Document:

Thomas F. Gallagher

                      CHANGE OF CONTROL SEVERANCE AGREEMENT

         THIS AGREEMENT  between  HomeBase,  Inc., a Delaware  corporation  (the
Company), and Thomas F. Gallagher (Executive),  dated as of August 21, 2001 (the
Effective Date).

         Executive  is a key  executive  of the Company or a  Subsidiary  and an
integral part of its management.

         The Company  recognizes  that the possibility of a change of control of
the Company may result in the  departure or  distraction  of  management  to the
detriment of the Company and its shareholders.

         The  Company  wishes  to  assure  Executive  of fair  severance  should
Executive's employment terminate in specified  circumstances  following a change
of control of the Company and to assure Executive of certain other benefits upon
a change of control.

         In consideration of Executive's  continued  employment with the Company
or a Subsidiary and other good and valuable consideration,  the parties agree as
follows:

         1.  Benefits Upon Change of Control.

         1.1 In General.  Within 30 days following a Change of Control,  whether
or not  Executive's  employment  has been  terminated,  the Company shall pay to
Executive the following in a lump sum:

          (a) an  amount  equal  to  the  "Target  Bonus"  under  the  Company's
         Management  Incentive Plan or any other annual  incentive plan which is
         applicable  to  Executive  for the  fiscal  year in which the Change of
         Control  occurs  (or if the  Target  Bonus is  reduced  within 180 days
         before the  commencement  of a Standstill  Period,  the "Target  Bonus"
         applicable  to  Executive  for the fiscal year in which such  reduction
         occurred); and

          (b) if Executive is a participant  in a  performance-based  long-range
         incentive plan at the Change of Control,  such amount as is required to
         be  paid  to  Executive  upon  a  Change  of  Control  pursuant  to the
         provisions of such plan.

         1.2 Benefits Following Qualified  Termination of Employment.  Executive
shall be entitled to the following benefits upon a Qualified Termination:

                  (a)  Within 30 days  following  the Date of  Termination,  the
Company shall pay to Executive the following in a lump sum:

                           (i) an  amount  equal to 2.5 times  Executive's  Base
                           Salary for one year at the rate in effect immediately
                           prior to the Date of  Termination  or the  Change  of
                           Control  (or if  Executive's  Base Salary was reduced
                           within  180  days  before  the   commencement   of  a
                           Standstill  Period,  the rate in  effect  immediately
                           prior to such reduction), plus the accrued and unpaid
                           portion of  Executive's  Base Salary through the Date
                           of Termination.  Any payments made to Executive under
                           any long term  disability  plan of the  Company  with
                           respect  to the 2.5 years  following  termination  of
                           employment  shall be  offset  against  such 2.5 times
                           Base Salary  payment.  Executive  shall promptly make
                           reimbursement  payments  to the Company to the extent
                           any such  disability  payments are received after the
                           Base Salary payment; and

                           (ii)  an  amount  equal  to  2.5  times   Executive's
                           automobile  allowance  for one  year  at the  rate in
                           effect  immediately  prior to the Date of Termination
                           or the  Change  of  Control,  (or if such  automobile
                           allowance  was  reduced  within  180 days  before the
                           commencement  of a  Standstill  Period,  the  rate in
                           effect  immediately  prior to such  reduction  unless
                           such  reduction  was  offset by an  increase  in Base
                           Salary during such 180-day period),  plus any portion
                           of  Executive's   automobile  allowance  payable  but
                           unpaid through the Date of Termination; and

                           (iii) an amount equal to the Target Bonus amount,  as
                           defined and determined under Section 1.1(a) above.

         (b)(i)  Until the day 30  months  after  the Date of  Termination,  the
Company  shall  maintain in full force and effect for the  continued  benefit of
Executive and Executive's family all life insurance and medical insurance (other
than long-term disability) plans and programs in which Executive was entitled to
participate  immediately prior to the Change of Control (or if Executive's title
was changed to a level below that of  Executive's  Current Title within 180 days
before the commencement of a Standstill  Period,  all such plans and programs in
which Executive was entitled to participate immediately prior to such change, if
the benefits  thereunder  are  greater),  provided  that  Executive's  continued
participation  is possible  under the general terms and provisions of such plans
and programs.  In the event that  participation in such plans or programs is not
available to Executive for any reason,  including  termination  of the plan, the
Company shall arrange upon comparable  terms to provide  Executive with benefits
substantially similar to those which Executive is entitled to receive under such
plans and programs.  Notwithstanding  the foregoing,  the Company's  obligations
hereunder with respect to life insurance or medical insurance plans and programs
shall be deemed  satisfied  to the extent  (but only to the  extent) of any such
insurance coverage or benefits provided by another employer.

         (b)(ii) If Qualified  Termination  occurs by reason of Disability,  the
Company  shall  maintain in full force and effect for the  continued  benefit of
Executive,  disability benefits and/or disability insurance at the same level to
which Executive was entitled immediately prior to the Qualified Termination.

         1.3  Coordination  With Certain Tax Rules.  Payments under Sections 1.1
and 1.2  shall be made  without  regard to  whether  the  deductibility  of such
payments  (or any other  payments to or for the benefit of  Executive)  would be
limited or precluded by Internal Revenue Code Section 280G and without regard to
whether such payments (or any other  payments)  would  subject  Executive to the
federal excise tax levied on certain "excess parachute  payments" under Internal
Revenue Code Section 4999; provided, that if the total of all payments to or for
the benefit of  Executive(including  acceleration  of vesting of benefits  under
existing  plans),  after  reduction  for all federal  taxes  (including  the tax
described in Internal  Revenue Code Section 4999, if applicable) with respect to
such payments  ("Executive's total after-tax  payments"),  would be increased by
the limitation or elimination of any payment under Sections 1.1 or 1.2,  amounts
payable under  Sections 1.1 and 1.2 shall be reduced to the extent,  and only to
the extent,  necessary to maximize  Executive's  total after-tax  payments.  The
determination  as to whether and to what extent  payments  under Sections 1.1 or
1.2 are required to be reduced in accordance  with the preceding  sentence shall
be made at the Company's expense by PricewaterhouseCoopers  LLP or by such other
certified public accounting firm as the Executive  Compensation Committee of the
Company's Board of Directors may designate prior to a Change of Control.  In the
event  of  any  underpayment  or  overpayment  under  Sections  1.1 or  1.2,  as
determined  by  PricewaterhouseCoopers  LLP (or such other firm as may have been
designated  in  accordance  with the  preceding  sentence),  the  amount of such
underpayment or overpayment  shall forthwith be paid to Executive or refunded to
the Company,  as the case may be, with interest at the  applicable  Federal rate
provided for in Section 7872(f)(2) of the Internal Revenue Code.

         2. Noncompetition;  No Mitigation of Damages; Other Severance Payments;
Withholding.

         2.1  Noncompetition.  Upon a Qualified  Termination,  any  agreement by
Executive  not to engage  in  competition  with the  Company  subsequent  to the
termination  of  Executive's  employment,  whether  contained  in an  employment
contract or other agreement, shall no longer be effective.

         2.2 No  Duty to  Mitigate  Damages.  Executive's  benefits  under  this
Agreement shall be considered severance pay in consideration of Executive's past
service and Executive's  continued service from the date of this Agreement,  and
Executive's  entitlement  thereto  shall  neither  be  governed  by any  duty to
mitigate  Executive's  damages by seeking  further  employment nor offset by any
compensation which Executive may receive from future employment.

         2.3 Other  Severance  Payments.  In the  event  that  Executive  has an
employment  contract or any other  agreement  with the Company (or a Subsidiary)
which  entitles   Executive  to  severance  payments  upon  the  termination  of
Executive's  employment  with the  Company,  the  amount  of any such  severance
payments shall be deducted from the payments to be made under this Agreement.

         2.4 Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company  hereunder to  Executive  shall be subject to
the  withholding  of such  amounts,  if any,  relating to tax and other  payroll
deductions as the Company may reasonably  determine it should withhold  pursuant
to any applicable law or regulation.

         3. Arbitration.  Any controversy or claim arising out of or relating to
this  Agreement,  or  the  breach  thereof,  shall  be  settled  exclusively  by
arbitration  in Los  Angeles,  California  in  accordance  with  the  Commercial
Arbitration Rules of the American  Arbitration  Association then in effect,  and
judgment  upon the award  rendered  by the  arbitrator(s)  may be entered in any
court having jurisdiction thereof.

         4. Legal Fees and  Expenses.  The Company  shall pay all legal fees and
expenses, including but not limited to counsel fees, stenographer fees, printing
costs, etc. reasonably incurred by Executive in contesting or disputing that the
termination of Executive's employment during a Standstill Period is for Cause or
other than for good  reason (as  defined  in  paragraph  (j) of Exhibit A) or in
obtaining  any right or  benefit  to which  Executive  is  entitled  under  this
Agreement.  Any amount  payable under this  Agreement  that is not paid when due
shall accrue  interest at the prime rate as from time to time in effect at Wells
Fargo Bank, N.A., or its successors or assigns, until paid in full.

         5.  Notice of  Termination.  During a  Standstill  Period,  Executive's
employment may be terminated by the Company (or a Subsidiary) only upon 30 days'
written notice to Executive.

         6.  Notices.  All notices shall be in writing and shall be deemed given
five days after  mailing  in the  continental  United  States by  registered  or
certified  mail, or upon personal  receipt after  delivery,  telex,  telecopy or
telegram,  to the party entitled  thereto at the address stated below or to such
changed address as the addressee may have given by a similar notice:

         To the Company:   HomeBase, Inc.
                           3345 Michelson Drive
                           Irvine, CA 92612
                           Attention: General Counsel

         To Executive:     At Executive's home address, as last
                           shown on the records of the Company

         7.  Severability.  In the event that any  provision  of this  Agreement
shall be  determined to be invalid or  unenforceable,  such  provision  shall be
enforceable in any other  jurisdiction in which valid and enforceable and in any
event the  remaining  provisions  shall  remain in full  force and effect to the
fullest extent permitted by law.

         8.  General Provisions.

         8.1 Binding  Agreement.  This Agreement shall be binding upon and inure
to the benefit of the  parties and be  enforceable  by  Executive's  personal or
legal  representatives or successors.  If Executive dies while any amounts would
still be payable to  Executive  hereunder,  benefits  would still be provided to
Executive's  family  hereunder or rights would still be exercisable by Executive
hereunder if Executive  had  continued  to live,  such amounts  shall be paid to
Executive's  estate,  such benefits shall be provided to Executive's  family and
such rights shall remain  exercisable by Executive's  estate in accordance  with
the terms of this Agreement. This Agreement shall not otherwise be assignable by
Executive.

         8.2  Successors.  This Agreement shall inure to and be binding upon the
Company's successors, including any successor to all or substantially all of the
Company's  business and/or assets. The Company will require any successor to all
or  substantially  all of the  business  and/or  assets of the  Company by sale,
merger (where the Company is not the surviving corporation), lease or otherwise,
by  agreement  in form  and  substance  satisfactory  to  Executive,  to  assume
expressly this  Agreement.  If the Company shall not obtain such agreement prior
to the effective date of any such  succession,  Executive  shall have all rights
resulting from termination by Executive for good reason (as defined in paragraph
(j) of Exhibit A) under this  Agreement.  This Agreement  shall not otherwise be
assignable by the Company.

         8.3  Amendment  or  Modification;  Waiver.  This  Agreement  may not be
amended  unless agreed to in writing by Executive and the Company.  No waiver by
either  party of any  breach  of this  Agreement  shall be  deemed a waiver of a
subsequent breach.

         8.4  Titles.  No provision of this Agreement is to be construed by
reference to the title of any section.

         8.5 Continued  Employment.  This Agreement shall not give Executive any
right of continued  employment or any right to compensation or benefits from the
Company or any Subsidiary except the right specifically stated herein to certain
severance  and  other  benefits,  and  shall  not  limit  the  Company's  (or  a
Subsidiary's)  right  to  change  the  terms  of  or  to  terminate  Executive's
employment,  with or without  Cause,  at any time other than during a Standstill
Period,  except as may be otherwise provided in a written  employment  agreement
between the Company (or a Subsidiary) and Executive.

         8.6  Termination  of  Agreement  Outside  of  Standstill  Period.  This
Agreement shall be  automatically  terminated upon the first to occur of (i) the
date  five  (5)  years  after  the  Effective  Date of this  Agreement  unless a
Standstill  Period is in effect on such  date,  in which  case such  termination
shall  occur  upon  the  expiration  of  such  Standstill  Period  or  (ii)  the
termination  of  Executive's  employment  for any reason,  whether  voluntary or
involuntary,  at any time other  than  during a  Standstill  Period or (iii) the
180th  day  after  a  change  in  Executive's  title  to a level  below  that of
Executive's  Current Title unless a Standstill  Period was in effect on the date
of such change or within 180 days thereafter or (iv) if Executive is employed by
a Subsidiary of the Company,  the date on which the Subsidiary  either ceases to
be a  Subsidiary  of the  Company  or  sells  or  otherwise  disposes  of all or
substantially  all of its assets,  unless such event occurs  during a Standstill
Period and  Executive's  employment  shall have been  terminated  in a Qualified
Termination within 90 days of such event.

         8.7 Prior  Agreement.  This  Agreement  amends and  restates  and shall
supersede and replace any prior change of control  severance  agreement  between
the Company or any of its subsidiaries, or any predecessor, and Executive.

         8.8 Definitions.  The terms defined in Exhibits A and B hereto are used
herein as so defined.

         8.9  Governing  Law.  The  validity,  interpretation,  performance  and
enforcement  of this  Agreement  shall be  governed  by the laws of the State of
California.

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

                                                   HOMEBASE, INC.

                                                   /s/HERBERT J. ZARKIN
                                                   -----------------------------
                                                   By: Herbert J. Zarkin

                                                   Executive:

                                                   /s/THOMAS F. GALLAGHER
                                                   -----------------------------
                                                   Thomas F. Gallagher

<PAGE>

                                    EXHIBIT A

                                   Definitions

             The  following  terms  as used in this  Agreement  shall  have  the
    following meanings:

             (a) "Base  Salary"  shall  mean  Executive's  annual  base  salary,
    exclusive of any bonus or other benefits Executive may receive.

             (b) "Cause" shall mean  dishonesty,  conviction of a felony,  gross
    neglect  of duties  (other  than as a result of  Incapacity,  Disability  or
    death),  or conflict of interest  which  conflict shall continue for 30 days
    after the Company gives written notice to Executive requesting the cessation
    of such conflict.

             In respect of any termination during a Standstill Period, Executive
    shall not be deemed to have  been  terminated  for Cause  until the later to
    occur of (i) the 30th day after notice of  termination is given and (ii) the
    delivery  to  Executive  of a  copy  of a  resolution  duly  adopted  by the
    affirmative vote of not less than a majority of the Company's directors at a
    meeting  called  and held for  that  purpose  (after  reasonable  notice  to
    Executive),  and at which  Executive  together with his counsel was given an
    opportunity  to be heard,  finding  that  Executive  was  guilty of  conduct
    described in the definition of "Cause" above, and specifying the particulars
    thereof in detail; provided, however, that the Company may suspend Executive
    and withhold payment of Executive's Base Salary from the date that notice of
    termination  is given  until the  earliest  to occur of (a)  termination  of
    Executive for Cause effected in accordance with the foregoing procedures (in
    which case Executive  shall not be entitled to  Executive's  Base Salary for
    such period),  (b) a determination by a majority of the Company's  directors
    that Executive was not guilty of the conduct  described in the definition of
    "Cause" above (in which case  Executive  shall be reinstated and paid any of
    Executive's  previously unpaid Base Salary for such period), or (c) the 90th
    day after notice of termination  is given (in which case Executive  shall be
    reinstated  and paid any of  Executive's  previously  unpaid Base Salary for
    such period).

             (c) "Change of Control" shall have the meaning set forth in Exhibit
    B.

             (d) "Company" shall mean HomeBase, Inc. or any successor.

             (e) "Current  Title" shall mean  Executive's  title on the date 180
    days prior to the commencement of a Standstill Period.

             (f) "Date of Termination"  shall mean the date on which Executive's
    employment is terminated.

             (g)  "Disability"  shall have the meaning given it in the Company's
    long-term  disability  plan.  Executive's  employment  shall be deemed to be
    terminated  for  Disability  on the date on which  Executive  is entitled to
    receive  long-term  disability   compensation  pursuant  to  such  long-term
    disability plan.

         (h) "Executive" shall have the meaning set forth in the first paragraph
    of this Agreement.

             (i)  "Incapacity"  shall mean a disability  (other than  Disability
    within  the  meaning  of the  immediately  preceding  definition)  or  other
    impairment of health that renders  Executive  unable to perform  Executive's
    duties  to the  reasonable  satisfaction  of the Board of  Directors  of the
    Company.  If  by  reason  of  Incapacity  Executive  is  unable  to  perform
    Executive's  duties for at least six  months in any  12-month  period,  upon
    written notice by the Company the employment of Executive shall be deemed to
    have terminated by reason of Incapacity.

             (j)  "Qualified   Termination"   shall  mean  the   termination  of
    Executive's  employment  during a Standstill Period (1) by the Company other
    than for Cause,  or (2) by Executive  for good  reason,  or (3) by reason of
    death, Incapacity or Disability.

