Document:

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                               Asta Funding, Inc.
                                   Form 10-KSB
                               September 30, 2001
                                                                    Exhibit 10.9

                                                                  EXECUTION COPY
                              AMENDED AND RESTATED
                           LOAN AND SECURITY AGREEMENT

                  THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") is executed and entered into as of November 15, 2001 by and among
ASTA FUNDING ACQUISITION II, LLC, a Delaware limited liability company and
PALISADES COLLECTION, L.L.C., a Delaware limited liability company (together,
"Borrower"), ASTA FUNDING, INC., a Delaware corporation ("Asta Funding") and
ISRAEL DISCOUNT BANK OF NEW YORK, a New York banking corporation ("Lender").

                                    RECITALS

                  A. Asta II, Asta Funding and Lender are parties to a Loan and
Security Agreement dated as of January 18, 2001 (the "Original Agreement")
pursuant to which Lender established a $10,000,000 discretionary Line of Credit
(the "Original Line of Credit") for the purpose of financing the acquisition of
portfolios of consumer loans and/or receivables, which Original Line of Credit
was guaranteed by Asta Funding and secured by certain assets of the Borrower and
Asta Funding. As of the date of this Agreement the outstanding principal
obligations of the Borrower under the Original Line of Credit are $_____________
(the "Existing Debt").

                  B. The Borrower and Asta Funding have requested that Lender
amend and restate the Original Line of Credit so as to have available a
revolving line of credit on the terms and conditions set forth herein, in an
amount not to exceed $20,000,000 at any one time outstanding, but in no event
shall the outstanding Advances (including, any Advance then being requested)
exceed the then effective Borrowing Base and/or Advance Ratio (the "Line of
Credit"). This Agreement is an amendment and restatement of the terms and
conditions of the lending relationship between the parties as previously set
forth in the Original Agreement and any amendments or supplements thereto, and
is not a new loan agreement, and all of the terms and conditions of the Original
Agreement shall remain in full force and effect as though set forth herein at
length, to the extent not inconsistent with the terms of this Agreement. The
execution and delivery of this Agreement and the Loan Documents shall not in any
circumstances be deemed to have terminated, released, extinguished or discharged
any existing indebtedness of any Borrower under the Original Agreement, the
Obligations of any Guarantors or the Collateral therefor, all of which
indebtedness, Obligations and collateral shall continue under and be governed by
this Agreement and the Loan Documents. To the extent of any inconsistencies, the
terms of this Agreement shall control.

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                  C. Lender has agreed to establish the Line of Credit for the
purpose of making Advances for working capital and to permit the Borrower, Asta
Funding and any Affiliate to acquire Portfolios on the terms and conditions of
this Agreement, as amended from time to time.

                  D. These Recitals are incorporated and made a part of this
Agreement.

                  NOW THEREFORE, in consideration of Lender's financing of the
acquisition of Portfolios, and in further consideration of the inducement to
Lender to make payments to the Sellers, make Advances to, and to otherwise
extend credit to the Borrower, the parties hereto agree as follows:

Section 1. Definitions: For purposes of this Agreement, the following terms
           shall mean:

                  All terms used in this Agreement which are defined in Article
1 or Article 9 of the Uniform Commercial Code ("UCC"), as each is amended from
time to time, shall have the meanings given therein, unless otherwise defined in
this Agreement and all references to the plural herein shall also mean the
singular.

1.1.     "Accounts" means all present and future accounts, contract rights,
         general intangibles, payment intangibles, promissory notes, deposit
         accounts, supporting obligations, chattel paper, documents and
         instruments, as such terms are defined in the UCC, including, without
         limitation, all obligations for the payment of money arising out of any
         Consumer Loan.
1.2.     "Account Debtor" means each person, firm, or entity in any way
         obligated to make payment of any Account.
1.3.     "Advance" or "Advances" means individually a loan and collectively the
         loans made by Lender to Borrower pursuant to this Agreement.
1.4.     "Advance Ratio" means at the date of computation an amount equal to
         fifteen (15) times the average Collections for the immediately
         preceding three (3) complete calendar month period prior to the date of
         each computation.
1.5.     "Advance Request" means each written request by Borrower for an Advance
         submitted with the information and documents required by Section 2.3
         hereof.
1.6.     "Affiliate" means an entity that is wholly owned by Asta Funding and is
         engaged in the business of acquiring and/or managing Portfolios and
         executes and delivers to Lender an Affiliate Guaranty, an Affiliate
         Security Agreement and an Affiliate Confirmation.
1.7.     "Affiliate Confirmation" means the agreement executed by each Affiliate
         in form of Exhibit C annexed hereto.
1.8.     "Affiliate Guaranty" means a guaranty, in form acceptable to Lender,
         executed by an Affiliate of all of the Obligations.
1.9.     "Affiliate Security Agreement" means a security agreement, in form
         acceptable to Lender, executed by an Affiliate granting to Lender a
         security interest in and lien on each Portfolio acquired by such
         Affiliate pursuant to the terms of this Agreement.
1.10.    "Aging Report" means a report in detail satisfactory to Lender with
         respect to the outstanding Accounts as of the last day of each month,
         setting forth the name of each Account Debtor, the original amount and
         date of each Account and date and amount of each Payment with respect
         to each Account.

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1.11.    "Asta I" means Asta Funding Acquisition I, LLC.
1.12.    "Asta II" means Asta Funding Acquisition II, LLC.
1.13.    "Asta Funding" means Asta Funding, Inc.
1.14.    "Auto Contract" means any agreement or contract or other evidence of
         debt executed by a borrower and/or lessee in connection with an Auto
         Loan and any amendments thereto.
1.15.    "Auto Loan" means all automobile loans presently and hereafter owned,
         set forth in a written report or in computer discs, from time to time,
         delivered to Lender, which computer discs shall be in the current
         format or any other format acceptable to Lender, together with each
         Auto Contract, chattel paper, instrument, document, general intangible,
         guarantee and all collateral security held with respect to such loans.
1.16.    "Banking Day" means any day on which Lender is open for business.
1.17.    "Books and Records" means all records, in any format whatsoever and the
         computer software, programs and access codes, relating to each Consumer
         Loan and the Collateral.
1.18.    "Borrower" means Asta II and Palisades.
1.19.    "Borrowing Base" means at the date of each Advance Request and/or
         Borrowing Base Certificate, without duplication, an amount equal to the
         lesser of (i) the sum of (a)50% of then existing Eligible Accounts, and
         (b) 50% of the Accounts which are part of a particular (i) proposed
         Small Portfolio or (ii) Portfolio Proposal approved by Lender and which
         Accounts would be considered Eligible Accounts if said Accounts were
         owned by Borrower and upon which the Lender had been granted a first
         and prior perfected security interest by the Debtors, but in no event
         more than the Portfolio Acquisition Cost, and (ii) the Advance Ratio.
1.20.    "Borrowing Base Certificate" means the certificate in the form of
         Exhibit A annexed hereto, completed and signed by an officer of
         Borrower and delivered to Lender with each Advance Request and not
         later than fifteen (15) days after the last day of each month, with
         respect to the prior month.
1.21.    "Chattel Paper" shall have the meaning given such term in the UCC.
1.22.    "Closing Date" means the date on which all of the conditions precedent
         set forth in Section 11 hereof have been complied with to the sole
         satisfaction of Lender.
1.23.    "Collateral" means (a) each Debtor's (other than Asta Funding's)
         present and future Accounts, Chattel Paper, Payment Intangibles and
         Collections, together with all of each Debtor's respective right, title
         and interest in and to all (i) Consumer Loans, (ii) all rights, claims,
         action and/or causes of action under any of the Consumer Loans, (iii)
         all Books and Records, (iv) all lawsuits (including, commercial tort
         actions) and judgments relating to each Consumer Loan, (v) all Support
         Obligations, guarantees and security with respect to each Consumer
         Loan, and (vi) all cash and non-cash proceeds of all of the foregoing,
         including insurance proceeds and the funds, if any, in the Operating
         Account and the Lockbox Account; and (b) all of Asta Funding's Auto
         Loans, Auto Contracts and the Accounts, Collections rights, claims,
         actions and/or causes of action, Books and Records, lawsuits, judgments
         and Support Obligations relating thereto that have been granted to
         Lender pursuant to the Original Agreement. Notwithstanding the
         foregoing, Collateral shall exclude any accounts and all other of the
         above-described property and assets that relate to any Rejected
         Portfolio that any Debtor may purchase notwithstanding Lender's
         rejection of the related Portfolio Proposal.

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1.24.    "Collection Report" means a report in detail satisfactory to Lender as
         to all Collections received during each month and the Account or
         Consumer Loan to which it applies.
1.25.    "Collections" mean all Payments actually received and collected (a) by
         or on behalf of the Borrower or any Guarantor with respect to any
         Consumer Loan, which is included in the Collateral, or (b) by or on
         behalf of a Seller with respect to a Portfolio Loan, which is to be
         included in the Collateral.
1.26.    "Consumer Loans" means all Credit Card Receivables, Auto Loans and any
         other type of consumer loan acceptable to Lender now or hereafter owned
         or held by the Borrower or any Guarantor.
1.27.    "Credit Card Receivables" means each of the performing and
         non-performing credit card receivables and/or loans presently owned,
         and as, from time to time, fully set forth in a computer disc delivered
         to Lender, which shall be in a format acceptable to the Lender, whether
         such is deemed to consist of accounts or general intangibles under the
         UCC, together with any chattel paper, instrument, document, general
         intangible, guarantee and other collateral security held by Borrower
         with respect to such receivables and/or loans, together with the
         proceeds thereof.
1.28.    "Debtors" means all or any of Borrower and the Guarantors, but in no
         event a Non-Affiliate.
1.29.    "Deficiency Fee" means the sum of $50,000 in the event that there are
         no outstanding Advances in each consecutive twelve (12) month period
         commencing from the date of this Agreement, and in the event there are
         advances the Deficiency Fee shall equal $50,000, less ($50,000
         multiplied by the average monthly amount of outstanding Advances
         divided by $1,670,000) provided that in no event shall there be a
         credit to the Borrower. In the event this Agreement is terminated prior
         to the Termination Date, the average monthly amount of outstanding
         advances shall be deemed to be zero for the months following the
         termination of this Agreement, and the Deficiency Fee shall then be due
         upon termination of this Agreement.
1.30.    "E.R." means E.R. Receivables Corp., L.L.C.
1.31.    "Eligible Accounts" means Accounts arising out of Consumer Loans, as to
         which Lender has been granted a first and prior perfected security
         interest by the Debtors, with respect to which the Account Debtor has
         made a Payment within the last ninety (90) days and which is presently
         owned by any Debtor or is part of a Portfolio Proposal approved by
         Lender.
1.32.    "Events of Default" shall have the meaning set forth in Section 12
         hereof.
1.33.    "Examination Fee" means a field examination fee of Lender not to exceed
         $750.00 per each day of examination, provided that so long as no Event
         of Default is continuing, Borrower shall not be required to pay for
         more than one field examination in any calendar quarter.
1.34.    "Financial Statements" mean the financial statements to be furnished to
         Lender pursuant to Section 9(t).
1.35.    "GAAP" means generally accepted accounting principles then in effect
         and consistent with those applied in the preparation of the financial
         statements to be delivered pursuant to Section 9(t) hereof.

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1.36.    "Grid Note" means the note executed by Borrower in the form of Exhibit
         B annexed hereto, as amended, renewed or replaced from time to time.
1.37.    "Guarantees" means the guaranty of all of the Obligations executed by
         Asta Funding, Asta I and each Affiliate Guaranty, as each is amended
         from time to time.
1.38.    "Guarantors" mean Asta Funding, Asta I, E.R. and each Affiliate, if
         any, or any one or more of them, but in no event a Non-Affiliate.
1.39.    "Indemnified Party" means Lender and each of its officers, directors,
         representatives and employees.
1.40.    "Lender Fees" means all Line Fees, Deficiency Fees, Portfolio
         Examination Fees and Examination Fees from time to time payable to
         Lender under this Agreement.
1.41.    "Line Fee" means a fee equal to $50,000, which shall be deemed earned
         as of the date of this Agreement and shall be payable on the Closing
         Date.
1.42.    "Line of Credit" shall have the meaning given such term in Recital B
         above.
1.43.    "Loan Documents" means this Agreement, the Grid Note, the Guarantees,
         the Security Agreements and each of the other documents required to be
         executed and delivered pursuant to Section 11 hereof.
1.44.    "Lockbox Account" means the segregated account to be established by
         Debtors after the occurrence and during the continuance of an Event of
         Default, into which the Account Debtors shall be instructed to send
         Payments and as to which account none of the Debtors shall have any
         control.
1.45.    "Non-Affiliate" means an entity that is wholly owned by Asta Funding
         which is not required by the Lender to execute and deliver an Affiliate
         Guaranty, an Affiliate Security Agreement and an Affiliate Confirmation
         pursuant to Section 2.3(d) of this Agreement.
1.46.    "Obligations" means all Advances and any and all loans, indebtedness,
         liabilities and obligations of any kind owing by Borrower to Lender and
         any of Lender's divisions, subsidiaries or affiliates, however
         evidenced, whether as principal, guarantor or otherwise, arising under
         this Agreement, or any supplement hereto, or otherwise, whether now
         existing or hereafter arising, whether direct or indirect, absolute or
         contingent, joint or several, due or not due, primary or secondary,
         liquidated or unliquidated, secured or unsecured, original, renewed or
         extended, and whether arising directly or acquired from others
         (including, without limitation, Lender's participation or interests in
         Borrower's obligations to others) and including, without limitation,
         all Existing Debt, Lender Fees, charges, commissions, interest,
         expenses, costs and attorneys' fees chargeable to Borrower in
         connection with all of the foregoing and as to which Lender is entitled
         under any Loan Document.
1.47.    "Obligor" means any person, firm or entity, which has guaranteed or is
         liable for the repayment of any Account Debtor's obligation.
1.48.    "Operating Account" means the account currently maintained by Asta II
         and the account to be established by Palisades with Lender.
1.49.    "Palisades" means Palisades Collection, L.L.C.
1.50.    "Payment Intangibles" shall have the meaning given such term in the
         UCC.
1.51.    "Payments" means the payments of whatsoever nature made by each Account
         Debtor with respect to the Accounts relating to such Account Debtor
         and/or the payments made by any Obligor with respect to any Account.

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1.52.    "Permitted Debt" means(a) the indebtedness (a) for borrowed monies of
         Borrower and the Guarantors set forth in Schedule A annexed hereto, but
         not any increase thereof, and (b)any debt to finance a Rejected
         Portfolio, and (c) of one Debtor to another Debtor, including, the
         indebtedness of Palisades to Asta I, Asta II and E.R. in connection
         with the acquisition of the Portfolio Loans set forth in Schedule A-1
         annexed hereto, but not any increase thereof.
1.53.    "Permitted Liens" means the security interests of the Debtors in favor
         of the secured parties listed in Schedule B annexed hereto, including
         liens on a Rejected Portfolio financed by another lender.
1.54.    "Portfolio" means the Portfolio Loans to be acquired with the proceeds
         of an Advance made by Lender.
1.55.    "Portfolio Acquisition Cost" means the actual or final amount to be
         paid to the Seller of a Portfolio pursuant to the terms of the
         applicable Portfolio Acquisition Documents.
1.56.    "Portfolio Acquisition Documents" means the purchase and other
         agreements between a Debtor and the Seller of each Portfolio, as each
         may be amended.
1.57.    "Portfolio Bid" means the specific amount or the maximum of a range of
         amounts which are to be bid to acquire a Portfolio.
1.58.    "Portfolio Examination Fee" means a fee of $750 per each day as
         required in Lender's sole discretion to review, examine and report as
         to the legal and financial status of each Portfolio Proposal, together
         with Lender's actual out-of-pocket expenses, including travel, meals
         and hotel expenses.
1.59.    "Portfolio Loans" means the Consumer Loans, which comprise each
         Portfolio, as more specifically detailed in the applicable Portfolio
         Proposal.
1.60.    "Portfolio Proposal" means a written proposal presented by Borrower or
         any other Guarantor with respect to a Portfolio that such party intends
         to submit to a Seller for the purchase of such Portfolio, which shall
         set forth in sufficient detail the (a) Portfolio Bid and the terms of
         payment thereof, (b) nature of the Consumer Loans comprising the
         Portfolio, (c) a computer disc or written report containing a detailed
         description of the Consumer Loans, (d) name of the Seller, and (e)
         Portfolio Acquisition Documents, all of which shall be in form, scope
         and substance acceptable to Lender.
1.61.    "Prime Rate" shall have the meaning given such term in the Grid Note.
1.62.    "Rejected Portfolio" means the Consumer Loans and all rights and
         interests related thereto that are in a Portfolio Proposal that is
         rejected by Lender.
1.63.    "Reports" mean the Aging Reports and the Collection Reports, including
         the computer discs containing all of the information contained therein.
1.64.    "Seller" means the party which has agreed to sell Portfolio Loans to a
         Debtor.
1.65.    "Security Agreements" means the security agreement executed by
         Borrower, each Guarantor and each Affiliate Guaranty, granting Lender a
         security interest in the Collateral owned by each party executing same,
         as each is amended from time to time.
1.66.    "Small Portfolio" is defined in Section 2.2(d).
1.67.    "Subordinated Debt" means any indebtedness which is subordinated in
         right of payment to the Obligations, pursuant to the terms of an
         agreement in form and scope and on terms acceptable to the Lender, in
         its sole discretion.
1.68.    "Support Obligation" shall have the meaning given such term in the UCC.

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1.69.    "Tangible Net Worth" means, for any period, the assets of any Borrower
         or Debtor, all as determined by GAAP and as reported in the Financial
         Statements, which shall exclude each Borrower's and Debtor's goodwill,
         all intangible assets and all loans, advances, exchanges and other
         indebtedness (other than Subordinated Debt) owing to each Borrower or
         Debtor by any shareholder, officer, employee or a relative thereof or
         any Affiliate or Non-Affiliate, as the case may be, less Total
         Liabilities.
1.70.    "Termination Date" means September 30, 2002.
1.71.    "Total Liabilities" means, for any period, all liabilities of each
         Borrower and Debtor, as determined by GAAP and as reported in the
         Financial Statements, which liabilities shall include the Advances then
         outstanding.

