset Dates,  Spread or Spread  Multiplier
                            (if any), minimum interest rate (if any) and maximum
                            interest  rate  (if any)  and,  in the case of Fixed
                            Rate  Notes or  Floating  Rate  Notes  that are also
                            Currency Indexed Notes, Specified Currency,  Indexed
                            Currency, Face Amount and Base Exchange Rate and the
                            Base  Interest  Rate, if any,

                                       39
<PAGE>

                            or that are also other Indexed Notes, the same terms
                            (all of the foregoing are  collectively  referred to
                            as the "Terms").  Each Global Note will be dated and
                            issued as of the date of its  authentication  by the
                            Trustee. Each Global Note will bear an "Issue Date",
                            which will be (i) with respect to an original Global
                            Note (or any portion  thereof),  its original  issue
                            date, and (ii) following a  consolidation  of Global
                            Notes,  the most  recent  Interest  Payment  Date to
                            which interest has been paid or duly provided for on
                            the predecessor Global Notes, regardless of the date
                            of authentication of such subsequently issued Global
                            Note.  Each  Book-Entry  Note will be deemed to have
                            been  dated and  issued as of the  settlement  date,
                            which  date shall be the  Original  Issue  Date.  No
                            Global Note will  represent any  Certificated  Note.

IDENTIFICATION
NUMBERS:                    The  Issuer  has  arranged  with the  CUSIP  Service
                            Bureau of Standard & Poor's  Corporation (the "CUSIP
                            Service  Bureau") for the reservation of a series of
                            CUSIP numbers  consisting of approximately 900 CUSIP
                            numbers  relating to Book-Entry  Notes. The Trustee,
                            the  Issuer  and DTC have  obtained  from the  CUSIP
                            Service Bureau a written list of such reserved CUSIP
                            numbers.  The Trustee will assign  CUSIP  numbers to
                            Global  Notes as  described  below under  Settlement
                            Procedure  "B".  DTC will  notify the CUSIP  Service
                            Bureau  periodically  of the CUSIP  numbers that the
                            Trustee has  assigned to Global  Notes.  The Trustee
                            will  notify  the Issuer at any time when fewer than
                            100 of the reserved CUSIP numbers remain  unassigned
                            to Global  Notes,  and, if it deems  necessary,  the
                            Issuer will  reserve  additional  CUSIP  numbers for
                            assignment to Global Notes  representing  Book-Entry
                            Notes. Upon obtaining such additional CUSIP numbers,
                            the Issuer shall  deliver a list of such  additional
                            CUSIP numbers to the Trustee and DTC.

REGISTRATION:               Each  Global  Note  will be  issued  only  in  fully
                            registered  form without  coupons.  Each Global Note
                            will be  registered  in the  name of Cede & Co.,  as
                            nominee   for  DTC,  on  the   Securities   Register
                            maintained under the Indenture. The beneficial owner
                            of a  Book-Entry  Note  (or  one  or  more  indirect
                            participants  in DTC  designated by such owner) will
                            designate  one or  more  participants  in DTC  (with
                            respect to such Note, the  "Participants") to act as
                            agent or agents  for such owner in  connection  with
                            the  book-entry  system

                                       40
<PAGE>

                            maintained by DTC, and DTC will record in book-entry
                            form, in accordance  with  instructions  provided by
                            such Participants,  a credit balance with respect to
                            such Note in the account of such  Participants.  The
                            ownership  interest of such beneficial owner in such
                            Note will be  recorded  through  the records of such
                            Participants or through the separate records of such
                            Participants  and one or more indirect  participants
                            in DTC.

TRANSFERS:                  Transfers of a Book-Entry  Note will be accomplished
                            by  book  entries  made  by DTC  and,  in  turn,  by
                            Participants  (and,  in certain  cases,  one or more
                            indirect  participants  in DTC)  acting on behalf of
                            beneficial transferors and transferees of such Note.

EXCHANGES:                  The Trustee may deliver to DTC and the CUSIP Service
                            Bureau at any time a written notice of consolidation
                            (a copy of which  shall be  attached  to the  Global
                            Note resulting from such  consolidation)  specifying
                            (i)  the  CUSIP  numbers  set  forth  on two or more
                            outstanding  Global Notes that represent  Book-Entry
                            Notes  having the same Terms and for which  interest
                            has  been  paid  to the  same  date,  (ii)  a  date,
                            occurring  at least  thirty days after such  written
                            notice is delivered  and at least thirty days before
                            the next Interest  Payment Date for such  Book-Entry
                            Notes, on which such Global Notes shall be exchanged
                            for a single replacement Global Note and (iii) a new
                            CUSIP  number  to be  assigned  to such  replacement
                            Global Note. Upon receipt of such a notice, DTC will
                            send to its  Participants  (including the Trustee) a
                            written  reorganization  notice to the  effect  that
                            such exchange will occur on such date.  Prior to the
                            specified exchange date, the Trustee will deliver to
                            the CUSIP Service  Bureau a written  notice  setting
                            forth such  exchange  date and the new CUSIP  number
                            and stating  that,  as of such  exchange  date,  the
                            CUSIP  numbers of the Global  Notes to be  exchanged
                            will no longer be valid.  On the specified  exchange
                            date,  the Trustee will  exchange  such Global Notes
                            for a  single  Global  Note  bearing  the new  CUSIP
                            number and a new  Original  Issue Date and the CUSIP
                            numbers  of the  exchanged  Global  Notes  will,  in
                            accordance with CUSIP Service Bureau procedures,  be
                            canceled    and    not    immediately    reassigned.
                            Notwithstanding  the foregoing,  if the Global Notes
                            to be  exchanged  exceed  $300,000,000  in aggregate
                            principal   amount,   one   Global   Note   will  be
                            authenticated   and   issued   to   represent   each
                            $300,000,000  of principal  amount of the  exchanged
                            Global Notes and an

                                       41
<PAGE>

                            additional  Global  Note will be  authenticated  and
                            issued to represent any remaining  principal  amount
                            of such Global Notes (see "Denominations"below).

MATURITIES:                 Each  Book-Entry  Note will mature on a Business Day
                            nine  months  or more from the  settlement  date for
                            such Note.

NOTICE OF
REPAYMENT TERMS:            With  respect  to  each   Book-Entry  Note  that  is
                            repayable  at the option of the  Holder the  Trustee
                            will furnish DTC on the settlement  date  pertaining
                            to such  Book-Entry  Note a notice setting forth the
                            terms of such  repayment  option.  Such terms  shall
                            include  the  start  date and end dates of the first
                            exercise  period,  the purchase date  following such
                            exercise  period,  the frequency  that such exercise
                            periods   occur  (i.e.,   quarterly,   semiannually,
                            annually,  etc.) and if the repayment option expires
                            before  maturity,   the  same  information   (except
                            frequency)  concerning the last exercise period.  It
                            is understood  that the exercise  period shall be at
                            least 15  calendar  days long and that the  purchase
                            date  shall be at least 7  calendar  days  after the
                            last day of the exercise period.

REDEMPTION AND
REPAYMENT:                  The Trustee will comply with the terms of the Letter
                            with regard to  redemptions  and  repayments  of the
                            Notes.  If a Global Note is to be redeemed or repaid
                            in part,  the Trustee will exchange such Global Note
                            for two Global Notes,  one of which shall  represent
                            the  portion of the Global  Note being  redeemed  or
                            repaid  and  shall  be  canceled  immediately  after
                            issuance and the other of which shall  represent the
                            remaining portion of such Global Note and shall bear
                            the CUSIP number of the surrendered Global Note.

DENOMINATIONS:              Book-Entry Notes will be issued in principal amounts
                            of $1,000 or any amount in excess thereof that is an
                            integral  multiple of $1,000.  Global  Notes will be
                            denominated  in  principal  amounts not in excess of
                            $300,000,000. If one or more Book-Entry Notes having
                            an   aggregate   principal   amount   in  excess  of
                            $300,000,000   would,  but  not  for  the  preceding
                            sentence,  be  represented  by a single Global Note,
                            then one  Global  Note will be  issued to  represent
                            each   $300,000,000   principal   amount   of   such
                            Book-Entry  Note or Notes and an  additional  Global
                            Note  will be  issued  to  represent  any  remaining
                            principal

                                       42
<PAGE>

                            amount of such  Book-Entry  Note or Notes. In such a
                            case,  each of the Global  Notes  representing  such
                            Book-Entry  Note or Notes shall be assigned the same
                            CUSIP number.

INTEREST:                   GENERAL. Interest on each Book-Entry Note will begin
                            to accrue from the Original Issue Date of the Global
                            Note  representing such Note or from the most recent
                            date to which  interest  has been paid,  as the case
                            may be, in accordance with the terms of the Note, as
                            described in the  Prospectus  Supplement (as defined
                            in the Agency  Agreement),  as  supplemented  by the
                            applicable  Pricing  Supplement.  Standard  & Poor's
                            Corporation will use the information received in the
                            pending   deposit   message   described   under  the
                            Settlement  Procedure  "C" below in order to include
                            the amount of any interest payable and certain other
                            information regarding the related Global Note in the
                            appropriate weekly bond report published by Standard
                            & Poor's Corporation.