             For  purposes of this  definition,  termination  for "good  reason"
    shall mean the voluntary termination by Executive of Executive's  employment
    (A) within 120 days after the occurrence without Executive's express written
    consent of any of the events  described in clauses (I), (II),  (III),  (IV),
    (V) or (VI) below,  provided that  Executive  gives notice to the Company at
    least 30 days in advance  requesting  that the situation  described in those
    clauses be remedied, and the situation remains unremedied upon expiration of
    such  30-day  period;  (B)  within  120 days  after the  occurrence  without
    Executive's  express  written  consent (which must  expressly  refer to such
    consent as being  given under this  Agreement)  of the events  described  in
    clauses (VII) or (VIII) below,  provided that Executive  gives notice to the
    Company at least 30 days in advance;  or (C) upon  occurrence  of the events
    described in clause(IX)  below,  provided that Executive gives notice to the
    Company at least 30 days in advance:

             (I)      the assignment to Executive of any duties inconsistent
                      with Executive's positions, duties, responsibilities,
                      reporting requirements, and status with the Company (or a
                      Subsidiary) immediately prior to a Change of Control, or a
                      substantive change in Executive's titles or offices as in
                      effect immediately prior to a Change of Control, or
                      any removal of Executive from or any failure to reelect
                      Executive to such positions, except in connection with the
                      termination of Executive's employment by the Company (or a
                      Subsidiary) for Cause or by Executive other than for good
                      reason; or any other action by the Company (or a
                      Subsidiary) which results in a diminishment in such
                      position, authority, duties or responsibilities, other
                      than an insubstantial and inadvertent action which is
                      remedied by the Company or the Subsidiary promptly after
                      receipt of notice thereof given by Executive; or

             (II)     if Executive's rate of Base Salary for any fiscal year is
                      less than 100 percent of the rate of Base Salary paid to
                      Executive in the completed fiscal year immediately
                      preceding the Change of Control, or if Executive's total
                      cash compensation opportunities, including salary,
                      incentives and automobile allowance, for any fiscal year
                      are less than 100 percent of the total cash compensation
                      opportunities made available to Executive in the completed
                      fiscal year immediately preceding the Change of Control
                      unless any such reduction represents an overall reduction
                      of no more than 10 percent in the rate of Base Salary paid
                      or cash compensation opportunities made available, as the
                      case may be, and affects all other executives in the same
                      organizational level (it being the Company's burden to
                      establish this fact); or

             (III)    the failure of the Company (or a  Subsidiary)  to continue
                      in effect any  benefits or  perquisites,  or any  pension,
                      life  insurance,  medical  insurance or disability plan in
                      which Executive was  participating  immediately prior to a
                      Change of Control  unless the  Company  (or a  Subsidiary)
                      provides  Executive  with a plan  or  plans  that  provide
                      substantially  similar  benefits,  or  the  taking  of any
                      action  by  the  Company  (or  a  Subsidiary)  that  would
                      adversely   affect   Executive's   participation   in   or
                      materially reduce  Executive's  benefits under any of such
                      plans or deprive  Executive of any material fringe benefit
                      enjoyed  by  Executive  immediately  prior to a Change  of
                      Control  unless the  elimination  or reduction of any such
                      benefit, perquisite or plan is of an aggregate value of no
                      more than 5 percent of the rate of Base Salary and affects
                      all other executives in the same organizational  level (it
                      being the Company's burden to establish this fact); or

             (IV)     any purported termination of Executive's employment by the
                      Company (or a  Subsidiary)  for Cause  during a Standstill
                      Period which is not effected in compliance  with paragraph
                      (b) of this Exhibit; or

             (V)      any relocation of Executive of more than 40 miles from the
                      place  where  Executive  was  located  at the  time of the
                      Change of Control; or

             (VI)     any other breach by the Company of any provision of this
                      Agreement; or

             (VII)    the  Company  sells  or  otherwise  disposes  of,  in  one
                      transaction or a series of related transactions, assets or
                      earning  power  aggregating  more than 30  percent  of the
                      assets (taken at asset value as stated on the books of the
                      Company  determined in accordance with generally  accepted
                      accounting  principles  consistently  applied)  or earning
                      power  of the  Company  (on an  individual  basis)  or the
                      Company and its subsidiaries (on a consolidated  basis) to
                      any other Person or Persons (as those terms are defined in
                      Exhibit B); or

             (VIII)   if Executive  is employed by a Subsidiary  of the Company,
                      such  Subsidiary  either  ceases to be a Subsidiary of the
                      Company  or  sells  or  otherwise   disposes  of,  in  one
                      transaction or a series of related transactions, assets or
                      earning  power  aggregating  more than 30  percent  of the
                      assets (taken at asset value as stated on the books of the
                      Subsidiary   determined  in  accordance   with   generally
                      accepted accounting  principles  consistently  applied) or
                      earning power of such Subsidiary (on an individual  basis)
                      or such Subsidiary and its subsidiaries (on a consolidated
                      basis) to any other  Person or Persons (as those terms are
                      defined in Exhibit B); or

             (IX)     the  voluntary  termination  by Executive  of  Executive's
                      employment at any time during the period  commencing eight
                      months plus one day after the Change of Control and ending
                      12 months after the Change of Control,  provided,  that in
                      the event of any such  voluntary  termination  pursuant to
                      this  clause  (IX),  the  Executive  shall be  entitled to
                      receive  only  one-half  (1/2)  of  the  lump  sum  amount
                      provided for in Section  1.2(a) and the benefits  provided
                      for in Section  1.2(b)(i)  shall be provided  for one-half
                      (1/2) the  number of months  from the Date of  Termination
                      stipulated in that Section.

             (k) "Standstill  Period" shall be the period commencing on the date
    of a Change of Control  and  continuing  until the close of  business on the
    last  business  day of the 24th  calendar  month  following  such  Change of
    Control.

             (l)  "Subsidiary"  shall mean any  corporation in which the Company
    owns,  directly  or  indirectly,  50 percent  or more of the total  combined
    voting power of all classes of stock.

<PAGE>

                                    EXHIBIT B

                         Definition of Change of Control

    A Change of Control shall mean:

                      (a) The  acquisition  by an  individual,  entity  or group
    (within  the  meaning of Section  13(d)(3)  or  14(d)(2)  of the  Securities
    Exchange  Act of  1934,  as  amended  (the  Exchange  Act))  (a  Person)  of
    beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
    Exchange  Act) of 20% or more of either (i) the  then-outstanding  shares of
    common stock of the Company (the  Outstanding  Company Common Stock) or (ii)
    the combined voting power of the  then-outstanding  voting securities of the
    Company  entitled  to vote  generally  in the  election  of  directors  (the
    Outstanding Company Voting Securities); provided, however, that for purposes
    of this  subsection (a), the following  acquisitions  shall not constitute a
    Change of Control: (i) any acquisition  directly from the Company,  (ii) any
    acquisition by the Company,  (iii) any  acquisition by any employee  benefit
    plan (or  related  trust)  sponsored  or  maintained  by the  Company or any
    corporation  controlled  by the  Company,  or (iv)  any  acquisition  by any
    corporation pursuant to a transaction which satisfies the criteria set forth
    in clauses (i), (ii) and (iii) of subsection (c) of this definition; or

                      (b) Individuals who, as of the date hereof, constitute the
    Board (the  Incumbent  Board) cease for any reason to  constitute at least a
    majority of the Board;  provided,  however,  that any individual  becoming a
    director  subsequently to the date hereof whose election,  or nomination for
    election by the Company's stockholders, was approved by a vote of at least a
    majority of the  directors  then  comprising  the  Incumbent  Board shall be
    considered as though such  individual  were a member of the Incumbent  Board
    (except that this proviso  shall not apply to any  individual  whose initial
    assumption  of  office  as a  director  occurs  as a result  of an actual or
    threatened  election  contest  with  respect to the  election  or removal of
    directors or other actual or threatened  solicitation of proxies or consents
    by or on behalf of a Person other than the Board); or

                      (c)   Consummation   of  a   reorganization,   merger   or
    consolidation involving the Company or a sale or other disposition of all or
    substantially all of the assets of the Company (a Business Combination),  in
    each case, unless, immediately following such Business Combination,  (i) all
    or substantially all of the individuals and entities who were the beneficial
    owners,   respectively,   of  the  Outstanding   Company  Common  Stock  and
    Outstanding  Company Voting  Securities  immediately  prior to such Business
    Combination  beneficially  own,  directly or  indirectly,  more than 60% of,
    respectively,  the then-outstanding  shares of common stock and the combined
    voting  power of the  then-outstanding  voting  securities  entitled to vote
    generally in the election of directors,  of the  corporation  resulting from
    such Business  Combination  (which as used in section (c) of this definition
    shall include,  without limitation,  a corporation which as a result of such
    transaction  owns the Company or all or  substantially  all of the Company's
    assets either directly or through one or more subsidiaries) in substantially
    the same proportions as their ownership,  immediately prior to such Business
    Combination, of the Outstanding Company Common Stock and Outstanding Company
    Voting  Securities,  as the  case  may be,  (ii) no  Person  (excluding  any
    corporation resulting from such Business Combination or any employee benefit
    plan (or related  trust) of the Company or such  corporation  resulting from
    such Business Combination) beneficially owns, directly or indirectly, 20% or
    more of,  respectively,  the then outstanding  shares of common stock of the
    corporation resulting from such Business Combination, or the combined voting
    power of the  then-outstanding  voting  securities of such  corporation  and
    (iii)  at  least  half of the  members  of the  board  of  directors  of the
    corporation  resulting  from such Business  Combination  were members of the
    Incumbent Board at the time of the execution of the initial agreement, or of
    the action of the Board, providing for such Business Combination; or

                      (d)  Approval  by the  stockholders  of the  Company  of a
    complete liquidation or dissolution of the Company.--------------------------------------------------------------------------------

                  SERIES 2001B SUPPLEMENTAL INDENTURE OF TRUST

                                 by and between

                        NELNET STUDENT LOAN CORPORATION-2

                                       and

                           ZIONS FIRST NATIONAL BANK,
                                   as Trustee

                           Authorizing the Issuance of

                                  $550,000,000
                        NELNET Student Loan Corporation-2
                         Student Loan Asset-Backed Notes
                                  Series 2001B

                          Dated as of September 1, 2001

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

<PAGE>

                                TABLE OF CONTENTS

                                                                           Page

                                    Article I

DEFINITIONS AND USE OF PHRASES................................................1

                                   Article II

             SERIES 2001B NOTE DETAILS, FORM OF SERIES 2001B NOTES,
                      REDEMPTION OF SERIES 2001B NOTES AND
                      USE OF PROCEEDS OF SERIES 2001B NOTES

Section 2.01.     Series 2001B Note Details...................................3
Section 2.02.     Redemption of the Series 2001B Notes........................6
Section 2.03.     Delivery of Series 2001B Notes..............................7
Section 2.04.     Trustee's Authentication Certificate........................8
Section 2.05.     Deposit of Series 2001B Note Proceeds.......................8
Section 2.06.     Forms of Series 2001B Notes.................................8

                                   Article III

                        AMENDMENTS TO ORIGINAL INDENTURE

                                   Article IV

                               GENERAL PROVISIONS

Section 4.01.     Date of Execution...........................................10
Section 4.02.     Laws Governing..............................................10
Section 4.03.     Severability................................................10
Section 4.04.     Exhibits....................................................10

                                    Article V

APPLICABILITY OF INDENTURE....................................................10

APPENDIX A   CERTAIN TERMS AND PROVISIONS OF THE AUCTION RATE NOTES
EXHIBIT A-1  FORM OF SENIOR CLASS 2001A NOTES
EXHIBIT A-2  FORM OF SUBORDINATE CLASS 2001B NOTES
EXHIBIT B    SERIES 2001B CLOSING CASH FLOW PROJECTIONS
EXHIBIT C    NOTICE OF PAYMENT DEFAULT
EXHIBIT D    NOTICE OF CURE OF PAYMENT DEFAULT
EXHIBIT E    NOTICE OF PROPOSED CHANGE IN LENGTH OF ONE OR MORE AUCTION PERIODS
EXHIBIT F    NOTICE ESTABLISHING CHANGE IN LENGTH OF ONE OR MORE AUCTION PERIODS
EXHIBIT G    NOTICE OF CHANGE IN AUCTION DATE

<PAGE>

                  SERIES 2001B SUPPLEMENTAL INDENTURE OF TRUST

        THIS SERIES 2001B SUPPLEMENTAL INDENTURE OF TRUST (this "Supplemental
Indenture") dated as of September 1, 2001, is by and between NELNET STUDENT LOAN
CORPORATION-2, a corporation duly organized and existing under the laws of the
State of Nevada (the "Issuer"), and ZIONS FIRST NATIONAL BANK, a national
banking association duly organized and operating under the laws of the United
States of America (together with its successors, the "Trustee"), as trustee
hereunder (all capitalized terms used in these preambles, recitals and granting
clauses shall have the same meanings assigned thereto in Article I hereof);

                              W I T N E S S E T H:

        WHEREAS, the Issuer has previously entered into an Indenture of Trust
dated as of June 1, 2000 (as previously amended, the "Original Indenture," and
together with this Supplemental Indenture, the "Indenture"), between the Issuer
and the Trustee;

        WHEREAS, the Issuer desires to enter into this Supplemental Indenture in
order to issue Notes pursuant to the terms of the Original Indenture, including
Section 2.08 thereof;

        WHEREAS, the Issuer represents that it is duly created as a corporation
under the laws of the State and that by proper action it has duly authorized the
issuance of $550,000,000 of its Student Loan Asset-Backed Notes, Series 2001B
consisting of two Classes, designated as Senior Class 2001A (the "Class 2001A
Notes") and Subordinate Class 2001B (the "Class 2001B Notes," and together with
the Class 2001A Notes, the "Series 2001B Notes"), and it has by proper corporate
action authorized the execution and delivery of this Supplemental Indenture;

        WHEREAS,  the  Series  2001B  Notes  constitute  Notes as defined in the
Indenture;

        WHEREAS, the Trustee has agreed to accept the trusts herein created upon
the terms herein set forth; and

        NOW, THEREFORE, it is mutually covenanted and agreed as follows:

                                   ARTICLE I

                         DEFINITIONS AND USE OF PHRASES

        All words and phrases defined in Article I of the Indenture shall have
the same meaning in this Supplemental Indenture, except as otherwise appears in
this Article. In addition, the following terms have the following meanings in
this Supplemental Indenture unless the context clearly requires otherwise:

        "AUTHORIZED DENOMINATIONS" means $50,000 and any integral multiple
thereof.

                                       1
<PAGE>

        "CLASS 2001A NOTES" means, collectively, the Class 2001A-2 Notes, the
Class 2001A-3 Notes, the Class 2001A-4 Notes, the Class 2001A-5 Notes, the Class
2001A-6 Notes and the Class 2001A-7 Notes.

        "CLASS 2001A-2 NOTES" means the $50,000,000 NELNET Student Loan
Corporation-2, Student Loan Asset-Backed Notes, Senior Class 2001A-2 Auction
Rate Notes.

        "CLASS 2001A-3 NOTES" means the $50,000,000 NELNET Student Loan
Corporation-2, Student Loan Asset-Backed Notes, Senior Class 2001A-3 Auction
Rate Notes.

        "CLASS 2001A-4 NOTES" means the $75,000,000 NELNET Student Loan
Corporation-2, Student Loan Asset-Backed Notes, Senior Class 2001A-4 Auction
Rate Notes.

        "CLASS 2001A-5 NOTES" means the $100,000,000 NELNET Student Loan
Corporation-2, Student Loan Asset-Backed Notes, Senior Class 2001A-5 Auction
Rate Notes.

        "CLASS 2001A-6 NOTES" means the $100,000,000 NELNET Student Loan
Corporation-2, Student Loan Asset-Backed Notes, Senior Class 2001A-6 Auction
Rate Notes.

        "CLASS 2001A-7 NOTES" means the $100,000,000 NELNET Student Loan
Corporation-2, Student Loan Asset-Backed Notes, Senior Class 2001A-7 Auction
Rate Notes.

        "CLASS 2001B NOTES" means the Class 2001B-1 Notes and the Class 2001B-2
Notes.

        "CLASS 2001B-1 NOTES" means the $37,500,000 NELNET Student Loan
Corporation-2, Student Loan Asset-Backed Notes, Subordinate Class 2001B-1
Auction Rate Notes.

        "CLASS 2001B-2 NOTES" means the $37,500,000 NELNET Student Loan
Corporation-2, Student Loan Asset-Backed Notes, Subordinate Class 2001B-2
Auction Rate Notes.

        "DATE OF ISSUANCE" means, with respect to the Series 2001B Notes,
September 4, 2001.

        "RATING  AGENCY" means,  collectively,  Fitch,  Inc.,  Standard & Poor's
Ratings Services and Moody's Investors Service.

        "SERIES 2001B NOTES" means the NELNET Student Loan Corporation-2,
Student Loan Asset-Backed Notes, Series 2001B issued pursuant to the Indenture
and this Supplemental Indenture in the aggregate principal amount of
$550,000,000 consisting of the Class 2001A Notes and the Class 2001B Notes.

        "SERIES 2001B RESERVE FUND REQUIREMENT" means 0.75% of the Notes
outstanding; provided, however, that so long as any Notes remain Outstanding
there shall be at least $1,000,000 on deposit in the Reserve Fund.

        "SERVICER" means NELnet, Inc., a Nevada corporation,  and its successors
and assigns.

                                       2
<PAGE>

        "SERVICING AGREEMENT" means, collectively, (i) the Servicing Agreement
dated as of June 1, 2000, as supplemented and amended from time to time, between
the Issuer and the Servicer, (ii) the Loan Subservicing Agreement dated as of
June 1, 2000, as supplemented and amended from time to time, between the
Servicer and UNIPAC Service Corporation, as subservicer and (iii) the Loan
Sub-Servicing Agreement dated as of June 1, 2000, as supplemented and amended
from time to time, between the Servicer and InTuition, Inc., as subservicer.

        "SUBSERVICER"  means,  collectively,   UNIPAC  Service  Corporation  and
InTuition, Inc., and their successors and assigns.

        "UNDERWRITER" means,  collectively,  UBS PaineWebber Inc., Salomon Smith
Barney Inc., Banc of America Securities LLC and J.P. Morgan Securities Inc.

        Words importing the masculine gender include the feminine gender. Words
importing persons include firms, associations and corporations. Words importing
the singular number include the plural number and vice versa. Additional terms
are defined in the body of this Supplemental Indenture and the Appendices
hereto.

        In the event that any term or provision contained herein with respect to
the Series 2001B Notes shall conflict with or be inconsistent with any term or
provision contained in the Indenture, the terms and provisions of this
Supplemental Indenture shall govern.

                                   ARTICLE II

                           SERIES 2001B NOTE DETAILS,
                           FORM OF SERIES 2001B NOTES,
                        REDEMPTION OF SERIES 2001B NOTES
                    AND USE OF PROCEEDS OF SERIES 2001B NOTES

SECTION 2.01.    SERIES 2001B NOTE DETAILS.

                (a) The  aggregate  principal  amount of the Series  2001B Notes
        which  may  be  initially   authenticated   and  delivered   under  this
        Supplemental  Indenture  is  limited to  $550,000,000  except for Series
        2001B Notes authenticated and delivered upon transfer of, or in exchange
        for,  or in lieu of  Notes  pursuant  to  Sections  2.03 and 2.04 of the
        Indenture.  The Series 2001B Notes shall be issued in eight (8) separate
        subclasses  (each a  "subclass")  consisting  of  $50,000,000  of  Class
        2001A-2 Notes,  $50,000,000 of Class 2001A-3 Notes, $75,000,000 of Class
        2001A-4  Notes,  $100,000,000  of Class 2001A-5 Notes,  $100,000,000  of
        Class 2001A-6 Notes, $100,000,000 of Class 2001A-7 Notes, $37,500,000 of
        Class 2001B-1 Notes and  $37,500,000 of Class 2001B-2 Notes.  The Series
        2001B  Notes  shall be issuable  only as fully  registered  notes in the
        Authorized Denominations.  The Series 2001B Notes of each subclass shall
        each be lettered  "R" and shall be numbered  separately  from 1 upwards,
        respectively.

               The Series 2001B Notes (collectively, the "Auction Rate Notes")
        shall be dated their Date of Issuance and shall bear interest from their
        Date of Issuance, payable on each Interest Payment Date (as defined in
        Appendix A to this Supplemental Indenture), except that Auction Rate
        Notes which are issued upon transfer, exchange or other replacement
        shall bear interest from the most recent Interest Payment Date to which
        interest has been paid, or if no interest has been paid, from the date

                                       3
<PAGE>

        of the Auction Rate Notes. The Series 2001B Notes shall mature on June
        1, 2035. Interest on the Auction Rate Notes shall be computed on the
        basis of a 360-day year and actual days elapsed. The terms of and
        definitions related to the Auction Rate Notes are found in Article I
        hereof and Appendix A to this Supplemental Indenture.

               The principal of the Series 2001B Notes due at its Stated
        Maturity or redemption in whole shall be payable at the Principal Office
        of the Trustee, or such other location as directed by the Trustee, or at
        the Principal Office of its successor in trust upon presentation and
        surrender of the Series 2001B Notes. Payment of interest and principal
        paid subject to a redemption on any Series 2001B Note shall be made to
        the Registered Owner thereof by check or draft mailed on the Interest
        Payment Date by the Trustee to the Registered Owner at his address as it
        last appears on the registration books kept by the Trustee at the close
        of business on the Record Date for such interest payment date, but any
        such interest not so timely paid or duly provided for shall cease to be
        payable to the Registered Owner thereof at the close of business on the
        Record Date and shall be payable to the Registered Owner thereof at the
        close of business on a special record date (a "Special Record Date") for
        the payment of any such defaulted interest. Such Special Record Date
        shall be fixed by the Trustee whenever moneys become available for
        payment of the defaulted interest, and notice of such Special Record
        Date shall be given to the Registered Owners of the Series 2001B Notes
        not less than 10 days prior thereto by first-class mail to each such
        Registered Owner as shown on the Trustee's registration books on the
        date selected by the Trustee, stating the date of the Special Record
        Date and the date fixed for the payment of such defaulted interest.
        Payment of interest to the Securities Depository or its nominee shall,
        and at the written request addressed to the Trustee of any other
        Registered Owner owning at least $1,000,000 principal amount of the
        Series 2001B Notes, payments of interest shall, be paid by wire transfer
        within the United States to the bank account number filed no later than
        the Record Date or Special Record Date with the Trustee for such
        purpose. All payments on the Series 2001B Notes shall be made in lawful
        money of the United States of America.