Section 2.  Line of Credit and Advances
2.1 (a) Lender shall from time to time upon Lender's receipt of an Advance
Request make an Advance to Borrower, provided, that (i) no Advance shall, if the
Advance is for the purpose of the acquisition of a Portfolio, exceed 100% of the
Portfolio Acquisition Cost set forth in the Advance Request made with respect to
such Advance; (ii) the outstanding Advances after giving effect to the Advance
requested in the Advance Request do not exceed the Borrowing Base, the Advance
Ratio and the Line of Credit, then in effect; and (iii) there exists no Event of
Default or an event which with the lapse of time and/or the giving of notice
would constitute an Event of Default.
                  (b) All Advances shall be payable on the earlier of (i) the
Termination Date, or (ii) the occurrence of an Event of Default.
                  (c) Borrower hereby irrevocably authorizes Lender to record on
the schedules annexed to the Grid Note and/or a loan account established on
Lender's computerized records the date and amount of each Advance under the Line
of Credit and each repayment thereof, which notations shall be conclusively
binding on Borrower absent manifest error.
                  (d) All Advances shall bear interest prior to an Event of
Default at the rate per annum equal to Lender's Prime Rate as from time to time
in effect and interest at the rate on and after an Event of Default as provided
for in the Grid Note, which interest shall be due and payable as provided for in
the Grid Note and be charged to the Operating Account.
                  (e) All monthly installments of principal, interest and Lender
Fees shall be charged to the Operating Account when due.
                  (f) Prior to the Termination Date the Borrower shall be
permitted to borrow, repay and reborrow under the Line of Credit provided there
is no existing Event of Default and Borrower is in compliance with Section
2.1(a) above.

2.2      Portfolio Proposal
                  (a) From time to time Borrower shall deliver by hand, email,
telecopier or overnight courier a Portfolio Proposal to Lender. Upon Lender's
request, in the event the Portfolio Bid is in excess of $3,000,000, Borrower
shall deliver to Lender all information and documents as Lender shall request
with respect to the Portfolio and the Portfolio Request and shall cause the
Seller to cooperate with Lender's examination of Seller's books and records, in
order to enable Lender to determine if it shall consider making an Advance.

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                  (b) In the event Lender in its sole discretion approves a
Portfolio Proposal it shall promptly notify Borrower by telecopier and Borrower
may request an Advance pursuant to Section 2.3(a) below.
                  (c) Lender shall not be required to advise Borrower the reason
for its failure to approve any Portfolio.
                  (d) Notwithstanding anything set forth in this Agreement
Lender shall not be required to approve the acquisition of any Portfolio which
has a Portfolio Acquisition Cost of $3,000,000, or less ("Small Portfolio"),
provided , that (i) Borrower shall comply with the provisions of Section 2.3
with respect to any such Portfolio, and (ii) after giving effect to such Advance
Borrower is in compliance with Section 2.1(a) hereof.
                  (e) Lender agrees to keep strictly confidential, subject to
disclosure under applicable law, all information relating to any Portfolio
Proposal or possible Portfolio Proposal, including, without limitation, the fact
that a Portfolio is for sale and the terms of the proposed bid.
                  (f) Within five (5) Banking Days of its receipt of a Portfolio
Proposal, Lender shall notify Borrower in writing of Lender's acceptance or
rejection of the Portfolio.

2.3 Notice of Advances
                  (a) Each Advance Request for the purchase of a Portfolio
(other than a Small Portfolio), if the Lender so requests, shall be accompanied
by a signed and completed Borrowing Base Certificate, to be delivered to Lender
prior to 1:00 p.m., New York City time of any Banking Day. Each Advance Request
shall be signed by any of the President, Chairman of the Board or Chief
Financial Officer of Borrower, and shall specify (i) the amount of the requested
Advance, (ii) the purpose of the Advance, (iii) if the Advance is for the
purchase of a Portfolio, the name of the Seller or Sellers of the Portfolio and
(iv) if applicable, the amount of the Portfolio Bid. Each Advance Request and
related documents shall be sent by telecopier to Lender at (212) 986-4786 or by
overnight courier, to the attention of Les Miller. Upon Lender's request
Borrower shall deliver to Lender all information and documents as Lender shall
request with respect to each Portfolio to be acquired, other than a Small
Portfolio.
                  (b) Within five (5) Banking Days after the actual receipt by
Lender of an Advance Request made for a Portfolio Proposal with a Portfolio Bid
in excess of $3,000,000, and within one (1) Banking Day after the actual receipt
by Lender of any other Advance request made pursuant to Section 2.3(a) herein;
and provided there is no Event of Default and after giving effect to any Advance
Request the Borrower is in compliance with the Borrowing Base and Advance Ratio,
Lender shall credit the amount of such Advance to the Borrower's Operating
Account or remit such amount by wire transfer in accordance with the Advance
Request.
                  (c) Each Advance Request shall constitute a representation by
Borrower that (i) the Advance shall only be used for working capital or the
purchase of the Portfolio described in the Advance Request; (ii) the statements
contained therein are true and correct; (iii) no Event of Default has occurred;
(iv) there has been no material adverse change in the business of any Debtor;
and (v) there has been no material change in the members and/or managers of Asta
Funding which have theretofore been certified to .Lender; and (vi) each Debtor
is controlled by Asta Funding or another Affiliate.

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                  (d) In the event any Advance Request relates to a Portfolio to
be acquired by an Affiliate, irrespective of the Portfolio Acquisition Cost of
such Portfolio, prior to Lender making such Advance, such Affiliate shall
execute and deliver its Affiliate Guaranty, Affiliate Security Agreement,
Affiliate Confirmation, UCC-1 Financing Statements and all such other documents
as Lender shall request, including, evidence of the good standing of such
Affiliate and UCC Searches, all in form acceptable to Lender. Notwithstanding
the prior sentence, an Affiliate that purchases a Rejected Portfolio is not
required to comply with this Section 3.2(d).

Section 3. Payments
3.1 (a) In addition to the payments required by this Agreement, the Borrower
shall within one (1) Banking Day pay to Lender the amount by which any
outstanding Advances exceed the Borrowing Base or Advance Ratio then in effect.
                  (b) Borrower shall be permitted from time to time to make
payment of the then outstanding Advances, in whole or in part, without payment
of any premium or penalty, provided, that all accrued and unpaid interest on the
amount then being paid is paid to Lender.

Section 4. Waiver of Right of Setoff
4.1 Borrower hereby acknowledges and agrees that the obligation of Borrower to
make the payments required to be made hereunder shall be absolute and
unconditional and shall not be subject to diminution or delay by setoff,
counterclaim, abatement or otherwise.

Section 5. Relationship of the Parties
5.1 Borrower acknowledges and agrees that the relationship between Borrower and
Lender created by this Agreement is that of debtor-creditor and not that of
joint venturers, that Lender is not a joint venturer of Borrower or any other
Debtor with respect to the acquisition of any Portfolio or otherwise, and that
Borrower will make no representations to others to the contrary.

Section 6. Grant of Security Interest
6.1 The Debtors also agree that to secure the payment by Borrower of the
Obligations, each Debtor pursuant to the terms of a Security Agreement to which
it is a party shall grant to Lender a first and prior security interest in the
Collateral, and the Collateral now or hereafter owned by each Debtor provided
for in each Debtor's Security Agreement.

6.2 Each Debtor will perform any and all steps reasonably requested by Lender to
create and maintain in Lender's favor a first and valid lien on, and security
interest in, the Collateral, including, without limitation, the execution,
delivery, filing and recording of financing statements and continuation
statements, supplemental security agreements, notes, filings with federal
government offices and any other documents necessary, in the opinion of Lender
or Lender's counsel, to protect its interest in the Collateral, which liens
shall be exclusive except for those liens expressly permitted elsewhere herein,
including, without limitation, any Permitted Liens. Lender and its designated
officers are each hereby appointed each of Debtor's attorney-in-fact to do all
acts and things which Lender may deem necessary to perfect and continue
perfected the security interests provided for in this Agreement, including, but
not limited to, executing financing statements on behalf of each Debtor.

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Section 7. Representations and Warranties of Debtors
                  To induce Lender to make Advances pursuant to this Agreement,
Borrower and Asta Funding on behalf of itself and as to each Debtor hereby
represent and warrant to Lender as follows:
                  (a) Each Debtor is a corporation duly incorporated or a
limited liability company duly organized and validly existing under the laws of
the State of Delaware and qualified to do business in the State of New Jersey.
Each Debtor has all requisite power and authority and legal right to own its
property, to carry on its business as it is now being conducted, to enter into
this Agreement and the other Loan Documents entered into by it and to perform
all of its obligations hereunder and thereunder.
                  (b) The execution and delivery by each Debtor of the Loan
Documents to which it is a party, and the performance of its obligations
thereunder, have been duly authorized by all necessary action, corporate or
otherwise, and do not and will not: (i) require any further action, consent or
approval on the part of its members or shareholders; (ii) violate any material
provision of law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect on any Debtor, or the articles of
organization or operating agreement of any Debtor; or (iii) result in any breach
of or constitute a default under any indenture or loan or credit agreement or
any other agreement, lease or instrument to which any Debtor is a party or by
which any Debtor or its properties may be bound or affected the violation of
which would have a material adverse effect on any Debtor, and none of the
Debtors is in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument, the violation of which would have a material
adverse effect on any Debtor.
                  (c) The Loan Documents to which any Debtor is a party have
been duly executed and delivered by such Debtor and are legal, valid and binding
obligations of that Debtor, enforceable against that Debtor in accordance with
their respective terms.
                  (d) The financing statements when filed with the Secretary of
State of Delaware and/or in such other jurisdiction as Lender shall direct will
constitute valid perfected first liens against the Collateral owned by each
Debtor in favor of the Lender.
                  (e) Except as previously disclosed to Lender, there is no
material action, suit, proceeding, inquiry or investigation, at law or in
equity, or before any court, governmental instrumentality, public board or
arbitrator pending or threatened against or affecting any Debtor or any of its
properties or rights, wherein an unfavorable decision, ruling or finding would
(i) result in any material adverse change in the financial condition, business,
properties or operations of such Debtor; (ii) materially or adversely affect the
transactions evidenced by the Loan Documents; (iii) materially impair the right
of any Debtor to carry on its business substantially as now conducted; or (iv)
adversely affect the validity or enforceability of the Loan Documents.
                  (f) To the best of each Debtor's knowledge, it is in
compliance with all laws applicable to such Debtor or its properties or assets
the violation of which would result in any material adverse change in the
financial condition, business, properties or operations of such Debtor.

                                       10
<PAGE>
                  (g) The proceeds of the Advances will be used for working
capital or the purpose of the purchase of Portfolios and none of the proceeds of
any Advance will be paid over or diverted to any member, manager, officer,
director or member of any Debtor or any other person except to effectuate the
purchase of Portfolios.
                  (h) Each Debtor other than Asta Funding is wholly owned by
Asta Funding, each Debtor has adequate capital to conduct its business, and each
Debtor other than Asta Funding has no subsidiaries and shall have no material
assets other than the Collateral and any Rejected Portfolio, any licenses and
permits, the loan(s) referred to in Section 10(b) below, and any Rejected
Portfolios purchased by such Debtor.
                  (i) The Collateral is free and clear of all mortgages,
pledges, liens, charges or other encumbrances, except in favor of Lender and the
Permitted Liens.
                  (j) Each Debtor has filed all federal, state and other income
or franchise tax returns which are required to be filed and have paid all taxes
due or which may become due pursuant to such returns or pursuant to any
assessment received by it.
                  (k) All timely authorizations, permits, approvals and consents
of governmental authorities which may be required in connection with the valid
execution and delivery of this Agreement and the other Loan Documents and the
carrying out or performance of any of the activities or transactions required or
contemplated hereunder or thereunder have been obtained (and remain in full
force and effect) where the failure to do so would have a material adverse
effect on any Debtor.
                  (l) All Financial Statements, Reports, information and other
financial data furnished by each Debtor to Lender in connection with this
Agreement (i) were true, correct and complete in all material respects, as of
the date thereof and (ii) present fairly the financial condition of such Debtor
at the respective dates thereof and the results of operations and changes in
financial position for the period to which they apply. Each Debtor represents
there have been no material adverse changes in the financial condition of each
Debtor since the delivery by each Debtor to Lender of its most recent financial
statements.
                  (m) Borrower's assets, at a fair valuation, exceed Borrower's
liabilities (including, without limitation, contingent liabilities). Borrower is
paying its debts as they become due and Borrower anticipates the continuing
ability to pay its debts as they become due. Borrower has assets sufficient to
carry on its business.
                  (n) Each Debtor is not in violation of or in default under
(nor on the Closing Date is there any waiver in effect which, if not in effect,
would result in a violation or default under) any provision of its respective
Certificate of Incorporation, Certificate of Formation or Operating Agreement,
or under any provision of any agreement, indenture, evidence of indebtedness,
loan or financing agreement, certificate, lease or other instrument to which it
is a party, or by which it is bound, or of any law, governmental order, rule or
regulation, in any such case under this subparagraph (n) so as to affect
adversely in any material manner its business, assets or financial conditions.
                  (o) All statements, representations and warranties made by
each Debtor in this Agreement, any other Loan Document and any other agreement,
document, certificate or instrument previously furnished or to be furnished to
Lender under this Agreement or in connection with the Advances; (i) are and
shall be true, correct and complete in all material respects at the time they
were made and, in the case of those made prior to the Closing Date, on and as of
the Closing Date, (ii) do not and shall not contain any untrue statement of a
material fact at the time made, and (iii) do not and shall not omit to state a
material fact at the time made necessary in order to make the information
contained herein or therein not misleading or incomplete. Debtors understand
that all such statements, representations and warranties shall be deemed to have
been relied upon by Lender as a material inducement to establish the Line of
Credit.

                                       11
<PAGE>

                  (p) No person is entitled to receive from Debtor or Lender any
brokerage commission, finder's fee or similar fee or payment in connection with
the consummation of the transactions contemplated by this Agreement other than
the acquisition of a Portfolio, which shall be fully disclosed in each Portfolio
Proposal.
                  (q) Each Debtor's address set forth below its signature, is
the location of such Debtor's chief executive office and is the only location
where such Debtor keeps its Books and Records concerning its Collateral.
                  (r) Borrower does not own any material trademarks, trade
names, patents or copyrights.
                  (s) Each Debtor warrants and represents that it has not and
will not violate any applicable federal or state law relating to unfair
collection practices in connection with any of the Consumer Loans and Accounts,
the violation of which will have a material adverse effect on any Debtor or the
Collateral. Each Debtor agrees to indemnify each Indemnified Party and to hold
each Indemnified Party harmless from and against any and all claims, demands,
losses, damages, penalties, fines, forfeitures, judgments, legal fees and other
costs, fees and expenses heretofore or hereafter incurred by each Indemnified
Party as a result of (i) any breach by a Debtor of the aforesaid warranty and
representation; or (ii) any acts and/or omissions by a Debtor resulting in any
claim, demand or assertion that Lender or any other Indemnified Party,
subsequent to the Closing Date, was in any way involved in, or had in any way
authorized, any unlawful collection practices in connection with any Consumer
Loans and Accounts. Each party agrees to notify the other within ten (10)
Banking Days of notice or knowledge of any such claim, demand or assertion.
                  (t) Each Debtor warrants, represents and agrees that it will
not institute any legal action in the name of Lender or continue to prosecute or
defend in the name of Lender any legal action; nor shall either Debtor
intentionally or unintentionally, through misrepresentation or nondisclosure,
mislead any person as to, or conceal from any person, the identity of each
Debtor as owner of the Consumer Loans and Accounts. NOR SHALL DEBTORS USE OR
REFER TO THE NAME ISRAEL DISCOUNT BANK OF NEW YORK OR ANY NAME DERIVED THEREFROM
OR CONFUSINGLY SIMILAR THEREWITH TO PROMOTE DEBTORS' MARKETING, ADVERTISING,
SALE OR TRANSFER OF ANY CONSUMER LOAN OR ACCOUNT OR THE COLLECTION OR MANAGEMENT
THEREOF.
                  (u) As of the date of this Agreement the outstanding amount of
the Consumer Loans of each Debtor is listed on Schedule C annexed hereto, and
the computer discs delivered to Lender with respect to same at the Closing Date
are each a true, correct and complete list thereof.

Section 8.  Survival of Representations and Warranties
                  The foregoing representations and warranties shall survive the
execution of this Agreement, the Closing Date and the repayment of the
Obligations.

Section 9.  Affirmative Covenants
                  To induce Lender to make the Advances pursuant to this
Agreement, the Borrower and Asta Funding on its own behalf and as to each other
Debtor hereby covenants and agrees that so long as any Obligations shall remain
outstanding hereunder, the Debtors shall comply with the following covenants:

                                       12
<PAGE>
                  (a) Debtors shall keep and maintain complete and accurate
Books and Records. Debtors shall permit access thereto and examination thereof
by Lender and any authorized representatives of Lender, at all reasonable times
and places during normal business hours (including the right to make copies
thereof at the cost and expense of Borrower) upon at least two (2) Banking Days
prior written notice and without notice at any time after and during the
continuance of an Event of Default.
                  (b) Debtors shall comply in all material respects with all
applicable federal, state, county and municipal laws, rules, regulations and
orders of any governmental authority having jurisdiction over Debtors, except to
the extent contested in good faith and by proper proceedings or where the
failure to so comply would not have a material adverse affect on Debtors.
                  (c) Debtors shall promptly notify Lender of the occurrence of
any Event of Default.
                  (d) Debtors shall, jointly and severally, indemnify, protect,
defend and save harmless each Indemnified Party from and against any and all
losses, damages, expenses or liabilities of any kind or nature and from any
suits, claims, or demands, by third parties including reasonable counsel fees
incurred in investigating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way connected
with this Agreement and the transactions contemplated herein, provided, however,
Debtors shall not be obligated to indemnify, protect, defend and save harmless
any Indemnified Party, if the loss, damage, expense or liability was caused by
or resulted from the gross negligence of willful misconduct of that Indemnified
Party. In case any action shall be brought against an Indemnified Party based
upon any of the above and in respect to which indemnity may be sought against
Debtors, the Indemnified Party against whom such action was brought, shall
promptly notify Borrower in writing, and Debtors shall assume the defense
thereof, including the employment of counsel selected by Debtors and reasonably
satisfactory to the Indemnified Party, the payment of all costs and expenses and
the right to negotiate and consent to settlement. Upon reasonable determination
made by the Indemnified Party, the Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof at the Indemnified Party's cost and expense. Debtors shall not be liable
for any settlement of any such action effected without its consent, but if
settled with Debtor's consent, or if there be a final judgment for the claimant
in any such action, Debtors agree to indemnify and save harmless said
Indemnified Party against whom such action was brought from and against any loss
or liability by reason of such settlement or judgment. The provisions of this
subparagraph (d) shall survive the termination of this Agreement and the final
repayment of the Obligations.
                  (e) After the occurrence of an Event of Default Debtors shall
establish and maintain a Lockbox Account, in accordance with Lender's
instructions, and after and during the continuance of an Event of Default (i)
Lender shall be authorized to send a notice directing all Account Debtors to
make all Payments to said Lockbox Account and (ii) each Debtor shall deposit all
Collections in the Lockbox Account. Any and all remittances received in said
Lockbox Account may be collected by Lender in its sole discretion, and shall be
applied to the Obligations of Borrower to Lender in accordance with
sub-paragraphs (g) and (q) hereof. Debtors shall bear all risk of loss of any
funds deposited in the Lockbox Account and pay all fees and charges related
thereto.