                      NOTICE  OF  INTEREST   PAYMENT  AND  REGULAR RECORD DATES.
                            On the first  Business Day of January,  April,  July
                            and October of each year,  the Trustee  will deliver
                            to the  Issuer  and DTC a  written  list of  Regular
                            Record  Dates and Interest  Payment  Dates that will
                            occur with  respect to  Book-Entry  Notes during the
                            six-month  period  beginning on such first  Business
                            Day. Promptly after each Interest Determination Date
                            or Calculation Date, as applicable (as defined in or
                            pursuant to the  applicable  Note) for Floating Rate
                            Notes,  the Issuer,  upon receiving  notice thereof,
                            will  notify  Standard & Poor's  Corporation  of the
                            interest   rate    determined   on   such   Interest
                            Determination   Date   or   Calculation   Date,   as
                            applicable.

CALCULATION OF
INTEREST:                   Interest on Fixed Rate Book-Entry  Notes  (including
                            interest for partial  periods) and interest rates on
                            Floating Rate Book-Entry Notes will be determined as
                            set  forth in the form of  Notes.  With  respect  to
                            Floating  Rate  Book-Entry  Notes,  the  Calculation
                            Agent shall determine the interest for each Interest
                            Reset Date and communicate such interest rate to the
                            Issuer  and the  Issuer  will  promptly  notify  the
                            Trustee   and  the   Paying   Agent  of  each   such
                            determination.


                                       43
<PAGE>

PAYMENTS OF PRINCIPAL
AND INTEREST:               PAYMENTS  OF  INTEREST  ONLY.  Promptly  after  each
                            Regular Record Date, the Trustee will deliver to the
                            Issuer and DTC a written notice  specifying by CUSIP
                            number  the  amount of  interest  to be paid on each
                            Global Note on the following  Interest  Payment Date
                            (other than an Interest Payment Date coinciding with
                            maturity) and the total of such amounts.  The Issuer
                            will confirm with the Trustee the amount  payable on
                            each Global Note on such Interest  Payment Date. DTC
                            will confirm the amount  payable on each Global Note
                            on such  Interest  Payment  Date by reference to the
                            daily or weekly bond reports published by Standard &
                            Poor's  Corporation.  The  Issuer  will  pay  to the
                            Trustee,  as  paying  agent,  the  total  amount  of
                            interest  due on such  Interest  Payment Date (other
                            than at  maturity),  and the  Trustee  will pay such
                            amount  to DTC at the times  and in the  manner  set
                            forth below under "Manner of Payment".


                            PAYMENTS AT MATURITY. On or about the first Business
                            Day of each month,  the Trustee  will deliver to the
                            Issuer  and  DTC a  written  list of  principal  and
                            interest  to be paid on each  Global  Note  maturing
                            either  at Stated  Maturity  or on a  Redemption  or
                            Repayment Date in the following  month.  The Issuer,
                            the Trustee and DTC will confirm the amounts of such
                            principal and interest payments with respect to each
                            such Global Note on or about the fifth  Business Day
                            preceding  the  maturity  of such Global  Note.  The
                            Issuer will pay to the Trustee, as paying agent, the
                            principal amount of such Global Note,  together with
                            interest due at such maturity.  The Trustee will pay
                            such  amounts  to DTC at the times and in the manner
                            set forth below under "Manner of Payment".  Promptly
                            after  payment to DTC of the  principal and interest
                            due at the maturity of such Global Note, the Trustee
                            will  cancel  and   destroy   such  Global  Note  in
                            accordance  with  the  terms  of the  Indenture  and
                            deliver a certificate of destruction to the Issuer.

                            MANNER OF PAYMENT. The total amount of any principal
                            and  interest  due on Global  Notes on any  Interest
                            Payment  Date or at  maturity  shall  be paid by the
                            Issuer to the Trustee in funds  available for use by
                            the Trustee as of 9:30 A.M. (New York City time), or
                            as soon as practicable  thereafter on such date. The
                            Issuer will confirm  instructions  regarding payment
                            in writing to the Trustee.  Prior

                                       44
<PAGE>

                            to 10:00 A.M.  (New York City time) on each Maturity
                            Date or as soon as  possible  thereafter,  following
                            receipt of such funds from the  Issuer,  the Trustee
                            will pay by separate  wire transfer  (using  Fedwire
                            message  entry  instructions  in a  form  previously
                            specified  by  DTC)  to an  account  at the  Federal
                            Reserve  Bank of New York  previously  specified  by
                            DTC, in funds  available  for  immediate use by DTC,
                            each payment of principal  (together  with  interest
                            thereon) due on Global  Notes on any Maturity  Date.
                            On each  Interest  Payment Date,  interest  payments
                            shall be made to DTC in same-day funds in accordance
                            with existing  arrangements  between the Trustee and
                            DTC. Thereafter, on each such date, DTC will pay, in
                            accordance  with its SDFS operating  procedures then
                            in  effect,  such  amounts  in funds  available  for
                            immediate  use to  the  respective  Participants  in
                            whose names the Book-Entry Notes represented by such
                            Global Notes are recorded in the  book-entry  system
                            maintained  by  DTC.  Neither  the  Issuer  nor  the
                            Trustee  shall  have any  direct  responsibility  or
                            liability   for   the   payment   by  DTC  to   such
                            Participants of the principal of and interest on the
                            Book-Entry Notes.

                            WITHHOLDING  TAXES. The amount of any taxes required
                            under   applicable  law  to  be  withheld  from  any
                            interest  payment  on  a  Book-Entry  Note  will  be
                            determined and withheld by the Participant, indirect
                            participant in DTC or other Person  responsible  for
                            forwarding  payments and  materials  directly to the
                            beneficial owner of such Note.

ACCEPTANCE OF
OFFERS:                     Each Agent will  promptly  advise the Issuer of each
                            reasonable  offer to purchase  Notes received by it,
                            other than those  rejected by such Agent.  The Agent
                            may, in its discretion reasonably exercised, without
                            notice to the Issuer,  reject any offer  received by
                            it, in whole or in part.  The  Issuer  will have the
                            sole right to accept  offers to  purchase  Notes and
                            may reject any such offer,  in whole or in part.  If
                            the  Issuer  rejects  an  offer,   the  Issuer  will
                            promptly notify the applicable Agent.

SETTLEMENT:                 The receipt by the Issuer of  immediately  available
                            funds  in  payment  for a  Book-Entry  Note  and the
                            authentication  and  issuance  of the Global Note or
                            Global Notes representing such Note shall constitute
                            "settlement"  with respect to such Note.  All orders
                            accepted  by the Issuer will be settled on the third
                            Business  Day from the date of the sale

                                       45
<PAGE>

                            pursuant to the timetable for  settlement  set forth
                            below unless the Issuer and the  purchaser  agree to
                            settlement  on another day which shall be no earlier
                            than the next Business Day.

SETTLEMENT
PROCEDURES:                 Settlement Procedures with regard to each Book-Entry
                            Note sold by the  Issuer  through an Agent as agent,
                            shall be as follows:

                       A.   For  each  offer   accepted  by  the   Issuer,   the
                            Presenting  Agent shall  communicate  to the Issuer,
                            Attention:  Treasurer (Fax: (630) 271-5604) who will
                            provide a copy to the  Trustee,  Attention:  Carolyn
                            Potter,  Harris Trust and Savings  Bank (Fax:  (312)
                            461-3525)   by  facsimile   transmission   or  other
                            acceptable means, the information set forth below:

                   1.                Principal amount.

                   2.                Maturity Date of Notes.

                   3.                In the case of a Fixed Rate Book-Entry
                                     Note, the interest rate or, in the case
                                     of a Floating Rate Book-Entry Note, the
                                     interest rate formula, the Initial
                                     Interest Rate (if known at such time),
                                     Index Maturity, Interest Reset Period,
                                     Interest Reset Dates, Spread or Spread
                                     Multiplier (if any), minimum interest
                                     rate (if any) and maximum interest rate
                                     (if any).

                   4.                Interest Payment Period and Interest
                                     Payment Dates.

                   5.                Redemption provisions, if any.

                   6.                Repayment provisions, if any.

                   7.                Settlement date (Original Issue Date).

                   8.                Price to public of the Note (expressed as
                                     a percentage).

                   9.                Agent's commission (to be paid in the
                                     form of a discount from the proceeds
                                     remitted to the Issuer upon settlement).

                                       46
<PAGE>


                   10.               Original issue discount provisions, if
                                     any.
                   11.               In the case of Currency Indexed Notes,
                                     the above-listed information, as
                                     applicable, and the Base Exchange
                                     Rate(s), Base Interest Rate and Indexed
                                     Currencies.

                   12.               In the case of Dual Currency Notes, the
                                     above-listed information, as applicable,
                                     and the Optional Payment Currency,
                                     Designated Exchange Rate and Optional
                                     Election Dates.