                (b) Except as  otherwise  provided in this  Section,  the Series
        2001B Notes in the form of one global note for each Stated Maturity date
        shall be  registered  in the name of the  Securities  Depository  or its
        nominee and ownership  thereof shall be maintained in book-entry form by
        the  Securities  Depository  for  the  account  of  the  Agent  Members.
        Initially,  each Series  2001B Note shall be  registered  in the name of
        CEDE & Co., as the nominee of The Depository  Trust  Company.  Except as
        provided in subsection  (d) of this Section,  the Series 2001B Notes may
        be  transferred,  in  whole  but not in  part,  only  to the  Securities
        Depository or a nominee of the  Securities  Depository or to a successor
        Securities Depository selected or approved by the Issuer or to a nominee
        of such successor Securities  Depository.  Each global note shall bear a
        legend  substantially  to the  following  effect:  "Except as  otherwise
        provided in the Indenture, this global note may be transferred, in whole
        but not in part,  only to another  nominee of the Securities  Depository
        (as defined in the Indenture) or to a successor Securities Depository or
        to a nominee of a successor Securities Depository."

                                       4
<PAGE>

                (c)  Except as  otherwise  provided  herein,  the Issuer and the
        Trustee shall have no  responsibility  or obligation with respect to (i)
        the accuracy of the records of the  Securities  Depository  or any Agent
        Member with respect to any beneficial  ownership  interest in the Series
        2001B Notes, (ii) the delivery to any Agent Member,  beneficial owner of
        the  Series  2001B  Notes or other  Person,  other  than the  Securities
        Depository,  of any notice  with  respect to the Series  2001B  Notes or
        (iii) the payment to any Agent  Member,  beneficial  owner of the Series
        2001B Notes or other Person,  other than the Securities  Depository,  of
        any amount with  respect to the  principal  of or interest on the Series
        2001B  Notes.  So long as the  certificates  for the Series  2001B Notes
        issued  under this  Supplemental  Indenture  are not issued  pursuant to
        subsection  (d) of this Section the Issuer and the Trustee may treat the
        Securities  Depository as, and deem the Securities Depository to be, the
        absolute  owner of the Series 2001B Notes for all  purposes  whatsoever,
        including,  without  limitation,  (A) the  payment of  principal  of and
        interest on such Series 2001B Notes,  (B) giving  notices of  redemption
        and other  matters  with  respect  to such  Series  2001B  Notes and (C)
        registering  transfers  with  respect to such  Series  2001B  Notes.  In
        connection with any notice or other  communication to be provided to the
        Registered Owners pursuant to this Supplemental  Indenture by the Issuer
        or the Trustee  with  respect to any consent or other action to be taken
        by the Registered Owners, the Issuer or the Trustee, as the case may be,
        shall  establish a record date for such  consent or other action and, if
        the Securities Depository shall hold all of the Series 2001B Notes, give
        the  Securities  Depository  notice of such record date not less than 15
        calendar  days in advance of such  record  date to the extent  possible.
        Such notice to the  Securities  Depository  shall be given only when the
        Securities Depository is the sole Registered Owner.

                (d) If at any time the Securities Depository notifies the Issuer
        and the Trustee that it is unwilling or unable to continue as Securities
        Depository with respect to any or all of the Series 2001B Notes or if at
        any time the Securities  Depository  shall no longer be registered or in
        good  standing  under the  Securities  Exchange Act or other  applicable
        statute or  regulation  and a  successor  Securities  Depository  is not
        appointed by the Issuer within 90 days after the Issuer  receives notice
        or becomes aware of such condition,  as the case may be, subsections (b)
        and (c) of this  Section  shall no longer be  applicable  and the Issuer
        shall   execute  and  the  Trustee   shall   authenticate   and  deliver
        certificates  representing  the Series 2001B Notes as provided below. In
        addition,  the Issuer may  determine  at any time that the Series  2001B
        Notes shall no longer be represented by global certificates and that the
        provisions  of  subsections  (b) and (c) of this Section shall no longer
        apply to the Series 2001B Notes. In such event, the Issuer shall execute
        and the Trustee shall authenticate and deliver certificates representing
        the Series 2001B Notes as provided  below.  Certificates  for the Series
        2001B Notes issued in exchange for a global certificate pursuant to this
        subsection   shall  be   registered   in  such   names  and   authorized
        denominations  as the Securities  Depository,  pursuant to  instructions
        from the Agent  Members or otherwise,  shall  instruct in writing to the
        Issuer and the Trustee,  and upon which written instructions the Trustee
        may rely without investigation.  The Trustee shall promptly deliver such
        certificates representing the Series 2001B Notes to the Persons in whose
        names such Notes are so registered.

                                       5
<PAGE>

SECTION 2.02.    REDEMPTION OF THE SERIES 2001B NOTES.

                (a) MANDATORY  REDEMPTION.  Subject to the provisions of Section
        2.02(d)  hereof,  the  Series  2001B  Notes  are  subject  to  mandatory
        redemption (a) in whole or in part, on the first  Interest  Payment Date
        after March 15,  2002,  at a  redemption  price  equal to the  principal
        amount thereof plus interest accrued,  if any, to the date of redemption
        thereof  from moneys  deposited in the  Acquisition  Fund on the Date of
        Issuance which have not been used to finance  Eligible Loans by March 1,
        2002 and (b) at the direction of the Issuer, in whole or in part, on any
        Interest  Payment  Date,  at a redemption  price equal to the  principal
        amount thereof plus interest accrued,  if any, to the date of redemption
        thereof from moneys  representing  Recoveries of Principal  deposited in
        the  Acquisition  Fund  after  July 1,  2004,  unless  such  date can be
        extended without  affecting the Rating on any of the Notes, as evidenced
        by a Rating Confirmation.

                (b) OPTIONAL REDEMPTIONS AND OPTIONAL PURCHASE.

                        (i) OPTIONAL  REDEMPTION OF SERIES 2001B NOTES.  Subject
                to the provisions of Section  2.02(d)  hereof,  the Series 2001B
                Notes are  subject to  redemption  at the option of the  Issuer,
                from funds  received  by the  Trustee  constituting  interest on
                Financed  Eligible Loans remaining in the Revenue Fund after all
                other prior  required  payments  have been made from the Revenue
                Fund,  in whole or in part,  on any Interest  Payment Date, at a
                redemption  price equal to the  principal  amount  thereof being
                redeemed,  plus  interest  accrued,  if  any,  to  the  date  of
                redemption.

                        (ii) EXTRAORDINARY  OPTIONAL  REDEMPTION OF SERIES 2001B
                NOTES.  Subject to the provisions of Section 2.02(d) hereof, the
                Series  2001B  Notes  shall  also be  subject  to  extraordinary
                optional  redemption,  at the  option  of the  Issuer,  from any
                unallocated  and  available  moneys  in the Trust  Estate,  at a
                redemption  price  equal to the  principal  amount of the Series
                2001B Notes being redeemed, plus accrued interest to the date of
                redemption,  without premium in whole or in part on any Interest
                Payment Date,  if the Issuer  reasonably  determines  that it is
                unable to  acquire  Financed  Eligible  Loans,  that the rate of
                return on Financed Eligible Loans has materially  decreased,  or
                that the costs of  administering  the Trust  Estate  have placed
                unreasonable  burdens  upon the ability of the Issuer to perform
                its obligations under the Indenture.

                        (iii) OPTIONAL  PURCHASE OF SERIES 2001B NOTES.  Subject
                to the  provisions  of Section  2.02(d)  hereof,  the Issuer may
                purchase or cause to be purchased  all of the Series 2001B Notes
                on any  Interest  Payment  Date on which the  aggregate  current
                principal  balance of the Series  2001B Notes shall be less than
                or equal to 20% of the initial  aggregate  principal  balance of
                the Series 2001B Notes on their Date of Issuance,  at a purchase
                price equal to the aggregate  current  principal balance of such
                Series  2001B Notes,  plus accrued  interest on the Series 2001B
                Notes  through the day  preceding  the Interest  Payment Date on
                which the purchase occurs. The amount deposited pursuant to this
                subsection  (iii) shall be paid to the Registered  Owners on the
                related  Interest  Payment  Date  following  the  date  of  such

                                       6
<PAGE>

                deposit.  All Series 2001B Notes which are purchased pursuant to
                this subsection (iii) shall be delivered by the Issuer upon such
                purchase  to, and be canceled by, the Trustee and be disposed of
                in a manner satisfactory to the Trustee and the Issuer.

                        (c) NOTICE OF REDEMPTION AND PURCHASE. The Trustee shall
                cause  notice  of any  redemption  or  purchase  to be  given by
                mailing  a  copy  of  the  notice  by  first-class  mail  to the
                Registered  Owner of any Series  2001B  Notes,  and the  Auction
                Agent,  designated  for  redemption  or  purchase in whole or in
                part,  at their  address as the same shall last  appear upon the
                registration  books, in each case not less than 15 days prior to
                the redemption or purchase date; provided, however, that failure
                to give such notice, or any defect therein, shall not affect the
                validity of any  proceedings for the redemption or purchase date
                of such Series  2001B Notes for which no such  failure or defect
                occurs.

                (d) PARTIAL REDEMPTION.

                        (i) If less than all of the Series 2001B Notes are to be
                redeemed  pursuant  to Section  2.02(a) or 2.02(b)  hereof,  the
                subclass of Series 2001B Notes to be redeemed  shall be redeemed
                as directed by an Issuer  Order.  If less than all of the Series
                2001B Notes of any Stated Maturity of any subclass of the Series
                2001B Notes are to be  redeemed,  the Series  2001B Notes of the
                same Stated  Maturity to be redeemed shall be selected by lot in
                such manner as the Trustee shall determine.  Notwithstanding the
                foregoing, Class 2001B Notes shall only be redeemed if after the
                redemption of such Class 2001B Notes, the Aggregate Market Value
                of the Trust  Estate  will equal at least 105% of the  aggregate
                principal amount of all Notes Outstanding.

                        (ii) In case a Series  2001B  Note is of a  denomination
                larger than an Authorized  Denomination,  a portion of such Note
                (in an Authorized  Denomination) may be redeemed. Upon surrender
                of any Series 2001B Note for redemption in part only, the Issuer
                shall execute and the Trustee shall  authenticate and deliver to
                the Registered Owner thereof, the cost of which shall be paid by
                the Issuer, a new Series 2001B Note or Series 2001B Notes of the
                same series,  maturity and of  authorized  denominations,  in an
                aggregate  principal  amount equal to the unredeemed  portion of
                the Series 2001B Note surrendered.

        SECTION  2.03.  DELIVERY OF SERIES 2001B NOTES.  Upon the  execution and
delivery of this Supplemental Indenture, the Issuer shall execute and deliver to
the  Trustee  and the  Trustee  shall  authenticate  the Series  2001B Notes and
deliver them to The Depository  Trust Company and as hereinafter in this Section
provided.

        Prior to the  delivery by the Trustee of any of the Series  2001B Notes,
there shall have been filed with or delivered to the Trustee the following:

                (a) A resolution  duly  adopted by the Issuer,  certified by the
        Secretary or other Authorized Officer thereof, authorizing the execution
        and  delivery of this  Supplemental  Indenture  and the  issuance of the
        Series 2001B Notes.

                                       7
<PAGE>

                (b) Duly executed  copies of this  Supplemental  Indenture and a
        copy of the Indenture.

                (c) Rating  letters from each Rating Agency  pursuant to Section
        2.08(b)(ii) of the Original Indenture.

                (d) An opinion of Note Counsel pursuant to Section  2.08(b)(iii)
        of the Original Indenture.

        SECTION  2.04.  TRUSTEE'S  AUTHENTICATION  CERTIFICATE.   The  Trustee's
authentication certificate upon the Series 2001B Notes shall be substantially in
the forms provided in Exhibits A-1 and A-2 hereof. No Series 2001B Note shall be
secured  hereby  or  entitled  to the  benefit  hereof,  or  shall  be  valid or
obligatory   for  any  purpose,   unless  a   certificate   of   authentication,
substantially  in such form,  has been duly  executed by the  Trustee;  and such
certificate  of the  Trustee  upon any Series  2001B  Note  shall be  conclusive
evidence and the only competent  evidence that such Note has been  authenticated
and delivered  hereunder.  The Trustee's  certificate of authentication shall be
deemed to have been duly  executed  by it if  manually  signed by an  authorized
officer of the Trustee,  but it shall not be necessary that the same person sign
the  certificate  of  authentication  on all of the Series  2001B  Notes  issued
hereunder.

        SECTION 2.05.  DEPOSIT OF SERIES 2001B NOTE PROCEEDS.  Upon the issuance
and  delivery  of the Series  2001B  Notes,  the Trustee  shall  deposit the net
proceeds thereof (i.e.,  net of Underwriters'  discount and a structuring fee of
$1,540,000):

                (a) an amount  equal to  $544,335,000  shall be deposited to the
        Acquisition Fund; and

                (b) an amount  equal to  $4,125,000  shall be  deposited  to the
        Reserve Fund.

        SECTION 2.06.  FORMS OF SERIES 2001B NOTES. The Series 2001B Notes shall
be in substantially the form set forth in Exhibit A-1 and A-2 hereto,  each with
such variations, omissions and insertions as may be necessary.

                                  ARTICLE III

                        AMENDMENTS TO ORIGINAL INDENTURE

        Article IV of the Original Indenture is hereby amended to include the
following as Sections 4.19 and 4.20:

        SECTION 4.19 REPRESENTATIONS OF THE ISSUER REGARDING THE TRUSTEE'S
SECURITY INTEREST. The Issuer hereby represents and warrants for the benefit of
the Trustee and the Registered Owners as follows:

               (a) This Indenture creates a valid and continuing security
        interest (as defined in the applicable Uniform Commercial Code in effect
        in the State of Colorado and Nevada) in the Financed Eligible Loans in
        favor of the Trustee, which security interest is prior to all other
        liens, charges, security interests, mortgages or other encumbrances ,
        and is enforceable as such as against creditors of and purchasers from
        Issuer.

                                       8
<PAGE>

               (b) The Financed Eligible Loans constitute either "general
        intangibles" or "instruments" within the meaning of the applicable UCC.

               (c) Issuer owns and has good and marketable title to the Financed
        Eligible Loans free and clear of any lien, charge, security interest,
        mortgage or other encumbrance, claim or encumbrance of any Person.

               (d) Issuer has caused or will have caused, within ten days, the
        filing of all appropriate financing statements in the proper filing
        office in the appropriate jurisdictions under applicable law in order to
        perfect the security interest in the Financed Eligible Loans granted to
        the Trustee hereunder.

               (e) All executed copies of each promissory note that constitute
        or evidence the Financed Eligible Loans have been delivered to either
        the Trustee or the Custodian.

               (f) Issuer has received a written acknowledgment from Custodian
        that Custodian is holding the promissory notes that constitute or
        evidence the Financed Eligible Loans solely on behalf and for the
        benefit of the Trustee.

               (g) Other than the security interest granted to the Trustee
        pursuant to this Indenture, Issuer has not pledged, assigned, sold,
        granted a security interest in, or otherwise conveyed any of the
        Financed Eligible Loans. Issuer has not authorized the filing of and is
        not aware of any financing statements against Issuer that include a
        description of collateral covering the Financed Eligible Loans other
        than any financing statement relating to the security interest granted
        to the Trustee hereunder or that has been terminated. Debtor is not
        aware of any judgment or tax lien filings against Issuer.

        SECTION 4.20 COVENANTS OF THE ISSUER REGARDING THE TRUSTEE'S SECURITY
INTEREST. The Issuer hereby covenants for the benefit of the Trustee and the
Registered Owners as follows:

               (a) The representations and warranties set forth in Section 4.19
        shall survive the termination of this Indenture.

               (b) The Trustee shall not waive any of the representations and
        warranties set forth in Section 4.19 above.

               (c) The Issuer shall take all steps necessary, and shall cause
        the Servicers to take all steps necessary and appropriate, to maintain
        the perfection and priority of the Trustee's security interest in the
        Financed Eligible Loans.

                                       9
<PAGE>

                                   ARTICLE IV

                               GENERAL PROVISIONS

        SECTION  4.01.  DATE  OF  EXECUTION.  This  Supplemental  Indenture  for
convenience and for the purpose of reference is dated as of September 1, 2001.

        SECTION 4.02.  LAWS  GOVERNING.  It is the intent of the parties  hereto
that this  Supplemental  Indenture shall in all respects be governed by the laws
of the State.

        SECTION 4.03. SEVERABILITY.  If any covenant, agreement, waiver, or part
thereof in this Supplemental  Indenture  contained be forbidden by any pertinent
law or  under  any  pertinent  law be  effective  to  render  this  Supplemental
Indenture invalid or unenforceable or to impair the lien hereof,  then each such
covenant,  agreement,  waiver,  or part  thereof  shall  itself be and is hereby
declared to be wholly  ineffective,  and this  Supplemental  Indenture  shall be
construed as if the same were not included herein.

        SECTION  4.04.  EXHIBITS.  The terms of the  Exhibits  attached  to this
Supplemental Indenture are incorporated herein in all particulars.

                                   ARTICLE V

                           APPLICABILITY OF INDENTURE

        The provisions of the Indenture are hereby ratified, approved and
confirmed, except as otherwise expressly modified by this Supplemental
Indenture. The representations, warranties and covenants contained in the
Indenture (except as expressly modified herein) are hereby reaffirmed with the
same force and effect as if fully set forth herein and made again as of the date
hereof.

                                       10
<PAGE>

        IN WITNESS WHEREOF, the Issuer has caused this Supplemental Indenture to
be executed in its corporate name and behalf by the Vice President, and the
Trustee, to evidence its acceptance of the trusts hereby created, has caused
this Supplemental Indenture to be executed in its corporate name and behalf, all
in multiple counterparts, each of which shall be deemed an original, and the
Issuer and the Trustee have caused this Supplemental Indenture to be dated as of
the date herein above first shown, although actually executed on the dates shown
in the acknowledgments hereafter appearing.

                                   NELNET STUDENT LOAN CORPORATION-2

                                   By /s/ Ronald W. Page
                                      ------------------------------------------
                                       Ronald W. Page
                                       Vice President

                                   ZIONS FIRST NATIONAL BANK, as Trustee

                                   By /s/ David W. Bata
                                      ------------------------------------------
                                       David W. Bata
                                       Vice President

                                       11
<PAGE>

                                   APPENDIX A

                         CERTAIN TERMS AND PROVISIONS OF
                             THE AUCTION RATE NOTES

                                    ARTICLE I

                                   DEFINITIONS

        Except as provided below in this Section, all terms which are defined in
Article I of the Indenture and Article I of this Supplemental Indenture shall
have the same meanings, respectively, in this Appendix A as such terms are given
in the Indenture and Article I of this Supplemental Indenture. In addition, the
following terms shall have the following respective meanings:

        "ALL HOLD RATE" means the Applicable LIBOR Rate less .20%; provided,
that in no event shall the applicable All Hold Rate be greater than the
applicable Maximum Rate.

        "APPLICABLE LIBOR RATE" means, (a) for Auction Periods of 35 days or
less, One-Month LIBOR, (b) for Auction Periods of more than 35 days but less
than 91 days, Three-Month LIBOR, (c) for Auction Periods of more than 90 days
but less than 181 days, Six-Month LIBOR, and (d) for Auction Periods of more
than 180 days, One-Year LIBOR.

        "AUCTION" means the implementation of the Auction Procedures on an
Auction Date.

        "AUCTION AGENT" means the Initial Auction Agent under the Initial
Auction Agent Agreement unless and until a Substitute Auction Agent Agreement
becomes effective, after which "Auction Agent" shall mean the Substitute Auction
Agent.

        "AUCTION AGENT AGREEMENT" means the Initial Auction Agent Agreement
unless and until a Substitute Auction Agent Agreement is entered into, after
which "Auction Agent Agreement" shall mean such Substitute Auction Agent
Agreement.