                                       13
<PAGE>
                  (f) If, notwithstanding the notices to Account Debtors to
remit Payments to the Lockbox Account, Debtors receive any Payments on the
Collateral, each Debtor agrees to immediately forward to Lender any and all
Payments and other remittances on the Collateral, including cash, checks,
drafts, notes, acceptances or other forms of payment in trust for Lender and to
deliver such Payments in the identical form in which they were received,
together with collection reports in form satisfactory to Lender.
                  (g) All Payments and Collections which are delivered to or
otherwise received by Lender for application to the Advances provided for
herein, shall be deemed received as of the date of actual receipt by Lender, and
shall be applied by Lender on account of the Obligations upon Lender's receipt
of same; provided, however, that no checks, drafts, or other instruments
received by Lender shall constitute payment to Lender unless and until such item
of payment has actually been collected by Lender. For the sole purpose of
calculation of interest due to Lender from Borrower, all Payments shall not be
considered applied on account of the Obligations until actual clearance of such
Payments.
                  (h) Debtors shall maintain accurate Books and Records of all
Collateral and all Collections.
                  (i) Each Debtor, as the case may be, shall, within fifteen
(15) days of the end of each month, deliver to Lender and Reports and related
computer discs with respect to the immediately preceding month, in such form as
may be reasonably acceptable to Lender, certified by the Chief Financial Officer
of each Debtor.
                  (j) Debtors will continue to hold all materially necessary
licenses and permits for the operations of its business.
                  (k) Lender (by any of its officers, employees and agents)
shall have the right, at reasonable times during each Debtor's usual business
hours (provided reasonable prior notice is given except if an Event of Default
has occurred and is continuing), to inspect the Collateral, all Books and
Records (and to make extracts from such Books and Records) and the premises upon
which any of the Collateral is located or administered, and to verify the
amount, quality, quantity, value and condition of, or any other matter relating
to, the Collateral.
                  (l) Lender shall have the right, after, and during the
continuance of, an Event of Default:
                           (i) to notify Account Debtors to make Payments to the
Lockbox Account established by Lender, to endorse all items of Payment which may
come into its hands payable to a Debtor, to take control of any cash or non-cash
proceeds of Accounts; to compromise, extend or renew any Account or deal with it
as it may deem advisable, and to make exchanges, substitutions or surrenders of
Collateral, to notify the postal authorities to deliver all mail, correspondence
or parcels addressed to any Debtor to Lender at such address as Lender may
choose; and
                           (ii) to endorse in Debtor's name on any checks,
notes, acceptances, drafts or any other instrument or document requiring said
endorsement and to sign either Debtor's name on any invoice relating to any
Account, or drafts against its customers, or schedules or confirmatory
assignment on Accounts, or notices of assignment, financing statements under the
UCC, and other public records, and in verification of Accounts and in notices to
Account Debtors. For the purposes set forth herein, each Debtor does hereby
appoint Lender or its designee as Attorney-in-Fact to sign in such Debtor's name
or to otherwise execute documents as set forth herein.

                                       14
<PAGE>
                  (m) Each Debtor will furnish Lender with at least ten (10)
days' prior written notice of any change in location of or addition to its chief
executive office or the office where it keeps its Books and Records concerning
its Accounts.
                  (n) Pay and discharge when due, all taxes, assessments or
other governmental charges imposed on its or any of its properties, unless the
same are currently being contested in good faith by appropriate proceedings and
adequate reserves are maintained therefor.
                  (o) Operate its properties or cause to be operated in
compliance with all material applicable orders, rules and regulations
promulgated by the jurisdictions and agencies thereof where such properties are
located and duly file or cause to be filed such reports and/or information
returns as may be required or appropriate under applicable orders, regulations
or law the violation of which would have a material adverse effect on any
Debtor.
                  (p) Permit the Lender's representatives and/or agents full and
complete access to any or all of Debtors' Books and Records and other financial
records, to make extracts from and/or audit such records and to examine and
discuss the Debtors' business, finances and affairs with the Debtors' officers
and if an Event of Default exists, outside accountants.
                  (q) After an Event of Default, Lender shall apply all Payments
and Collections deposited in the Lockbox Account, as follows:
                           First: to the payment of all unpaid costs and
expenses of Lender, including, its legal fees;
                           Second: to the payment of any unpaid Facility Fee,
Line Fees and Examination Fees then due;
                           Third: to the payment of all accrued and unpaid
interest under the Grid Note; and
                           Fourth: to the repayment of each of the then unpaid
Advances.
                  (r) Within twenty (20) days after the repayment of Asta I's
indebtedness as listed on Schedule A, Asta I shall deliver to Lender executed
UCC-3 Termination Statements executed by the secured party listed on Schedule B
relating thereto.
                  (s) Each Debtor agrees that it shall, from time to time
promptly execute and deliver all instruments and documents, and take all further
action, that may be necessary or appropriate, or that Lender may request, in
order to perfect against such Debtor and all third parties, and in order to
protect and continue the security interest granted or purported to be granted
hereby, or to enable Lender to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing each Debtor shall execute and deliver such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or appropriate, or as Lender may request, in order to perfect and
preserve the security interest in all of the Collateral granted or purported to
be granted hereby.
                  (t) So long as any of the Obligations shall remain outstanding
Debtors shall deliver to Lender, the following:
                           (i) within ninety (90) days after the end of the
respective fiscal years of Asta Funding, a balance sheet, income statement and
cash flow statement, prepared in accordance with GAAP, by an independent
certified public accountant acceptable to Lender, on a audited basis and without
material exception or qualification and in the case of the other Debtors, a
trial balance prepared by management and certified by the Chief Financial
Officer of each Debtor;

                                       15
<PAGE>
                           (ii) within fifteen (15) days after the end of each
month a Borrowing Base Certificate as of the last business day of the previous
month, prepared by and certified by the chief financial officer of each Debtor,
together with a payment in reduction of the Obligations of an amount equal to
the Advances, if any, in excess of the Borrowing Base and/or Advance Ratio in
such Borrowing Base Certificate; and
                           (iii) together with each Borrowing Base Certificate a
Report as to each Debtor as of the last business day of the previous month;
                  (u) Each Debtor certifies that any information concerning the
business organization or financial condition of such Debtor furnished to Lender
is and shall be true and correct and fairly presents and will present the
financial condition of such Debtor in accordance with GAAP.
                  (v) Each Debtor covenants to promptly give Lender notice in
writing of any (a) threatened or actual actions or suits and of all
investigations or proceedings by or before any court, arbitrator or any
governmental department, board, agency or other instrumentality, state or
federal, affecting either Debtor or their respective properties which involves
uninsured potential liability of any Debtor (other than Asta Funding) in excess
of $250,000 and $1,000,000 as to Asta Funding in any individual case; (b)
material adverse change in the condition (financial or otherwise) of any Debtor;
(c) notice of intent to seize, levy or assess or of any actual seizure, levy or
assessment upon or against any material property of any Debtor, and (d) change
in any Debtor's name and any change in its chief executive office or place(s) of
business or incorporation or formation.

Section 10.  Negative Covenants of Debtors
                  To induce Lender to make the Advances pursuant to this
Agreement, Borrower and Asta Funding on its own behalf and as to each Debtor,
hereby covenants and agrees that so long as any of the Obligations shall remain
outstanding, Debtors shall not:
                  (a) Except for the security interests in favor of Lender and
the Permitted Liens, at any time: (i) create, incur, assume or suffer to exist
any mortgage, deeds of trust, pledge, security interest, encumbrance, lien,
hypothecation, or charge of any nature upon or with respect to the Collateral;
or (ii) sign or file under the UCC of any jurisdiction a financing statement
which names a Debtor as a debtor or Guarantor as a debtor as to any Collateral;
or (iii) sign any security agreement authorizing any secured party thereunder to
file such financing statement. Debtors further covenant and agree not to grant
any similar negative pledge to any other lender.
                  (b) Permit the Debtors' Tangible Net Worth on a consolidated
or combined basis to be less than $15,000,000.00.
                  (c) Permit the Borrower's Tangible Net Worth on a consolidated
or combined basis to be less than $15,000,000.00.
                  (d) Permit Asta Funding to enter into an agreement for the
repurchase, redemption or retirement of its outstanding capital if after giving
effect to such repurchase (i) the Debtors shall not be incompliance with the
provisions of Section 10(b) and (c), or (ii) there shall exist an Event of
Default or a default with the giving of notice or the lapse of time shall result
in an Event of Default. At Lender's request Asta Funding shall render a report
as to any of the transactions covered by this Section 10(d).

                                       16
<PAGE>

                  (e) As to Borrower only, without the prior written consent of
Lender, make any advance, loan, extension of credit or capital contribution to,
or purchase any stock, bonds, notes, debentures or other securities of or any
assets constituting a business unit of, or make any other investment in any
other person, firm or entity, other than a loan to any other Debtor that is
acquiring a Portfolio with an Advance, provided, that any such Portfolio is
included in the Collateral.
                  (f) Without the prior written consent of Lender, (i) enter
into any merger or consolidation, except with another Debtor or if it is the
survivor, or (ii) liquidate or wind-up or dissolve itself (or suffer any
liquidation or dissolution), or (iii) convey, sell, lease, assign, transfer or
otherwise dispose of all or substantially all of its property, business or
assets, except to another Debtor, or (iv) make any material change in its
present method of conducting business or permit any Guarantor who is not a
natural person to do any of the foregoing.
                  (g) Materially change, amend, alter or modify its Certificate
of Formation, Certificate of Incorporation, Operating Agreement, or other
governing documents of a Debtor to do any of the foregoing.
                  (h) As to Borrower only, enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any member or manager of Borrower, or with any
officer, director, shareholder or partner of Asta Funding or any of the
foregoing, except for arm's length transactions with Affiliates.
                  (i) As to Borrower only, declare or pay any dividends on,
distributions on or make any payment on account of, or set apart assets or a
sinking fund for the purchase, redemption, defeasance, retirement or other
acquisition of, any member interest, shares or any class of stock or any
warranty or option to purchase any such stock whether now or hereafter
outstanding or make any other distribution in respect thereof, directly or
indirectly whether in cash or property or obligations, other than payments to
Asta Funding in the ordinary course of business so long as no Event of Default
exists after giving effect thereto. At Lender's request Borrower shall render a
report as to the payments made to Asta Funding.
                  (j) Create, incur or suffer to exist any indebtedness, except
(i) indebtedness in respect of the Advances; and (ii) indebtedness for expenses
incurred in the ordinary course of business and (iii) Permitted Debt.
                  (k) Without prior written consent of Lender, remove any
material portion of the Collateral from its present location.
                  (l) Allow its existence to be other than in good standing and
will not, without the prior written consent of Lender, (i) reincorporate or
reorganize under the laws of any other State than Delaware, dissolve or
liquidate, or (ii) merge or consolidate with or acquire or affiliate with any
other business entity, unless a Debtor is the survivor or acquirer.
                  (m) Change its name without furnishing to Lender at least ten
(10) days' prior written notice thereof.
                  (n) Change in any material respect the nature of its business.
                  (o) Permit Asta Funding to sell, assign, transfer or dispose
of any majority controlling ownership interest in any Debtor, voluntarily or
involuntarily, by operation of law or otherwise, except to another Affiliate.

                                       17
<PAGE>

Section 11.  Conditions Precedent to Advances
                  As a condition to the execution and delivery of this Agreement
and the making of any Advance, the Debtors shall or cause the execution and
delivery of each of the Loan Documents listed in Exhibit D annexed hereto, all
in form, scope and substance satisfactory to Lender.

Section 12.       Events of Default
                  At Lender's option, the happening of any of the following
events or conditions shall, if not cured within any applicable cure period,
constitute an "Event of Default" under this Agreement and the Grid Note, whether
happening to any Debtor:
                  (a) Failure to pay any Obligation when due or when duly
demanded by Lender;
                  (b) Failure to perform or observe any non-monetary obligation
or agreement in this Agreement or any other Loan Document, which failure shall
continue for five (5) Banking Days after the giving of notice by Lender to
Borrower;
                  (c) Loss, theft, substantial damage or destruction of a
material portion of the Collateral taken as a whole except as herein permitted
or the making of any levy, seizure, garnishment, or attachment thereof or
thereon that is not discharged or bonded within ten (10) days;
                  (d) Any material representation and warranty contained in this
Agreement, any Loan Document, Borrowing Base Certificate, Report, Financial
Statement or in any Advance Request shall be or become false in any material
respect;
                  (e) The making of an assignment for the benefit of creditors,
filing a petition in bankruptcy, the petition to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial part of
its assets, or the commencement of any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect, or any
such petition is filed against any Debtor, or any such proceeding is commenced
against it, which is not dismissed within forty-five (45) days;
                  (f) The admission in writing of its inability, or it is
generally unable, to pay its debts as they become due, or any act or omission,
indicating its consent to, approval of or acquiescence in any petition,
application, proceeding or order for relief or the appointment of a custodian,
receiver or trustee for such Debtor or any substantial part of any of its
properties, or suffers any such custodianship, receivership or trusteeship;
                  (g) Any event or occurrence of whatever nature (including any
adverse determination in any litigation, arbitration, investigation or
proceeding), which in Lender's reasonable judgment has a material adverse effect
on the business, operations, revenues, financial condition, property, or
business prospects of the Debtors collectively, or the value of the Collateral,
or the ability of the Debtors collectively to timely pay or perform their
Obligations to Lender.
                  (h) Merger (unless, as to Asta Funding, if it is the
survivor), consolidation, change of voting control or transfer or sale of
substantially all the assets of any Debtor, without Lender's prior written
consent;
                  (i) There is a change in any Debtor's managerial control,
including a change resulting from a management contract or a change in any
Debtor's executive officers;

                                       18
<PAGE>
                  (j) Any final judgment(s) for the payment of money are
rendered against any Debtor (except Asta Funding) in excess of $100,000 in the
aggregate, or against Asta Funding in excess of $250,000 in the aggregate,
excluding judgments for claims covered by insurance, and the same shall remain
undischarged for a period of thirty (30) consecutive days during which execution
shall not be effectively stayed, or notice of intent to levy by any governmental
agency or body (whether local, state or federal) is issued to or against any
Debtor (except Asta Funding) or any of its properties for an amount in excess of
$100,000, or against Asta Funding or any of its properties for an amount in
excess of $250,000 and the same shall remain undischarged for a period of ten
(10) consecutive days during which execution shall not be effectively stayed;
                  (k) Any consent, approval, franchise, license or permit of any
governmental agency, which is necessary for the ownership of any Debtor's assets
or for the operation of its business, is cancelled, revoked or modified in a
manner which materially adversely affect any Debtor or its properties;
                  (l) The termination of any of the Guarantees; or
                  (m) Any Debtor shall default in the performance of any
agreement with any person other than Lender if the effect of such default is, or
with notice or the passage of time or both would be, to accelerate the maturity
of any indebtedness for borrowed money in excess of $250,000, or any Debtor
shall fail to pay any indebtedness for borrowed money at maturity in excess of
$250,000.

Section 13. Remedies
                  Upon the earlier of (i) the Borrower's failure to pay in full
the Obligations when duly demanded by Lender; or (ii) the occurrence of any
Event of Default or (iii) the Termination Date, the Line of Credit shall be
terminated and any obligation of Lender to make Advances to Borrower hereunder
shall be terminated. In the Event of a Default Lender shall have the right to
terminate this Agreement, without demand or notice, and in such event, all
Obligations secured hereby, shall immediately become due and payable without
demand or notice and Lender may take immediate possession of the Collateral
(including, without limitation the right to offset any funds in the Lockbox
Account, the Operating Account or any other account maintained by any Debtor
with Lender) without demand, notice or legal process; and for the purpose and in
furtherance thereof, Debtors shall, if Lender so requests, assemble the
Collateral and make it available to Lender at a reasonably convenient place
designated by Lender, and Lender shall have the right (and each Debtor hereby
authorizes and empowers Lender to do so) to notify Account Debtors and to
exercise all of its rights under the Loan Documents and the UCC. Lender may, in
its sole discretion, sell the Collateral by private or public sale for the
account of Debtors after giving reasonable notice of the time and place of sale
to each Debtor. Any notice from Lender placed in the U.S. Mail, postage prepaid,
addressed to a Debtor at its address shown on Lender's records at least ten (10)
days prior to any action or sale shall be reasonable notice under the UCC. Any
proceeds of the disposition of any Collateral may be applied by Lender toward
the reasonable expenses of retaking, holding, or toward preparing for sale and
selling the Collateral or toward Lender's reasonable attorneys' fees and legal
expenses incurred by Lender, or toward Obligations of Borrower to Lender in any
order Lender may elect. Each Debtor shall be liable for any deficiency and
Lender shall be entitled to interest thereon at the default rate provided in the
Grid Note. In the event of repossession of the Collateral by Lender, then the
rights and remedies applicable under the UCC in effect in the State of New York

                                       19
<PAGE>

shall apply, except as permitted to be modified by agreement and which were so
modified herein. In conjunction with or in lieu of any of the remedies provided
for in this paragraph, and at Lender's sole option, each Debtor shall allow
Lender or any agent or designee thereof to enter upon such Debtor's premises for
the purpose of taking possession of, holding, and controlling the disposition
of, in any manner deemed appropriate by Lender, all Collateral and the Books and
Records. Each Debtor hereby grants to Lender an irrevocable power of attorney,
which power of attorney shall be coupled with an interest in the Collateral, and
hereby appoints Lender or any of Lender's officers as such Debtor's
attorney-in-fact if an Event of Default exists to execute on Borrower's behalf
all documents, and to do any and all things in the name of and on behalf of such
Debtor, to enable Lender to fully exercise its rights in and to the Collateral
as provided in this Agreement and under applicable law, including, the
establishment of a Lockbox Account. In addition to the foregoing, Lender shall
be entitled to exercise all of its rights under the Loan Documents, which rights
may be exercised at any time and not in lieu of the rights herein provided.