                   13.               Net proceeds to the Issuer.

              B.               The Trustee will confirm the information set
                               forth in Settlement Procedure "A" above by
                               telephone with the applicable Agent and the
                               Issuer.

              C.               The Trustee will assign a CUSIP number to the
                               Global Note representing such Note and will
                               telephone the Issuer and advise the Issuer of
                               such CUSIP number.  The Trustee will enter a
                               pending deposit message through DTC's Participant
                               Terminal System, providing the following
                               settlement information to DTC (which shall route
                               such information to Standard & Poor's
                               Corporation) and the Presenting Agent:

                1.                The applicable information set forth in
                                  Settlement Procedure "A".

                2.                Identification as a Fixed Rate Book-Entry
                                  Note or a Floating Rate Book-Entry Note.

                3.                Initial Interest Payment Date for such
                                  Note, number of days by which such date
                                  succeeds the related DTC Record Date
                                  (which, in the case of Floating Rate
                                  Notes which reset daily or weekly shall
                                  be the date five calendar days
                                  immediately preceding the applicable
                                  Interest Payment Date and in the case of
                                  all other Notes

                                       47
<PAGE>

                                  shall be the Regular Record Date as defined in
                                  the Note), the amount of interest payable on
                                  such Interest Payment Date per $1,000
                                  principal amount of Notes at Maturity,
                                  and amount of interest payable per $1,000
                                  principal amount of Notes in the case of
                                  Fixed Rate Notes.

                4.                CUSIP number of the Global Note
                                  representing such Note.

                5.                Whether  such Global  Note will  represent
                                  any other  Book-Entry  Note (to the extent
                                  known at such time).

              D.            To the extent the  Issuer has not  already  done so,
                            the Issuer  will  deliver  to the  Trustee a Pricing
                            Supplement  in a form that has been  approved by the
                            Issuer and the  applicable  Agent.  The Issuer  will
                            also   deliver   to  the   Trustee  a  Global   Note
                            representing such Note.

              E.            The  Trustee  will  complete  and  authenticate  the
                            Global Note representing such Note.

              F.            DTC  will   credit   such  Note  to  the   Trustee's
                            participant account at DTC.

              G.            The Trustee will enter an SDFS deliver order through
                            DTC's Participant Terminal System instructing DTC to
                            (i)  debit  such Note to the  Trustee's  participant
                            account  and  credit  such  Note  to the  applicable
                            Agent's  participant  account  and  (ii)  debit  the
                            applicable Agent's settlement account and credit the
                            Trustee's  settlement account for an amount equal to
                            the price of such Note less such Agent's commission.
                            The entry of such a deliver order shall constitute a
                            representation  and  warranty  by the Trustee to DTC
                            that  (i)  the   Global   Note   representing   such
                            Book-Entry  Note has been  executed,  delivered  and
                            authenticated  and (ii) the Trustee is holding  such
                            Global  Note  pursuant to the  relevant  Medium-Term
                            Note Certificate  Agreement  between the Trustee and
                            DTC.


                                       48
<PAGE>

              H.            The  applicable  Agent  will  enter an SDFS  deliver
                            order  through  DTC's  Participant  Terminal  System
                            instructing  DTC  (i) to  debit  such  Note  to such
                            Agent's  participant account and credit such Note to
                            the participant  accounts of the  Participants  with
                            respect   to  such   Note  and  (ii)  to  debit  the
                            settlement  accounts of such Participants and credit
                            the  settlement  account of such Agent for an amount
                            equal to the price of such Note.

              I.            Transfers of funds in  accordance  with SDFS deliver
                            orders  described in Settlement  Procedures  "G" and
                            "H"  will  be  settled  in   accordance   with  SDFS
                            operating  procedures  in effect  on the  settlement
                            date.

              J.            The Trustee,  upon confirming  receipt of such funds
                            in accordance  with  Settlement  Procedure "G", will
                            wire   transfer   to  the   account  of  the  Issuer
                            maintained  at Bank  One,  N.A.,  1 Bank One  Plaza,
                            Chicago,  Illinois 60670, (312) 732-2100, ABA Number
                            071000013,   Account  Number   51-24093,   in  funds
                            available for immediate use, the amount  transferred
                            to  the  Trustee  in  accordance   with   Settlement
                            Procedure "G".

              K.            The Agent will  confirm the purchase of such Note to
                            the  purchaser   either  by   transmitting   to  the
                            Participants   with   respect   to   such   Note   a
                            confirmation   order   or   orders   through   DTC's
                            institutional   delivery  system  or  by  mailing  a
                            written confirmation to such purchaser.

SETTLEMENT PROCEDURES
TIMETABLE:                  For  orders  of  Book-Entry  Notes  solicited  by an
                            Agent,  as agent,  and  accepted  by the  Issuer for
                            settlement on the first  Business Day after the sale
                            date,  Settlement  Procedures  "A"  through  "K" set
                            forth above shall be  completed  as soon as possible
                            but not later  than the  respective  times (New York
                            City time) set forth below:


                                       49
<PAGE>


                     SETTLEMENT PROCEDURE               TIME

                             A                 11:00 a.m. on the sale date
                             B                 12:00 noon on the sale date
                             C                 2:00 p.m. on the sale date
                             D                 3:00 p.m. on the day before
                                                            settlement
                             E                 9:00 a.m. on settlement date
                             F                 10:00 a.m. on settlement date
                             G-H               2:00 p.m. on settlement date
                             I                 4:45 p.m. on settlement date
                             J-K               5:00 p.m. on settlement date

                            If a sale is to be settled two  Business  Days after
                            the sale date,  Settlement  Procedures  "A", "B" and
                            "C" shall be  completed as soon as  practicable  but
                            not later than 11:00 a.m., 12:00 noon and 2:00 p.m.,
                            as the case may be, on the first  Business Day after
                            the sale date.

                            If a sale is to be  settled  more than two  Business
                            Days after the sale date,  Settlement  Procedure "A"
                            shall be  completed  as soon as  practicable  but no
                            later  than  11:00 a.m.  on the first  Business  Day
                            after the sale date and  Settlement  Procedures  "B"
                            and "C" shall be  completed  as soon as  practicable
                            but no later than  12:00 noon and 2:00 p.m.,  as the
                            case may be, on the second  Business  Day before the
                            settlement  date. If the initial interest rate for a
                            Floating   Rate   Book-Entry   Note   has  not  been
                            determined at the time that Settlement Procedure "A"
                            is  completed,  Settlement  Procedures  "B"  and "C"
                            shall  be  completed  as soon as such  rate has been
                            determined  but not later  than  12:00 noon and 2:00
                            p.m.,  respectively,  on the Business Day before the
                            settlement date. Settlement Procedure "I" is subject
                            to extension  in  accordance  with any  extension of
                            Fedwire  closing  deadlines  and in the other events
                            specified in the SDFS operating procedures in effect
                            on the settlement date.

                            If settlement of a Book-Entry Note is rescheduled or
                            canceled,  the Trustee,  upon receipt of notice from
                            the  Issuer,  will  deliver  to DTC,  through  DTC's
                            Participant  Terminal System, a cancellation message
                            to such  effect by no later  than  2:00 p.m.  on the
                            Business Day  immediately  preceding  the  scheduled
                            settlement date.


                                       50
<PAGE>


FAILURE TO SETTLE:          If the applicable Agent or Trustee fails to enter an
                            SDFS deliver order with respect to a Book-Entry Note
                            pursuant to  Settlement  Procedure  "G", the Trustee
                            may  deliver  to  DTC,  through  DTC's   Participant
                            Terminal   System,   as  soon  as   practicable,   a
                            withdrawal  message  instructing  DTC to debit  such
                            Note to the Trustee's  participant account. DTC will
                            process the  withdrawal  message,  provided that the
                            Trustee's  participant  account contains a principal
                            amount of the  Global  Note  representing  such Note
                            that is at least equal to the principal amount to be
                            debited.  If a withdrawal  message is processed with
                            respect to all the Book-Entry Notes represented by a
                            Global Note,  the Trustee will mark such Global Note
                            "canceled",  make appropriate entries in its records
                            and send such  canceled  Global  Note to the Issuer.
                            The CUSIP number assigned to such Global Note shall,
                            in accordance with CUSIP Service Bureau  procedures,
                            be canceled  and not  immediately  reassigned.  If a
                            withdrawal  message is processed with respect to one
                            or  more,  but  not  all,  of the  Book-Entry  Notes
                            represented  by a  Global  Note,  the  Trustee  will
                            exchange such Global Note for two Global Notes,  one
                            of which shall  represent  such  Book-Entry  Note or
                            Notes  and  shall  be  canceled   immediately  after
                            issuance and the other of which shall  represent the
                            remaining Book-Entry Notes previously represented by
                            the surrendered Global Note and shall bear the CUSIP
                            number of the surrendered Global Note.