        "AUCTION AGENT FEE" has the meaning set forth in the Auction Agent
Agreement.

        "AUCTION DATE" means, initially, October 2, 2001 with respect to the
Class 2001A-2 Notes, October 9, 2001 with respect to the Class 2001A-3 Notes,
October 16, 2001 with respect to the Class 2001A-4 Notes, October 17, 2001 with
respect to the Class 2001A-5 Notes, October 3, 2001 with respect to the Class
2001A-6 Notes, September 26, 2001 with respect to the Class 2001A-7 Notes,
October 23, 2001 with respect to the Class 2001B-1 Notes and October 30, 2001
with respect to the Class 2001B-2 Notes, and thereafter, the Business Day
immediately preceding the first day of each Auction Period for each respective
Subclass, other than:

               (a) each Auction Period commencing after the ownership of the
        applicable Auction Rate Notes is no longer maintained in Book-entry Form
        by the Securities Depository;

                                      A-1-1
<PAGE>

               (b)  each  Auction  Period   commencing  after  and  during  the
        continuance of a Payment Default; or

               (c) each Auction Period commencing less than two Business Days
        after the cure or waiver of a Payment Default.

Notwithstanding the foregoing, the Auction Date for one or more Auction Periods
may be changed pursuant to Section 2.02(h) of this Appendix A.

        "AUCTION RATE NOTES" means, collectively, the Series 2001B Notes.

        "AUCTION NOTE INTEREST RATE" means each variable rate of interest per
annum borne by an Auction Rate Note for each Auction Period and determined in
accordance with the provisions of Sections 2.01 and 2.02 of this Appendix A;
provided, however, that in the event of a Payment Default, the Auction Note
Interest Rate shall equal the applicable Non-Payment Rate; provided, further,
however that such Auction Note Interest Rate shall in no event exceed the lesser
of the Net Loan Rate and the Maximum Rate.

        "AUCTION PERIOD" means the Interest Period applicable to the Auction
Rate Notes during which time the Interest Rate is determined pursuant to Section
2.02(a) of this Appendix A, which Auction Period (after the Initial Period for
such Subclass) initially shall consist generally of 28 days for the Class
2001A-2 Notes, the Class 2001A-3 Notes, the Class 2001A-4 Notes, the Class
2001A-5 Notes, the Class 2001A-6 Notes, the Class 2001A-7 Notes, the Class
2001B-1 Notes and the Class 2001B-2 Notes, as the same may be adjusted pursuant
to Section 2.02(g) of this Appendix A.

        "AUCTION PERIOD ADJUSTMENT" means an adjustment to the Auction Period as
provided in Section 2.02(g) of this Appendix A.

        "AUCTION PROCEDURES" means the procedures set forth in Section 2.02(a)
of this Appendix A by which the Auction Rate is determined.

        "AUCTION RATE" means the rate of interest per annum that results from
implementation of the Auction Procedures and is determined as described in
Section 2.02(a)(iii)(B) of this Appendix A.

        "AUTHORIZED DENOMINATIONS" means $50,000 and any integral multiple
thereof.

        "AVAILABLE AUCTION RATE NOTES" has the meaning set forth in Section
2.02(a)(iii)(A)(1) of this Appendix A.

        "BID" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.

        "BID AUCTION RATE" has the meaning set forth in Section 2.02(a)(iii)(A)
of this Appendix A.

        "BIDDER" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.
                                      A-1-2
<PAGE>

        "BOND EQUIVALENT YIELD" means, in respect of any security the rate for
which is quoted in THE WALL STREET JOURNAL on a bank discount basis, the "bond
equivalent yield" (expressed as a percentage) for such security which appears on
Telerate's United States Treasury and Money Market Composite Page 0223, rounded
up to the nearest one one-hundredth of one percent.

        "BOOK-ENTRY FORM" or "BOOK-ENTRY SYSTEM" means a form or system under
which (a) the beneficial right to principal and interest may be transferred only
through a book entry, (b) physical securities in registered form are issued only
to a Securities Depository or its nominee as registered owner, with the
securities "immobilized" to the custody of the Securities Depository, and (c)
the book entry is the record that identifies the owners of beneficial interests
in that principal and interest.

        "BROKER-DEALER" means, collectively, UBS PaineWebber Inc., Salomon Smith
Barney Inc., Banc of America Securities LLC and J.P. Morgan Securities Inc., or
any other broker or dealer (each as defined in the Securities Exchange Act of
1934, as amended), commercial bank or other entity permitted by law to perform
the functions required of a Broker-Dealer set forth in the Auction Procedures
that (a) is a Participant (or an affiliate of a Participant), (b) has been
appointed as such by the Issuer pursuant to Section 2.02(f) of this Appendix A,
and (c) has entered into a Broker-Dealer Agreement that is in effect on the date
of reference.

        "BROKER-DEALER AGREEMENT" means each agreement between the Auction Agent
and a Broker-Dealer, and approved by the Issuer, pursuant to which the
Broker-Dealer agrees to participate in Auctions as set forth in the Auction
Procedures, as from time to time amended or supplemented. Each Broker-Dealer
Agreement shall be in substantially the form of the Broker-Dealer Agreements,
each dated as of September 1, 2001, among the Issuer, Bankers Trust Company, as
Auction Agent, and the Broker-Dealers.

        "BROKER-DEALER FEE" has the meaning set forth in the Auction Agent
Agreement.

        "BROKER-DEALER FEE RATE" has the meaning set forth in the Auction Agent
Agreement.

        "BUSINESS DAY" means any day other than April 14 and 15, December 30 and
31, a Saturday, Sunday, holiday or day on which banks located in the City of New
York, New York, or the New York Stock Exchange, the Trustee or the Auction
Agent, are authorized or permitted by law or executive order to close or such
other date as may be agreed to in writing by the Auction Agent, the
Broker-Dealers and the Issuer.

        "CARRY-OVER AMOUNT" means the excess, if any, of (a) the amount of
interest on an Auction Rate Note that would have accrued with respect to the
related Interest Period at the applicable Auction Rate over (b) the amount of
interest on such Auction Rate Note actually accrued with respect to such Auction
Rate Note with respect to such Interest Period based on the Net Loan Rate,
together with the unreduced portion of any such excess from prior Interest
Periods; provided that any reference to "principal" or "interest" in the
Supplemental Indenture and in this Appendix A and the Auction Rate Notes shall
not include within the meanings of such words any Carry-over Amount or any
interest accrued on any Carry-over Amount.

        "CLOSING DATE" means the Date of Issuance of the Auction Rate Notes
(September 4, 2001).
                                      A-1-3
<PAGE>

        "COMMERCIAL PAPER DEALER" means UBS PaineWebber Inc., its successors and
assigns,  and any other commercial  paper dealer  appointed  pursuant to Section
2.02(c) of this Appendix A.

        "EFFECTIVE INTEREST RATE" means, with respect to any Financed Eligible
Loan, the interest rate per annum payable by the borrower as of the last day of
the calendar quarter borne by such Financed Eligible Loan after giving effect to
any reduction in such interest rate pursuant to borrower incentives, (a) less
all accrued rebate fees on such Financed Eligible Loan constituting
Consolidation Loans paid during such calendar quarter expressed as a percentage
per annum and (b) plus all accrued Interest Benefit Payments and Special
Allowance Payments applicable to such Financed Eligible Loan during such
calendar quarter expressed as a percentage per annum.

        "ELIGIBLE CARRY-OVER MAKE-UP AMOUNT" means, with respect to each
Interest Period relating to the Auction Rate Notes as to which, as of the first
day of such Interest Period, there is any unpaid Carry-over Amount, an amount
equal to the lesser of (a) interest computed on the principal balance of the
Auction Rate Notes in respect to such Interest Period at a per annum rate equal
to the excess, if any, of the Net Loan Rate over the Auction Rate, together with
the unreduced portion of any such excess from prior Interest Periods and (b) the
aggregate Carry-over Amount remaining unpaid as of the first day of such
Interest Period together with interest accrued and unpaid thereon through the
end of such Interest Period.

        "EXISTING OWNER" means (a) with respect to and for the purpose of
dealing with the Auction Agent in connection with an Auction, a Person who is a
Broker-Dealer listed in the Existing Owner Registry at the close of business on
the Business Day immediately preceding the Auction Date for such Auction and (b)
with respect to and for the purpose of dealing with the Broker-Dealer in
connection with an Auction, a Person who is a beneficial owner of Auction Rate
Notes.

        "EXISTING OWNER REGISTRY" means the registry of Persons who are owners
of the Auction Rate Notes, maintained by the Auction Agent as provided in the
Auction Agent Agreement.

        "HOLD ORDER" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.

        "INITIAL AUCTION AGENT" means Bankers Trust Company, a New York banking
corporation, its successors and assigns.

        "INITIAL AUCTION AGENT AGREEMENT" means, collectively, the Auction Agent
Agreement dated as of September 1, 2001, by and among the Issuer, the Trustee
and the Initial Auction Agent, including any amendment thereof or supplement
thereto.

        "INITIAL PERIOD" means, as to Auction Rate Notes, the period commencing
on the Closing Date and continuing through the day immediately preceding the
Initial Rate Adjustment Date for such Auction Rate Notes.

        "INITIAL RATE" means 3.55% for the Class 2001A-2 Notes, 3.55% for the
Class 2001A-3 Notes, 3.55% for the Class 2001A-4 Notes, 3.52% for the Class
2001A-5 Notes, 3.55% for the Class 2001A-6 Notes, 3.569% for the Class 2001A-7
Notes, 3.65% for the Class 2001B-1 Notes and 3.65% for the Class 2001B-2 Notes.

                                      A-1-4
<PAGE>

        "INITIAL RATE ADJUSTMENT DATE" means, with respect to the Class 2001A-2
Notes, October 3, 2001; with respect to the Class 2001A-3 Notes, October 10,
2001; with respect to the Class 2001A-4 Notes, October 17, 2001; with respect to
the Class 2001A-5 Notes, October 18, 2001; with respect to the Class 2001A-6
Notes, October 4, 2001; with respect to the Class 2001A-7 Notes, September 27,
2001; with respect to the Class 2001B-1 Notes, October 24, 2001; and with
respect to the Class 2001B-2 Notes, October 31, 2001.

        "INTEREST PAYMENT DATE" means (a) so long as the Auction Rate Notes bear
interest at an Auction Note Interest Rate for an Interest Period of not greater
than 180 days, the Business Day immediately following the expiration of the
Initial Period for such Subclass, and each related Auction Period thereafter and
(b) if and for so long as the Auction Rate Notes bear interest at an Auction
Note Interest Rate for an Interest Period of greater than 180 days, each January
1 and June 1.

        "INTEREST PERIOD" means, with respect to the Auction Rate Notes, the
Initial Period and each period commencing on an Interest Rate Adjustment Date
for such Subclass and ending on the day before (a) the next Interest Rate
Adjustment Date for such Subclass or (b) the Stated Maturity of such Subclass,
as applicable.

        "INTEREST RATE ADJUSTMENT DATE" means the date on which an Auction Note
Interest Rate is effective, and means, with respect to the Auction Rate Notes,
the date of commencement of each Auction Period.

        "INTEREST RATE DETERMINATION DATE" means, with respect to the Auction
Rate Notes, the Auction Date, or if no Auction Date is applicable to such
Subclass, the Business Day immediately preceding the date of commencement of an
Auction Period.

        "MAXIMUM RATE" means the least of (a) either (i) the Applicable LIBOR
Rate plus 1.50% (if the ratings assigned by the Rating Agency to the Auction
Rate Notes are "Aa3" and "AA-," respectively, or better) or (ii) the Applicable
LIBOR Rate plus 2.50% (if any one of the ratings assigned by the Rating Agency
to the Auction Rate Notes is less than "Aa3" or "AA-," respectively), (b) 18%
and (c) the highest rate the Issuer may legally pay, from time to time, as
interest on the Auction Rate Notes. For purposes of the Auction Agent and the
Auction Procedures, the ratings referred to in this definition shall be the last
ratings of which the Auction Agent has been given written notice pursuant to the
Auction Agent Agreement.

        "NET LOAN RATE" means, respect to any Interest Period applicable to the
Auction Rate Notes, the greater of (a) the rate of interest per annum (rounded
to the next highest one one-hundredth of one percent) equal to the applicable
United States Treasury Security Rate plus 1.50% or (b) the rate of interest per
annum (rounded to the next highest one-hundredth of one percent) equal to (i)
the weighted average Effective Interest Rate of the Financed Eligible Loans for
the calendar quarter immediately preceding such Interest Period, as determined
by the Issuer on the last day of such calendar quarter, less (ii) the Program
Expense Percentage, as determined by the Issuer on the last day of each calendar
year. In making the determinations in (b)(i) and (ii) of this definition of "Net
Loan Rate," the Issuer shall take into account as an increase to such Net Loan
Rate the receipt of any Reciprocal Payment and as a decrease to any Issuer
Derivative Payment. The determinations made by the Issuer in (b)(i) and (ii) of
this definition of "Net Loan Rate" shall be given in writing to the Auction
Agent, the Trustee and the Broker-Dealers immediately upon their respective
calculation dates.
                                      A-1-5
<PAGE>

        "NON-PAYMENT RATE" means One-Month LIBOR plus 1.50%.

        "ONE-MONTH LIBOR," "THREE-MONTH LIBOR," "SIX-MONTH LIBOR" or "ONE-YEAR
LIBOR," means the offered rate, as determined by the Auction Agent or Trustee,
as applicable, of the Applicable LIBOR Based Rate for United States dollar
deposits which appears on Telerate Page 3750, as reported by Bloomberg Financial
Markets Commodities News (or such other page as may replace Telerate Page 3750
for the purpose of displaying comparable rates) as of approximately 11:00 a.m.,
London time, on the LIBOR Determination Date; provided, that if on any
calculation date, no rate appears on Telerate Page 3750 as specified above, the
Auction Agent or Trustee, as applicable, shall determine the arithmetic mean of
the offered quotations of four major banks in the London interbank market, for
deposits in United States dollars for the respective periods specified above to
the banks in the London interbank market as of approximately 11:00 a.m., London
time, on such calculation date and in a principal amount of not less than
$1,000,000 that is representative of a single transaction in such market and at
such time, unless fewer than two such quotations are provided, in which case,
the Applicable LIBOR Based Rate shall be the arithmetic mean of the offered
quotations that leading banks in New York City selected by the Auction Agent or
Trustee, as applicable, are quoting on the relevant LIBOR Determination Date for
loans in United States dollars to leading European banks in a principal amount
of not less than $1,000,000 that is representative of a single transaction in
such market at such time. All percentages resulting from such calculations shall
be rounded upwards, if necessary, to the nearest one-hundredth of one percent.

        "ORDER" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.

        "PAYMENT DEFAULT" means, with respect to the Auction Rate Notes, (a) a
default in the due and punctual payment of any installment of interest on such
Auction Rate Notes, or (b) a default in the due and punctual payment of any
interest on and principal of such Auction Rate Notes at their maturity.

        "POTENTIAL OWNER" means any Person (including an Existing Owner that is
(a) a Broker-Dealer when dealing with the Auction Agent and (b) a potential
beneficial owner when dealing with a Broker-Dealer) who may be interested in
acquiring Auction Rate Notes (or, in the case of an Existing Owner thereof, an
additional principal amount of Auction Rate Notes).

        "PROGRAM EXPENSE PERCENTAGE" means, the percentage that all Program
Expenses estimated for the next 12 months represent of the principal amount of
the Notes, which as of September 1, 2001 is 1.05%, and which the Issuer shall
calculate annually on the last day of each calendar year. Any adjustment in the
Program Expense Percentage shall be effective beginning on the first Interest
Rate Determination Date following each such calculation.

        "PSA" means the Public Securities Association, its successors and
assigns.

        "QUARTERLY AVERAGE AUCTION RATE" means the simple average of the Auction
Rates for the Auction Dates preceding the current Auction Date by 91 days or
less, including the current Auction Date.

        "QUARTERLY AVERAGE T-BILL RATE" means the simple average of the Bond
Equivalent Yields of 91-day Treasury bills auctioned in the 91 days preceding
(but not including) the current Auction Date.

                                      A-1-6
<PAGE>

        "REGULAR RECORD DATE" means the Business Day next preceding the
applicable Auction Date.

        "S&P"  means  Standard & Poor's  Ratings  Services,  a  Division  of The
McGraw-Hill Companies, Inc., its successors and assigns.

        "SELL ORDER" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.

        "SUBMISSION DEADLINE" means 1:00 p.m., eastern time, on any Auction Date
or such other time on any Auction Date by which Broker-Dealers are required to
submit Orders to the Auction Agent as specified by the Auction Agent from time
to time.

        "SUBMITTED BID" has the meaning set forth in Section 2.02(a)(iii)(A) of
this Appendix A.

        "SUBMITTED HOLD ORDER" has the meaning set forth in Section
2.02(a)(iii)(A) of this Appendix A.

        "SUBMITTED ORDER" has the meaning set forth in Section 2.02(a)(iii)(A)
of this Appendix A.

        "SUBMITTED SELL ORDER" has the meaning set forth in Section
2.02(a)(iii)(A) of this Appendix A.

        "SUBSTITUTE AUCTION AGENT" means the Person with whom the Issuer and the
Trustee enter into a Substitute Auction Agent Agreement.

        "SUBSTITUTE AUCTION AGENT AGREEMENT" means an auction agent agreement
containing terms substantially similar to the terms of the Initial Auction Agent
Agreement, whereby a Person having the qualifications required by Section
2.02(e) of this Appendix A agrees with the Trustee and the Issuer to perform the
duties of the Auction Agent under this Appendix A.

        "SUFFICIENT BIDS" has the meaning set forth in Section 2.02(a)(iii)(A)
of this Appendix A.

        "UNITED STATES TREASURY SECURITY RATE" means, for purposes of
calculating the Net Loan Rate applicable to the Auction Rate Notes, that rate of
interest per annum equal to the Bond Equivalent Yield on the applicable United
States Treasury securities sold at the last auction thereof that immediately
precedes the Interest Rate Adjustment Date for the Auction Rate Notes.

        "VARIABLE RATE" means the variable rate of interest per annum, including
the Initial Rate, borne by each Subclass of Auction Rate Notes during the
Initial Period for such Subclass, and each Interest Period thereafter as such
rate of interest is determined in accordance with the provisions of Article II
of this Appendix A.
                                      A-1-7
<PAGE>

                                   ARTICLE II

                               TERMS AND ISSUANCE

        SECTION 2.01. AUCTION RATE AND CARRY-OVER AMOUNTS. During the Initial
Period, the Auction Rate Notes shall bear interest at the Initial Rate for such
Subclass. Thereafter, and except with respect to an Auction Period Adjustment,
the Auction Rate Notes shall bear interest at an Auction Note Interest Rate
based on a 28-day Auction Period for the Auction Rate Notes, as determined
pursuant to this Section 2.01 and Section 2.02 of this Appendix A.

        For the Auction Rate Notes during the Initial Period and each Auction
Period thereafter, interest at the applicable Auction Rate Notes Interest Rate
shall accrue daily and shall be computed for the actual number of days elapsed
on the basis of a year consisting of 360 days.

        The Auction Note Interest Rate to be borne by the Auction Rate Notes
after such Initial Period for each Auction Period until an Auction Period
Adjustment, if any, shall be determined as described below. Each such Auction
Period after the Initial Period shall commence on and include the day following
the expiration of the immediately preceding Auction Period and terminate on and
include the (i) second Business Day of the following fourth week in the case of
the Class 2001A-2 Notes, the Class 2001A-3 Notes, the Class 2001A-4 Notes, the
Class 2001B-1 Notes and the Class 2001B-2 Notes, and (ii) third Business Day of
the following fourth week in the case of the Class 2001A-5 Notes, the Class
2001A-6 Notes and the Class 2001A-7 Notes; provided, however, that in the case
of the Auction Period that immediately follows the Initial Period for the
Auction Rate Notes, such Auction Period shall commence on the Initial Rate
Adjustment Date. The Auction Note Interest Rate of the Auction Rate Notes for
each Auction Period shall be the Auction Rate in effect for such Auction Period
as determined in accordance with Section 2.02(a) of this Appendix A; provided
that if, on any Interest Rate Determination Date, an Auction is not held for any
reason, then the Auction Note Interest Rate on such Auction Rate Notes for the
next succeeding Auction Period shall be the applicable Maximum Rate.