Section 14. Miscellaneous
14.1  Notices
                  All notices and other communications to any party hereto
required or permitted under this Agreement or any other agreement or document
executed or delivered pursuant hereto or thereto shall be in writing and given
(unless otherwise provided herein) (a) by hand delivery; (b) certified mail,
return receipt requested, postage prepaid; (c) one (1) business day after being
entrusted to a reputable commercial overnight delivery service if by overnight
delivery service or (d) by telecopier with respect to Advance Requests and the
response of Lender thereto. All notices shall be sent to the addresses and
telecopier numbers indicated in the signature pages hereto. The Debtors each
hereby irrevocably designate and appoint Asta Funding as its agent for the
purpose of receiving notices under this Agreement.

14.2. Expenses
                  Debtors shall pay all expenses of every kind for the
enforcement of any of Lender's rights mentioned herein during the existence of
an Event of Default and reimburse Lender for any expenditures, including
expenses incurred in realizing on Collateral, court costs, other legal expenses
and reasonable attorneys' fees incurred in consultation or in judicial,
administrative or arbitration proceedings, both at trial and appellate levels,
and such expenses shall bear interest at the default rate provided for in the
Grid Note, until paid and shall be secured by the Collateral.

14.3. No Waiver
                  No waiver of any default or non-exercise of a right hereunder
shall waive any other default, or the same default on a future occasion, or
preclude exercising any other right or the same right on a future occasion.
Acceptance of any payment after its due date shall not be deemed a waiver of the
right to require prompt payment when due or all other sums, and acceptance of
any payment after Lender has declared its entire indebtedness due and payable
shall not cure any Event of Default or operate as a waiver of any right of
Lender hereunder.

                                       20
<PAGE>
14.4. Successors and Assigns
                  Lender's rights hereunder shall inure to the benefit of its
successors and assigns, and Lender may without notice to or the consent of
either Debtor sell one or more participations in the Obligations and Collateral.
Each Debtor's obligations hereunder shall bind its successors and assigns.

14.5. Severability
                  If any provision of this Agreement shall for any reason be
held to be invalid, illegal or unenforceable in any respect under applicable
law, the same shall not affect any other provision of this Agreement and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.

14.6. Entire Agreement; Amendments
                  This Agreement and any other agreement or document executed or
delivered pursuant hereto, or in connection or arising with the Advances or
transactions contemplated by this Agreement, embody the entire agreement and
understanding between the parties hereto, supersede all prior agreements and
understandings relating to the subject matter hereof, and may not be modified or
varied except in a writing signed by Lender and each Debtor.

14.7. Conflicts
                  In the event any conflict arises between the terms of this
Agreement and the terms of any Advance Request or any other document or
agreement between Lender and any Debtor, the terms of this Agreement shall
govern.

14.8. Counterpart Copies
                  This Agreement may be executed in counterpart copies all of
which shall constitute one instrument and manually signed counterpart copies may
be sent by telecopier to the other parties.

14.9. Cumulative Remedies
                  No provision of this Agreement or any other agreement, shall
limit the right of Lender (a) to foreclose against the Collateral by the
exercise of a power of sale under this Agreement or applicable law; (b) to
exercise self-help remedies including, without limitation, setoff and
repossession; (c) to obtain provisional or ancillary remedies such as injunctive
relief, attachment, or the appointment or a receiver from a court having
jurisdiction before, during, or after the pendency of any arbitration
proceeding; or (d) to otherwise exercise its rights in and to the Collateral or
its remedies as a secured party under Article 9 of the UCC.

14.10.   Waiver of Jury Trial; Consent to Jurisdiction
                  EACH DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION ARISING OUT OF
OR IN CONNECTION WITH (1) THIS AGREEMENT, THE GRID NOTE OR ANY OTHER LOAN
DOCUMENT; (2) ALL PAST, PRESENT AND FUTURE AGREEMENTS INVOLVING THE PARTIES; (3)
ANY TRANSACTION CONTEMPLATED HEREBY, AND ALL PAST, PRESENT, AND FUTURE
TRANSACTIONS INVOLVING THE PARTIES; AND (4) ANY ASPECT OF THE PAST, PRESENT, OR
FUTURE RELATIONSHIPS OF THE PARTIES. THIS WAIVER OF TRIAL BY JURY PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT AND TO MAKE ADVANCES
TO BORROWER.

                                       21
<PAGE>
                  EACH DEBTOR AND LENDER AGREE THAT ANY ACTION, SUIT OR
PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT, THE GRID NOTE, OR ANY
OTHER LOAN DOCUMENT RELATING TO THE LINE OF CREDIT, MAY BE INITIATED AND
PROSECUTED IN THE STATE OR FEDERAL COURTS, AS THE CASE MAY BE, LOCATED IN NEW
YORK COUNTY, NEW YORK.

14.11.   Governing Law
                  This Agreement shall be governed by and construed and enforced
under the internal laws of the State of New York without regard to any conflict
of laws of principles.

14.12.  Special Covenants of Asta Funding
                  In order to induce Lender to enter into this Agreement
increasing the Original Line of Credit and reducing the rate of interest with
respect to Advances, Asta Funding hereby agrees that (a) it and the Borrowers
shall each maintain its Operating Accounts with Lender, (b) in the event it (in
a borrowing capacity) or any other Debtor, with the written consent of Lender,
enters into a financing arrangement with another lender (other than with respect
to the financing of a Rejected Portfolio) on terms providing for interest and/or
fees payable to such lender in excess of the Lender Fees and/or interest payable
to Lender hereunder, the Debtors shall enter into an amendment hereto to grant
Lender the same terms, and (c) it shall cause each Affiliate and/or Debtor to
execute and deliver each document required in this Agreement and to observe each
covenant provided hereunder.

14.13.   Releases for Rejected Portfolios
                  Lender will provide releases requested by any other lender
with respect to Lender's liens in any Rejected Portfolio and the proceeds and
other rights related thereto.

                  IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed under its hand and seal by its duly authorized
representative as of the date and year first written above.

                                      ISRAEL DISCOUNT BANK OF NEW YORK

                                      By:      ___________________________
                                               Name:
                                               Title:

                                      By:      ___________________________
                                               Name:
                                               Title:

                                      Address: 511 Fifth Avenue
                                               New York, New York 10017
                                               Attention: Les Miller
                                      Telecopier No: _____________________

                                       22
<PAGE>

                                    ASTA FUNDING ACQUISITION II, LLC

                                    By:  ___________________________
                                         Name: Gary Stern, Manager

                                    By: ___________________________
                                        Mitchell Herman, Manager

                                    Address: 210 Sylvan Avenue
                                             Englewood Cliffs, New Jersey 07632
                                             Attention: Gary Stern
                                    Telecopier No: ______________________

                                    PALISADES COLLECTION, L.L.C.

                                    By:  ___________________________
                                         Gary Stern, Manager

                                    By: ___________________________
                                        Mitchell Herman, Manager

                                    Address: 210 Sylvan Avenue
                                             Englewood Cliffs, New Jersey 07632
                                             Attention:
                                    Telecopier No: ______________________

                                       23
<PAGE>

                                    ASTA FUNDING, INC.

                                    By:  ___________________________
                                             Gary Stern
                                             Title:

                                    By: ___________________________
                                             Mitchell Herman
                                             Title:

                                    Address: 210 Sylvan Avenue
                                             Englewood Cliffs, New Jersey 07632
                                             Attention:
                                    Telecopier No: ______________________

Agreed:

ASTA FUNDING ACQUISITION I, LLC

By:  ___________________________
         Gary Stern, Manager

By: ___________________________
         Mitchell Herman, Manager

         Address:          210 Sylvan Avenue
                           Englewood Cliffs, New Jersey 07632
                           Attention:
         Telecopier No: ______________________

E.R. RECEIVABLES CORP., L.L.C.

By:  ___________________________
         Gary Stern, Manager

By: ___________________________
         Mitchell Herman, Manager

         Address:          210 Sylvan Avenue
                           Englewood Cliffs, New Jersey 07632
                           Attention:
         Telecopier No: ______________________

                                       24
<PAGE>

                             EXHIBITS AND SCHEDULES

                  EXHIBIT A         -         Borrowing Base Certificate

                  EXHIBIT B         -         Grid Note

                  EXHIBIT C         -         Confirmation of Affiliate

                  EXHIBIT D         -         Loan Documents

                  SCHEDULE A        -         Permitted Debt

                  SCHEDULE A-1      -         Acquired Portfolio Debt

                  SCHEDULE B        -         Permitted Liens

                  SCHEDULE C        -         Consumer Loans

                                       25
<PAGE>

                                    EXHIBIT A

                           BORROWING BASE CERTIFICATE

BORROWER:                  ASTA FUNDING ACQUISITION II, LLC
                           and PALISADES COLLECTION, L.L.C.

                                      Date:

                        Certificate No. ________________

In order to induce ISRAEL DISCOUNT BANK OF NEW YORK ("Lender") in its sole
discretion, to make Advances to Borrower pursuant to the Agreement (as
hereinafter defined). The undersigned, an authorized signatory of Borrower, does
hereby certify, represent, warrant and covenant to Lender that the information
set forth herein is true, correct and complete as of the date hereof. All
capitalized terms used herein shall have the same meaning as in the Amended and
Restated Loan and Security Agreement dated November 14, 2001, as amended from
time to time ("Agreement") between Lender, Asta Funding, Asta II and Palisades.
The Eligible Accounts aging attached hereto evidences undisputed balances due on
bona fide indebtedness incurred by Account Debtors, without dispute, offset,
counterclaim or rights of recoupment.

As of the date hereof: each of the representations and warranties set forth in
the Agreement and in any other Loan Documents executed and delivered to Lender
by Borrower and the other Debtors is true, correct and complete in all material
respects; each Debtor is in compliance with all of the terms, covenants and
conditions of the Agreement and the Loan Documents; there exists no default or
Event of Default under the Agreement or the Loan Documents; and there has been
no material adverse change in the business or financial condition any Debtor.

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

<PAGE>

                           Borrowing Base Certificate
                                 No.: _________

                                                        Dated __________________
<TABLE>
<CAPTION>
<S>          <C>                                            <C>                        <C>
A.       Total Existing Eligible Accounts

                  Asta II                            $_________________
                  Palisades                          $_________________
                  E.R.                               $_________________
                  [Name of Debtor]                   $_________________

                                                     TOTAL (A)                  $_________________

B.       Proposed Small Portfolios
                                            (1)                                 (2)
         Name of                    Portfolio Acquisition                       Total
         Acquirer                           Cost                           Eligible Accounts
         --------                   ---------------------                  ------------------

--------------------                $                                  $
--------------------                $                                  $
--------------------                $                                  $

Lesser of (1) and (2)                                TOTAL (B)                  $_________________

C.       Proposed Portfolio Acquisition

                                            (1)                                 (2)
         Name of                    Portfolio Acquisition                      Total
         Acquirer                          Cost                           Eligible Accounts
         --------                   ---------------------                 -----------------

--------------------                $                                  $
--------------------                $                                  $
--------------------                $                                  $

Lesser of (1) and (2)                                TOTAL (C)         $_________________

D.       Total Eligible Accounts

         A + B + C  X  50% =                         TOTAL (D)         $_________________
</TABLE>

                                       27
<PAGE>
E.       Advance Ratio

         Average Collections for:

            month ended             _____________             $_________________
            month ended             _____________             $_________________
            month ended             _____________             $_________________

                                            X        15

                                    Total Advance Ratio (E)   $_________________

F.       Total Outstanding Advances                           $_________________
         --------------------------

G.       Line of Credit                                       $20,000,000.00
         --------------

H.       Borrowing Base

         An amount equal to the lesser of:

         (D)      $________________
                           plus
(H)               $________________
                           and
         (E)      $________________                  (H)      $_________________

I hereby certify that the information contained in the within Certificate is
true and accurate.

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

                                       28
<PAGE>

                                    EXHIBIT B

                                    GRID NOTE

$20,000,000.00                   New York, New York           November __, 2001

             FOR VALUE RECEIVED, the undersigned promises to pay to the order of
ISRAEL DISCOUNT BANK OF NEW YORK, (hereinafter the "Bank") at its principal
office, located at 511 Fifth Avenue, New York, NY 10017, or at another location
if notified in writing, the principal amount of $20,000,000.00 or, if less, the
aggregate unpaid principal amount of all loans (each an "Advance" and
collectively the "Advances") made by the Bank to the undersigned from time to
time, as and when provided in accordance with the Amended and Restated Loan and
Security Agreement between the Bank, the undersigned and Asta Funding, Inc., of
even date herewith, as the same may be amended from time to time (the
"Agreement"), and to pay interest on the unpaid balance of the principal amount
of each Advance from and including the date of each Advance (as shown by the
schedules annexed hereto) at the rate per annum equal to the Prime Rate of the
Bank from time to time in effect, calculated on the basis of a 360-day year and
actual number of days elapsed (but in no event in excess of the maximum rate
permitted by applicable law), such interest to be payable monthly on the first
day of each month beginning with the month immediately following the date of the
Advance as set forth in the schedule annexed hereto and continuing on the same
day of each month thereafter and until this Note is paid in full. Any change in
such rate of interest shall be effective on the date a change in the prime loan
rate of the Bank occurs, without notice to the undersigned. The prime loan rate
of the Bank in effect on the date of this Note is ____% per annum.

             On and after the date of any Event of Default (as defined in the
Agreement), interest shall be at a rate per annum equal to 5% above the rate
charged hereunder on the date of such demand or if such rate shall not be lawful
with respect to the undersigned, at the highest lawful rate then in effect.

             This Note shall be paid and prepaid in accordance with the terms of
the Agreement.

             All payments hereunder shall be made in lawful money of the United
States and in immediately available funds. Any extension of time for the payment
of the principal of this Note resulting from the due date falling on a Saturday,
Sunday or legal holiday shall be included in the computation of interest.

             The undersigned hereby expressly authorizes the Bank to record on a
separate schedule annexed hereto the amount and date of each Advance, and the
date and amount of each payment of principal and interest. In the event of any
discrepancy between any such notation by the Bank and in any records of the
undersigned, the records of the Bank shall be controlling and conclusive. In no
event shall the Bank be obligated to make any Advances to the undersigned
hereunder, except as provided for in the Agreement.

                                       29
<PAGE>

             The undersigned shall give the Bank notice of each Advance Request
pursuant to the terms of the Agreement. The Bank shall be entitled to rely upon
any such Advance Request and the undersigned hereby agrees to indemnify the Bank
against any claims, liabilities, losses and expenses ensuing from such reliance.

             This Note is the Grid Note referred to in the Agreement, and the
holder hereof is entitled to all of the benefits of the Agreement, which terms
and conditions are incorporated herein, and this Note shall be secured by the
Collateral. Notwithstanding any provision of this Note, all payments due under
the Note become due and payable as set forth in the Agreement. The Agreement
also contains provisions with respect to Collateral to secure this Note and for
Events of Default under this Note. Terms used herein that are defined in the
Agreement are used herein with the same meaning there ascribed to them therein.

             This Note replaces the note issued by ASTA ACQUISITION II, LLC to
the Bank, dated January 18, 2001 (the "Original Note") pursuant to the Original
Agreement (as defined in the Agreement) and all Advances outstanding under the
Original Note, as of the date of this Note, shall be deemed outstanding under
this Note as of the date hereof and shall be secured by the Collateral (as
defined in the Agreement).

             The undersigned shall be jointly and severally liable under this
Note and in the event of an Event of Default, the undersigned shall be jointly
and severally liable for all costs of enforcement and collection of this Note
incurred by Bank or any other holder of this Note.

             The undersigned in any litigation (whether or not arising out of or
relating to this Note or any other obligations or liability of the undersigned
to the Bank) in which the Bank and the undersigned shall be adverse parties, (i)
consent to the jurisdiction of the Federal and State courts located in New York
County, New York, as provided in the Agreement, and (ii) waive trial by jury and
the right to interpose any defense, set-off or counterclaim of any nature or
description.

             The undersigned agrees to pay on demand all of the Bank's
reasonable out of pocket costs and expenses, including reasonable counsel fees,
in connection with collection of any amounts due to the Bank and enforcement of
its rights under this Note.

             This Note and the provisions hereof are to be binding upon the
assigns or successors of the undersigned; and they are to be construed according
to and governed by the internal laws of the State of New York.

                         ASTA ACQUISITION II, LLC

                         By: ___________________________
                               Gary Stern, Manager

                         By: ___________________________
                              Mitchell Herman, Manager

                         PALISADES COLLECTION, L.L.C.

                         By: ___________________________
                              Gary Stern, Manager

                         By: ___________________________
                              Mitchell Herman, Manager

                                       30

<PAGE>

                              ADVANCES AND PAYMENTS
                                  OF PRINCIPAL

<TABLE>
<CAPTION>
                Amount of      Amount       Amount of      Unpaid          Notation
     Date       Advance      of Advance    Principal      Principal        Made By
                                Paid        Balance
<S>               <C>            <C>          <C>             <C>            <C>

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

                                       31
<PAGE>

                                    EXHIBIT C
                            CONFIRMATION OF AFFILIATE

         Reference is made to the Amended and Restated Loan and Security
Agreement dated November 14, 2001 (as the same may be amended and in effect on
the date hereof, the "Agreement") between ASTA FUNDING ACQUISITION II, LLC and
PALISADES COLLECTION, L.L.C. (together, the "Borrower"), ASTA FUNDING, INC.
("Asta Funding") and ISRAEL DISCOUNT BANK OF NEW YORK (the "Lender") with
respect to a Line of Credit pursuant to which the Borrower, Asta Funding or
Affiliates may obtain Advances with which to acquire Portfolios, which advances
are evidenced by the Borrower's Grid Note in the amount of $20,000,000.00 dated
November 14, 2001.

         Pursuant to this Confirmation, effective immediately, the undersigned
(the "Affiliate") hereby agrees to be a party to, to be bound by, and to be in
compliance with, all the terms, conditions and covenants of the Agreement, the
Grid Note and any other Loan Documents, and also agrees to execute an Affiliate
Guaranty, an Affiliate Security Agreement, and such other documents as Lender
may deem necessary, all in form acceptable to Lender.

         The Affiliate hereby acknowledges receipt of a copy of the Agreement
and the Grid Note and acknowledges that it has not relied on any representation
or warranty, of any nature whatsoever, made by Lender, other than such
representations or warranties which have been given to Affiliate in writing.

         This Confirmation shall be governed by and be construed in accordance
with the internal laws of the State of New York, and may be executed in
counterpart copies all of which shall constitute one instrument.