                            If the purchase price for any Book-Entry Note is not
                            timely paid to the Participants with respect to such
                            Note  by  the  beneficial  purchaser  thereof  (or a
                            person,  including an indirect  participant  in DTC,
                            acting   on   behalf   of  such   purchaser),   such
                            Participants  and, in turn, the Presenting Agent may
                            enter SDFS deliver orders through DTC's  Participant
                            Terminal   System   reversing  the  orders   entered
                            pursuant  to  Settlement  Procedures  "G"  and  "H",
                            respectively.  Thereafter,  the Trustee will deliver
                            the  withdrawal  message  and  take  the  applicable
                            related   actions   described   in   the   preceding
                            paragraph.  If such failure  shall have occurred for
                            any reason other than the failure of the  Presenting
                            Agent to provide  the  Purchase  Information  to the
                            Issuer  or  to   provide  a   confirmation   to  the
                            purchaser,  the Issuer will reimburse the Presenting
                            Agent on an equitable  basis for its loss of the use
                            of funds  during the period when they were  credited
                            to the account of the Issuer.


                                       51
<PAGE>


                            Notwithstanding  the foregoing,  upon any failure to
                            settle with  respect to a Book-Entry  Note,  DTC may
                            take  any  actions  in  accordance   with  its  SDFS
                            operating procedures then in effect. In the event of
                            a failure to settle with respect to one or more, but
                            not  all,  of the  Book-Entry  Notes  to  have  been
                            represented  by a  Global  Note,  the  Trustee  will
                            provide,  in accordance with  Settlement  Procedures
                            "D" and "E", for the  authentication and issuance of
                            a Global  Note  representing  the  other  Book-Entry
                            Notes to have been  represented  by such Global Note
                            and will make appropriate entries in its records.

PROCEDURE FOR RATE
CHANGES:                    The Issuer and the Agents will  discuss from time to
                            time the price of,  and the rates to be borne by the
                            Notes   that  may  be  sold  as  a  result   of  the
                            solicitation of offers by the Agents.  Once an Agent
                            has  recorded  any  indication  of interest in Notes
                            upon  certain  terms,  and  communicated   with  the
                            Issuer,  if the  Issuer  plans to accept an offer to
                            purchase  Notes upon such terms,  it will  prepare a
                            Pricing  Supplement  to  the  Prospectus,   as  then
                            amended  or  supplemented,  reflecting  the terms of
                            such Notes and will arrange to transmit such Pricing
                            Supplement   to  the   Commission   for   filing  in
                            accordance  with and within the time  prescribed  by
                            the  applicable  paragraph  of Rule 424(b) under the
                            Act.  The Issuer  will supply at least two copies of
                            the Prospectus as then amended or supplemented,  and
                            bearing such Pricing  Supplement,  to the Presenting
                            Agent.  No  settlements  with  respect to Notes upon
                            such terms may occur prior to such  transmitting and
                            the  Presenting   Agent  will  not,  prior  to  such
                            transmitting,  mail  confirmations  to customers who
                            have,  offered to  purchase  Notes upon such  terms.
                            After   such   transmitting,   sales,   mailing   of
                            confirmations and settlements may occur with respect
                            to Notes upon such terms,  subject to the provisions
                            of "Delivery of Prospectus" below.

                            Outdated  Stickers,  and copies of the Prospectus to
                            which they are attached  (other than those  retained
                            for files), will be destroyed.


                                       52
<PAGE>


SUSPENSION OF SOLICITATION;
AMENDMENT OR
SUPPLEMENT:                 As provided in the Agency Agreement,  the Issuer may
                            suspend  solicitation of purchases at any time, and,
                            upon  receipt of notice from the Issuer,  the Agents
                            will as  promptly  as  practicable,  but in no event
                            later than one Business Day  following  such notice,
                            suspend  solicitation  until such time as the Issuer
                            has advised them that  solicitation of purchases may
                            be resumed.

                            If an Agent  receives  the  notice  from the  Issuer
                            contemplated   by   Section   2(a)  of  the   Agency
                            Agreement,  they will promptly suspend  solicitation
                            and will only resume solicitation as provided in the
                            Agency Agreement.  If the Issuer decides to amend or
                            supplement   the   Registration   Statement  or  the
                            Prospectus  relating to the Notes,  it will promptly
                            advise the Agents and will  furnish  the Agents with
                            the proposed  amendment or  supplement in accordance
                            with the terms of the Agency  Agreement.  The Issuer
                            will  promptly  file or mail to the  Commission  for
                            filing such  amendment  or  supplement,  provide the
                            Agents  with  copies  of  any  such   amendment   or
                            supplement,   confirm  to  the   Agents   that  such
                            amendment  or  supplement  has been  filed  with the
                            Commission  and advise the Agents that  solicitation
                            may be resumed. Any such suspension shall not affect
                            the Issuer's obligations under the Agency Agreement;
                            and  in  the  event  that  at the  time  the  Issuer
                            suspends  solicitation  of purchases  there shall be
                            any   offers   already   accepted   by  the   Issuer
                            outstanding for settlement, the Issuer will have the
                            sole responsibility for fulfilling such obligations;
                            the applicable Agent will make reasonable efforts to
                            assist the Issuer to fulfill such  obligations,  but
                            the  applicable  Agent  will  not  be  obligated  to
                            fulfill  such   obligations.   The  Issuer  will  in
                            addition  promptly  advise the applicable  Agent and
                            the Trustee if such offers are not to be settled and
                            if copies of the Prospectus as in effect at the time
                            of the suspension may not be delivered in connection
                            with the settlement of such offers.

DELIVERY OF PROSPECTUS:     A copy of the Prospectus,  as most recently  amended
                            or  supplemented  on the  date of  delivery  thereof
                            (except as provided  below),  must be delivered to a
                            purchaser  prior to or together  with the earlier of
                            delivery  of (i) the written  confirmation  provided
                            for  above,  and  (ii) any  Note  purchased  by such
                            purchaser  at  the  following

                                       53
<PAGE>

                            address:  if to J.P. Morgan  Securities  Inc., to 60
                            Wall Street,  New York, N.Y. 10260,  Telecopy Number
                            (212)  648-5151,  Attention:  Transaction  Execution
                            Group;  if to  Goldman,  Sachs  & Co.,  to 85  Broad
                            Street,  New York, New York 10004,  Telecopy  Number
                            (212) 902-0658, Attention: Medium Term Note Trading;
                            if to Banc of America  Securities  LLC, to 100 North
                            Tryon Street, 7th Floor,  Charlotte,  North Carolina
                            28255,  Telecopy Number (704)  388-9939,  Attention:
                            Lynn McConnell;  and if to Banc One Capital Markets,
                            Inc., to 1 Bank One Plaza, Suite IL1-0595,  Chicago,
                            Illinois  60670,  Telecopy  Number  (312)  732-4773,
                            Attention: Evonne W. Taylor. The Issuer shall ensure
                            that the  Presenting  Agent  receives  copies of the
                            Prospectus and each amendment or supplement  thereto
                            (including  appropriate Pricing Supplements) in such
                            quantities  and  within  such  time  limits  as will
                            enable  the   Presenting   Agent  to  deliver   such
                            confirmation  or Note to a purchaser as contemplated
                            by  these  procedures  and in  compliance  with  the
                            preceding sentence. If, since the date of acceptance
                            of a purchaser's  offer,  the Prospectus  shall have
                            been  supplemented  solely  to  reflect  any sale of
                            Notes  on  terms  different  from  those  agreed  to
                            between the Issuer and such purchaser or a change in
                            posted rates not applicable to such purchaser,  such
                            purchaser   shall  not  receive  the  Prospectus  as
                            supplemented  by  such  new  supplement,  but  shall
                            receive the  Prospectus as  supplemented  to reflect
                            the  terms  of the  Notes  being  purchased  by such
                            purchaser and otherwise as most recently  amended or
                            supplemented   on  the  date  of   delivery  of  the
                            Prospectus.


PART III:  ADMINISTRATIVE PROCEDURES FOR MASTER NOTE METHOD OF BOOK-ENTRY NOTES

         The following  explains the  administrative  procedures  for the Master
Note method of the DTC book-entry system. Any reference to "Book-Entry Notes" in
this Part III refers to the Master Note method (for a  discussion  of the Global
Note method of the book-entry  system,  see Part II above).  (Certain  generally
applicable  administrative  procedures are set forth in Part I above See "Issue/
Authentication  Date", "Price to Public",  "Minimum Purchase",  "Authenticity of
Signatures",  "Advertising  Cost",  and "Business  Day"). In connection with the
qualification of the Book-Entry  Notes for eligibility in the book-entry  system
maintained by DTC, the Trustee will perform the custodial,  document control and
administrative  functions  described  below,  in accordance  with its respective
obligations under a Letter of Representations (the "Letter") from the Issuer and
the  Trustee  to DTC  dated  as of  the  date  hereof,  and a  Medium-Term  Note
Certificate  Agreement  between  the Trustee  and DTC and its

                                       54
<PAGE>

obligations as a participant in DTC,  including DTC's Same-Day Funds  Settlement
System ("SDFS").  Both Fixed and Floating Rate Notes  denominated and payable in
U.S. dollars may be issued in book-entry form.  Single and  Multi-Indexed  Notes
may also be issued in book-entry form.