        Notwithstanding the foregoing:

               (a) if the ownership of an Auction Rate Note is no longer
        maintained in Book-entry Form, the Auction Note Interest Rate on the
        Auction Rate Notes for any Interest Period commencing after the delivery
        of certificates representing Auction Rate Notes pursuant to this
        Supplemental Indenture shall equal the lesser of (i) the Maximum Rate
        and (ii) the Net Loan Rate on the Business Day immediately preceding the
        first day of such subsequent Interest Period; or

               (b) if a Payment Default shall have occurred, the Auction Note
        Interest Rate on the Auction Rate Notes for the Interest Period
        commencing on or immediately after such Payment Default, and for each
        Interest Period thereafter, to and including the Interest Period, if
        any, during which, or commencing less than two Business Days after, such
        Payment Default is cured, shall equal the applicable Non-Payment Rate on
        the first day of each such Interest Period.

        In accordance with Section 2.02(a)(iii)(B) and (C) of this Appendix A,
the Auction Agent shall promptly give written notice to the Trustee and the

                                      A-1-8
<PAGE>

Issuer of each Auction Note Interest Rate (unless the Auction Note Interest Rate
is the applicable Non-Payment Rate) and the Maximum Rate when such rate is not
the Auction Note Interest Rate, applicable to the Auction Rate Notes. The
Trustee shall notify the Registered Owners and the Issuer of Auction Rate Notes
of the applicable Auction Note Interest Rate applicable to such Auction Rate
Notes for each Auction Period not later than the third Business Day of such
Auction Period. Notwithstanding any other provision of the Auction Rate Notes or
this Supplemental Indenture and except for the occurrence of a Payment Default,
interest payable on the Auction Rate Notes for an Auction Period shall never
exceed for such Auction Period the amount of interest payable at the applicable
Maximum Rate in effect for such Auction Period.

        If the Auction Rate for the Auction Rate Notes is greater than the Net
Loan Rate, then the Variable Rate applicable to such Auction Rate Notes for that
Interest Period will be the Net Loan Rate. If the Variable Rate applicable to
such Auction Rate Notes for any Interest Period is the Net Loan Rate, the
Trustee shall determine the Carry-over Amount, if any, with respect to such
Auction Rate Notes for such Interest Period. Such Carry-over Amount shall bear
interest calculated at a rate equal to One-Month LIBOR (as determined by the
Auction Agent, provided the Trustee has received notice of One-Month LIBOR from
the Auction Agent, and if the Trustee shall not have received such notice from
the Auction Agent, then as determined by the Trustee) from the Interest Payment
Date for the Interest Period with respect to which such Carry-over Amount was
calculated, until paid. Any payment in respect of Carry-over Amount shall be
applied, first, to any accrued interest payable thereon and, second, in
reduction of such Carry-over Amount. For purposes of this Supplemental Indenture
and this Appendix A, any reference to "principal" or "interest" herein shall not
include within the meaning of such words Carry-over Amount or any interest
accrued on any such Carry-over Amount. Such Carry-over Amount shall be
separately calculated for each Auction Rate Note by the Trustee during such
Interest Period in sufficient time for the Trustee to give notice to each
Registered Owner of such Carry-over Amount as required in the next succeeding
sentence. Not less than four days before the Interest Payment Date for an
Interest Period with respect to which such Carry-over Amount has been calculated
by the Trustee, the Trustee shall give written notice to each Registered Owner
the Auction Agent and the Issuer of the Carry-over Amount applicable to each
Registered Owner's Auction Rate Note, which written notice may accompany the
payment of interest by check made to each such Registered Owner on such Interest
Payment Date or otherwise shall be mailed on such Interest Payment Date by
first-class mail, postage prepaid, to each such Registered Owner at such
Registered Owner's address as it appears on the registration records maintained
by the Registrar. Such notice shall state, in addition to such Carry-over
Amount, that, unless and until an Auction Rate Note has been redeemed (other
than by optional redemption), after which all accrued Carry-over Amounts (and
all accrued interest thereon) that remains unpaid shall be canceled and no
Carry-over Amount (and interest accrued thereon) shall be paid with respect to
an Auction Rate Note, (a) the Carry-over Amount (and interest accrued thereon
calculated at a rate equal to One-Month LIBOR) shall be paid by the Trustee on
an Auction Rate Note on the earliest of (i) the date of defeasance of the
Auction Rate Notes or (ii) the first occurring Interest Payment Date (or on the
date of any such optional redemption) if and to the extent that (A) the Eligible
Carry-over Make-Up Amount with respect to such subsequent Interest Period is
greater than zero, and (B) moneys are available pursuant to the terms of the
Indenture in an amount sufficient to pay all or a portion of such Carry-over
Amount (and interest accrued thereon), and (b) interest shall accrue on the
Carry-over Amount at a rate equal to One-Month LIBOR until such Carry-over
Amount is paid in full or is cancelled.

                                      A-1-9
<PAGE>

        The Carry-over Amount (and interest accrued thereon) for Auction Rate
Notes shall be paid by the Trustee on Outstanding Auction Rate Notes on the
earliest of (a) the date of defeasance of any of the Auction Rate Notes or (b)
the first occurring Interest Payment Date if and to the extent that (i) the
Eligible Carry-over Make-Up Amount with respect to such Interest Period is
greater than zero, and (ii) on such Interest Payment Date there are sufficient
moneys in the Revenue Fund to pay all interest due on the Auction Rate Notes on
such Interest Payment Date. Any Carry-over Amount (and any interest accrued
thereon) on any Auction Rate Note which is due and payable on an Interest
Payment Date, which Auction Rate Note is to be redeemed (other than by optional
redemption) on said Interest Payment Date, shall be paid to the Registered Owner
thereof on said Interest Payment Date to the extent that moneys are available
therefor in accordance with the provisions of this Appendix A; provided,
however, that any Carry-over Amount (and any interest accrued thereon) which is
not yet due and payable on said Interest Payment Date shall be cancelled with
respect to said Auction Rate Note that is to be redeemed (other than by optional
redemption) on said Interest Payment Date and shall not be paid on any
succeeding Interest Payment Date. To the extent that any portion of the
Carry-over Amount (and any interest accrued thereon) remains unpaid after
payment of a portion thereof, such unpaid portion shall be paid in whole or in
part as required hereunder until fully paid by the Trustee on the earliest of
(a) the date of defeasance of any of the Auction Rate Notes or (b) the next
occurring Interest Payment Date or Dates, as necessary, if and to the extent
that the conditions in the second preceding sentence are satisfied. On any
Interest Payment Date on which the Trustee pays only a portion of the Carry-over
Amount (and any interest accrued thereon) on Auction Rate Notes, the Trustee
shall give written notice in the manner set forth in the immediately preceding
paragraph to the Registered Owner of such Auction Rate Note receiving such
partial payment of the Carry-over Amount remaining unpaid on such Auction Rate
Note.

        The Interest Payment Date or other date on which such Carry-over Amount
(or any interest accrued thereon) for Auction Rate Notes shall be paid shall be
determined by the Trustee in accordance with the provisions of the immediately
preceding paragraph, and the Trustee shall make payment of the Carry-over Amount
(and any interest accrued thereon) in the same manner as, and from the same Fund
from which, it pays interest on the Auction Rate Notes on an Interest Payment
Date. Any payment of Carry-over Amounts (and interest accrued thereon) shall
reduce the amount of Eligible Carry-Over Make-Up Amount.

        In the event that the Auction Agent no longer determines, or fails to
determine, when required, the Auction Note Interest Rate with respect to Auction
Rate Notes, or, if for any reason such manner of determination shall be held to
be invalid or unenforceable, the Auction Note Interest Rate for the next
succeeding Interest Period, which Interest Period shall be an Auction Period,
for Auction Rate Notes shall be the applicable Maximum Rate as determined by the
Auction Agent for such next succeeding Auction Period, and if the Auction Agent
shall fail or refuse to determine the Maximum Rate, the Maximum Rate shall be
determined by the securities dealer appointed by the Issuer capable of making
such a determination in accordance with the provisions of this Appendix A and
written notice of such determination shall be given by such securities dealer to
the Trustee.

                                      A-1-10
<PAGE>

        SECTION 2.02.  AUCTION RATE.

               (a) DETERMINING THE AUCTION RATE. By purchasing Auction Rate
        Notes, whether in an Auction or otherwise, each purchaser of the Auction
        Rate Notes, or its Broker-Dealer, must agree and shall be deemed by such
        purchase to have agreed (x) to participate in Auctions on the terms
        described herein, (y) to have its beneficial ownership of the Auction
        Rate Notes maintained at all times in Book-entry Form for the account of
        its Participant, which in turn will maintain records of such beneficial
        ownership and (z) to authorize such Participant to disclose to the
        Auction Agent such information with respect to such beneficial ownership
        as the Auction Agent may request.

               So long as the ownership of Auction Rate Notes is maintained in
        Book-entry Form by the Securities Depository, an Existing Owner may
        sell, transfer or otherwise dispose of Auction Rate Notes only pursuant
        to a Bid or Sell Order placed in an Auction or otherwise sell, transfer
        or dispose of Auction Rate Notes through a Broker-Dealer, provided that,
        in the case of all transfers other than pursuant to Auctions, such
        Existing Owner, its Broker-Dealer or its Participant advises the Auction
        Agent of such transfer. Auctions shall be conducted on each Auction
        Date, if there is an Auction Agent on such Auction Date, in the
        following manner:

                (i) (A) Prior to the Submission Deadline on each Auction Date;

                                (1) each  Existing  Owner of Auction  Rate Notes
                        may submit to a Broker-Dealer  by telephone or otherwise
                        any information as to:

                                            a. the principal amount of
                                    Outstanding Auction Rate Notes, if any,
                                    owned by such Existing Owner which such
                                    Existing Owner desires to continue to own
                                    without regard to the Auction Note Interest
                                    Rate for the next succeeding Auction Period;

                                            b. the principal amount of
                                    Outstanding Auction Rate Notes, if any,
                                    which such Existing Owner offers to sell if
                                    the Auction Note Interest Rate for the next
                                    succeeding Auction Period shall be less than
                                    the rate per annum specified by such
                                    Existing Owner; and/or

                                            c. the principal amount of
                                    Outstanding Auction Rate Notes, if any,
                                    owned by such Existing Owner which such
                                    Existing Owner offers to sell without regard
                                    to the Auction Note Interest Rate for the
                                    next succeeding Auction Period;

                                    and

                                      A-1-11
<PAGE>

                                    (2) one or more Broker-Dealers may contact
                             Potential Owners to determine the principal amount
                             of Auction Rate Notes which each Potential Owner
                             offers to purchase, if the Auction Note Interest
                             Rate for the next succeeding Auction Period shall
                             not be less than the rate per annum specified by
                             such Potential Owner.

                             The statement of an Existing Owner or a Potential
                      Owner referred to in (1) or (2) of this paragraph (A) is
                      herein referred to as an "Order," and each Existing Owner
                      and each Potential Owner placing an Order is herein
                      referred to as a "Bidder"; an Order described in clause
                      (1)a is herein referred to as a "Hold Order"; an Order
                      described in clauses (1)b and (2) is herein referred to as
                      a "Bid"; and an Order described in clause (1)c is herein
                      referred to as a "Sell Order."

                             (B) (1) Subject to the provisions of Section
                             2.02(a)(ii) of this Appendix A, a Bid by an
                             Existing Owner shall constitute an irrevocable
                             offer to sell:

                                          a. the principal amount of Outstanding
                                    Auction Rate Notes  specified in such Bid if
                                    the Auction  Note  Interest Rate  determined
                                    as provided in this Section 2.02(a) shall be
                                    less than the rate specified therein; or

                                            b. such principal amount, or a
                                    lesser principal amount of Outstanding
                                    Auction Rate Notes to be determined as set
                                    forth in Section 2.02(a)(iv)(A)(4) of this
                                    Appendix A, if the Auction Note Interest
                                    Rate determined as provided in this Section
                                    2.02(a) shall be equal to the rate specified
                                    therein; or

                                            c. such principal amount, or a
                                    lesser principal amount of Outstanding
                                    Auction Rate Notes to be determined as set
                                    forth in Section 2.02(a)(iv)(B)(3) of this
                                    Appendix A, if the rate specified therein
                                    shall be higher than the applicable Maximum
                                    Rate and Sufficient Bids have not been made.

                                    (2) Subject to the provisions of Section
                             2.02(a)(ii) of this Appendix A, a Sell Order by an
                             Existing Owner shall constitute an irrevocable
                             offer to sell:

                                            a.     the   principal   amount   of
                                    Outstanding Auction Rate Notes specified in
                                    such Sell Order; or

                                            b.     such   principal amount, or a
                                    lesser principal amount of Outstanding
                                    Auction Rate Notes set forth  in  Section
                                    2.02(a)(iv) (B)(3)  of this  Appendix A, if
                                    Sufficient  Bids have not been made.

                                      A-1-12
<PAGE>

                                    (3) Subject to the provisions of Section
                             2.02(a)(ii) of this Appendix A, a Bid by a
                             Potential Owner shall constitute an irrevocable
                             offer to purchase:

                                        a. the principal  amount of  Outstanding
                                Auction Rate Notes  specified in such Bid if the
                                Auction  Note   Interest   Rate   determined  as
                                provided in this Section 2.02(a) shall be higher
                                than the rate specified in such Bid; or

                                        b. such  principal  amount,  or a lesser
                                principal  amount of  Outstanding  Auction  Rate
                                Notes set forth in Section  2.02(a)(iv)(A)(5) of
                                this  Appendix A, if the Auction  Note  Interest
                                Rate  determined  as  provided  in this  Section
                                2.02(a) shall be equal to the rate  specified in
                                such Bid.

                      (ii) (A) Each Broker-Dealer shall submit in writing to the
                      Auction Agent prior to the Submission Deadline on each
                      Auction Date all Orders obtained by such Broker-Dealer and
                      shall specify with respect to each such Order:

                                (1) the name of t he Bidder placing such Order;

                                (2) the  aggregate  principal  amount of Auction
                        Rate Notes that are the subject of such Order;

                                (3)  to  the  extent  that  such  Bidder  is  an
                        Existing Owner:

                                        a. the principal  amount of Auction Rate
                                Notes, if any,  subject to any Hold Order placed
                                by such Existing Owner;

                                        b. the principal  amount of Auction Rate
                                Notes, if any, subject to any Bid placed by such
                                Existing  Owner and the rate  specified  in such
                                Bid; and

                                        c. the principal  amount of Auction Rate
                                Notes, if any,  subject to any Sell Order placed
                                by such Existing Owner;

                             and

                                (4) to the  extent  such  Bidder is a  Potential
                        Owner, the rate specified in such Potential Owner's Bid.

                             (B) If any rate specified in any Bid contains more
                      than three figures to the right of the decimal point, the
                      Auction Agent shall round such rate up to the next higher
                      one thousandth of 1%.

                                      A-1-13
<PAGE>

                             (C) If an Order or Orders covering all Outstanding
                      Auction Rate Notes owned by an Existing Owner is not
                      submitted to the Auction Agent prior to the Submission
                      Deadline, the Auction Agent shall deem a Hold Order to
                      have been submitted on behalf of such Existing Owner
                      covering the principal amount of Outstanding Auction Rate
                      Notes owned by such Existing Owner and not subject to an
                      Order submitted to the Auction Agent.

                             (D) Neither the Issuer, the Trustee nor the Auction
                      Agent shall be responsible for any failure of a
                      Broker-Dealer to submit an Order to the Auction Agent on
                      behalf of any Existing Owner or Potential Owner.

                             (E) If any Existing Owner submits through a
                      Broker-Dealer to the Auction Agent one or more Orders
                      covering in the aggregate more than the principal amount
                      of Outstanding Auction Rate Notes owned by such Existing
                      Owner, such Orders shall be considered valid as follows
                      and in the following order of priority:

                                    (1) All Hold Orders shall be considered
                             valid, but only up to the aggregate principal
                             amount of Outstanding Auction Rate Notes owned by
                             such Existing Owner, and if the aggregate principal
                             amount of Auction Rate Notes subject to such Hold
                             Orders exceeds the aggregate principal amount of
                             Auction Rate Notes owned by such Existing Owner,
                             the aggregate principal amount of Auction Rate
                             Notes subject to each such Hold Order shall be
                             reduced pro rata so that the aggregate principal
                             amount of Auction Rate Notes subject to such Hold
                             Order equals the aggregate principal amount of
                             Outstanding Auction Rate Notes owned by such
                             Existing Owner.

                                    (2) a. Any Bid shall be considered valid up
                                    to an amount equal to the excess of the
                                    principal amount of Outstanding Auction Rate
                                    Notes owned by such Existing Owner over the
                                    aggregate principal amount of Auction Rate
                                    Notes subject to any Hold Order referred to
                                    in clause (A) of this paragraph (v);

                                            b. subject to subclause (1) of this
                                    clause (B), if more than one Bid with the
                                    same rate is submitted on behalf of such
                                    Existing Owner and the aggregate principal
                                    amount of Outstanding Auction Rate Notes
                                    subject to such Bids is greater than such
                                    excess, such Bids shall be considered valid
                                    up to an amount equal to such excess;

                                            c. subject to subclauses (1) and (2)
                                    of this clause (B), if more than one Bid
                                    with different rates are submitted on behalf
                                    of such Existing Owner, such Bids shall be

                                      A-1-14
<PAGE>

                                    considered valid first in the ascending
                                    order of their respective rates until the
                                    highest rate is reached at which such excess
                                    exists and then at such rate up to the
                                    amount of such excess; and

                                          d. in any  such  event, the amount  of
                                   Outstanding Auction Rate Notes, if any,
                                   subject to Bids not valid under this clause
                                   (B)shall be treated as the  subject of a Bid
                                   by a Potential Owner at the rate therein
                                   specified; and

                                    (3) All Sell Orders shall be considered
                             valid up to an amount equal to the excess of the
                             principal amount of Outstanding Auction Rate Notes
                             owned by such Existing Owner over the aggregate
                             principal amount of Auction Rate Notes subject to
                             Hold Orders referred to in clause (1) of this
                             paragraph (v) and valid Bids referred to in clause
                             (2) of this paragraph (E).

                             (F) If more than one Bid for Auction Rate Notes is
                      submitted on behalf of any Potential Owner, each Bid
                      submitted shall be a separate Bid with the rate and
                      principal amount therein specified.

                             (G) An Existing Owner that offers to purchase
                      additional Auction Rate Notes is, for purposes of such
                      offer, treated as a Potential Owner.

                             (H) Any Bid or Sell Order submitted by an Existing
                      Owner covering an aggregate principal amount of Auction
                      Rate Notes not equal to an Authorized Denomination shall
                      be rejected and shall be deemed a Hold Order. Any Bid
                      submitted by a Potential Owner covering an aggregate
                      principal amount of Auction Rate Notes not equal to an
                      Authorized Denomination shall be rejected.

                             (I) Any Bid specifying a rate higher than the
                      applicable Maximum Rate will (1) be treated as a Sell
                      Order if submitted by an Existing Owner and (2) not be
                      accepted if submitted by a Potential Owner.

                             (J) Any Order submitted in an Auction by a
                      Broker-Dealer to the Auction Agent prior to the Submission
                      Deadline on any Auction Date shall be irrevocable.