         The Affiliate hereby (a) consents to the (i) non-exclusive jurisdiction
of the federal and state courts located in the County, City and State of New
York, in the event of any proceeding instituted in connection herewith and (ii)
service of process in accordance with the laws of the State of New York and the
United States of America and (b) waives trial by jury in any such proceeding.

         Each capitalized term not defined herein shall have the meaning
ascribed to it in the Agreement.

                          AFFILIATE:

                          [Name of Affiliate]

                          By: _________________________
                               Name:
                               Title:

                                       32

<PAGE>

                                    EXHIBIT D

                        ASTA FUNDING ACQUISITION II, LLC

                                 LOAN DOCUMENTS

Lender:           Israel Discount Bank of New York

Asta Funding:     Asta Funding, Inc.

Asta I:           Asta Funding Acquisition I, LLC

Asta II:          Asta Funding Acquisition II, LLC

E.R.:             E.R. Receivables Corp., L.L.C.

Palisades:        Palisades Collection, L.L.C.
------------------------------------------------------------------------

1.       Demand Grid Note of Asta II and Palisades

2.       Amended and Restated Loan and Security Agreement of Asta II, Palisades,
         Asta Funding and Lender

3.       Security Agreement of Asta Funding

4.       Security Agreement of Asta I

5.       Security Agreement of Asta II

6.       Security Agreement of E.R.

7.       Security Agreement of Palisades

8.       UCC-1 Financing Statement(s) of Asta Funding for filing in Delaware

9.       UCC-1 Financing Statement(s) of Asta I for filing in Delaware

10.      UCC-1 Financing Statement(s) of Asta II for filing in Delaware

11.      UCC-1 Financing Statement(s) of E.R. for filing in Delaware.

12.      UCC-1 Financing Statement(s) of Palisades for filing in Delaware

                                       33
<PAGE>

13.      Guaranty of Asta Funding
         a. Certificate of Resolutions of Asta Funding

14.      Guaranty of Asta I
         a. Certificate of Resolutions of Asta I

15.      Guaranty of E.R.
         a. Certificate of Resolutions of E.R.

16.      UCC/Judgment Searches in Delaware and New Jersey, and Delaware Good
         Standing Certificate and New Jersey Certificate of Authority for Asta
         Funding

17.      UCC/Judgment Searches in Delaware and New Jersey, and Delaware Good
         Standing Certificate and New Jersey Certificate of Authority for Asta I

18.      UCC/Judgment Searches in Delaware and New Jersey, and Delaware Good
         Standing Certificate and New Jersey Certificate of Authority for Asta
         II

19.      UCC/Judgment Searches in Delaware and New Jersey , and Delaware Good
         Standing Certificate and New Jersey Certificate of Authority for E.R.

20.      UCC/Judgment Searches in Delaware and New Jersey, and Delaware Good
         Standing Certificate and New Jersey Certificate of Authority for
         Palisades

21.      Operating Agreement of Asta I, certified by an officer of Asta I

22.      Operating Agreement of Asta II, certified by an officer of Asta II

23.      Operating Agreement of E.R., certified by an officer of E.R.

24.      Operating Agreement of Palisades, certified by an officer of Palisades

25.      Certificate of Resolutions authorizing the Loan Agreement and Loan
         Documents of (a) Asta I, (b) Asta II , (c) E.R. and (d) Palisades

26.      Opinion of Lowenstein Sandler PC, counsel to Asta Funding, Asta I, Asta
         II, E.R. and Palisades with respect to such matters as Lender may
         reasonably request

27.      Advance Request, if any, of Asta II and/or Palisades and the documents
         therein required

28.      Letter of Asta II and Palisades authorizing Lender to (a) make payment,
         if any, for the Portfolio as directed by the Seller of the Portfolio,
         (b) charge the Operating Account for the Lender Fees then due, and (c)
         charge the Operating Account for attorneys' fees and expenses of Lender
         in connection with this transaction

29.      Post Closing Agreement of Asta II and Palisades

30.      Such other agreements, certificates or other documents as Lender may
         reasonably request

                                       34
<PAGE>

                                   SCHEDULE A

                                 Permitted Debt

                           [TO BE PROVIDED BY BORROWER
                                PRIOR TO CLOSING]

                                       35
<PAGE>
                                  SCHEDULE A-1

                               Acquired Portfolio
                                 Permitted Debt

                          [TO BE PROVIDED BY BORROWER]

                                       36

<PAGE>

                                   SCHEDULE B

                                 Permitted Liens

Permitted liens are to be those liens reflected in Report 531025, dated June 29,
2001and in Report 531033 dated November 9, 2001, each as provided by Bridge
Service Corp, excluding those liens which are to be released or terminated
pursuant to a Post-Closing Agreement of even date herewith between Asta Funding
Acquisition II, LLC, Palisades Collection, L.L.C. and Israel Discount Bank Of
New York.

                                       37
<PAGE>

SCHEDULE C

                                 Consumer Loans

                           [TO BE PROVIDED BY BORROWER
                         IN HARD COPY AND COMPUTER DISC
                                PRIOR TO CLOSING]

                                       38Exhibit 4-6

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

                     Public Service Electric and Gas Company

                                       To

                           First Union National Bank,
                                     Trustee

                                    Indenture
                          ----------------------------

                          Dated as of December 1, 2000

                          ----------------------------
                           Providing for the Issuance

                                       of

                             Senior Debt Securities

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

                     PUBLIC SERVICE ELECTRIC AND GAS COMPANY

           Reconciliation and tie between Trust Indenture Act of 1939
                   and Indenture, dated as of December 1, 2000

Trust Indenture
Indenture Act Section                                            Section

ss.310(a)(1)                                                     607
         (a)(2)                                                  607
         (b)                                                     608
ss.312(c)                                                        701
ss.314(a)                                                        703
         (a)(4)                                                  1005
         (c)(1)                                                  102
         (c)(2)                                                  102
         (e)                                                     102
ss.315(b)                                                        601
ss.316(a) (last sentence)                                        101
                                                                 ("Outstanding")

         (a)(1)(A)                                               502, 512
         (a)(1)(B)                                               513
         (b)                                                     508
ss.317(a)(1)                                                     503
         (a)(2)                                                  504

ss.318(a)                                                        111
         (c)                                                     111

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

                                TABLE OF CONTENTS

                                   ARTICLE ONE

             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 101.  Definitions .................................................    1
Section 102.  Compliance Certificates and Opinions ........................    8
Section 103.  Form of Documents Delivered to Trustee ......................    9
Section 104.  Acts of Holders .............................................   10
Section 105.  Notices, Etc., to Trustee and Company .......................   11
Section 106.  Notice to Holders; Waiver ...................................   12
Section 107.  Effect of Headings and Table of Contents ....................   13
Section 108.  Successors and Assigns ......................................   13
Section 109.  Separability Clause .........................................   13
Section 110.  Benefits of Indenture .......................................   13
Section 111.  Governing Law ...............................................   13
Section 112.  Legal Holidays ..............................................   13

                                   ARTICLE TWO

                                SECURITIES FORMS

Section 201.  Forms of Securities .........................................   15
Section 202.  Form of Trustee's Certificate of Authentication .............   15
Section 203.  Securities Issuable in Global Form ..........................   15

                                  ARTICLE THREE

                                 THE SECURITIES

Section 301.  Amount Unlimited; Issuable in Series ........................   16
Section 302.  Denominations ...............................................   20
Section 303.  Execution, Authentication, Delivery and Dating ..............   20
Section 304.  Temporary Securities ........................................   22
Section 305.  Registration, Registration of Transfer and Exchange .........   24
Section 306.  Mutilated, Destroyed, Lost and Stolen Securities ............   27
Section 307.  Payment of Interest; Interest Rights Preserved;
              Optional Interest Reset .....................................   28
Section 308.  Optional Extension of Maturity ..............................   31
Section 309.  Persons Deemed Owners .......................................   32
Section 310.  Cancellation ................................................   33
Section 311.  Computation of Interest .....................................   33
Section 312.  CUSIP Numbers ...............................................   33

                                       i
<PAGE>

                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

Section 401.  Satisfaction and Discharge of Indenture .....................   34
Section 402.  Application of Trust Funds ..................................   35

                                  ARTICLE FIVE

                                    REMEDIES

Section 501.  Events of Default ...........................................   36
Section 502.  Acceleration of Maturity; Rescission and Annulment ..........   37
Section 503.  Collection of Indebtedness and Suits for Enforcement
              by Trustee ..................................................   38
Section 504.  Trustee May File Proofs of Claim ............................   39
Section 505.  Trustee May Enforce Claims Without Possession of
              Securities or Coupons .......................................   39
Section 506.  Application of Money Collected ..............................   40
Section 507.  Limitation on Suits .........................................   40
Section 508.  Unconditional Right of Holders to Receive Principal,
              Premium and Interest ........................................   41
Section 509.  Restoration of Rights and Remedies ..........................   41
Section 510.  Rights and Remedies Cumulative ..............................   41
Section 511.  Delay or Omission Not Waiver ................................   41
Section 512.  Control by Holders of Securities ............................   41
Section 513.  Waiver of Past Defaults .....................................   42
Section 514.  Waiver of Stay or Extension Laws ............................   42

                                   ARTICLE SIX

                                   THE TRUSTEE

Section 601.  Notice of Defaults ..........................................   42
Section 602.  Certain Rights of Trustee ...................................   43
Section 603.  Not Responsible for Recitals or Issuance of Securities ......   44
Section 604.  May Hold Securities .........................................   44
Section 605.  Money Held in Trust .........................................   44
Section 606.  Compensation and Reimbursement ..............................   45
Section 607.  Corporate Trustee Required; Eligibility .....................   45
Section 608.  Resignation and Removal; Appointment of Successor ...........   45
Section 609.  Acceptance of Appointment by Successor ......................   47
Section 610.  Merger, Conversion, Consolidation or Succession to Business .   48
Section 611.  Appointment of Authenticating Agent .........................   48

                                       ii
<PAGE>

                                  ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

Section 701.  Disclosure of Names and Addresses of Holders ................   50
Section 702.  Reports by Trustee ..........................................   50
Section 703.  Reports by Company. : .......................................   50
Section 704.  Calculation of Original Issue Discount ......................   51

                                  ARTICLE EIGHT

                  CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER

Section 801.  Company May Consolidate, Etc., Only on Certain Terms ........   51
Section 802.  Successor Person Substituted ................................   52

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

Section 901.  Supplemental Indentures Without Consent of Holders ..........   52
Section 902.  Supplemental Indentures with Consent of Holders .............   53
Section 903.  Execution of Supplemental Indentures ........................   55
Section 904.  Effect of Supplemental Indentures ...........................   55
Section 905.  Conformity with Trust Indenture Act .........................   55
Section 906.  Reference in Securities to Supplemental Indentures ..........   55

                                   ARTICLE TEN

                                    COVENANTS

Section 1001.  Payment of Principal, Premium, if any, and Interest ........   55
Section 1002.  Maintenance of Office or Agency ............................   56
Section 1003.  Money for Securities Payments to Be Held in Trust ..........   57
Section 1004.  Additional Amounts .........................................   58
Section 1005.  Statement as to Compliance .................................   59
Section 1006.  Waiver of Certain Covenants ................................   59

                                 ARTICLE ELEVEN

                            REDEMPTION OF SECURITIES

Section 1101.  Applicability of Article ...................................   60
Section 1102.  Election to Redeem; Notice to Trustee ......................   60
Section 1103.  Selection by Trustee of Securities to Be Redeemed ..........   60

                                      iii
<PAGE>

Section 1104.  Notice of Redemption .......................................   60
Section 1105.  Deposit of Redemption Price ................................   52
Section 1106.  Securities Payable on Redemption Date ......................   62
Section 1107.  Securities Redeemed in Part ................................   63

                                 ARTICLE TWELVE

                                  SINKING FUNDS

Section 1201.  Applicability of Article ...................................   63
Section 1202.  Satisfaction of Sinking Fund Payments with Securities ......   63
Section 1203.  Redemption of Securities for Sinking Fund ..................   64

                                ARTICLE THIRTEEN

                       REPAYMENT AT THE OPTION OF HOLDERS

Section 1301.  Applicability of Article ...................................   64
Section 1302.  Repayment of Securities ....................................   64
Section 1303.  Exercise of Option .........................................   64
Section 1304.  When Securities Presented for Repayment Become Due
               and Payable ................................................   65
Section 1305.  Securities Repaid in Part ..................................   66

                                ARTICLE FOURTEEN

                       DEFEASANCE AND COVENANT DEFEASANCE

Section 1401.  Applicability of Article; Company's Option to Effect
               Defeasance or Covenant Defeasance ..........................   66
Section 1402.  Defeasance and Discharge ...................................   66
Section 1403.  Covenant Defeasance ........................................   67
Section 1404.  Conditions to Defeasance or Covenant Defeasance ............   67
Section 1405.  Deposited Money and Government Obligations to Be Held
               in Trust; Other Miscellaneous Provisions ...................   69

                                 ARTICLE FIFTEEN

                        MEETINGS OF HOLDERS OF SECURITIES

Section 1501.  Purposes for Which Meetings May Be Called ..................   70
Section 1502.  Call, Notice and Place of Meetings .........................   70
Section 1503.  Persons Entitled to Vote at Meetings .......................   70
Section 1504.  Quorum; Action .............................................   70
Section 1505.  Determination of Voting Rights; Conduct and Adjournment
               of Meetings ................................................   72

                                       iv
<PAGE>

Section 1506.  Counting Votes and Recording Action of Meetings ............   72

EXHIBIT A

EXHIBIT A-1

EXHIBIT A-2

                                       v
<PAGE>

            INDENTURE, dated as of December 1, 2000, between PUBLIC SERVICE
ELECTRIC AND GAS COMPANY, a New Jersey corporation (hereinafter called the
"Company"), having its principal office at 80 Park Plaza, Newark, NJ 07102, and
FIRST UNION NATIONAL BANK, a national banking association organized and existing
under the laws of the United States of America, as Trustee (hereinafter called
the "Trustee"), having a Corporate Trust Office at 21 South Street, Morristown,
NJ 07960.

                             RECITALS OF THE COMPANY

            The Company deems it necessary to issue from time to time for its
lawful purposes senior debt securities (hereinafter called the "Securities")
evidencing its unsecured and unsubordinated indebtedness, which may or may not
be convertible into or exchangeable for any securities of any Person (including
the Company), and has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of the Securities,
unlimited as to principal amount, to bear such rates of interest, to mature at
such times and to have such other provisions as shall be fixed as hereinafter
provided.

            This Indenture is subject to the provisions of the Trust Indenture
Act of 1939, as amended, that are required to be part of this Indenture and
shall, to the extent applicable, be governed by such provisions.

            All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.

            NOW, THEREFORE, THIS INDENTURE WITNESSETH:

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

                                   ARTICLE ONE

             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

            SECTION 101. Definitions. For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:

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

            (2) all other terms used herein which are defined in the Trust
      Indenture Act, either directly or by reference therein, have the meanings
      assigned to them therein, and the terms "cash transaction" and
      "self-liquidating paper", as used in TIA Section 311, shall have the
      meanings assigned to them in the rules of the Commission adopted under the
      Trust Indenture Act;
<PAGE>

            (3) all accounting terms not otherwise defined herein have the
      meanings assigned to them in accordance with Generally Accepted Accounting
      Principles; and

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

            Certain terms, used principally in Article Three, Article Five,
Article Six and Article Ten, are defined in those Articles.

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

            "Additional Amounts" means any additional amounts which are required
by a Security or by or pursuant to a Board Resolution, under circumstances
specified therein, to be paid by the Company in respect of certain taxes imposed
on certain Holders and which are owing to such Holders.

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

            "Authenticating Agent" means any authenticating agent appointed by
the Trustee pursuant to Section 611.

            "Authorized Newspaper" means a newspaper, in the English language or
in an official language of the country of publication, customarily published on
each Business Day, whether or not published on Saturdays, Sundays or holidays,
and of general circulation in each place in connection with which the term is
used or in the financial community of each such place. Where successive
publications are required to be made in Authorized Newspapers, the successive
publications may be made in the same or in different newspapers in the same city
meeting the foregoing requirements and in each case on any Business Day.

            "Bearer Security" means any Security established pursuant to Section
201 which is payable to bearer.

            "Board of Directors" means the board of directors of the Company,
the executive committee or any committee of that board duly authorized to act on
behalf of that board.

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

                                       2
<PAGE>

            "Business Day", when used with respect to any Place of Payment or
any other particular location referred to in this Indenture or in the
Securities, means, unless otherwise specified with respect to any Securities
pursuant to Section 301, each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in that Place of Payment or
particular location are authorized or obligated by law or executive order to
close.

            "Clearstream" means Clearstream Banking, socie'te' anonyme,
Luxembourg, or its successor.

            "Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.

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

            "Company Request" and "Company Order" mean, respectively, a written
request or order signed in the name of the Company by the Chairman, the
President or a Vice President, the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary, of
the Company, and delivered to the Trustee.

            "Corporate Trust Office" means the office of the Trustee at which,
at any particular time, its corporate trust business shall be administered,
which office at the date hereof is located at 21 South Street, Morristown, NJ
07960.

            "Corporation" includes corporations, associations, companies,
limited liability companies and business trusts.

            "Coupon" means any interest coupon appertaining to a Bearer
Security.

            "Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.

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

            "Dollar", "Dollars" or "$" means a dollar or other equivalent unit
in such coin or currency of the United States of America as at the time shall be
legal tender for the payment of public and private debts.

            "Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels Office, or its successor as operator of the Euroclear System.

            "European Communities" means the European Union, the European Coal
and Steel Community and the European Atomic Energy Community.

                                       3
<PAGE>

            "Event of Default" has the meaning specified in Article Five.

            "Generally Accepted Accounting Principles" means the generally
accepted accounting principles set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board.

            "Government Obligations" means securities which are (i) direct
obligations of the United States of America or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America, the payment of which is unconditionally guaranteed as
a full faith and credit obligation by the United States of America, which are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt; provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.

            "Holder" means, in the case of a Registered Security, the Person in
whose name a Security is registered in the Security Register and, in the case of
a Bearer Security, the bearer thereof and, when used with respect to any coupon,
shall mean the bearer thereof.