ISSUANCE:                   On or  before  any date of  settlement  (as  defined
                            under "Settlement" below) for one or more Book-Entry
                            Notes  represented by one or more Master Notes,  the
                            Issuer will deliver one or more Pricing  Supplements
                            (with  a  Prospectus  and  a  Prospectus  Supplement
                            attached thereto unless previously  delivered to the
                            Trustee)  to the Trustee  identifying  each issue of
                            Book-Entry Notes that have the same Stated Maturity,
                            redemption  provisions,  if  any,  Interest  Payment
                            Dates,  Original Issue Date, original issue discount
                            provisions,  if any,  and, in the case of Fixed Rate
                            Notes,  interest  rate, or, in case of Floating Rate
                            Notes, interest rate formula, initial interest rate,
                            Index  Maturity,  Interest  Reset  Period,  Interest
                            Reset Dates,  Spread or Spread  Multiplier (if any),
                            minimum  interest rate (if any) and maximum interest
                            rate (if any) and,  in the case of Fixed  Rate Notes
                            or  Floating  Rate  Notes  that  are  also  Currency
                            Indexed Notes, Specified Currency, Indexed Currency,
                            Face  Amount  and  Base  Exchange  Rate and the Base
                            Interest  Rate,  if any,  or  that  are  also  Other
                            Indexed Notes,  the same terms (all of the foregoing
                            are collectively  referred to as the "Terms").  Each
                            Pricing  Supplement shall be accompanied by a letter
                            from the Issuer (i)  advising the Trustee that as of
                            the date of such letter, the Issuer has issued Notes
                            pursuant to the Indenture having the Terms specified
                            in such Pricing  Supplement,  (ii)  confirming  that
                            such  Notes  are  debt  obligations  of  the  Issuer
                            referred  to  and   evidenced  by  the  Master  Note
                            registered in the name of Cede & Co., as nominee for
                            DTC and  (iii)  requesting  the  Trustee  to make an
                            appropriate  entry identifying such debt obligations
                            on the  records  of  the  Issuer  maintained  by the
                            Trustee. Each Book-Entry Note will be deemed to have
                            been  dated and  issued as of the  settlement  date,
                            which  date shall be the  Original  Issue  Date.  No
                            Master Note will represent any Certificated Note.

IDENTIFICATION
NUMBERS:                    The  Issuer  has  arranged  with the  CUSIP  Service
                            Bureau of Standard & Poor's  Corporation (the "CUSIP
                            Service  Bureau") for the reservation of a series of
                            CUSIP numbers, consisting of approximately 900 CUSIP
                            numbers  relating to

                                       55
<PAGE>

                            Book-Entry  Notes.  The Trustee,  the Issuer and DTC
                            have  obtained  from  the  CUSIP  Service  Bureau  a
                            written list of such  reserved  CUSIP  numbers.  The
                            Trustee will assign  CUSIP  numbers to each issue of
                            Book-Entry Notes identified by a Pricing  Supplement
                            as described below under  Settlement  Procedure "B".
                            DTC   will   notify   the   CUSIP   Service   Bureau
                            periodically  of the CUSIP  numbers that the Trustee
                            has assigned to each issue of Book-Entry  Notes. The
                            Trustee  will  notify  the  Issuer  at any time when
                            fewer than 100 of the reserved  CUSIP numbers remain
                            unassigned to issues of Book-Entry Notes, and, if it
                            deems necessary,  the Issuer will reserve additional
                            CUSIP numbers for assignment to issues of Book-Entry
                            Notes. Upon obtaining such additional CUSIP numbers,
                            the Issuer shall  deliver a list of such  additional
                            CUSIP numbers to the Trustee and DTC.

REGISTRATION:               The Master Note  representing  the Book-Entry  Notes
                            will be issued only in fully registered form without
                            coupons.  The Master Note will be  registered in the
                            name of  Cede & Co.,  as  nominee  for  DTC,  on the
                            Securities  Register maintained under the Indenture.
                            The beneficial owner of a Book-Entry Note (or one or
                            more indirect participants in DTC designated by such
                            owner)   will   designate   one   or   more   direct
                            participants in DTC (with respect to such Book-Entry
                            Note, the  "Participants") to act as agent or agents
                            for such  owner in  connection  with the  book-entry
                            system  maintained  by DTC,  and DTC will  record in
                            book-entry  form,  in accordance  with  instructions
                            provided by such Participants, a credit balance with
                            respect  to  such  Note  in  the   account  of  such
                            Participants.   The   ownership   interest  of  such
                            beneficial  owner in such  Book-Entry  Note  will be
                            recorded through the records of such Participants or
                            through the  separate  records of such  Participants
                            and one or more indirect participants in DTC.



TRANSFERS:                  Transfers of a Book-Entry  Note will be accomplished
                            by  book  entries  made  by DTC  and,  in  turn,  by
                            Participants  (and  in  certain  cases,  one or more
                            indirect  participants  in DTC)  acting on behalf of
                            beneficial transferors and transferees of such Note.


                                       56
<PAGE>

EXCHANGES:                  The Trustee may deliver to DTC and the CUSIP Service
                            Bureau at any time a written notice of consolidation
                            specifying (i) the CUSIP numbers set forth on two or
                            more Pricing  Supplements  that  identify  issues of
                            Book-Entry Notes having the same Terms and for which
                            interest  has  been  paid to the same  date,  (ii) a
                            date,  occurring  at least  thirty  days  after such
                            written notice is delivered and at least thirty days
                            before  the  next  Interest  Payment  Date  for such
                            issues  of  Book-Entry  Notes  and (iii) a new CUSIP
                            number to be assigned  to such issues of  Book-Entry
                            Notes having the same Terms.  Upon receipt of such a
                            notice, DTC will send to its Participants (including
                            the Trustee) a written  reorganization notice to the
                            effect that such  exchange  will occur on such date.
                            Prior to the specified  exchange  date,  the Trustee
                            will deliver to the CUSIP  Service  Bureau a written
                            notice  setting forth such exchange date and the new
                            CUSIP number and stating  that,  as of such exchange
                            date,  the CUSIP  numbers of the relevant  issues of
                            Book-Entry  Notes  will no longer  be valid.  On the
                            specified  exchange  date,  the CUSIP numbers of the
                            relevant   issues  of  Book-Entry   Notes  will,  in
                            accordance with the CUSIP Service Bureau procedures,
                            be canceled and not immediately reassigned.

MATURITIES:                 Each  issue of  Book-Entry  Notes  will  mature on a
                            Business  Day 9 months or more  from the  settlement
                            date for such issue of Book Entry Notes.

NOTICE OF
REPAYMENT:                  With  respect  to  each   Book-Entry  Note  that  is
                            repayable  at the option of the  Holder the  Trustee
                            will furnish DTC on the settlement  date  pertaining
                            to such  Book-Entry  Note a notice setting forth the
                            terms of such  repayment  option.  Such terms  shall
                            include  the  start  date and end dates of the first
                            exercise  period,  the purchase date  following such
                            exercise  period,  the frequency  that such exercise
                            periods   occur  (i.e.,   quarterly,   semiannually,
                            annually,  etc.) and if the repayment option expires
                            before  maturity,   the  same  information   (except
                            frequency)  concerning the last exercise period.  It
                            is understood  that the exercise  period shall be at
                            least 15  calendar  days long and that the  purchase
                            date  shall be at least 7  calendar  days  after the
                            last day of the exercise period.


                                       57
<PAGE>

REDEMPTION AND
REPAYMENT:                  The Trustee will comply with the terms of the Letter
                            with regard to  redemptions  and  repayments  of the
                            Notes.  If an  issue  of  Book-Entry  Notes is to be
                            redeemed or repaid in part,  the  Trustee  will make
                            appropriate  entries in its  records to reflect  the
                            remaining portion of such issue of Book Entry Notes,
                            which  portion  shall bear the same CUSIP  number as
                            prior to the  redemption or  repayment,  as the case
                            may be.

DENOMINATIONS:              Book-Entry Notes will be issued in principal amounts
                            of $1,000 or any amount in excess thereof that is an
                            integral multiple of $1,000.

INTEREST:                   GENERAL. Interest on each Book-Entry Note will begin
                            to accrue from the  Original  Issue Date of an issue
                            of Book-Entry  Notes or from the most recent date to
                            which  interest  has been paid,  as the case may be,
                            and  will  be  calculated  and  paid  in the  manner
                            described in the  Prospectus  Supplement (as defined
                            in the Agency  Agreement),  as  supplemented  by the
                            applicable  Pricing  Supplement.  Standard  & Poor's
                            Corporation will use the information received in the
                            pending deposit message  described under  Settlement
                            Procedure  "C" below in order to include  the amount
                            of  any   interest   payable   and   certain   other
                            information   regarding   the   related   issue   of
                            Book-Entry  Notes  in the  appropriate  weekly  bond
                            report published by Standard & Poor's Corporation.