                      (iii) (A) Not earlier than the Submission Deadline on each
                      Auction Date, the Auction Agent shall assemble all valid
                      Orders submitted or deemed submitted to it by the
                      Broker-Dealers (each such Order as submitted or deemed
                      submitted by a Broker-Dealer being herein referred to
                      individually as a "Submitted Hold Order," a "Submitted
                      Bid" or a "Submitted Sell Order," as the case may be, or
                      as a "Submitted Order," and collectively as "Submitted
                      Hold Orders," "Submitted Bids" or "Submitted Sell Orders,"
                      as the case may be, or as "Submitted Orders") and shall
                      determine:

                                      A-1-15
<PAGE>

                                    (1) the excess of the total principal amount
                             of Outstanding Auction Rate Notes over the sum of
                             the aggregate principal amount of Outstanding
                             Auction Rate Notes subject to Submitted Hold Orders
                             (such excess being herein referred to as the
                             "Available Auction Rate Notes"), and

                                    (2)     from the Submitted Orders whether:

                                        a. the  aggregate  principal  amount  of
                                Outstanding   Auction  Rate  Notes   subject  to
                                Submitted  Bids by Potential  Owners  specifying
                                one or more  rates  equal to or  lower  than the
                                applicable Maximum Rate;

                             exceeds or is equal to the sum of:

                                        b. the  aggregate  principal  amount  of
                                Outstanding   Auction  Rate  Notes   subject  to
                                Submitted Bids by Existing Owners specifying one
                                or more rates higher than the applicable Maximum
                                Rate; and

                                        c. the  aggregate  principal  amount  of
                                Outstanding   Auction  Rate  Notes   subject  to
                                Submitted Sell Orders;

                             (in the event such excess or such equality exists,
                             other than because all of the Outstanding Auction
                             Rate Notes are subject to Submitted Hold Orders,
                             such Submitted Bids described in subclause a. above
                             shall be referred to collectively as "Sufficient
                             Bids"); and

                                    (3) if Sufficient Bids exist, the Bid
                             Auction Rate, which shall be the lowest rate
                             specified in such Submitted Bids such that if:

                                        a. (x) each  Submitted Bid from Existing
                                Owners  specifying  such lowest rate and (y) all
                                other   Submitted  Bids  from  Existing   Owners
                                specifying  lower  rates  were  rejected,   thus
                                entitling  such  Existing  Owners to continue to
                                own the  principal  amount of Auction Rate Notes
                                subject to such Submitted Bids; and

                                        b.  (x)  each  such  Submitted  Bid from
                                Potential Owners specifying such lowest rate and
                                (y) all  other  Submitted  Bids  from  Potential
                                Owners specifying lower rates were accepted;

                                      A-1-16
<PAGE>

                                the result  would be that such  Existing  Owners
                                described in  subclause a. above would  continue
                                to  own  an   aggregate   principal   amount  of
                                Outstanding Auction Rate Notes which, when added
                                to the aggregate principal amount of Outstanding
                                Auction  Rate  Notes  to be  purchased  by  such
                                Potential   Owners  described  in  subclause  b.
                                above,  would equal not less than the  Available
                                Auction Rate Notes.

                             (B) Promptly after the Auction Agent has made the
                      determinations pursuant to Section 2.02(a)(iii)(A) of this
                      Appendix A, the Auction Agent shall advise the Trustee,
                      the Broker-Dealers and the Issuer of the Net Loan Rate,
                      Maximum Rate and the All Hold Rate and the components
                      thereof on the Auction Date and, based on such
                      determinations, the Auction Rate for the next succeeding
                      Interest Period as follows:

                                    (1) if Sufficient Bids exist, that the
                             Auction Rate for the next succeeding Interest
                             Period shall be equal to the Bid Auction Rate so
                             determined;

                                    (2) if Sufficient Bids do not exist (other
                             than because all of the Outstanding Auction Rate
                             Notes are subject to Submitted Hold Orders), that
                             the Auction Rate for the next succeeding Interest
                             Period shall be equal to the applicable Maximum
                             Rate; or

                                    (3) if all Outstanding Auction Rate Notes
                             are subject to Submitted Hold Orders, that the
                             Auction Rate for the next succeeding Interest
                             Period shall be equal to the applicable All Hold
                             Rate.

                             (C) Promptly after the Auction Agent has determined
                      the Auction Rate, the Auction Agent shall determine and
                      advise the Trustee of the Auction Note Interest Rate,
                      which rate shall be the lesser of (x) the Auction Rate and
                      (y) the Net Loan Rate; provided, however, that in no event
                      shall the Auction Note Interest Rate exceed the applicable
                      Maximum Rate.

                      (iv) Existing Owners shall continue to own the principal
               amount of Auction Rate Notes that are subject to Submitted Hold
               Orders. If the Net Loan Rate is equal to or greater than the Bid
               Auction Rate and if Sufficient Bids have been received by the
               Auction Agent, the Bid Auction Rate will be the Auction Note
               Interest Rate, and Submitted Bids and Submitted Sell Orders will
               be accepted or rejected and the Auction Agent will take such
               other action as described below in subparagraph (A).

                      If the Net Loan Rate is less than the Auction Rate, the
               Net Loan Rate will be the Auction Note Interest Rate. If the

                                      A-1-17
<PAGE>

               Auction Rate and the Net Loan Rate are both greater than the
               applicable Maximum Rate, the Auction Note Interest Rate shall be
               equal to the applicable Maximum Rate. If the Auction Agent has
               not received Sufficient Bids (other than because all of the
               Outstanding Auction Rate Notes are subject to Submitted Hold
               Orders), the Auction Note Interest Rate will be the lesser of the
               Net Loan Rate and the applicable Maximum Rate. In any of the
               cases described above, Submitted Orders will be accepted or
               rejected and the Auction Agent will take such other action as
               described below in subparagraph (B).

                             (A) If Sufficient Bids have been made and the Net
                      Loan Rate is equal to or greater than the Bid Auction
                      Rate, and if the applicable Maximum Rate does not apply
                      (in which case the Auction Note Interest Rate shall be the
                      Bid Auction Rate), all Submitted Sell Orders shall be
                      accepted and, subject to the provisions of clauses (4) and
                      (5) of this Section 2.02(a)(iv), Submitted Bids shall be
                      accepted or rejected as follows in the following order of
                      priority, and all other Submitted Bids shall be rejected:

                                    (1) Existing Owners' Submitted Bids
                             specifying any rate that is higher than the Auction
                             Note Interest Rate shall be accepted, thus
                             requiring each such Existing Owner to sell the
                             aggregate principal amount of Auction Rate Notes
                             subject to such Submitted Bids;

                                    (2) Existing Owners' Submitted Bids
                             specifying any rate that is lower than the Auction
                             Note Interest Rate shall be rejected, thus
                             entitling each such Existing Owner to continue to
                             own the aggregate principal amount of Auction Rate
                             Notes subject to such Submitted Bids;

                                    (3)     Potential  Owners'  Submitted Bids
                             specifying any rate that is lower than the Auction
                             Note  Interest  Rate shall be accepted;

                                    (4) Each Existing Owners' Submitted Bid
                             specifying a rate that is equal to the Auction Note
                             Interest Rate shall be rejected, thus entitling
                             such Existing Owner to continue to own the
                             aggregate principal amount of Auction Rate Notes
                             subject to such Submitted Bid, unless the aggregate
                             principal amount of Outstanding Auction Rate Notes
                             subject to all such Submitted Bids shall be greater
                             than the principal amount of Auction Rate Notes
                             (the "remaining principal amount") equal to the
                             excess of the Available Auction Rate Notes over the
                             aggregate principal amount of Auction Rate Notes
                             subject to Submitted Bids described in clauses (2)
                             and (3) of this Section 2.02(a)(iv)(D)(1), in which
                             event such Submitted Bid of such Existing Owner
                             shall be rejected in part, and such Existing Owner

                                      A-1-18
<PAGE>
                             shall be entitled to continue to own the principal
                             amount of Auction Rate Notes subject to such
                             Submitted Bid, but only in an amount equal to the
                             aggregate principal amount of Auction Rate Notes
                             obtained by multiplying the remaining principal
                             amount by a fraction, the numerator of which shall
                             be the principal amount of Outstanding Auction Rate
                             Notes owned by such Existing Owner subject to such
                             Submitted Bid and the denominator of which shall be
                             the sum of the principal amount of Outstanding
                             Auction Rate Notes subject to such Submitted Bids
                             made by all such Existing Owners that specified a
                             rate equal to the Auction Note Interest Rate,
                             subject to the provisions of Section 2.02(a)(iv)(D)
                             of this Appendix A; and

                                    (5) Each Potential Owner's Submitted Bid
                             specifying a rate that is equal to the Auction Note
                             Interest Rate shall be accepted, but only in an
                             amount equal to the principal amount of Auction
                             Rate Notes obtained by multiplying the excess of
                             the aggregate principal amount of Available Auction
                             Rate Notes over the aggregate principal amount of
                             Auction Rate Notes subject to Submitted Bids
                             described in clauses (2), (3) and (4) of this
                             Section 2.02(a)(iv)(A) by a fraction the numerator
                             of which shall be the aggregate principal amount of
                             Outstanding Auction Rate Notes subject to such
                             Submitted Bid and the denominator of which shall be
                             the sum of the principal amount of Outstanding
                             Auction Rate Notes subject to Submitted Bids made
                             by all such Potential Owners that specified a rate
                             equal to the Auction Note Interest Rate, subject to
                             the provisions of Section 2.02(a)(iv)(D) of this
                             Appendix A.

                             (B) If Sufficient Bids have not been made (other
                      than because all of the Outstanding Auction Rate Notes are
                      subject to submitted Hold Orders), or if the Net Loan Rate
                      is less than the Bid Auction Rate (in which case the
                      Auction Note Interest Rate shall be the Net Loan Rate) or
                      if applicable Maximum Rate applies, subject to the
                      provisions of Section 2.02(a)(iv)(D) of this Appendix A,
                      Submitted Orders shall be accepted or rejected as follows
                      in the following order of priority and all other Submitted
                      Bids shall be rejected:

                                    (1) Existing Owners' Submitted Bids
                             specifying any rate that is equal to or lower than
                             the Auction Note Interest Rate shall be rejected,
                             thus entitling such Existing Owners to continue to
                             own the aggregate principal amount of Auction Rate
                             Notes subject to such Submitted Bids;

                                    (2) Potential Owners' Submitted Bids
                             specifying (x) any rate that is equal to or lower
                             than the Auction Note Interest Rate shall be
                             accepted and (y) any rate that is higher than the
                             Auction Note Interest Rate shall be rejected; and

                                      A-1-19
<PAGE>

                                    (3) each Existing Owner's Submitted Bid
                             specifying any rate that is higher than the Auction
                             Note Interest Rate and the Submitted Sell Order of
                             each Existing Owner shall be accepted, thus
                             entitling each Existing Owner that submitted any
                             such Submitted Bid or Submitted Sell Order to sell
                             the Auction Rate Notes subject to such Submitted
                             Bid or Submitted Sell Order, but in both cases only
                             in an amount equal to the aggregate principal
                             amount of Auction Rate Notes obtained by
                             multiplying the aggregate principal amount of
                             Auction Rate Notes subject to Submitted Bids
                             described in clause (2)(x) of this Section
                             2.02(a)(iv)(B) by a fraction the numerator of which
                             shall be the aggregate principal amount of
                             Outstanding Auction Rate Notes owned by such
                             Existing Owner subject to such submitted Bid or
                             Submitted Sell Order and the denominator of which
                             shall be the aggregate principal amount of
                             Outstanding Auction Rate Notes subject to all such
                             Submitted Bids and Submitted Sell Orders.

                             (C) If all Auction Rate Notes are subject to
                      Submitted Hold Orders, all Submitted Bids shall be
                      rejected.

                             (D) If, as a result of the procedures described in
                      paragraph (A) or (B) of this Section 2.02(a)(iv), any
                      Existing Owner would be entitled or required to sell, or
                      any Potential Owner would be entitled or required to
                      purchase, a principal amount of Auction Rate Notes that is
                      not equal to an Authorized Denomination, the Auction Agent
                      shall, in such manner as in its sole discretion it shall
                      determine, round up or down the principal amount of
                      Auction Rate Notes to be purchased or sold by any Existing
                      Owner or Potential Owner so that the principal amount of
                      Auction Rate Notes purchased or sold by each Existing
                      Owner or Potential Owner shall be equal to an Authorized
                      Denomination.

                             (E) If, as a result of the procedures described in
                      paragraph (B) of this Section 2.02(a)(iv), any Potential
                      Owner would be entitled or required to purchase less than
                      an Authorized Denomination of Auction Rate Notes, the
                      Auction Agent shall, in such manner as in its sole
                      discretion it shall determine, allocate Auction Rate Notes
                      for purchase among Potential Owners so that only Auction
                      Rate Notes in Authorized Denominations are purchased by
                      any Potential Owner, even if such allocation results in
                      one or more of such Potential Owners not purchasing any
                      Auction Rate Notes.

                      (v) Based on the result of each Auction, the Auction Agent
               shall determine the aggregate principal amount of Auction Rate
               Notes to be purchased and the aggregate principal amount of
               Auction Rate Notes to be sold by Potential Owners and Existing
               Owners on whose behalf each Broker-Dealer submitted Bids or Sell
               Orders and, with respect to each Broker-Dealer, to the extent
               that such aggregate principal amount of Auction Rate Notes to be
               sold differs from such aggregate principal amount of Auction Rate

                                      A-1-20
<PAGE>
               Notes to be purchased, determine to which other Broker-Dealer or
               Broker-Dealers acting for one or more purchasers such
               Broker-Dealer shall deliver, or from which other Broker-Dealer or
               Broker-Dealers acting for one or more sellers such Broker-Dealer
               shall receive, as the case may be, Auction Rate Notes.

                      (vi) Any calculation by the Auction Agent or the Trustee,
               as applicable, of the Auction Note Interest Rate, the Maximum
               Rate, the All Hold Rate, the Net Loan Rate and the Non-Payment
               Rate shall, in the absence of manifest error, be binding on all
               other parties.

                      (vii) Notwithstanding anything in this Appendix A to the
               contrary, (A) no Auction for the Auction Rate Notes for an
               Auction Period of less than 180 days will be held on any Auction
               Date hereunder on which there are insufficient moneys in the
               Revenue Fund to pay, or otherwise held by the Trustee under the
               Indenture and available to pay, the principal of and interest due
               on the Auction Rate Notes on the Interest Payment Date
               immediately following such Auction Date, and (B) no Auction will
               be held on any Auction Date hereunder during the continuance of a
               Payment Default. The Trustee shall promptly notify the Auction
               Agent of any such occurrence.

               (b)  APPLICATION OF INTEREST PAYMENTS FOR THE AUCTION RATE NOTES.

                      (i) The Trustee shall determine not later than 2:00 p.m.,
               eastern time, on the Business Day next succeeding an Interest
               Payment Date, whether a Payment Default has occurred. If a
               Payment Default has occurred, the Trustee shall, not later than
               2:15 p.m., eastern time, on such Business Day, send a notice
               thereof in substantially the form of Exhibit C attached hereto to
               the Auction Agent by telecopy or similar means and, if such
               Payment Default is cured, the Trustee shall immediately send a
               notice in substantially the form of Exhibit D attached hereto to
               the Auction Agent by telecopy or similar means.

                      (ii) Not later than 2:00 p.m., eastern time, on each
               anniversary of the Closing Date, the Trustee shall pay to the
               Auction Agent, in immediately available funds out of amounts in
               the Revenue Fund, an amount equal to the Auction Agent Fee as set
               forth in the Auction Agent Agreement. Not later than 2:00 p.m.,
               eastern time, on each Auction Date, the Trustee shall pay to the
               Auction Agent, in immediately available funds out of amounts in
               the Revenue Fund, an amount equal to the Broker-Dealer Fee as
               calculated in the Auction Agent Agreement. The Trustee shall,
               from time to time at the request of the Auction Agent and at the
               direction of an Authorized Officer, reimburse the Auction Agent
               for its reasonable expenses as provided in the Auction Agent
               Agreement, such expenses to be paid out of amounts in the Revenue
               Fund.

               (c) CALCULATION OF MAXIMUM RATE, ALL HOLD RATE, NET LOAN RATE,
        APPLICABLE LIBOR RATE, AND NON-PAYMENT RATE. The Auction Agent shall
        calculate the applicable Maximum Rate, Net Loan Rate, Applicable LIBOR
        Rate, and All Hold Rate, as the case may be, on each Auction Date and

                                      A-1-21
<PAGE>

        shall notify the Trustee and the Broker-Dealers of the applicable
        Maximum Rate, Net Loan Rate, Applicable LIBOR Rate, and All Hold Rate,
        as the case may be, as provided in the Auction Agent Agreement;
        provided, that if the ownership of the Auction Rate Notes is no longer
        maintained in Book-entry Form, or if a Payment Default has occurred,
        then the Trustee shall determine the applicable Maximum Rate, Net Loan
        Rate, Applicable LIBOR Rate, All Hold Rate and Non-Payment Rate for each
        such Interest Period. If the ownership of the Auction Rate Notes is no
        longer maintained in Book-entry Form by the Securities Depository, the
        Trustee shall calculate the applicable Maximum Rate and the Net Loan
        Rate on the Business Day immediately preceding the first day of each
        Interest Period after the delivery of certificates representing the
        Auction Rate Notes pursuant to the Indenture. If a Payment Default shall
        have occurred, the Trustee shall calculate the Non-Payment Rate on the
        Interest Rate Determination Date for (i) each Interest Period commencing
        after the occurrence and during the continuance of such Payment Default
        and (ii) any Interest Period commencing less than two Business Days
        after the cure of any Payment Default. The determination by the Trustee
        or the Auction Agent, as the case may be, of the applicable Maximum
        Rate, Net Loan Rate, Applicable LIBOR Rate, All Hold Rate and
        Non-Payment Rate shall (in the absence of manifest error) be final and
        binding upon all parties. If calculated or determined by the Auction
        Agent, the Auction Agent shall promptly advise the Trustee of the
        applicable Maximum Rate, Net Loan Rate, Applicable LIBOR Rate, and All
        Hold Rate.

               (d)    NOTIFICATION OF RATES, AMOUNTS AND PAYMENT DATES.

                      (i) By 12:00 noon, eastern time, on the Business Day
               following each Regular Record Date, the Trustee shall determine
               the aggregate amounts of interest distributable on the next
               succeeding Interest Payment Date to the beneficial owners of
               Auction Rate Notes.

                      (ii) At least four days prior to any Interest Payment
               Date, the Trustee shall:

                             (A) confirm with the Auction Agent, so long as no
                      Payment Default has occurred and is continuing and the
                      ownership of the Auction Rate Notes is maintained in
                      Book-entry Form by the Securities Depository, (1) the date
                      of such next Interest Payment Date and (2) the amount
                      payable to the Auction Agent on the Auction Date pursuant
                      to Section 2.02(b)(ii) of this Appendix A;

                             (B) pursuant to Section 2.01 of this Appendix A,
                      advise the Registered Owners of a Subclass of Auction Rate
                      Notes of any Carry-over Amount accruing on such Auction
                      Rate Notes; and

                             (C) advise the Securities Depository, so long as
                      the ownership of the Auction Rate Notes is maintained in
                      Book-entry Form by the Securities Depository, upon
                      request, of the aggregate amount of interest distributable
                      on such next Interest Payment Date to the beneficial
                      owners of each Subclass of the Auction Rate Notes.

                                      A-1-22
<PAGE>

               If any day scheduled to be an Interest Payment Date shall be
        changed after the Trustee shall have given the notice or confirmation
        referred to in clause (i) of the preceding sentence, the Trustee shall,
        not later than 11:15 a.m., eastern time, on the Business Day next
        preceding the earlier of the new Interest Payment Date or the old
        Interest Payment Date, by such means as the Trustee deems practicable,
        give notice of such change to the Auction Agent, so long as no Payment
        Default has occurred and is continuing and the ownership of the Auction
        Rate Notes is maintained in Book-entry Form by the Securities
        Depository.

               (e)    AUCTION AGENT.