            "Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including the provisions of the TIA that are deemed to be a part hereof, and
shall include the terms of particular series of Securities established as
contemplated by Section 301; provided, however, that, if at any time more than
one Person is acting as Trustee under this instrument, "Indenture" shall mean,
with respect to any one or more series of Securities for which such Person is
Trustee, this instrument as originally executed or as it may from time to time
be supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof and shall include the terms of
the or those particular series of Securities for which such Person is Trustee
established as contemplated by Section 301, exclusive, however, of any
provisions or terms which relate solely to other series of Securities for which
such Person is not Trustee, regardless of when such terms or provisions were
adopted, and exclusive of any provisions or terms adopted by means of one or
more indentures supplemental hereto executed and delivered after such Person had
become such Trustee but to which such Person, as such Trustee, was not a party.

            "Indexed Security" means a Security as to which all or certain
interest payments and/or the principal amount payable at Maturity are determined
by reference to prices, changes in prices, or differences between prices, of
securities, Currencies, intangibles, goods, articles or commodities or by such
other objective price, economic or other measures as are specified in Section
301 hereof.

                                       4
<PAGE>

            "Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, shall mean
interest payable after Maturity, and, when used with respect to a Security which
provides for the payment of Additional Amounts pursuant to Section 1004,
includes such Additional Amounts.

            "Interest Payment Date", when used with respect to any Security,
means the Stated Maturity of an installment of interest on such Security.

            "Issue Date", when used with respect to any Security, means the date
on which the Security is originally issued.

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

            "Officer" means the Chairman, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Controller, any Assistant Controller,
the Secretary or any Assistant Secretary of the Company.

            "Officers' Certificate" means a certificate signed on behalf of the
Company by any one of its Officers and delivered to the Trustee.

            "Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company or who may be an employee of or other counsel for the
Company.

            "Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.

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

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

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

                                       5
<PAGE>

            (iii) Securities, except to the extent provided in Sections 1402 and
      1403, with respect to which the Company has effected defeasance and/or
      covenant defeasance as provided in Article Fourteen; and

            (iv) Securities which have been paid pursuant to Section 306 or in
      exchange for or in lieu of which other Securities have been authenticated
      and delivered pursuant to this Indenture, other than any such Securities
      in respect of which there shall have been presented to the Trustee proof
      satisfactory to it that such Securities are held by a bona fide purchaser
      in whose hands such Securities are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or are present at
a meeting of Holders for quorum purposes, and for the purpose of making the
calculations required by TIA Section 313, (i) the principal amount of an
Original Issue Discount Security that may be counted in making such
determination or calculation and that shall be deemed to be Outstanding for such
purpose shall be equal to the amount of principal thereof that would be (or
shall have been declared to be) due and payable, at the time of such
determination, upon a declaration of acceleration of the Maturity thereof
pursuant to Section 502, (ii) the principal amount of any Indexed Security that
may be counted in making such determination or calculation and that shall be
deemed outstanding for such purpose shall be equal to the principal face amount
of such Indexed Security at original issuance, unless otherwise provided with
respect to such Security pursuant to Section 301 and (iii) Securities owned by
the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee actually knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the Company
or of such other obligor.

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

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

            "Place of Payment", when used with respect to the Securities of or
within any series, means the place or places where the principal of (and
premium, if any) and interest, if any, on such Securities are payable as
specified and as contemplated by Sections 301 and 1002.

            "Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and,

                                       6
<PAGE>

for the purposes of this definition, any Security authenticated and delivered
under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or
stolen Security or a Security to which a mutilated, destroyed, lost or stolen
coupon appertains shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security or the Security to which the mutilated,
destroyed, lost or stolen coupon appertains.

            "Record Date", when used with respect to any Security, means the
Regular Record Date, the Special Record Date or any date set to determine the
Holders of such Security entitled to vote, make a request, consent, receive a
payment or exercise any other right with respect to such Security.

            "Redemption Date", when used with respect to any Security to be
redeemed, in whole or in part, means the date specified for such redemption in
accordance with the terms thereof or by or pursuant to this Indenture.

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

            "Registered Security" shall mean any Security which is registered in
the Security Register.

            "Regular Record Date" for the interest payable on any Interest
Payment Date on the Registered Securities of or within any series means the date
specified for that purpose as contemplated by Section 301, whether or not a
Business Day.

            "Repayment Date" means, when used with respect to any Security to be
repaid at the option of the Holder, the date fixed for such repayment by or
pursuant to this Indenture.

            "Repayment Price" means, when used with respect to any Security to
be repaid at the option of the Holder, the price at which it is to be repaid by
or pursuant to this Indenture.

            "Responsible Officer", when used with respect to the Trustee, means
any officer of the Trustee assigned by the Trustee to administer its corporate
trust matters.

            "Security" or "Securities" has the meaning stated in the first
recital of this Indenture and, more particularly, means any Security or
Securities authenticated and delivered under this Indenture; provided, however,
that, if at any time there is more than one Person acting as Trustee under this
Indenture, "Securities" with respect to the Indenture as to which such Person is
Trustee shall have the meaning stated in the first recital of this Indenture and
shall more particularly mean Securities authenticated and delivered under this
Indenture, exclusive, however, of Securities of any series as to which such
Person is not Trustee.

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

            "Special Record Date" for the payment of any Defaulted Interest on
the Registered Securities of or within any series means a date fixed by the
Trustee pursuant to Section 307.

                                       7
<PAGE>

            "Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security or a coupon representing such installment of interest as the
fixed date on which the principal of such Security or such installment of
principal or interest is due and payable, as such date may be extended pursuant
to the provisions of Section 308.

            "Subsidiary" means any Corporation a majority of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries of the Company. For the purposes of this definition,
"voting stock" means stock (or other interests, including partnership interests)
having voting power for the election of directors, managers or trustees thereof,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.

            "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force at the date as of which this Indenture was executed, except as
provided in Section 905.

            "Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder;
provided, however, that if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean only
the Trustee with respect to Securities of that series.

            "United States" means, unless otherwise specified with respect to
any Securities pursuant to Section 301, the United States of America (including
the states and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction.

            "United States Person" means, unless otherwise specified with
respect to any Securities pursuant to Section 301, an individual who is a
citizen or resident of the United States, a Corporation, partnership or other
entity created or organized in or under the laws of the United States or an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source.

            "Yield to Maturity" means the yield to maturity, computed at the
time of issuance of a Security (or, if applicable, at the most recent
redetermination of interest on such Security) and as set forth in such Security
in accordance with generally accepted United States bond yield computation
principles.

            SECTION 102. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by

                                       8
<PAGE>

any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.

            Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1005) shall include:

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

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

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

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

            SECTION 103. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion as to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.

            Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon an Opinion of Counsel, or a
certificate or representations by counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the opinion, certificate or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such Opinion of Counsel or certificate or
representations may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information as to such factual matters is in the
possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
as to such matters are erroneous.

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

            SECTION 104. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders of the Outstanding Securities of
all series or one or more series, as the case may be, may be embodied in and
evidenced by one or more instruments of substantially similar tenor

                                       9
<PAGE>

signed by such Holders in person or by agents duly appointed in writing. If
Securities of a series are issuable as Bearer Securities, any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders of Securities of such series may,
alternatively, be embodied in and evidenced by the record of Holders of
Securities of such series voting in favor thereof, either in person or by
proxies duly appointed in writing, at any meeting of Holders of Securities of
such series duly called and held in accordance with the provisions of Article
Fifteen, or a combination of such instruments and any such record. Except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments or record or both are delivered to the Trustee
and, where it is hereby expressly required, to the Company. Such instrument or
instruments and any such record (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments or so voting at any such meeting. Proof of
execution of any such instrument or of a writing appointing any such agent, or
of the holding by any Person of a Security, shall be sufficient for any purpose
of this Indenture and conclusive in favor of the Trustee and the Company and any
agent of the Trustee or the Company, if made in the manner provided in this
Section. The record of any meeting of Holders of Securities shall be proved in
the manner provided in Section 1506.

            (b) The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may be proved in any
manner that the Trustee deems reasonably sufficient.

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

            (d) The ownership of Bearer Securities may be proved by the
production of such Bearer Securities or by a certificate executed, as
depository, by any trust company, bank, banker or other depository, wherever
situated, if such certificate shall be deemed by the Trustee to be satisfactory,
showing that at the date therein mentioned such Person had on deposit with such
depository, or exhibited to it, the Bearer Securities therein described; or such
facts may be proved by the certificate or affidavit of the Person holding such
Bearer Securities, if such certificate or affidavit is deemed by the Trustee to
be satisfactory. The Trustee and the Company may assume that such ownership of
any Bearer Security continues until (1) another certificate or affidavit bearing
a later date issued in respect of the same Bearer Security is produced, or (2)
such Bearer Security is produced to the Trustee by some other Person, or (3)
such Bearer Security is surrendered in exchange for a Registered Security, or
(4) such Bearer Security is no longer Outstanding. The ownership of Bearer
Securities may also be proved in any other manner that the Trustee deems
sufficient.

            (e) If the Company shall solicit from the Holders of Registered
Securities any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, in or pursuant to a Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to

                                       10
<PAGE>

the first solicitation of Holders generally in connection therewith and not
later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.

            (f) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee, any
Security Registrar, any Paying Agent, any Authenticating Agent or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.

SECTION 105. Notices, Etc., to Trustee and Company. Any notice, request or other
communication required or permitted to be given hereunder shall be in writing
and delivered, telecopied or mailed by first-class mail, postage prepaid,
addressed as follows:

            if to the Company:

                  Public Service Electric and Gas Company
                  80 Park Plaza
                  P.O. Box 570
                  Newark, New Jersey 07101
                  Facsimile No.: (973) 596-6309
                  Attention: Treasurer

            if to the Trustee:

                  First Union National Bank
                  21 South Street
                  Morristown, New Jersey 07960
                  Facsimile No.:  (973) 682-4531
                  Attention: Corporate Trust Department

            The Company or the Trustee, by giving notice to the other, may
designate additional or different addresses for subsequent notices or
communications. The Company shall notify the Holders of any such additional or
different addresses of which the Company receives notice from the Trustee.

                                       11
<PAGE>

            SECTION 106. Notice to Holders; Waiver. Where this Indenture
provides for notice of any event to Holders of Registered Securities by the
Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each such Holder affected by such event, at his address as
it appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders of Registered Securities is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders of Registered Securities or the sufficiency of any notice to
Holders of Bearer Securities given as provided herein. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice.

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

            Except as otherwise expressly provided herein or otherwise specified
with respect to any Securities pursuant to Section 301, where this Indenture
provides for notice to Holders of Bearer Securities of any event, such notice
shall be sufficiently given if published in an Authorized Newspaper in The City
of New York and in such other city or cities as may be specified in such
Securities on a Business Day, such publication to be not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. Any such notice shall be deemed to have been given on the date of such
publication or, if published more than once, on the date of the first such
publication.

            If by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Securities as provided
above, then such notification to Holders of Bearer Securities as shall be given
with the approval of the Trustee shall constitute sufficient notice to such
Holders for every purpose hereunder. Neither the failure to give notice by
publication to Holders of Bearer Securities as provided above, nor any defect in
any notice so published, shall affect the sufficiency of such notice with
respect to other Holders of Bearer Securities or the sufficiency of any notice
to Holders of Registered Securities given as provided herein.

            Any request, demand, authorization, direction, notice, consent or
waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of the
country of publication.

            If the Company mails a notice or communication to the Holders, it
shall mail a copy to the Trustee and each Registrar, Paying Agent or
co-Registrar.

            Holders may communicate, pursuant to TIA Section 312(b), with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar, the Paying Agent and anyone else shall have
the protection of TIA Section 312(c).

                                       12
<PAGE>

            SECTION 107. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.

            SECTION 108. Successors and Assigns. All covenants and agreements in
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.

            SECTION 109. Separability Clause. In case any provision in this
Indenture or in any Security or coupon shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

            SECTION 110. Benefits of Indenture. Nothing in this Indenture or in
the Securities or coupons, express or implied, shall give to any Person, other
than the parties hereto, any Security Registrar, any Paying Agent, any
Authenticating Agent and their successors hereunder and the Holders any benefit
or any legal or equitable right, remedy or claim under this Indenture.

            SECTION 111. Governing Law. This Indenture and the Securities and
coupons shall be governed by and construed in accordance with the law of the
State of New Jersey without regard to principles of conflicts of laws. This
Indenture is subject to the provisions of the Trust Indenture Act that are
required to be part of this Indenture and shall, to the extent applicable, be
governed by such provisions.

            SECTION 112. Legal Holidays. In any case where any Interest Payment
Date, Redemption Date, Repayment Date, sinking fund payment date, Stated
Maturity or Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or any
Security or coupon other than a provision in the Securities of any series which
specifically states that such provision shall apply in lieu of this Section),
payment of principal (or premium, if any) or interest, if any, need not be made
at such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date, Redemption Date, Repayment Date or sinking fund
payment date, or at the Stated Maturity or Maturity; provided that no interest
shall accrue on the amount so payable for the period from and after such
Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment
date, Stated Maturity or Maturity, as the case may be.

                                       13
<PAGE>

                                   ARTICLE TWO

                                SECURITIES FORMS

            SECTION 201. Forms of Securities. The Registered Securities, if any,
of each series and the Bearer Securities, if any, of each series and related
coupons shall be in substantially the forms as shall be established in one or
more indentures supplemental hereto or approved from time to time by or pursuant
to a Board Resolution in accordance with Section 301, shall have such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture or any indenture supplemental hereto,
and may have such letters, numbers or other marks of identification or
designation and such legends or endorsements placed thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Securities may be listed, or to conform to usage.

            Unless otherwise specified as contemplated by Section 301, Bearer
Securities shall have interest coupons attached.

            The definitive Securities and coupons shall be printed, lithographed
or engraved or produced by any combination of these methods on a steel engraved
border or steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities or coupons, as evidenced by
their execution of such Securities or coupons.

            SECTION 202. Form of Trustee's Certificate of Authentication.
Subject to Section 611, the Trustee's certificate of authentication shall be in
substantially the following form:

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

                                        FIRST UNION NATIONAL BANK,
                                                as Trustee

                                        By ___________________________
                                              Authorized Signatory

            SECTION 203. Securities Issuable in Global Form. If Securities of or
within a series are issuable in global form, as specified as contemplated by
Section 301, then, notwithstanding clause (8) of Section 301 and the provisions
of Section 302, any such Security shall represent such of the Outstanding
Securities of such series as shall be specified therein and may provide that it
shall represent the aggregate amount of Outstanding Securities of such series
from time to time endorsed thereon and that the aggregate amount of Outstanding
Securities of such series represented thereby may from time to time be increased
or decreased to reflect exchanges. Any endorsement of a Security in global form
to reflect the amount, or any increase or decrease in the amount, of Outstanding
Securities represented thereby shall be made by the

                                       14
<PAGE>

Trustee in such manner and upon instructions given by such Person or Persons as
shall be specified therein or in the Company Order to be delivered to the
Trustee pursuant to Section 303 or 304. Subject to the provisions of Section 303
and, if applicable, Section 304, the Trustee shall deliver and redeliver any
Security in permanent global form in the manner and upon instructions given by
the Person or Persons specified therein or in the applicable Company Order. If a
Company Order pursuant to Section 303 or 304 has been, or simultaneously is,
delivered, any instructions by the Company with respect to endorsement, delivery
or redelivery of a Security in global form shall be in writing but need not
comply with Section 102 and need not be accompanied by an Opinion of Counsel.

            The provisions of the last sentence of Section 303 shall apply to
any Security represented by a Security in global form if such Security was never
issued and sold by the Company and the Company delivers to the Trustee the
Security in global form together with written instructions (which need not
comply with Section 102 and need not be accompanied by an Opinion of Counsel)
with regard to the reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 303.

            Notwithstanding the provisions of Section 307, unless otherwise
specified as contemplated by Section 301, payment of principal of (and premium,
if any) and interest, if any, on any Security in permanent global form shall be
made to the Person or Persons specified therein.

            Notwithstanding the provisions of Section 309 and except as provided
in the preceding paragraph, the Company, the Trustee and any agent of the
Company and the Trustee shall treat as the Holder of such principal amount of
Outstanding Securities represented by a permanent global Security (i) in the
case of a permanent global Security in registered form, the Holder of such
permanent global Security in registered form, or (ii) in the case of a permanent
global Security in bearer form, Euroclear or Clearstream.

                                  ARTICLE THREE

                                 THE SECURITIES

            SECTION 301. Amount Unlimited; Issuable in Series. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.