                            NOTICE OF INTEREST PAYMENT AND REGULAR RECORD DATES.
                            On the first  Business Day of January,  April,  July
                            and October of each year,  the Trustee  will deliver
                            to the  Issuer  and DTC a  written  list of  Regular
                            Record  Dates and Interest  Payment  Dates that will
                            occur with  respect to  Book-Entry  Notes during the
                            six-month  period  beginning on such first  Business
                            Day. Promptly after each Interest Determination Date
                            or Calculation  Date, as applicable (as set forth in
                            the Prospectus  Supplement,  as  supplemented by the
                            applicable Pricing  Supplement,  and pursuant to the
                            applicable   Note)  for  Floating  Rate  Notes,  the
                            Issuer,  upon receiving notice thereof,  will notify
                            Standard & Poor's  Corporation  of the interest rate
                            determined  on such Interest  Determination  Date or
                            Calculation Date, as applicable.


                                       58
<PAGE>

CALCULATION OF INTEREST:    Interest on Fixed Rate Book-Entry  Notes  (including
                            interest for partial  periods) and interest rates on
                            Floating Rate Book-Entry Notes will be determined as
                            set   forth  in  the   Prospectus   Supplement,   as
                            supplemented by the applicable  Pricing  Supplement,
                            and pursuant to the applicable Note. With respect to
                            Floating  Rate  Book-Entry  Notes,  the  Calculation
                            Agent shall determine the interest for each Interest
                            Reset Date and communicate such interest rate to the
                            Issuer  and the  Issuer  will  promptly  notify  the
                            Trustee   and  the   Paying   Agent  of  each   such
                            determination.

PAYMENTS OF PRINCIPAL
AND INTEREST                PAYMENTS  OF  INTEREST  ONLY.  Promptly  after  each
                            Regular Record Date, the Trustee will deliver to the
                            Issuer and DTC a written notice  specifying by CUSIP
                            number  the  amount of  interest  to be paid on each
                            issue of Book-Entry Notes on the following  Interest
                            Payment  Date (other than an Interest  Payment  Date
                            coinciding  with  Maturity)  and the  total  of such
                            amounts.  The Issuer will  confirm  with the Trustee
                            the amount payable on each issue of Book-Entry Notes
                            on such Interest  Payment Date. DTC will confirm the
                            amount payable on each issue of Book-Entry  Notes on
                            such Interest Payment Date by reference to the daily
                            or weekly  bond  reports  published  by  Standard  &
                            Poor's  Corporation.  The  Issuer  will  pay  to the
                            Trustee,  as  paying  agent,  the  total  amount  of
                            interest  due on such  Interest  Payment Date (other
                            than the  maturity),  and the Trustee  will pay such
                            amount  to DTC at the times  and in the  manner  set
                            forth below under "Manner of Payment".

                            PAYMENTS AT MATURITY: On or about the first Business
                            Day of each month,  the Trustee  will deliver to the
                            Issuer  and  DTC a  written  list of  principal  and
                            interest  to be  paid on each  issue  of  Book-Entry
                            Notes  represented by a single CUSIP number maturing
                            either  at Stated  Maturity  or on a  Redemption  or
                            Repayment Date in the following  month.  The Issuer,
                            the Trustee and DTC will confirm the amounts of such
                            principal and interest payments with respect to each
                            such issue of Book-Entry Notes on or about the fifth
                            Business Day preceding the maturity of such issue of
                            Book-Entry   Notes.  The  Issuer  will  pay  to  the
                            Trustee,  as paying agent,  the principal  amount of
                            each  issue  of  Book-Entry  Notes  identified  by a
                            single CUSIP  number,  together with interest due at
                            such maturity.  The Trustee will pay such amounts to
                            DTC at the times and in the manner  set forth

                                       59
<PAGE>

                            below  under  "Manner of  Payment".  Promptly  after
                            payment to DTC of the  principal and interest due at
                            maturity  of each  issue of  Book-Entry  Notes,  the
                            Trustee  will  reduce  the  principal  amount of the
                            Master  Note  representing  the issue of  Book-Entry
                            Notes and so advise the Issuer.

                            MANNER OF PAYMENT. The total amount of any principal
                            and interest due on each issue of  Book-Entry  Notes
                            identified  by a single CUSIP number on any Interest
                            Payment  Date or at  maturity  shall  be paid by the
                            Issuer to the Trustee in funds  available for use by
                            the Trustee as of 9:30 a.m. (New York City time), or
                            as soon as practicable  thereafter on such date. The
                            Issuer will confirm  instructions  regarding payment
                            in writing to the Trustee.  Prior to 10:00 a.m. (New
                            York City time) on each  Maturity Date or as soon as
                            possible thereafter, following receipt of such funds
                            from the Issuer,  the  Trustee  will pay by separate
                            wire   transfer   (using   Fedwire   message   entry
                            instructions in a form previously  specified by DTC)
                            to an account  at the  Federal  Reserve  Bank of New
                            York previously specified by DTC, in funds available
                            for  immediate use by DTC, each payment of principal
                            (together  with interest  thereon) due on each issue
                            of  Book-Entry  Notes on any Maturity  Date. On each
                            Interest  Payment Date,  interest  payments shall be
                            made to DTC in  same-day  funds in  accordance  with
                            existing  arrangements  between the Trustee and DTC.
                            Thereafter,  on each such  date,  DTC will  pay,  in
                            accordance  with its SDFS operating  procedures then
                            in  effect,  such  amounts  in funds  available  for
                            immediate  use to  the  respective  Participants  in
                            whose names the Book-Entry Notes  represented by the
                            Master Note are  recorded in the  book-entry  system
                            maintained  by  DTC.  Neither  the  Issuer  nor  the
                            Trustee  shall  have any  direct  responsibility  or
                            liability   for   the   payment   by  DTC  to   such
                            Participants of the principal of and interest on the
                            Book-Entry Notes.

                            WITHHOLDING  TAXES. The amount of any taxes required
                            under   applicable  law  to  be  withheld  from  any
                            interest  payment  on  a  Book-Entry  Note  will  be
                            determined and withheld by the Participant, indirect
                            participant in DTC or other Person  responsible  for
                            forwarding  payments and  materials  directly to the
                            beneficial owner of such Note.

                                       61
<PAGE>

ACCEPTANCE OF
OFFERS:                     Each Agent will  promptly  advise the Issuer of each
                            reasonable  offer to purchase  Notes received by it,
                            other than those  rejected by each Agent.  The Agent
                            may, in its discretion reasonably exercised, without
                            notice to the Issuer,  reject any offer  received by
                            it, in whole or in part.  The  Issuer  will have the
                            sole right to accept  offers to  purchase  Notes and
                            may reject any such offer,  in whole or in part.  If
                            the  Issuer  rejects  an  offer,   the  Issuer  will
                            promptly  notify the applicable  Agent.  SETTLEMENT:
                            The receipt by the Issuer of  immediately  available
                            funds in payment for a  Book-Entry  Note and receipt
                            by  the  Trustee  of a  properly  completed  Pricing
                            Supplement   shall  constitute   "settlement"   with
                            respect to such Book-Entry Note. All orders accepted
                            by the Issuer will be settled on the third  Business
                            Day from the date of sale  pursuant to the timetable
                            for settlement set forth below unless the Issuer and
                            the  purchaser  agree to  settlement  on another day
                            which  shall be no  earlier  than the next  Business
                            Day.

SETTLEMENT PROCEDURES:      Settlement Procedures with regard to each Book-Entry
                            Note sold by the  Issuer  through an Agent as agent,
                            shall be as follows:

                   A.       For  each  offer   accepted  by  the   Issuer,   the
                            Presenting  Agent shall  communicate  to the Issuer,
                            Attention:  Treasurer (Fax: (630) 271-5604) who will
                            provide a copy to the  Trustee,  Attention:  Carolyn
                            Potter,  Harris Trust and Savings  Bank (Fax:  (312)
                            461-3525)   by  facsimile   transmission   or  other
                            acceptable means, the information set forth below:

                           1.         Principal amount.

                           2.         Maturity Date of Notes.


                           3.         In the case of a Fixed Rate Book-Entry
                                      Note, the interest rate or, in the case
                                      of a Floating Rate Book-Entry Note, the
                                      interest rate formula, the Initial
                                      Interest Rate (if known at such time),
                                      Index Maturity, Interest Reset Period,
                                      Interest Reset Dates, Spread or Spread
                                      Multiplier (if any), minimum interest
                                      rate (if any) and maximum interest rate
                                      (if any).

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<PAGE>

                           4.         Interest Payment Period and Interest
                                      Payment Dates.

                           5.         Redemption provisions, if any.

                           6.         Repayment provisions, if any.

                           7.         Settlement date (Original Issue  Date).

                           8.         Price to public of the Note  (expressed
                                      as a percentage).

                           9.         The Agent's commission (to be paid in the
                                      form of a discount from the proceeds
                                      remitted to the Issuer upon settlement).

                           10.        Original issue discount provisions, if
                                      any.

                           11.        In the case of Currency Indexed Notes,
                                      the above-listed information, as
                                      applicable, and the Base Exchange
                                      Rate(s), Base Interest Rate and Indexed
                                      Currencies.