                      (i) Bankers Trust Company is hereby appointed as Initial
               Auction Agent to serve as agent for the Issuer in connection with
               Auctions. The Trustee and the Issuer will, and the Trustee is
               hereby directed to, enter into the Initial Auction Agent
               Agreement with Bankers Trust Company, as the Initial Auction
               Agent. Any Substitute Auction Agent shall be (A) a bank, national
               banking association or trust company duly organized under the
               laws of the United States of America or any state or territory
               thereof having its principal place of business in the Borough of
               Manhattan, New York, or such other location as approved by the
               Trustee in writing and having a combined capital stock or surplus
               of at least $50,000,000, or (B) a member of the National
               Association of Securities Dealers, Inc., having a capitalization
               of at least $50,000,000, and, in either case, authorized by law
               to perform all the duties imposed upon it hereunder and under the
               Auction Agent Agreement. The Auction Agent may at any time resign
               and be discharged of the duties and obligations created by this
               Appendix A by giving at least 90 days' notice to the Trustee,
               each Broker-Dealer and the Issuer. The Auction Agent may be
               removed at any time by the Trustee upon the written direction of
               an Authorized Officer or the Registered Owners of 51% of the
               aggregate principal amount of the Auction Rate Notes then
               Outstanding, and if by such Registered Owners, by an instrument
               signed by such Registered Owners or their attorneys and filed
               with the Auction Agent, the Issuer and the Trustee upon at least
               90 days' written notice. Neither resignation nor removal of the
               Auction Agent pursuant to the preceding two sentences shall be
               effective until and unless a Substitute Auction Agent has been
               appointed and has accepted such appointment. If required by the
               Issuer, a Substitute Auction Agent Agreement shall be entered
               into with a Substitute Auction Agent. Notwithstanding the
               foregoing, the Auction Agent may terminate the Auction Agent
               Agreement if, within 25 days after notifying the Trustee, each
               Broker-Dealer and the Issuer in writing that it has not received
               payment of any Auction Agent Fee due it in accordance with the
               terms of the Auction Agent Agreement, the Auction Agent does not
               receive such payment.

                      (ii) If the Auction Agent shall resign or be removed or be
               dissolved, or if the property or affairs of the Auction Agent

                                      A-1-23
<PAGE>
               shall be taken under the control of any state or federal court or
               administrative body because of bankruptcy or insolvency, or for
               any other reason, the Trustee at the direction of an Authorized
               Officer, shall use its best efforts to appoint a Substitute
               Auction Agent.

                      (iii) The Auction Agent is acting as agent for the Issuer
               in connection with Auctions. In the absence of bad faith,
               negligent failure to act or negligence on its part, the Auction
               Agent shall not be liable for any action taken, suffered or
               omitted or any error of judgment made by it in the performance of
               its duties under the Auction Agent Agreement and shall not be
               liable for any error of judgment made in good faith unless the
               Auction Agent shall have been negligent in ascertaining (or
               failing to ascertain) the pertinent facts.

               (f)    BROKER-DEALERS.

                        (i) The  Auction  Agent will  enter  into  Broker-Dealer
                Agreements with UBS PaineWebber Inc., Salomon Smith Barney Inc.,
                Banc of America  Securities LLC and J. P. Morgan Securities Inc.
                as the initial  Broker-Dealers.  An Authorized Officer may, from
                time to time, approve one or more additional persons to serve as
                Broker-Dealers  under  Broker-Dealer  Agreements  and  shall  be
                responsible for providing such  Broker-Dealer  Agreements to the
                Trustee and the Auction Agent.

                        (ii) Any  Broker-Dealer  may be removed at any time,  at
                the request of an Authorized  Officer,  but there shall,  at all
                times,  be at least one  Broker-Dealer  appointed  and acting as
                such.

               (g) CHANGES IN AUCTION PERIOD OR PERIODS AND CERTAIN PERCENTAGES.

                        (i) While any of the Auction Rate Notes are Outstanding,
                the Issuer may,  from time to time,  change the length of one or
                more Auction Periods (an "Auction Period Adjustment"),  in order
                to conform with then  current  market  practice  with respect to
                similar  securities  or to  accommodate  economic and  financial
                factors  that may  affect or be  relevant  to the  length of the
                Auction  Period and the interest  rate borne by the Auction Rate
                Notes.   The  Issuer  shall  not  initiate  an  Auction   Period
                Adjustment  unless it shall have received the written consent of
                the  applicable  Broker-Dealer,   which  consent  shall  not  be
                unreasonably  withheld,  not later  than nine days  prior to the
                Auction Date for such Auction Period.  The Issuer shall initiate
                the Auction Period Adjustment by giving written notice by Issuer
                Order  to  the  Trustee,   the  Auction  Agent,  the  applicable
                Broker-Dealer,  each Rating Agency and the Securities Depository
                in substantially  the form of, or containing  substantially  the
                information  contained in, Exhibit E attached hereto at least 10
                days prior to the Auction Date for such Auction Period.

                        (ii) Any such adjusted  Auction Period shall not be less
                than 7 days nor more than 366 days.

                        (iii) An Auction  Period  Adjustment  shall take  effect
                only if (A) the Trustee and the Auction Agent receive,  by 11:00
                a.m.,

                                      A-1-24
<PAGE>
                eastern  time,  on the  Business Day before the Auction Date for
                the  first  such  Auction  Period,  an  Issuer   Certificate  in
                substantially the form attached as, or containing  substantially
                the same  information  contained in, Exhibit F attached  hereto,
                authorizing  the Auction  Period  Adjustment  specified  in such
                certificate  along  with a copy of the  written  consent  of the
                applicable  Broker-Dealer  and, (B) Sufficient  Bids exist as of
                the Auction on the Auction Date for such first  Auction  Period.
                If the  condition  referred  to in (A)  above  is not  met,  the
                applicable  Auction  Note  Interest  Rate for the  next  Auction
                Period shall be determined  pursuant to the above  provisions of
                this  Section  2.02 and the Auction  Period shall be the Auction
                Period  determined  without reference to the proposed change. If
                the  condition  referred  to in  (A) is met  but  the  condition
                referred in (B) above is not met,  the  applicable  Auction Note
                Interest  Rate  for  the  next  Auction   Period  shall  be  the
                applicable  Maximum  Rate and the  Auction  Period  shall be the
                Auction  Period  determined  without  reference  to the proposed
                change.

                      In connection with any Auction Period Adjustment, the
                Auction Agent shall provide such further notice to such parties
                as is specified in Section 2.03 of the Auction Agent Agreement.

               (h) CHANGES IN THE AUCTION DATE. The applicable Broker-Dealer,
        with the written consent of an Authorized Officer and, if applicable,
        upon receipt of the opinion of Note Counsel as required below, may
        specify an earlier Auction Date (but in no event more than five Business
        Days earlier) than the Auction Date that would otherwise be determined
        in accordance with the definition of "Auction Date" in Section 1.01 of
        this Appendix A with respect to one or more specified Auction Periods in
        order to conform with then current market practice with respect to
        similar securities or to accommodate economic and financial factors that
        may affect or be relevant to the day of the week constituting an Auction
        Date and the interest rate borne on the Auction Rate Notes. The
        applicable Broker-Dealer shall deliver a written request for consent to
        such change in the length of the Auction Date to the Issuer at least 14
        days prior to the effective date of such change. If the Issuer shall
        have delivered such written consent to the applicable Broker-Dealer,
        such Broker-Dealer shall provide notice of its determination to specify
        an earlier Auction Date for one or more Auction Periods by means of a
        written notice delivered at least 10 days prior to the proposed changed
        Auction Date to the Trustee, the Auction Agent, the Issuer, each Rating
        Agency and the Securities Depository. Such notice shall be substantially
        in the form of, or contain substantially the information contained in,
        Exhibit G attached hereto.

               In connection with any change described in this Section 2.02(h),
        the Auction Agent shall provide such further notice to such parties as
        is specified in Section 2.03 of the Auction Agent Agreement.

        SECTION 2.03. ADDITIONAL PROVISIONS REGARDING THE INTEREST RATES ON THE
AUCTION RATE NOTES. The determination of a Variable Rate by the Auction Agent or
any other Person pursuant to the provisions of the applicable Section of this
Article II shall be conclusive and binding on the Registered Owners of the
Auction Rate Notes to which such Variable Rate applies, and the Issuer and the
Trustee may rely thereon for all purposes.

                                      A-1-25
<PAGE>

        In no event shall the cumulative amount of interest paid or payable on
the Auction Rate Notes (including interest calculated as provided herein, plus
any other amounts that constitute interest on the Auction Rate Notes under
applicable law, which are contracted for, charged, reserved, taken or received
pursuant to the Auction Rate Notes or related documents) calculated from the
Date of Closing of the Auction Rate Notes through any subsequent day during the
term of the Auction Rate Notes or otherwise prior to payment in full of the
Auction Rate Notes exceed the amount permitted by applicable law. If the
applicable law is ever judicially interpreted so as to render usurious any
amount called for under the Auction Rate Notes or related documents or otherwise
contracted for, charged, reserved, taken or received in connection with the
Auction Rate Notes, or if the redemption or acceleration of the maturity of the
Auction Rate Notes results in payment to or receipt by the Registered Owner or
any former Registered Owner of the Auction Rate Notes of any interest in excess
of that permitted by applicable law, then, notwithstanding any provision of the
Auction Rate Notes or related documents to the contrary, all excess amounts
theretofore paid or received with respect to the Auction Rate Notes shall be
credited on the principal balance of the Auction Rate Notes (or, if the Auction
Rate Notes have been paid or would thereby be paid in full, refunded by the
recipient thereof), and the provisions of the Auction Rate Notes and related
documents shall automatically and immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
under the Auction Rate Notes and under the related documents.

                                      A-1-26
<PAGE>

                                   EXHIBIT A-1

                              FORM OF SENIOR NOTES

        EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES
DEPOSITORY (AS DEFINED IN THE INDENTURE) OR TO A SUCCESSOR SECURITIES DEPOSITORY
OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.

                        NELNET STUDENT LOAN CORPORATION-2
                         STUDENT LOAN ASSET-BACKED NOTE
                          SENIOR CLASS 2001A-[2] [3] [4] [5] [6] [7]
                               AUCTION RATE NOTES

REGISTERED NO. R-__                                  REGISTERED $_______________

     MATURITY DATE        INTEREST RATE    ORIGINAL ISSUE DATE         CUSIP NO.

      June 1, 2035           Variable       September 4, 2001         __________

PRINCIPAL SUM: _________________________________________ AND 00/100 DOLLARS
REGISTERED OWNER: CEDE & CO.

        NELNET STUDENT LOAN CORPORATION-2, a corporation organized under the
corporation laws of the State of Nevada (the "Issuer," which term includes any
successor corporation under the Indenture of Trust, dated as of June 1, 2000 (as
previously amended, the "Original Indenture") and the Series 2001B Supplemental
Indenture of Trust dated as of September 1, 2001 (as amended, the "Series 2001B
Supplemental Indenture," and together with the Original Indenture, the
"Indenture"), each between the Issuer and Zions First National Bank, as trustee
(the "Trustee," which term includes any successor trustee under the Indenture))
for value received, hereby promises to pay to the Registered Owner (stated
above) or registered assigns, the Principal Sum of (stated above), but solely
from the revenues and receipts hereinafter specified and not otherwise, on the
Maturity Date specified above (subject to the right of prior redemption
hereinafter described), upon presentation and surrender of this note at the
Principal Office of the Trustee, as paying agent, trustee, authenticating agent
and registrar for the Notes, or a duly appointed successor paying agent, and to
pay interest in arrears on said Principal Sum, but solely from the revenues and
receipts hereinafter specified and not otherwise, to the Registered Owner hereof
from the most recent Interest Payment Date to which interest has been paid
hereon, until the payment of said principal sum in full.

        Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in the
Indenture.

<PAGE>

        This note shall bear interest at an Auction Rate, all as determined in
Appendix A of the Series 2001B Supplemental Indenture.

        The principal of and interest on this note are payable in lawful money
of the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other than a
Business Day then such payment may be made on the next succeeding Business Day,
with the same force and effect as if made on the specified date for such payment
without additional interest.

        Interest payable on this note shall be computed on the assumption that
each year contains 360 days and actual days elapsed.

        This note is one of a series of notes of the Issuer designated Student
Loan Asset-Backed Notes, Senior Class 2001A-[2][3][4][5][6][7] Auction Rate
Notes, dated the Original Issue Date, in the aggregate original principal amount
of $_______________ (the "Class 2001A-[2][3][4][5][6][7] Notes") which have been
authorized by the Issuer under a certain resolution, and issued by the Issuer
pursuant to the Indenture. The Issuer is, simultaneously with the Class
2001A-[2][3][4][5][6][7] Notes, issuing $_______________ of its Student Loan
Asset-Backed Notes, Senior Class 2001A Notes in five subclasses (together with
the Class 2001A-[2][3][4][5][6][7] Notes, the "Class 2001A Notes") and
$75,000,000 of its Student Loan Asset-Backed Notes, Subordinate Class 2001B
Notes in two subclasses (the "Class 2001B Notes"). The proceeds of such notes
have been used by the Issuer, together with other moneys of the Issuer, for the
purpose of providing funds to finance the acquisition of student loans, fund a
reserve fund and to pay certain costs and expenses in connection with the
issuance of such notes. The Issuer has previously issued $1,480,000,000 of its
Student Loan Asset-Backed Notes pursuant to the terms of the Indenture,
consisting of $1,430,000,000 of Senior Class A Notes (the "Outstanding Class A
Notes," and together with the Class 2001A Notes, the "Class A Notes") and
$50,000,000 of Subordinate Class B Notes (the "Outstanding Class B Notes," and
together with the Class 2001B Notes, the "Class B Notes"). The Indenture
provides for the issuance of additional notes (the "Additional Notes") which may
be secured on a parity with or subordinate to the Class A Notes or the Class B
Notes as determined by the Issuer. The Class A Notes, the Class B Notes and any
Additional Notes are collectively referred to herein as the "Notes."

        MANDATORY REDEMPTION, OPTIONAL REDEMPTION AND EXTRAORDINARY REDEMPTION.
This note is subject to mandatory redemption, optional redemption and
extraordinary redemption, all as described in the Indenture.

        OPTIONAL PURCHASE. The Issuer may purchase or cause to be purchased all
of the Notes on any Interest Payment Date on which the aggregate current
principal balance of the Notes shall be less than or equal to 20% of the initial
aggregate principal balance of the Notes on the Date of Issuance, at a purchase
price equal to the aggregate current principal balance of such Notes, plus
accrued interest on the Notes through the day preceding the Interest Payment
Date on which the purchase occurs.

        NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption
shall be given by the Trustee by mailing a copy of the notice at least 15 days
prior to the redemption or purchase date to the Registered Owners of the Notes
to be redeemed in whole or in part at the address of such Registered Owner last

                                     A-1-2
<PAGE>

showing on the registration books. Failure to give such notice or any defect
therein shall not affect the validity of any proceedings for the redemption or
purchase of such Auction Rate Notes for which no such failure or defect occurs.
All Notes called for redemption or purchase will cease to bear interest after
the specified redemption or purchase date, provided funds for their payment are
on deposit at the place of payment at the time. If less than all Notes are to be
redeemed or purchased, Notes shall be selected for redemption or purchase as
provided in the Indenture.

        The Indenture provides that the Issuer may enter into a derivative
product between the Issuer and a derivative provider (a "Reciprocal Payor"), as
originally executed and as amended or supplemented, or other interest rate hedge
agreement between the Issuer and a Reciprocal Payor, as originally executed and
as amended or supplemented. Payments due to a Reciprocal Payor from the Issuer
pursuant to the applicable Derivative Product are referred to herein as "Issuer
Derivative Payments," and may be secured on a parity with any series of Bonds.

        The principal of and interest on the Class A Notes and any Additional
Notes issued on a parity with the Class A Notes and any Issuer Derivative
Payments secured on a parity with the Class A Notes are payable on a superior
basis to such payments on the Class B Notes and any Additional Notes issued on a
parity or subordinate to the Class B Notes; provided, however, that current
principal and interest may be paid on the Class B Notes and any Additional Notes
issued on a parity with the Class B Notes or subordinate to the Class B Notes if
all principal and interest payments due and owing at such time on the Class A
Notes and any Additional Notes issued on a parity with the Class A Notes and any
Issuer Derivative Payments secured on a parity with the Class A Notes have been
previously made or provided for as provided in the Indenture.

        Reference is hereby made to the Indenture, copies of which are on file
in the Principal Office of the Trustee, and to all of the provisions of which
any Registered Owner of this note by his acceptance hereof hereby assents, for
definitions of terms; the description of and the nature and extent of the
security for the Notes; the Issuer's student loan origination and acquisition
program; the revenues and other money pledged to the payment of the principal of
and interest on the Notes; the nature and extent and manner of enforcement of
the pledge; the conditions upon which the Indenture may be amended or
supplemented with or without the consent of the Registered Owners of the Notes
and any Reciprocal Payor; the rights and remedies of the Registered Owner hereof
with respect hereto and thereto, including the limitations upon the right of a
Registered Owner hereof to institute any suit, action, or proceeding in equity
or at law with respect hereto and thereto; the rights, duties, and obligations
of the Issuer and the Trustee thereunder; the terms and provisions upon which
the liens, pledges, charges, trusts, and covenants made therein may be
discharged at or prior to the stated maturity or earlier redemption of this
note, and this note thereafter shall no longer be secured by the Indenture or be
deemed to be Outstanding, as defined in the Indenture, thereunder; and for the
other terms and provisions thereof.

        THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM,
AND FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.

                                     A-1-3
<PAGE>

        No recourse, either directly or indirectly, shall be had for the payment
of the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Trustee, or any incorporator,
director, officer, employee, or agent of the Issuer, nor against the State of
Nevada, or any official thereof, but the obligation to pay all amounts required
by the Indenture securing this note and the obligation to do and perform the
covenants and acts required of the Issuer therein and herein shall be and remain
the responsibility and obligation of said Issuer, limited as herein set forth.

        Subject to the restrictions specified in the Indenture, this note is
transferable on the Note Register kept for that purpose by the Trustee, as
registrar, upon surrender of this note for transfer at the principal office of
the Trustee, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Registered
Owner hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of the same series, Stated Maturity, of authorized denominations,
bearing interest at the same rate, and for the same aggregate principal amount
will be issued to the designated transferee or transferees. At the option of the
Registered Owner, any Note may be exchanged for other Notes in authorized
denominations upon surrender of the Note to be exchanged at the principal office
of the Trustee. Upon any such presentation for exchange, one or more new Notes
of the same series, Stated Maturity, in authorized denominations, bearing
interest at the same rate, and for the same aggregate principal amount as the
Note or Notes so surrendered will be issued to the Registered Owner of the Note
or Notes so surrendered; and the Note or Notes so surrendered shall thereupon be
cancelled by the Trustee.

        Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the "Securities
Depository") or a nominee thereof, this note may be transferred in whole but not
in part only to the Securities Depository or a nominee thereof or to a successor
Securities Depository or its nominee.

        The Issuer, the Trustee, and any agent of either of them shall treat the
Person in whose name this note is registered as the Registered Owner hereof (a)
on the record date for purposes of receiving timely payment of interest hereon,
and (b) on the date of surrender of this note for purposes of receiving payment
of principal hereof at its stated maturity and (c) for all other purposes,
whether or not this note is overdue, and neither the Issuer, the Trustee, nor
any such agent shall be affected by notice to the contrary.

        To the extent permitted by the Indenture, modifications or alterations
of the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or without
the consent of any of such Registered Owners (by reason of a change in the Act
or Regulation or to cure ambiguities or conflicts), but such modification or
alteration is not permitted to affect the maturity date, Stated Maturity,
amount, Interest Payment Date, or rate of interest on any outstanding Notes or
affect the rights of the Registered Owners of less than all of the Notes
outstanding.

        The Registered Owner hereof shall not have the right to demand payment
of this note or any interest hereon out of funds raised or to be raised by
taxation.