            The Securities shall rank equally and pari passu and may be issued
in one or more series. There shall be established in one or more Board
Resolutions or pursuant to authority granted by one or more Board Resolutions
and, subject to Section 303, set forth, or determined in the manner provided, in
an Officers' Certificate, or established in one or more indentures supplemental
hereto, prior to the issuance of Securities of any series, any or all of the
following, as applicable (each of which (except for the matters set forth in
clauses (1), (2) and (15) below), if so provided, may be determined from time to
time by the Company with respect to unissued Securities of the series when
issued from time to time):

                                       15
<PAGE>

            (1) the title of the Securities of the series (which shall
      distinguish the Securities of such series from all other series of
      Securities);

            (2) any limit upon the aggregate principal amount of the Securities
      of the series that may be authenticated and delivered under this Indenture
      (except for Securities authenticated and delivered upon registration of
      transfer of, or in exchange for, or in lieu of, other Securities of the
      series pursuant to Section 304, 305, 306, 906, 1107 or 1305);

            (3) the date or dates, or the method by which such date or dates
      will be determined or extended, on which the principal of the Securities
      of the series shall be payable;

            (4) the rate or rates at which the Securities of the series shall
      bear interest, if any, or the method by which such rate or rates shall be
      determined, the date or dates from which such interest shall accrue or the
      method by which such date or dates shall be determined, the Interest
      Payment Dates on which such interest will be payable and the Regular
      Record Date, if any, for the interest payable on any Registered Security
      on any Interest Payment Date, or the method by which such date shall be
      determined, and the basis upon which such interest shall be calculated if
      other than that of a 360-day year of twelve 30-day months;

            (5) the place or places, if any, other than or in addition to the
      Borough of Manhattan, The City of New York, where the principal of (and
      premium, if any) and interest, if any, on Securities of the series shall
      be payable, any Registered Securities of the series may be surrendered for
      registration of transfer, Securities of the series may be surrendered for
      exchange, where Securities of any series that are convertible or
      exchangeable may be surrendered for conversion or exchange, as applicable,
      and where notices or demands to or upon the Company in respect of the
      Securities of the series and this Indenture may be served;

            (6) the period or periods within which, or the date or dates on
      which, the price or prices at which and other terms and conditions upon
      which Securities of the series may be redeemed, in whole or in part, at
      the option of the Company, if the Company is to have the option;

            (7) the obligation, if any, of the Company to redeem, repay or
      purchase Securities of the series pursuant to any sinking fund or
      analogous provision or at the option of a Holder thereof, and the period
      or periods within which or the date or dates on which, the price or prices
      at which and other terms and conditions upon which Securities of the
      series shall be redeemed, repaid or purchased, in whole or in part,
      pursuant to such obligation;

            (8) if other than denominations of $1,000 and any integral multiple
      thereof, the denomination or denominations in which any Registered
      Securities of the series shall be issuable and, if other than
      denominations of $5,000, the denomination or denominations in which any
      Bearer Securities of the series shall be issuable;

                                       16
<PAGE>

            (9) if other than the Trustee, the identity of each Security
      Registrar and/or Paying Agent;

            (10) if other than the principal amount thereof, the portion of the
      principal amount of Securities of the series that shall be payable upon
      declaration of acceleration of the Maturity thereof pursuant to Section
      502 or the method by which such portion shall be determined;

            (11) whether the amount of payments of principal of (or premium, if
      any) or interest, if any, on the Securities of the series may be
      determined with reference to an index, formula or other method (which
      index, formula or method may be based, without limitation, on one or more
      Currencies, commodities, equity indices or other indices), and the manner
      in which such amounts shall be determined;

            (12) provisions, if any, granting special rights to the Holders of
      Securities of the series upon the occurrence of such events as may be
      specified;

            (13) any deletions from, modifications of or additions to the Events
      of Default or covenants (including any deletions from, modifications of or
      additions to any of the provisions of Section 1006) of the Company with
      respect to Securities of the series, whether or not such Events of Default
      or covenants are consistent with the Events of Default or covenants set
      forth herein;

            (14) whether Securities of the series are to be issuable as
      Registered Securities, Bearer Securities (with or without coupons) or
      both, any restrictions applicable to the offer, sale or delivery of Bearer
      Securities and the terms upon which Bearer Securities of the series may be
      exchanged for Registered Securities of the series and vice versa (if
      permitted by applicable laws and regulations), whether any Securities of
      the series are to be issuable initially in temporary global form and
      whether any Securities of the series are to be issuable in permanent
      global form with or without coupons and, if so, whether beneficial owners
      of interests in any such permanent global Security may exchange such
      interests for Securities of such series in certificated form and of like
      tenor of any authorized form and denomination and the circumstances under
      which any such exchanges may occur, if other than in the manner provided
      in Section 305, and, if Registered Securities of the series are to be
      issuable as a global Security, the identity of the depository for such
      series;

            (15) the date as of which any Bearer Securities of the series and
      any temporary global Security representing Outstanding Securities of the
      series shall be dated if other than the date of original issuance of the
      first Security of the series to be issued;

            (16) the Person to whom any interest on any Registered Security of
      the series shall be payable, if other than the Person in whose name such
      Security (or one or more Predecessor Securities) is registered at the
      close of business on the Regular Record Date for such interest, the manner
      in which, or the Person to whom, any interest on any Bearer Security of
      the series shall be payable, if otherwise than upon presentation and
      surrender

                                       17
<PAGE>

      of the coupons appertaining thereto as they severally mature, and the
      extent to which, or the manner in which, any interest payable on a
      temporary global Security on an Interest Payment Date will be paid if
      other than in the manner provided in Section 304;

            (17) the applicability, if any, of Sections 1402 and/or 1403 to the
      Securities of the series and any provisions in modification of, in
      addition to or in lieu of any of the provisions of Article Fourteen;

            (18) if the Securities of such series are to be issuable in
      definitive form (whether upon original issue or upon exchange of a
      temporary Security of such series) only upon receipt of certain
      certificates or other documents or satisfaction of other conditions, then
      the form and/or terms of such certificates, documents or conditions;

            (19) whether, under what circumstances, the Company will pay
      Additional Amounts as contemplated by Section 1004 on the Securities of
      the series to any Holder who is not a United States person (including any
      modification to the definition of such term) in respect of any tax,
      assessment or governmental charge and, if so, whether the Company will
      have the option to redeem such Securities rather than pay such Additional
      Amounts (and the terms of any such option);

            (20) if the Securities of the series are to be convertible into or
      exchangeable for any securities of any Person (including the Company), the
      terms and conditions upon which such Securities will be so convertible or
      exchangeable; and

            (21) any other terms of the series (which terms shall not be
      inconsistent with the provisions of this Indenture or the requirements of
      the Trust Indenture Act).

            All Securities of any one series and the coupons appertaining to any
Bearer Securities of such series shall be substantially identical except, in the
case of Registered Securities, as to denomination and except as may otherwise be
provided in or pursuant to such Board Resolution (subject to Section 303) and
set forth in such Officers' Certificate or in any such indenture supplemental
hereto. All Securities of any one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the Holders, for issuances of additional Securities of such series.

            If any of the terms of the Securities of any series are established
by action taken pursuant to one or more Board Resolutions, a copy of an
appropriate record of such action(s) shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Officers' Certificate setting forth the terms of the
Securities of such series.

            SECTION 302. Denominations. The Securities of each series shall be
issuable in such denominations as shall be specified as contemplated by Section
301. With respect to Securities of any series denominated in Dollars, in the
absence of any such provisions with respect to the Securities of any series, the
Registered Securities of such series, other than Registered Securities issued in
global form (which may be of any denomination) shall be issuable

                                       18
<PAGE>

in denominations of $1,000 and any integral multiple thereof, and the Bearer
Securities of such series, other than Bearer Securities issued in global form
(which may be of any denomination), shall be issuable in a denomination of
$5,000.

            SECTION 303. Execution, Authentication, Delivery and Dating. The
Securities and any coupons appertaining thereto shall be executed on behalf of
the Company by its Chairman, its President or one of its Vice Presidents, under
its corporate seal reproduced thereon, and attested by its Secretary or one of
its Assistant Secretaries. The signature of any of these officers on the
Securities and coupons may be manual or facsimile signatures of the present or
any future such authorized officer and may be imprinted or otherwise reproduced
on the Securities.

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

            At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities of any series, together
with any coupon appertaining thereto, executed by the Company, to the Trustee
for authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities; provided, however, that,
in connection with its original issuance, no Bearer Security shall be mailed or
otherwise delivered to any location in the United States; and provided further
that, unless otherwise specified with respect to any series of Securities
pursuant to Section 301, a Bearer Security may be delivered in connection with
its original issuance only if the Person entitled to receive such Bearer
Security shall have furnished a certificate in the form set forth in Exhibit A-1
to this Indenture or such other certificate as may be specified with respect to
any series of Securities pursuant to Section 301, dated no earlier than 15 days
prior to the earlier of the date on which such Bearer Security is delivered and
the date on which any temporary Security first becomes exchangeable for such
Bearer Security in accordance with the terms of such temporary Security and this
Indenture. If any Security shall be represented by a permanent global Bearer
Security, then, for purposes of this Section and Section 304, the notation of a
beneficial owner's interest therein upon original issuance of such Security or
upon exchange of a portion of a temporary global Security shall be deemed to be
delivery in connection with its original issuance of such beneficial owner's
interest in such permanent global Security. Except as permitted by Section 306,
the Trustee shall not authenticate and deliver any Bearer Security unless all
appurtenant coupons for interest then matured have been detached and canceled.
If all the Securities of any series are not to be issued at one time and if the
Board Resolution or supplemental indenture establishing such series shall so
permit, such Company Order may set forth procedures acceptable to the Trustee
for the issuance of such Securities and determining the terms of particular
Securities of such series, such as interest rate, maturity date, date of
issuance and date from which interest shall accrue. In authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be

                                       19
<PAGE>

entitled to receive, and (subject to TIA Section 315(a) through 315(d)) shall be
fully protected in relying upon,

            (i) an Opinion of Counsel stating,

                  (a) that the form or forms of such Securities and any coupons
            have been established in conformity with the provisions of this
            Indenture;

                  (b) that the terms of such Securities and any coupons have
            been established in conformity with the provisions of this
            Indenture; and

                  (c) that such Securities, together with any coupons
            appertaining thereto, when completed by appropriate insertions and
            executed and delivered by the Company to the Trustee for
            authentication in accordance with this Indenture, authenticated and
            delivered by the Trustee in accordance with this Indenture and
            issued by the Company in the manner and subject to any conditions
            specified in such Opinion of Counsel, will constitute legal, valid
            and binding obligations of the Company, enforceable in accordance
            with their terms, subject to applicable bankruptcy, insolvency,
            reorganization and other similar laws of general applicability
            relating to or affecting the enforcement of creditors' rights, to
            general equitable principles and to such other qualifications as
            such counsel shall conclude do not materially affect the rights of
            Holders of such Securities and any coupons; and

            (ii) an Officers' Certificate stating, to the best of the knowledge
      of the signer of such certificate, that no Event of Default with respect
      to any of the Securities shall have occurred and be continuing.

            Notwithstanding the provisions of Section 301 and of this Section
303, if all the Securities of any series are not to be issued at one time, it
shall not be necessary to deliver an Officers' Certificate otherwise required
pursuant to Section 301 or the Company Order, Opinion of Counsel or Officers'
Certificate otherwise required pursuant to the preceding paragraph at the time
of issuance of each Security of such series, but such order, opinion and
certificates, with appropriate modifications to cover such future issuances,
shall be delivered at or before the time of issuance of the first Security of
such series.

            If such form or terms have been so established, the Trustee shall
not be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties,
obligations or immunities under the Securities and this Indenture or otherwise
in a manner which is not reasonably acceptable to the Trustee.

            Each Registered Security shall be dated the date of its
authentication and each Bearer Security shall be dated as of the date specified
as contemplated by Section 301.

            No Security or coupon shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security or Security to which such coupon appertains a certificate of
authentication substantially in the form provided for

                                       20
<PAGE>

herein duly executed by the Trustee or an Authenticating Agent by manual
signature of an authorized signatory, and such certificate upon any Security
shall be conclusive evidence, and the only evidence, that such Security has been
duly authenticated and delivered hereunder and is entitled to the benefits of
this Indenture. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 310 together with a written statement (which need not comply
with Section 102 and need not be accompanied by an Opinion of Counsel) stating
that such Security has never been issued and sold by the Company, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.

            SECTION 304. Temporary Securities. (a) Pending the preparation of
definitive Securities of any series, the Company may execute, and upon Company
Order the Trustee shall authenticate and deliver, temporary Securities which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Securities
in lieu of which they are issued, in registered form, or, if authorized, in
bearer form with one or more coupons or without coupons, and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as conclusively evidenced by
their execution of such Securities. In the case of Securities of any series,
such temporary Securities may be in global form.

            Except in the case of temporary Securities in global form (which
shall be exchanged in accordance with Section 304(b) or as otherwise provided in
or pursuant to a Board Resolution), if temporary Securities of any series are
issued, the Company will cause definitive Securities of that series to be
prepared without unreasonable delay. After the preparation of definitive
Securities of such series, the temporary Securities of such series shall be
exchangeable for definitive Securities of such series upon surrender of the
temporary Securities of such series at the office or agency of the Company in a
Place of Payment for that series, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities of any series
(accompanied by any non-matured coupons appertaining thereto), the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of the same series of authorized
denominations; provided, however, that no definitive Bearer Security shall be
delivered in exchange for a temporary Registered Security; and provided further
that a definitive Bearer Security shall be delivered in exchange for a temporary
Bearer Security only in compliance with the conditions set forth in Section 303.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.

            (b) Unless otherwise provided in or pursuant to a Board Resolution,
this Section 304(b) shall govern the exchange of temporary Securities issued in
global form. If temporary Securities of any series are issued in global form,
any such temporary global Security shall, unless otherwise provided therein, be
delivered to the London office of a depository or common depository (the "Common
Depository"), for the benefit of Euroclear and Clearstream, for credit to the
respective accounts of the beneficial owners of such Securities (or to such
other accounts as they may direct).

                                       21
<PAGE>

            Without unnecessary delay but in any event not later than the date
specified in, or determined pursuant to the terms of, any such temporary global
Security (the "Exchange Date"), the Company shall deliver to the Trustee
definitive Securities, in aggregate principal amount equal to the principal
amount of such temporary global Security, executed by the Company. On or after
the Exchange Date, such temporary global Security shall be surrendered by the
Common Depository to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Securities
without charge, and the Trustee shall authenticate and deliver, in exchange for
each portion of such temporary global Security, an equal aggregate principal
amount of definitive Securities of the same series of authorized denominations
and of like tenor as the portion of such temporary global Security to be
exchanged. The definitive Securities to be delivered in exchange for any such
temporary global Security shall be in bearer form, registered form, permanent
global bearer form or permanent global registered form, or any combination
thereof, as specified as contemplated by Section 301, and, if any combination
thereof is so specified, as requested by the beneficial owner thereof; provided,
however, that, unless otherwise specified in such temporary global Security,
upon such presentation by the Common Depository, such temporary global Security
is accompanied by a certificate dated the Exchange Date or a subsequent date and
signed by Euroclear as to the portion of such temporary global Security held for
its account then to be exchanged and a certificate dated the Exchange Date or a
subsequent date and signed by Clearstream as to the portion of such temporary
global Security held for its account then to be exchanged, each in the form set
forth in Exhibit A-2 to this Indenture or in such other form as may be
established pursuant to Section 301; and provided further that definitive Bearer
Securities shall be delivered in exchange for a portion of a temporary global
Security only in compliance with the requirements of Section 303.

            Unless otherwise specified in such temporary global Security, the
interest of a beneficial owner of Securities of a series in a temporary global
Security shall be exchanged for definitive Securities of the same series and of
like tenor following the Exchange Date when the account holder instructs
Euroclear or Clearstream, as the case may be, to request such exchange on his
behalf and delivers to Euroclear or Clearstream, as the case may be, a
certificate in the form set forth in Exhibit A-1 to this Indenture (or in such
other form as may be established pursuant to Section 301), dated no earlier than
15 days prior to the Exchange Date, copies of which certificate shall be
available from the offices of Euroclear and Clearstream, the Trustee, any
Authenticating Agent appointed for such series of Securities and each Paying
Agent. Unless otherwise specified in such temporary global Security, any such
exchange shall be made free of charge to the beneficial owners of such temporary
global Security, except that a Person receiving definitive Securities must bear
the cost of insurance, postage, transportation and the like unless such Person
takes delivery of such definitive Securities in person at the offices of
Euroclear or Clearstream. Definitive Securities in bearer form to be delivered
in exchange for any portion of a temporary global Security shall be delivered
only outside the United States.

            Until exchanged in full as hereinabove provided, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of the same series and of like
tenor authenticated and delivered hereunder, except that, unless otherwise
specified as contemplated by Section 301, interest payable on a temporary global
Security on an Interest Payment Date for Securities of such series occurring
prior to the

                                       22
<PAGE>

applicable Exchange Date shall be payable to Euroclear and Clearstream on such
Interest Payment Date upon delivery by Euroclear and Clearstream to the Trustee
of a certificate or certificates in the form set forth in Exhibit A-2 to this
Indenture (or in such other forms as may be established pursuant to Section
301), for credit without further interest on or after such Interest Payment Date
to the respective accounts of Persons who are the beneficial owners of such
temporary global Security on such Interest Payment Date and who have each
delivered to Euroclear or Clearstream, as the case may be, a certificate dated
no earlier than 15 days prior to the Interest Payment Date occurring prior to
such Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in
such other forms as may be established pursuant to Section 301). Notwithstanding
anything to the contrary herein contained, the certifications made pursuant to
this paragraph shall satisfy the certification requirements of the preceding two
paragraphs of this Section 304(b) and of the third paragraph of Section 303 of
this Indenture and the interests of the Persons who are the beneficial owners of
the temporary global Security with respect to which such certification was made
will be exchanged for definitive Securities of the same series and of like tenor
on the Exchange Date or the date of certification if such date occurs after the
Exchange Date, without further act or deed by such beneficial owners. Except as
otherwise provided in this paragraph, no payments of principal (or premium, if
any) or interest, if any, owing with respect to a beneficial interest in a
temporary global Security will be made unless and until such interest in such
temporary global Security shall have been exchanged for an interest in a
definitive Security. Any interest so received by Euroclear and Clearstream and
not paid as herein provided shall be returned to the Trustee prior to the
expiration of two years after such Interest Payment Date in order to be repaid
to the Company.

            SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
or in any office or agency of the Company in a Place of Payment a register for
each series of Securities (the registers maintained in such office or in any
such office or agency of the Company in a Place of Payment being herein
sometimes referred to collectively as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Registered Securities and of transfers of Registered
Securities. The Security Register shall be in written form or any other form
capable of being converted into written form within a reasonable time. The
Trustee, at its Corporate Trust Office, is hereby initially appointed "Security
Registrar" for the purpose of registering Registered Securities and transfers of
Registered Securities on such Security Register as herein provided. In the event
that the Trustee shall cease to be Security Registrar, it shall have the right
to examine the Security Register at all reasonable times.

            Upon surrender for registration of transfer of any Registered
Security of any series at any office or agency of the Company in a Place of
Payment for that series, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Registered Securities of the same series, of any
authorized denominations and of a like aggregate principal amount, bearing a
number not contemporaneously outstanding and containing identical terms and
provisions.

            At the option of the Holder, Registered Securities of any series may
be exchanged for other Registered Securities of the same series, of any
authorized denomination or

                                       23
<PAGE>

denominations and of a like aggregate principal amount, containing identical
terms and provisions, upon surrender of the Registered Securities to be
exchanged at any such office or agency. Whenever any Registered Securities are
so surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Registered Securities which the Holder making the
exchange is entitled to receive. Unless otherwise specified with respect to any
series of Securities as contemplated by Section 301, Bearer Securities may not
be issued in exchange for Registered Securities.

            If (but only if) permitted by the applicable Board Resolution and
(subject to Section 303) set forth in the applicable Officers' Certificate, or
in any indenture supplemental hereto, delivered as contemplated by Section 301,
at the option of the Holder, Bearer Securities of any series may be exchanged
for Registered Securities of the same series of any authorized denominations and
of a like aggregate principal amount and tenor, upon surrender of the Bearer
Securities to be exchanged at any such office or agency, with all unmatured
coupons and all matured coupons in default thereto appertaining. If the Holder
of a Bearer Security is unable to produce any such unmatured coupon or coupons
or matured coupon or coupons in default, any such permitted exchange may be
effected if the Bearer Securities are accompanied by payment in funds acceptable
to the Company in an amount equal to the face amount of such missing coupon or
coupons, or the surrender of such missing coupon or coupons may be waived by the
Company and the Trustee if there is furnished to them such security or indemnity
as they may require to save each of them and any Paying Agent harmless. If
thereafter the Holder of such Security shall surrender to any Paying Agent any
such missing coupon in respect of which such a payment shall have been made,
such Holder shall be entitled to receive the amount of such payment; provided,
however, that, except as otherwise provided in Section 1002, interest
represented by coupons shall be payable only upon presentation and surrender of
those coupons at an office or agency located outside the United States.
Notwithstanding the foregoing, in case a Bearer Security of any series is
surrendered at any such office or agency in a permitted exchange for a
Registered Security of the same series and like tenor after the close of
business at such office or agency on (i) any Regular Record Date and before the
opening of business at such office or agency on the relevant Interest Payment
Date, or (ii) any Special Record Date and before the opening of business at such
office or agency on the related proposed date for payment of Defaulted Interest,
such Bearer Security shall be surrendered without the coupon relating to such
Interest Payment Date or proposed date for payment, as the case may be, and
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the Holder of such coupon when due in accordance
with the provisions of this Indenture.