                           12.        In the case of Dual Currency Notes, the
                                      above-listed information, as applicable,
                                      and the Optional Payment Currency,
                                      Designated Exchange Rate and Optional
                                      Election Dates.

                           13.        Net proceeds to the Issuer.


                   B.       The Trustee will confirm the  information  set forth
                            in Settlement  Procedure  "A" by telephone  with the
                            Agent and the Issuer.

                   C.       The Trustee  will assign a CUSIP number to the issue
                            of Book Entry  Notes and will  telephone  the Issuer
                            and  notify the  Issuer of such  CUSIP  number.  The
                            Trustee will enter a pending deposit message through
                            DTC's  Participant  Terminal  System,  providing the
                            following settlement information to DTC (which shall
                            route  such   information   to   Standard  &  Poor's
                            Corporation) and the Presenting Agent:


                                       63
<PAGE>


                           1.        The applicable information set forth in
                                     Settlement Procedure "A".

                           2.        Identification as a Fixed Rate Book-Entry
                                     Note or a Floating Rate Book-Entry Note.

                           3.        Initial Interest Payment Date for each
                                     issue of Book-Entry Notes, number of days
                                     by which such date succeeds the related
                                     DTC Record Date (which, in the case of
                                     Floating Rate Notes which reset daily or
                                     weekly shall be the date five calendar
                                     days immediately preceding the applicable
                                     Interest Payment Date and in the case of
                                     all other Notes shall be the Regular
                                     Record Date as defined in the Prospectus
                                     Supplement), the amount of interest
                                     payable on such Interest Payment Date per
                                     $1,000 principal amount of Notes at
                                     Maturity, and amount of interest payable
                                     per $1,000 principal amount of Notes in
                                     the case of Fixed Rate Notes.

                           4.        CUSIP number of such issue of Book-Entry
                                     Notes.

                           5.        Whether such CUSIP number will identify
                                     any other issue of Book-Entry Notes (to
                                     the extent known at such time).

                   D.       To the extent the  Issuer has not  already  done so,
                            the Issuer  will  deliver  to the  Trustee a Pricing
                            Supplement  in a form that has been  approved by the
                            Issuer  and  the  applicable   Agent  and  a  letter
                            advising of the relevant issuance.

                   E.       DTC  will  credit  such  Book-Entry   Notes  to  the
                            Trustee's participant account at DTC.

                   F.       The Trustee will enter an SDFS deliver order through
                            DTC's Participant Terminal System instructing DTC to
                            (i) debit  such  Book-Entry  Notes to the  Trustee's
                            participant account and credit such Book-Entry Notes
                            to the applicable  Agent's  participant  account and
                            (ii) debit the

                                       64
<PAGE>

                            applicable Agent's settlement account and credit the
                            Trustee's  settlement account for an amount equal to
                            the price of such Book-Entry Notes less such Agent's
                            commission.  The entry of such a deliver order shall
                            constitute  a  representation  and  warranty  by the
                            Trustee to DTC that (i) such  Book-Entry  Notes have
                            been executed,  delivered and authenticated and (ii)
                            the Trustee is holding the Master Note  representing
                            such  Book-Entry  Notes  pursuant  to  the  relevant
                            Medium-Term Note Certificate  Agreement  between the
                            Trustee and DTC.

                   G.       The  applicable  Agent  will  enter an SDFS  deliver
                            order  through  DTC's  Participant  Terminal  System
                            instructing  DTC  (i) to  debit  such  Note  to such
                            Agent's  participant account and credit such Note to
                            the participant  accounts of the  Participants  with
                            respect   to  such   Note  and  (ii)  to  debit  the
                            settlement  accounts of such Participants and credit
                            the  settlement  account of such Agent for an amount
                            equal to the price of such Note.

                   H.       Transfers of funds in  accordance  with SDFS deliver
                            orders  described in Settlement  Procedures  "F" and
                            "G"  will  be  settled  in   accordance   with  SDFS
                            operating  procedures  in effect  on the  settlement
                            date.

                   I.       The Trustee,  upon confirming  receipt of such funds
                            in accordance  with  Settlement  Procedure "F", will
                            wire   transfer   to  the   account  of  the  Issuer
                            maintained  at Bank  One,  N.A.,  1 Bank One  Plaza,
                            Chicago,  Illinois 60670, (312) 732-2100, ABA Number
                            071000013,   Account  Number   51-24093,   in  funds
                            available for immediate use, the amount  transferred
                            to  the  Trustee  in  accordance   with   Settlement
                            Procedure "F".

                   J.       The  applicable  Agent will  confirm the purchase of
                            such Note to the purchaser either by transmitting to
                            the  Participants   with  respect  to  such  Note  a
                            confirmation   order   or   orders   through   DTC's
                            institutional   delivery  system  or  by  mailing  a
                            written confirmation to such purchaser.


                                       65
<PAGE>

SETTLEMENT PROCEDURES
TIMETABLE:                  For  orders of  Book-Entry  Notes  solicited  by the
                            Agent,  as agent,  and  accepted  by the  Issuer for
                            settlement on the first  Business Day after the sale
                            date,  Settlement  Procedures  "A"  through  "J" set
                            forth above shall be  completed  as soon as possible
                            but not later  than the  respective  times (New York
                            City time) set forth below:

                     SETTLEMENT PROCEDURE               TIME

                             A                 11:00 a.m. on the sale date
                             B                 12:00 noon on the sale date
                             C                 2:00 p.m. on the sale date
                             D                 3:00 p.m. on the day before
                                                            settlement
                             E                 9:00 a.m. on settlement date
                             F-G               2:00 p.m. on settlement date
                             H                 4:45 p.m. on settlement date
                             I-J               5:00 p.m. on settlement date

                            If a sale is to be settled two  Business  Days after
                            the sale date,  Settlement  Procedures  "A", "B" and
                            "C" shall be  completed as soon as  practicable  but
                            not later than 11:00 a.m., 12:00 noon and 2:00 p.m.,
                            as the case may be, on the first  Business Day after
                            the sale date.

                            If a sale is to be  settled  more than two  Business
                            Days after the sale date,  Settlement  Procedure "A"
                            shall be  completed  as soon as  practicable  but no
                            later  than  11:00 a.m.  on the First  Business  Day
                            after the sale date and  Settlement  Procedures  "B"
                            and "C" shall be  completed  as soon as  practicable
                            but no later than  12:00 noon and 2:00 p.m.,  as the
                            case may be, on the second  Business  Day before the
                            settlement  date. If the initial interest rate for a
                            Floating   Rate   Book-Entry   Note   has  not  been
                            determined at the time that Settlement Procedure "A"
                            is  completed,  Settlement  Procedures  "B"  and "C"
                            shall  be  completed  as soon as such  rate has been
                            determined  but not later  than  12:00 noon and 2:00
                            p.m.,  respectively,  on the Business Day before the
                            settlement date. Settlement Procedure "H" is subject
                            to extension  in  accordance  with any  extension of
                            Fedwire  closing  deadlines  and in the other events
                            specified in the SDFS operating procedures in effect
                            on the settlement date.

                            If settlement of a Book-Entry Note is rescheduled or
                            canceled,  the Trustee,  upon receipt of notice from
                            the  Issuer,  will  deliver  to DTC,  through

                                       67
<PAGE>

                            DTC's  Participant  Terminal  System, a cancellation
                            message to such effect by no later than 2:00 p.m. on
                            the Business Day immediately preceding the scheduled
                            settlement date.

FAILURE TO SETTLE:          If the applicable Agent or Trustee fails to enter an
                            SDFS deliver order with respect to a Book-Entry Note
                            pursuant to  Settlement  Procedure  "F", the Trustee
                            may  deliver  to  DTC,  through  DTC's   Participant
                            Terminal   System,   as  soon  as   practicable,   a
                            withdrawal  message  instructing  DTC to debit  such
                            Note to the Trustee's  participant account. DTC will
                            process the  withdrawal  message,  provided that the
                            Trustee's  participant  account contains a principal
                            amount of Book-Entry Notes represented by the Master
                            Note that is at least equal to the principal  amount
                            to be debited.  If a withdrawal message is processed
                            with respect to all the Book-Entry  Notes identified
                            by a single  CUSIP  number,  the Trustee will advise
                            the Issuer and will make appropriate  entries in its
                            records.  The CUSIP number assigned to such issue of
                            Book-Entry  Notes shall,  in  accordance  with CUSIP
                            Service  Bureau  procedures,  be  canceled  and  not
                            immediately  reassigned.  If a withdrawal message is
                            processed  with respect to one or more, but not all,
                            of the issue of  Book-Entry  Notes  identified  by a
                            single  CUSIP  number,  the Trustee  will advise the
                            Issuer  and will  make  appropriate  entries  in its
                            records.