                                     A-1-4
<PAGE>

        Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.

        It is hereby certified and recited that all acts and things required by
the laws of the State of Nevada to happen, exist, and be performed precedent to
and in the issuance of this note, and the passage of said resolution and the
execution of said Indenture, have happened, exist and have been performed as so
required.

                                     A-1-5
<PAGE>

        IN TESTIMONY WHEREOF, the Board of Directors of NELNET STUDENT LOAN
CORPORATION-2 has caused this note to be executed by the manual or facsimile
signatures of the President and Secretary of the Issuer all as of the Original
Issue Date.

                                            NELNET STUDENT LOAN CORPORATION-2

                                 By
                                    --------------------------------------------
                                    President

                                 By
                                    --------------------------------------------
                                    Secretary

                                     A-1-6
<PAGE>

                          CERTIFICATE OF AUTHENTICATION

        This note is one of the Class 2001A-__ Notes designated therein and
described in the within-mentioned Indenture.

                                           ZIONS FIRST NATIONAL BANK, as Trustee

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

Authentication Date:

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

                                     A-1-7
<PAGE>

                                   ASSIGNMENT

        FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints __________
attorney to transfer the within note on the books kept for registration thereof,
with full power of substitution in the premises.

Dated:                          SIGNED:
       ----------------------          ------------------------------------
                                NOTICE:  The  signature  on this Assignment must
                                correspond with the name of the Registered Owner
                                as it appears on the face of the within  note in
                                every particular.

Signature Guaranteed by:

-------------------------------
A Member of The New York Stock
Exchange or a State or National
Bank

                                     A-1-8
<PAGE>

                                   EXHIBIT A-2

                            FORM OF SUBORDINATE NOTES

        EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES
DEPOSITORY (AS DEFINED IN THE INDENTURE) OR TO A SUCCESSOR SECURITIES DEPOSITORY
OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.

                        NELNET STUDENT LOAN CORPORATION-2
                         STUDENT LOAN ASSET-BACKED NOTE
                         SUBORDINATE CLASS 2001B-[1] [2]
                               AUCTION RATE NOTES

REGISTERED NO. R-1                                       REGISTERED $37,500,000

     MATURITY DATE      INTEREST RATE     ORIGINAL ISSUE DATE         CUSIP NO.

      June 1, 2035         Variable        September 4, 2001         __________

PRINCIPAL SUM:  THIRTY SEVEN MILLION FIVE HUNDRED THOUSAND AND 00/100
                    DOLLARS
REGISTERED OWNER: CEDE & CO.

        NELNET STUDENT LOAN CORPORATION-2, a corporation organized under the
corporation laws of the State of Nevada (the "Issuer," which term includes any
successor corporation under the Indenture of Trust, dated as of June 1, 2000 (as
previously amended, the "Original Indenture") and the Series 2001B Supplemental
Indenture of Trust dated as of September 1, 2001 (as amended, the "Series 2001B
Supplemental Indenture," and together with the Original Indenture, the
"Indenture"), each between the Issuer and Zions First National Bank, as trustee
(the "Trustee," which term includes any successor trustee under the Indenture))
for value received, hereby promises to pay to the Registered Owner (stated
above) or registered assigns, the Principal Sum of (stated above), but solely
from the revenues and receipts hereinafter specified and not otherwise, on the
Maturity Date specified above (subject to the right of prior redemption
hereinafter described), upon presentation and surrender of this note at the
Principal Office of the Trustee, as paying agent, trustee, authenticating agent
and registrar for the Notes, or a duly appointed successor paying agent, and to
pay interest in arrears on said Principal Sum, but solely from the revenues and
receipts hereinafter specified and not otherwise, to the Registered Owner hereof
from the most recent Interest Payment Date to which interest has been paid
hereon, until the payment of said principal sum in full.

        Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in the
Indenture.

<PAGE>

        This note shall bear interest at an Auction Rate, all as determined in
Appendix A of the Series 2001B Supplemental Indenture.

        The principal of and interest on this note are payable in lawful money
of the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other than a
Business Day then such payment may be made on the next succeeding Business Day,
with the same force and effect as if made on the specified date for such payment
without additional interest.

        Interest payable on this note shall be computed on the assumption that
each year contains 360 days and actual days elapsed.

        This note is one of a series of notes of the Issuer designated Student
Loan Asset-Backed Notes, Subordinate Class 2001B-[1][2] Auction Rate Notes,
dated the Original Issue Date, in the aggregate original principal amount of
$37,500,000 (the "Class 2001B-[1][2] Notes") which have been authorized by the
Issuer under a certain resolution, and issued by the Issuer pursuant to the
Indenture. The Issuer is, simultaneously with the Class 2001B-[1][2] Notes,
issuing $37,500,000 of its Student Loan Asset-Backed Notes, Subordinate Class
2001B-[1][2] (the "Class 2001B-[1][2] Notes," and together with the Class
2001B-[1][2] Notes, the "Class 2001B Notes") and $475,000,000 of its Student
Loan Asset-Backed Notes, Senior Class 2001A Notes in six subclasses
(collectively, the "Class 2001A Notes"). The proceeds of such notes have been
used by the Issuer, together with other moneys of the Issuer, for the purpose of
providing funds to finance the acquisition of student loans, fund a reserve fund
and to pay certain costs and expenses in connection with the issuance of such
notes. The Issuer has previously issued $1,480,000,000 of its Student Loan
Asset-Backed Notes pursuant to the terms of the Indenture, consisting of
$1,430,000,000 of Senior Class A Notes (the "Outstanding Class A Notes," and
together with the Class 2001A Notes, the "Class A Notes") and $50,000,000 of
Subordinate Class B Notes (the "Outstanding Class B Notes," and together with
the Class 2001B Notes, the "Class B Notes"). The Indenture provides for the
issuance of additional notes (the "Additional Notes") which may be secured on a
parity with or subordinate to the Class A Notes or the Class B Notes as
determined by the Issuer. The Class A Notes, the Class B Notes and any
Additional Notes are collectively referred to herein as the "Notes."

        MANDATORY REDEMPTION, OPTIONAL REDEMPTION AND EXTRAORDINARY REDEMPTION.
This note is subject to mandatory redemption, optional redemption and
extraordinary redemption, all as described in the Indenture.

        OPTIONAL PURCHASE. The Issuer may purchase or cause to be purchased all
of the Notes on any Interest Payment Date on which the aggregate current
principal balance of the Notes shall be less than or equal to 20% of the initial
aggregate principal balance of the Notes on the Date of Issuance, at a purchase
price equal to the aggregate current principal balance of such Notes, plus
accrued interest on the Notes through the day preceding the Interest Payment
Date on which the purchase occurs.

        NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption
shall be given by the Trustee by mailing a copy of the notice at least 15 days
prior to the redemption or purchase date to the Registered Owners of the Notes

                                     A-2-2
<PAGE>

to be redeemed in whole or in part at the address of such Registered Owner last
showing on the registration books. Failure to give such notice or any defect
therein shall not affect the validity of any proceedings for the redemption or
purchase of such Auction Rate Notes for which no such failure or defect occurs.
All Notes called for redemption or purchase will cease to bear interest after
the specified redemption or purchase date, provided funds for their payment are
on deposit at the place of payment at the time. If less than all Notes are to be
redeemed or purchased, Notes shall be selected for redemption or purchase as
provided in the Indenture.

        The Indenture provides that the Issuer may enter into a derivative
product between the Issuer and a derivative provider (a "Reciprocal Payor"), as
originally executed and as amended or supplemented, or other interest rate hedge
agreement between the Issuer and a Reciprocal Payor, as originally executed and
as amended or supplemented. Payments due to a Reciprocal Payor from the Issuer
pursuant to the applicable Derivative Product are referred to herein as "Issuer
Derivative Payments," and may be secured on a parity with any series of Bonds.

        The principal of and interest on the Class A Notes and any Additional
Notes issued on a parity with the Class A Notes and any Issuer Derivative
Payments secured on a parity with the Class A Notes are payable on a superior
basis to such payments on the Class B Notes and any Additional Notes issued on a
parity or subordinate to the Class B Notes; provided, however, that current
principal and interest may be paid on the Class B Notes and any Additional Notes
issued on a parity with the Class B Notes or subordinate to the Class B Notes if
all principal and interest payments due and owing at such time on the Class A
Notes and any Additional Notes issued on a parity with the Class A Notes and any
Issuer Derivative Payments secured on a parity with the Class A Notes have been
previously made or provided for as provided in the Indenture.

        Reference is hereby made to the Indenture, copies of which are on file
in the Principal Office of the Trustee, and to all of the provisions of which
any Registered Owner of this note by his acceptance hereof hereby assents, for
definitions of terms; the description of and the nature and extent of the
security for the Notes; the Issuer's student loan origination and acquisition
program; the revenues and other money pledged to the payment of the principal of
and interest on the Notes; the nature and extent and manner of enforcement of
the pledge; the conditions upon which the Indenture may be amended or
supplemented with or without the consent of the Registered Owners of the Notes
and any Reciprocal Payor; the rights and remedies of the Registered Owner hereof
with respect hereto and thereto, including the limitations upon the right of a
Registered Owner hereof to institute any suit, action, or proceeding in equity
or at law with respect hereto and thereto; the rights, duties, and obligations
of the Issuer and the Trustee thereunder; the terms and provisions upon which
the liens, pledges, charges, trusts, and covenants made therein may be
discharged at or prior to the stated maturity or earlier redemption of this
note, and this note thereafter shall no longer be secured by the Indenture or be
deemed to be Outstanding, as defined in the Indenture, thereunder; and for the
other terms and provisions thereof.

        THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM,
AND FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.

                                     A-2-3
<PAGE>

        No recourse, either directly or indirectly, shall be had for the payment
of the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Trustee, or any incorporator,
director, officer, employee, or agent of the Issuer, nor against the State of
Nevada, or any official thereof, but the obligation to pay all amounts required
by the Indenture securing this note and the obligation to do and perform the
covenants and acts required of the Issuer therein and herein shall be and remain
the responsibility and obligation of said Issuer, limited as herein set forth.

        Subject to the restrictions specified in the Indenture, this note is
transferable on the Note Register kept for that purpose by the Trustee, as
registrar, upon surrender of this note for transfer at the principal office of
the Trustee, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Registered
Owner hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of the same series, Stated Maturity, of authorized denominations,
bearing interest at the same rate, and for the same aggregate principal amount
will be issued to the designated transferee or transferees. At the option of the
Registered Owner, any Note may be exchanged for other Notes in authorized
denominations upon surrender of the Note to be exchanged at the principal office
of the Trustee. Upon any such presentation for exchange, one or more new Notes
of the same series, Stated Maturity, in authorized denominations, bearing
interest at the same rate, and for the same aggregate principal amount as the
Note or Notes so surrendered will be issued to the Registered Owner of the Note
or Notes so surrendered; and the Note or Notes so surrendered shall thereupon be
cancelled by the Trustee.

        Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the "Securities
Depository") or a nominee thereof, this note may be transferred in whole but not
in part only to the Securities Depository or a nominee thereof or to a successor
Securities Depository or its nominee.

        The Issuer, the Trustee, and any agent of either of them shall treat the
Person in whose name this note is registered as the Registered Owner hereof (a)
on the record date for purposes of receiving timely payment of interest hereon,
and (b) on the date of surrender of this note for purposes of receiving payment
of principal hereof at its stated maturity and (c) for all other purposes,
whether or not this note is overdue, and neither the Issuer, the Trustee, nor
any such agent shall be affected by notice to the contrary.

        To the extent permitted by the Indenture, modifications or alterations
of the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or without
the consent of any of such Registered Owners (by reason of a change in the Act
or Regulation or to cure ambiguities or conflicts), but such modification or
alteration is not permitted to affect the maturity date, Stated Maturity,
amount, Interest Payment Date, or rate of interest on any outstanding Notes or
affect the rights of the Registered Owners of less than all of the Notes
outstanding.

        The Registered Owner hereof shall not have the right to demand payment
of this note or any interest hereon out of funds raised or to be raised by
taxation.

                                     A-2-4
<PAGE>

        Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.

        It is hereby certified and recited that all acts and things required by
the laws of the State of Nevada to happen, exist, and be performed precedent to
and in the issuance of this note, and the passage of said resolution and the
execution of said Indenture, have happened, exist and have been performed as so
required.

                                     A-2-5
<PAGE>

        IN TESTIMONY WHEREOF, the Board of Directors of NELNET STUDENT LOAN
CORPORATION-2 has caused this note to be executed by the manual or facsimile
signatures of the President and Secretary of the Issuer all as of the Original
Issue Date.

                             NELNET STUDENT LOAN CORPORATION-2

                             By
                                -----------------------------------------------
                                President

                             By
                                -----------------------------------------------
                                Secretary

                                     A-2-6
<PAGE>

                          CERTIFICATE OF AUTHENTICATION

        This note is one of the Class 2001B-1 Notes designated therein and
described in the within-mentioned Indenture.

                                         ZIONS FIRST NATIONAL BANK, as Trustee

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

Authentication Date:

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

                                     A-2-7
<PAGE>

                                   ASSIGNMENT

        FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints __________
attorney to transfer the within note on the books kept for registration thereof,
with full power of substitution in the premises.

Dated:                          SIGNED:
       ----------------------          ------------------------------------
                                NOTICE:  The  signature on this  Assignment must
                                correspond with the name of the Registered Owner
                                as it appears on the face of the within  note in
                                every particular.

Signature Guaranteed by:

-------------------------------------
A Member of The New York Stock
Exchange or a State or National
Bank

                                     A-2-8
<PAGE>

                                    EXHIBIT B

                   SERIES 2001B CLOSING CASH FLOW PROJECTIONS

<PAGE>

                                    EXHIBIT C

                            NOTICE OF PAYMENT DEFAULT

                        NELNET STUDENT LOAN CORPORATION-2
                         STUDENT LOAN ASSET-BACKED NOTES
                                  CLASS 2001__
                         AUCTION RATE CERTIFICATE NOTES

        NOTICE IS HEREBY GIVEN that a Payment Default has occurred and is
continuing with respect to the Auction Rate Notes identified above. The next
Auction for the Auction Rate Notes will not be held. The Auction Rate for the
Auction Rate Notes for the next succeeding Interest Period shall be the
Non-Payment Rate.

                                           ZIONS FIRST NATIONAL BANK, as Trustee

Dated:                                     By
      ------------                           -----------------------------------

<PAGE>

                                    EXHIBIT D

                        NOTICE OF CURE OF PAYMENT DEFAULT

                        NELNET STUDENT LOAN CORPORATION-2
                         STUDENT LOAN ASSET-BACKED NOTES
                                  CLASS 2001__
                         AUCTION RATE CERTIFICATE NOTES

        NOTICE IS HEREBY GIVEN that a Payment Default with respect to the
Auction Rate Notes identified above has been waived or cured. The next Interest
Payment Date is __________________________ and the Auction Date is
__________________________.

                                           ZIONS FIRST NATIONAL BANK, as Trustee

Dated:                                      By
      -------------------------               ----------------------------------

<PAGE>

                                    EXHIBIT E

                       NOTICE OF PROPOSED CHANGE IN LENGTH
                         OF ONE OR MORE AUCTION PERIODS

                        NELNET STUDENT LOAN CORPORATION-2
                         STUDENT LOAN ASSET-BACKED NOTES
                                  CLASS 2001__
                         AUCTION RATE CERTIFICATE NOTES

        Notice is hereby given that the Issuer proposes to change the length of
one or more Auction Periods pursuant to the Indenture of Trust, as amended (the
"Indenture") as follows:

        1. The change shall take effect on  _______________,  the Interest  Rate
Adjustment Date for the next Auction Period (the "Effective Date").

        2. The Auction Period Adjustment in Paragraph 1 shall take place only if
(a) the Trustee and the Auction Agent receive,  by 11:00 a.m.,  eastern time, on
the Business Day before the Auction Date for the Auction  Period  commencing  on
the Effective Date, a certificate from the Issuer,  as required by the Indenture
authorizing  the  change  in  length  of one or  more  Auction  Periods  and (b)
Sufficient  Bids exist on the Auction Date for the Auction Period  commencing on
the Effective Date.

        3. If the condition referred to in (a) above is not met, the Auction
Rate for the Auction Period commencing on the Effective Date will be determined
pursuant to the Auction Procedures and the Auction Period shall be the Auction
Period determined without reference to the proposed change. If the condition
referred to in (a) is met but the condition referred to in (b) above is not met,
the Auction Rate for the Auction Period commencing on the Effective Date shall
be the Maximum Rate and the Auction Period shall be the Auction Period
determined without reference to the proposed change.

        4. It is hereby represented, upon advice of the Auction Agent for the
Class 2001__ Notes described herein, that there were Sufficient Bids for such
Class 2001__ Notes at the Auction immediately preceding the date of this Notice.

        5. Terms not defined in this Notice shall have the meanings set forth in
the Indenture entered into in connection with the Class 2001__ Notes.

                                            NELNET STUDENT LOAN CORPORATION-2

Dated:                                      By
      -----------------------                  ---------------------------------

<PAGE>

                                    EXHIBIT F

                      NOTICE ESTABLISHING CHANGE IN LENGTH
                         OF ONE OR MORE AUCTION PERIODS

                        NELNET STUDENT LOAN CORPORATION-2
                         STUDENT LOAN ASSET-BACKED NOTES
                                  CLASS 2001__
                         AUCTION RATE CERTIFICATE NOTES

        Notice is hereby given that the Issuer hereby establishes new lengths
for one or more Auction Periods pursuant to the Indenture of Trust, as amended:

        1. The change shall take effect on  _______________,  the Interest  Rate
Adjustment Date for the next Auction Period (the "Effective Date").

        2. For the Auction Period commencing on the Effective Date, the Interest
Rate Adjustment Date shall be _______________, or the next succeeding Business
Day if such date is not a Business Day.

        3. For Auction Periods occurring after the Auction Period commencing on
the Effective Date, the Interest Rate Adjustment Date shall be
[_______________(date) and every ______________(number) ______________(day of
week) thereafter] [every ______________(number) ______________(day of week)
after the date set forth in paragraph 2 above], or the next Business Day if any
such day is not a Business Day; provided, however, that the length of subsequent
Auction Periods shall be subject to further change hereafter as provided in the
Indenture of Trust.

        4. The changes described in paragraphs 2 and 3 above shall take place
only upon delivery of this Notice and the satisfaction of other conditions set
forth in the Indenture of Trust and our prior notice dated _______________
regarding the proposed change.

        5. Terms not defined in this Notice shall have the meanings set forth in
the Indenture of Trust relating to the Class 2001__ Notes.

                                            NELNET STUDENT LOAN CORPORATION-2

Dated:                                      By
      -----------------------                  ---------------------------------

<PAGE>

                                    EXHIBIT G

                        NOTICE OF CHANGE IN AUCTION DATE

                        NELNET STUDENT LOAN CORPORATION-2
                         STUDENT LOAN ASSET-BACKED NOTES
                                  CLASS 2001__
                         AUCTION RATE CERTIFICATE NOTES

        Notice is hereby given by [ ], as Broker-Dealer for the Auction Rate
Notes, that with respect to the Auction Rate Notes, the Auction Date is hereby
changed as follows:

        1. With respect to Class 2001__ Notes, the definition of "Auction Date"
shall be deemed amended by substituting "_______________(number) Business Day"
in the second line thereof and by substituting "_______________(number) Business
Days" for "two Business Days" in subsection (d) thereof.

        2. This change shall take effect on  _______________  which shall be the
Auction Date for the Auction Period commencing on _______________.

        3. The  Auction  Date for the Class  2001__  Notes  shall be  subject to
further change hereafter as provided in the Indenture of Trust.

        4. Terms not defined in this Notice  shall have the meaning set forth in
the Indenture of Trust, as amended, relating to the Class 2001__ Notes.

                                            [BROKER-DEALER], as Broker-Dealer

Dated:                                      By
      -----------------------                  ---------------------------------

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