                            If the purchase price for any Book-Entry Note is not
                            timely paid to the Participants with respect to such
                            Note  by  the  beneficial  purchaser  thereof  (or a
                            person,  including an indirect  participant  in DTC,
                            acting   on   behalf   of  such   purchaser),   such
                            Participants  and, in turn, the Presenting Agent may
                            enter SDFS deliver orders through DTC's  Participant
                            Terminal   System   reversing  the  orders   entered
                            pursuant  to  Settlement  Procedures  "F"  and  "G",
                            respectively.  Thereafter,  the Trustee will deliver
                            the  withdrawal  message  and  take  the  applicable
                            related   actions   described   in   the   preceding
                            paragraph.  If such failure  shall have occurred for
                            any reason other than the failure by the  Presenting
                            Agent to provide  the  Purchase  Information  to the
                            Issuer  or  to   provide  a   confirmation   to  the
                            purchaser,  the Issuer will reimburse the Presenting
                            Agent on an equitable  basis for its loss of the use
                            of the  funds  during  the  period  when  they  were
                            credited to the account of the Issuer.

                                       68
<PAGE>



                            Notwithstanding  the foregoing,  upon any failure to
                            settle with  respect to a Book-Entry  Note,  DTC may
                            take  any  actions  in  accordance   with  its  SDFS
                            operating procedures then in effect.

PERIODIC STATEMENTS
FROM THE TRUSTEE:           Periodically,  the Trustee will send to the Issuer a
                            statement  setting  forth  the  principal  amount of
                            Book-Entry  Notes  outstanding  as of that  date and
                            setting  forth a brief  description  of any sales of
                            Book-Entry Notes of which the Issuer has advised the
                            Trustee but which have not yet been settled.

PROCEDURE FOR RATE
CHANGES:                    The Issuer and the Agents will  discuss from time to
                            time the price of,  and the rates to be borne by the
                            Notes   that  may  be  sold  as  a  result   of  the
                            solicitation  of offers by the Agent.  Once an Agent
                            has  recorded  any  indication  of interest in Notes
                            upon  certain  terms,  and  communicated   with  the
                            Issuer,  if the  Issuer  plans to accept an offer to
                            purchase  Notes upon such terms,  it will  prepare a
                            Pricing  Supplement  to  the  Prospectus,   as  then
                            amended  or  supplemented,  reflecting  the terms of
                            such Notes and will arrange to transmit such Pricing
                            Supplement   to  the   Commission   for   filing  in
                            accordance  with and within the time  prescribed  by
                            the  applicable  paragraph  of Rule 424(b) under the
                            Act.  The Issuer  will supply at least two copies of
                            the Prospectus as then amended or supplemented,  and
                            bearing such Pricing  Supplement,  to the Presenting
                            Agent.  No  settlements  with  respect to Notes upon
                            such terms may occur prior to such  transmitting and
                            the  Presenting   Agent  will  not,  prior  to  such
                            transmitting,  mail  confirmations  to customers who
                            have,  offered to  purchase  Notes upon such  terms.
                            After   such   transmitting,   sales,   mailing   of
                            confirmations and settlements may occur with respect
                            to Notes upon such terms,  subject to the provisions
                            of "Delivery of Prospectus" below.


                            Outdated  Stickers,  and copies of the Prospectus to
                            which they are attached  (other than those  retained
                            for files), will be destroyed.

SUSPENSION OF SOLICITATION;
AMENDMENT OR
SUPPLEMENT:                 As provided in the Agency Agreement,  the Issuer may
                            suspend  solicitation of purchases at any time, and,
                            upon  receipt of notice from the Issuer,  the Agents
                            will as  promptly  as  practicable,  but in no

                                       69
<PAGE>


                            event later than one  Business  Day  following  such
                            notice,  suspend solicitation until such time as the
                            Issuer  has  advised  them  that   solicitation   of
                            purchases may be resumed.

                            If the Agents  receive  the  notice  from the Issuer
                            contemplated   by   Section   2(a)  of  the   Agency
                            Agreement,  they will promptly suspend  solicitation
                            and will only resume solicitation as provided in the
                            Agency Agreement.  If the Issuer decides to amend or
                            supplement   the   Registration   Statement  or  the
                            Prospectus  relating to the Notes,  it will promptly
                            advise the Agents and will  furnish  the Agents with
                            the proposed  amendment or  supplement in accordance
                            with the terms of the Agency  Agreement.  The Issuer
                            will  promptly  file or mail to the  Commission  for
                            filing such  amendment  or  supplement,  provide the
                            Agents  with  copies  of  any  such   amendment   or
                            supplement,   confirm  to  the   Agents   that  such
                            amendment  or  supplement  has been  filed  with the
                            Commission  and advise the Agents that  solicitation
                            may be resumed. Any such suspension shall not affect
                            the Issuer's obligations under the Agency Agreement;
                            and  in  the  event  that  at the  time  the  Issuer
                            suspends  solicitation  of purchases  there shall be
                            any   offers   already   accepted   by  the   Issuer
                            outstanding for settlement, the Issuer will have the
                            sole responsibility for fulfilling such obligations;
                            the applicable Agent will make reasonable efforts to
                            assist the Issuer to fulfill such  obligations,  but
                            the  applicable  Agent  will  not  be  obligated  to
                            fulfill  such   obligations.   The  Issuer  will  in
                            addition  promptly  advise the applicable  Agent and
                            the Trustee if such offers are not to be settled and
                            if copies of the Prospectus as in effect at the time
                            of the suspension may not be delivered in connection
                            with the settlement of such offers.

DELIVERY OF PROSPECTUS:     A copy of the Prospectus,  as most recently  amended
                            or  supplemented  on the  date of  delivery  thereof
                            (except as provided  below),  must be delivered to a
                            purchaser  prior to or together  with the earlier of
                            delivery  of (i) the written  confirmation  provided
                            for  above,  and  (ii) any  Note  purchased  by such
                            purchaser  at  the  following  address:  if to  J.P.
                            Morgan Securities Inc., to 60 Wall Street, New York,
                            N.Y.   10260,   Telecopy   Number  (212)   648-5151,
                            Attention:   Transaction   Execution  Group;  if  to
                            Goldman,  Sachs & Co., to

                                       70
<PAGE>

                            85 Broad Street, New York, New York 10004,  Telecopy
                            Number (212) 902-0658,  Attention:  Medium Term Note
                            Trading;  if to Banc of America  Securities  LLC, to
                            100 North Tryon Street, 7th Floor, Charlotte,  North
                            Carolina  28255,  Telecopy  Number  (704)  388-9939,
                            Attention:  Lynn  McConnell;  and  if  to  Banc  One
                            Capital  Markets,  Inc., to 1 Bank One Plaza,  Suite
                            IL1-0595,  Chicago,  Illinois 60670, Telecopy Number
                            (312)  732-4773,  Attention:  Evonne W. Taylor.  The
                            Issuer  shall  ensure  that  the  Presenting   Agent
                            receives copies of the Prospectus and each amendment
                            or supplement thereto (including appropriate Pricing
                            Supplements) in such quantities and within such time
                            limits  as  will  enable  the  Presenting  Agent  to
                            deliver such  confirmation or Note to a purchaser as
                            contemplated  by these  procedures and in compliance
                            with the preceding  sentence.  If, since the date of
                            acceptance of a purchaser's  offer,  the  Prospectus
                            shall have been  supplemented  solely to reflect any
                            sale of Notes on terms  different  from those agreed
                            to between the Issuer and such purchaser or a change
                            in posted rates not  applicable  to such  purchaser,
                            such  purchaser  shall not receive the Prospectus as
                            supplemented  by  such  new  supplement,  but  shall
                            receive the  Prospectus as  supplemented  to reflect
                            the  terms  of the  Notes  being  purchased  by such
                            purchaser and otherwise as most recently  amended or
                            supplemented   on  the  date  of   delivery  of  the
                            Prospectus.


                                       71
<PAGE>

                          CROSS-REFERENCE TARGET LIST

       NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR
                         IN THE TARGET PULL-DOWN LIST.
       (This list is for the use of the wordprocessor only, is not a part
                    of this document and may be discarded.)
<TABLE>
<CAPTION>


ARTICLE/SECTION TARGET NAME    ARTICLE/SECTION TARGET NAME   ARTICLE/SECTION TARGET NAME     ARTICLE/SECTION
===========================    ===========================   ===========================     ===============
<S>                                  <C>                          <C>                         <C>
              reps                         furn.agt                     reg.comply              agt.term.agt
                                     avail.sec.hldr                       reg.true
sol.agt.purch.prin                                                                                   pos.agt
           sol.agt                          sec.out                 cond.comm.date
                                           not.sell                 coun.agnt.opin            rep.indem.surv
        purch.prin
         oblig.sev                        furn.opin                       acct.ltr                   notices
         admin.pro                         furn.ltr                        rec.ltr
                                                                                                        succ
     commence.date                        furn.cert                  indem.contrib
                                                                      co.indem.agt                     amend
            cov.co                         cost.exp                   agt.indem.co
        cov.co.sec                                                                                   app.law
                                               cond                  indem.unavail
          no.amend                             pros                   ref.rel.bene
         file.rpts
                                     no.downgrading                           term
          qual.sec                     co.coun.opin               agt.term.anytime
            untrue
                                          fair.pres
                                          coun.opin



</TABLE>

                                       72
<PAGE>