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

            Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any permanent global Security shall be exchangeable
only as provided in this paragraph. If any beneficial owner of an interest in a
permanent global Security is entitled to exchange such interest for Securities
of such series and of like tenor and principal amount of

                                       24
<PAGE>

another authorized form and denomination, as specified as contemplated by
Section 301 and provided that any applicable notice provided in the permanent
global Security shall have been given, then without unnecessary delay but in any
event not later than the earliest date on which such interest may be so
exchanged, the Company shall deliver to the Trustee definitive Securities in
aggregate principal amount equal to the principal amount of such beneficial
owner's interest in such permanent global Security, executed by the Company. On
or after the earliest date on which such interests may be so exchanged, such
permanent global Security shall be surrendered by the Common Depository or such
other depository as shall be specified in the Company Order with respect thereto
to the Trustee, as the Company's agent for such purpose, to be exchanged, in
whole or from time to time in part, for definitive Securities without charge and
the Trustee shall authenticate and deliver, in exchange for each portion of such
permanent global Security, an equal aggregate principal amount of definitive
Securities of the same series of authorized denominations and of like tenor as
the portion of such permanent global Security to be exchanged which, unless the
Securities of the series are not issuable both as Bearer Securities and as
Registered Securities, as specified as contemplated by Section 301, shall be in
the form of Bearer Securities or Registered Securities, or any combination
thereof, as shall be specified by the beneficial owner thereof; provided,
however, that no such exchanges may occur during a period beginning at the
opening of business 15 days before any selection of Securities to be redeemed
and ending on the relevant Redemption Date if the Security for which exchange is
requested may be among those selected for redemption; and provided further that
no Bearer Security delivered in exchange for a portion of a permanent global
Security shall be mailed or otherwise delivered to any location in the United
States. If a Registered Security is issued in exchange for any portion of a
permanent global Security after the close of business at the office or agency
where such exchange occurs on (i) any Regular Record Date and before the opening
of business at such office or agency on the relevant Interest Payment Date, or
(ii) any Special Record Date and before the opening of business at such office
or agency on the related proposed date for payment of Defaulted Interest,
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of such Registered Security, but will be payable on such Interest
Payment Date or proposed date for payment, as the case may be, only to the
Person to whom interest in respect of such portion of such permanent global
Security is payable in accordance with the provisions of this Indenture.

            All Securities issued upon any registration of transfer or exchange
of Securities shall be valid obligations of the Company, evidencing the same
debt and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.

            Every Registered Security presented or surrendered for registration
of transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.

            No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or

                                       25
<PAGE>

exchange of Securities, other than exchanges pursuant to Section 304, 906, 1107
or 1305 not involving any transfer.

            The Company shall not be required (i) to issue, register the
transfer of or exchange any Security if such Security may be among those
selected for redemption during a period beginning at the opening of business 15
days before selection of the Securities to be redeemed under Section 1103 and
ending at the close of business on (A) if such Securities are issuable only as
Registered Securities, the day of the mailing of the relevant notice of
redemption and (B) if such Securities are issuable as Bearer Securities, the day
of the first publication of the relevant notice of redemption or, if such
Securities are also issuable as Registered Securities and there is no
publication, the mailing of the relevant notice of redemption, or (ii) to
register the transfer of or exchange any Registered Security so selected for
redemption in whole or in part, except, in the case of any Registered Security
to be redeemed in part, the portion thereof not to be redeemed, or (iii) to
exchange any Bearer Security so selected for redemption except that such a
Bearer Security may be exchanged for a Registered Security of that series and
like tenor, provided that such Registered Security shall be simultaneously
surrendered for redemption, or (iv) to issue, register the transfer of or
exchange any Security which has been surrendered for repayment at the option of
the Holder, except the portion, if any, of such Security not to be so repaid.

            SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If
any mutilated Security or a Security with a mutilated coupon appertaining to it
is surrendered to the Trustee or the Company, together with, in proper cases,
such security or indemnity as may be required by the Company or the Trustee to
save each of them or any agent of either of them harmless, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and principal amount, containing identical terms
and provisions and bearing a number not contemporaneously outstanding, with
coupons corresponding to the coupons, if any, appertaining to the surrendered
Security.

            If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
or coupon, and (ii) such security or indemnity as may be required by them to
save each of them and any agent of either of them harmless, then, in the absence
of notice to the Company or the Trustee that such Security or coupon has been
acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a new Security of the same series and principal
amount, containing identical terms and provisions and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains.

            Notwithstanding the provisions of the previous two paragraphs, in
case any such mutilated, destroyed, lost or stolen Security or coupon has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, with coupons corresponding to the coupons, if
any, appertaining to such mutilated, destroyed, lost or stolen Security or to
the Security to which such mutilated, destroyed, lost or stolen coupon
appertains,

                                       26
<PAGE>

pay such Security or coupon; provided, however, that payment of principal of
(and premium, if any) and interest, if any, on Bearer Securities shall, except
as otherwise provided in Section 1002, be payable only at an office or agency
located outside the United States and, unless otherwise specified as
contemplated by Section 301, any interest on Bearer Securities shall be payable
only upon presentation and surrender of the coupons appertaining thereto.

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

            Every new Security of any series with its coupons, if any, issued
pursuant to this Section in lieu of any destroyed, lost or stolen Security, or
in exchange for a Security to which a destroyed, lost or stolen coupon
appertains, shall constitute an original additional contractual obligation of
the Company, whether or not the destroyed, lost or stolen Security and its
coupons, if any, or the destroyed, lost or stolen coupon shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities of that
series and their coupons, if any, duly issued hereunder.

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

            SECTION 307. Payment of Interest; Interest Rights Preserved;
Optional Interest Reset. (a) Except as otherwise specified with respect to a
series of Securities in accordance with the provisions of Section 301, interest,
if any, on any Registered Security that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company maintained for such purpose pursuant to Section
1002; provided, however, that each installment of interest, if any, on any
Registered Security may at the Company's option be paid by (i) mailing a check
for such interest, payable to or upon the written order of the Person entitled
thereto pursuant to Section 309, to the address of such Person as it appears on
the Security Register or (ii) transfer to an account maintained by the payee
inside the United States.

            Unless otherwise provided as contemplated by Section 301 with
respect to the Securities of any series, payment of interest, if any, may be
made, in the case of a Bearer Security, by transfer to an account maintained by
the payee with a bank located outside the United States.

            Unless otherwise provided as contemplated by Section 301, every
permanent global Security will provide that interest, if any, payable on any
Interest Payment Date will be paid to each of Euroclear and Clearstream with
respect to that portion of such permanent global Security held for its account
by the Common Depository, for the purpose of permitting each of

                                       27
<PAGE>

Euroclear and Clearstream to credit the interest, if any, received by it in
respect of such permanent global Security to the accounts of the beneficial
owners thereof.

            In case a Bearer Security of any series is surrendered in exchange
for a Registered Security of such series after the close of business (at an
office or agency in a Place of Payment for such series) on any Regular Record
Date and before the opening of business (at such office or agency) on the next
succeeding Interest Payment Date, such Bearer Security shall be surrendered
without the coupon relating to such Interest Payment Date and interest will not
be payable on such Interest Payment Date in respect of the Registered Security
issued in exchange for such Bearer Security, but will be payable only to the
Holder of such coupon when due in accordance with the provisions of this
Indenture.

            Except as otherwise specified with respect to a series of Securities
in accordance with the provisions of Section 301, any interest on any Registered
Security of any series that is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the registered Holder thereof on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:

            (1) The Company may elect to make payment of any Defaulted Interest
      to the Persons in whose names the Registered Securities of such series (or
      their respective Predecessor Securities) are registered at the close of
      business on a Special Record Date for the payment of such Defaulted
      Interest, which shall be fixed in the following manner. The Company shall
      notify the Trustee in writing of the amount of Defaulted Interest proposed
      to be paid on each Registered Security of such series and the date of the
      proposed payment (which shall not be less than 20 days after such notice
      is received by the Trustee), and at the same time the Company shall
      deposit with the Trustee an amount of money in Dollars equal to the
      aggregate amount proposed to be paid in respect of such Defaulted Interest
      or shall make arrangements satisfactory to the Trustee for such deposit on
      or prior to the date of the proposed payment, such money when deposited to
      be held in trust for the benefit of the Persons entitled to such Defaulted
      Interest as in this clause provided. Thereupon the Trustee shall fix a
      Special Record Date for the payment of such Defaulted Interest which shall
      be not more than 15 days and not less than 10 days prior to the date of
      the proposed payment and not less than 10 days after the receipt by the
      Trustee of the notice of the proposed payment. The Trustee shall promptly
      notify the Company of such Special Record Date and, in the name and at the
      expense of the Company, shall cause notice of the proposed payment of such
      Defaulted Interest and the Special Record Date therefor to be mailed,
      first-class postage prepaid, to each Holder of Registered Securities of
      such series at his address as it appears in the Security Register not less
      than 10 days prior to such Special Record Date. Notice of the proposed
      payment of such Defaulted Interest and the Special Record Date therefor
      having been mailed as aforesaid, such Defaulted Interest shall be paid to
      the Persons in whose names the Registered Securities of such series (or
      their respective Predecessor Securities) are registered at the close of
      business on such Special Record Date and shall no longer be payable
      pursuant to the following clause (2). In case a Bearer Security of any
      series is surrendered at the

                                       28
<PAGE>

      office or agency in a Place of Payment for such series in exchange for a
      Registered Security of such series after the close of business at such
      office or agency on any Special Record Date and before the opening of
      business at such office or agency on the related proposed date for payment
      of Defaulted Interest, such Bearer Security shall be surrendered without
      the coupon relating to such proposed date of payment and Defaulted
      Interest will not be payable on such proposed date of payment in respect
      of the Registered Security issued in exchange for such Bearer Security,
      but will be payable only to the Holder of such coupon when due in
      accordance with the provisions of this Indenture.

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

            (b) The provisions of this Section 307(b) may be made applicable to
any series of Securities pursuant to Section 301 (with such modifications,
additions or substitutions as may be specified pursuant to such Section 301).
The interest rate (or the spread or spread multiplier used to calculate such
interest rate, if applicable) on any Security of such series may be reset by the
Company on the date or dates specified on the face of such Security (each an
"Optional Reset Date"). The Company may exercise such option with respect to
such Security by notifying the Trustee of such exercise at least 45 but not more
than 60 days prior to an Optional Reset Date for such Security. Not later than
40 days prior to each Optional Reset Date, the Trustee shall transmit, in the
manner provided for in Section 106, to the Holder of any such Security a notice
(the "Reset Notice") indicating whether the Company has elected to reset the
interest rate (or the spread or spread multiplier used to calculate such
interest rate, if applicable), and if so (i) such new interest rate (or such new
spread or spread multiplier, if applicable) and (ii) the provisions, if any, for
redemption during the period from such Optional Reset Date to the next Optional
Reset Date or if there is no such next Optional Reset Date, to the Stated
Maturity of such Security (each such period a "Subsequent Interest Period"),
including the date or dates on which or the period or periods during which and
the price or prices at which such redemption may occur during the Subsequent
Interest Period.

            Notwithstanding the foregoing, not later than 20 days prior to the
Optional Reset Date, the Company may, at its option, revoke the interest rate
(or the spread or spread multiplier used to calculate such interest rate, if
applicable) provided for in the Reset Notice and establish a higher interest
rate (or a spread or spread multiplier providing for a higher interest rate, if
applicable) for the Subsequent Interest Period by causing the Trustee to
transmit, in the manner provided for in Section 106, notice of such higher
interest rate (or such spread or spread multiplier providing for a higher
interest rate, if applicable) to the Holder of such Security. Such notice shall
be irrevocable. All Securities with respect to which the interest rate (or the
spread or spread multiplier used to calculate such interest rate, if applicable)
is reset on an Optional Reset Date, and with respect to which the Holders of
such Securities have not tendered such Securities for repayment (or have validly
revoked any such tender) pursuant to the next succeeding

                                       29
<PAGE>

paragraph, will bear such higher interest rate (or such spread or spread
multiplier providing for a higher interest rate, if applicable).

            The Holder of any such Security may have the option to elect
repayment by the Company of the principal of such Security on each Optional
Reset Date at a price equal to the principal amount thereof plus interest
accrued to such Optional Reset Date. In order to obtain repayment on an Optional
Reset Date, the Holder must follow the procedures set forth in Article Thirteen
for repayment at the option of Holders except that the period for delivery or
notification to the Trustee shall be at least 25 but not more than 35 days prior
to such Optional Reset Date and except that, if the Holder has tendered any
Security for repayment pursuant to the Reset Notice, the Holder may, by written
notice to the Trustee, revoke such tender or repayment until the close of
business on the tenth day before such Optional Reset Date.

            Subject to the foregoing provisions of this Section and Section 305,
each Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.

            SECTION 308. Optional Extension of Maturity. The provisions of this
Section 308 may be made applicable to any series of Securities pursuant to
Section 301 (with such modifications, additions or substitutions as may be
specified pursuant to such Section 301). The Stated Maturity of any Security of
such series may be extended at the option of the Company for the period or
periods specified on the face of such Security (each an "Extension Period") up
to but not beyond the date (the "Final Maturity") set forth on the face of such
Security. The Company may exercise such option with respect to any Security by
notifying the Trustee of such exercise at least 45 but not more than 60 days
prior to the Stated Maturity of such Security in effect prior to the exercise of
such option (the "Original Stated Maturity"). If the Company exercises such
option, the Trustee shall transmit, in the manner provided for in Section 106,
to the Holder of such Security not later than 40 days prior to the Original
Stated Maturity a notice (the "Extension Notice") indicating (i) the election of
the Company to extend the Stated Maturity, (ii) the new Stated Maturity, (iii)
the interest rate (or spread, spread multiplier or other formula to calculate
such interest rate, if applicable), if any, applicable to the Extension Period
and (iv) the provisions, if any, for redemption during such Extension Period.
Upon the Trustee's transmittal of the Extension Notice, the Stated Maturity of
such Security shall be extended automatically and, except as modified by the
Extension Notice and as described in the next paragraph, such Security will have
the same terms as prior to the transmittal of such Extension Notice.

            Notwithstanding the foregoing, not later than 20 days before the
Original Stated Maturity of such Security, the Company may, at its option,
revoke the interest rate (or spread, spread multiplier or other formula used to
calculate such interest rate, if applicable) provided for in the Extension
Notice and establish a higher interest rate (or spread, spread multiplier or
other formula used to calculate such higher interest rate, if applicable) for
the Extension Period by causing the Trustee to transmit, in the manner provided
for in Section 106, notice of such higher interest rate (or spread, spread
multiplier or other formula used to calculate such interest rate, if

                                       30
<PAGE>

applicable) to the Holder of such Security. Such notice shall be irrevocable.
All Securities with respect to which the Stated Maturity is extended will bear
such higher interest rate.

            If the Company extends the Stated Maturity of any Security, the
Holder will have the option to elect repayment of such Security by the Company
on the Original Stated Maturity at a price equal to the principal amount
thereof, plus interest accrued to such date. In order to obtain repayment on the
Original Stated Maturity once the Company has extended the Stated Maturity
thereof, the Holder must follow the procedures set forth in Article Thirteen for
repayment at the option of Holders, except that the period for delivery or
notification to the Trustee shall be at least 25 but not more than 35 days prior
to the Original Stated Maturity and except that, if the Holder has tendered any
Security for repayment pursuant to an Extension Notice, the Holder may by
written notice to the Trustee revoke such tender for repayment until the close
of business on the tenth day before the Original Stated Maturity.

            SECTION 309. Persons Deemed Owners. Prior to due presentment of a
Registered Security for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name such
Registered Security is registered as the owner of such Security for the purpose
of receiving payment of principal of (and premium, if any) and (subject to
Sections 305 and 307) interest, if any, on such Registered Security and for all
other purposes whatsoever, whether or not such Registered Security be overdue,
and neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.

            Title to any Bearer Security and any coupons appertaining thereto
shall pass by delivery. The Company, the Trustee and any agent of the Company or
the Trustee may treat the bearer of any Bearer Security and the bearer of any
coupon as the absolute owner of such Security or coupon for the purpose of
receiving payment thereof or on account thereof and for all other purposes
whatsoever, whether or not such Security or coupon be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

            None of the Company, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Security in global form or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.

            Notwithstanding the foregoing, with respect to any global Security,
nothing herein shall prevent the Company, the Trustee, or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by any depository, as a Holder, with respect to
such global Security or impair, as between such depository and owners of
beneficial interests in such global Security, the operation of customary
practices governing the exercise of the rights of such depository (or its
nominee) as Holder of such global Security.

            SECTION 310. Cancellation. All Securities and coupons surrendered
for payment, redemption, repayment at the option of the Holder, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the

                                       31
<PAGE>

Trustee, be delivered to the Trustee, and any such Securities and coupons and
Securities and coupons surrendered directly to the Trustee for any such purpose
shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold, and all Securities so delivered shall be promptly
canceled by the Trustee. If the Company shall so acquire any of the Securities,
however, such acquisition shall not operate as a redemption or satisfaction of
the indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. Canceled
Securities and coupons held by the Trustee shall be destroyed by the Trustee and
the Trustee shall deliver a certificate of such destruction to the Company,
unless by a Company Order the Company directs their return to it.

            SECTION 311. Computation of Interest. Except as otherwise specified
as contemplated by Section 301 with respect to Securities of any series,
interest, if any, on the Securities of each series shall be computed on the
basis of a 360-day year consisting of twelve 30-day months.

            SECTION 312. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall indicate the "CUSIP" numbers of the Securities in notices of redemption as
a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption and that reliance
may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.

                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

            SECTION 401. Satisfaction and Discharge of Indenture. This Indenture
shall upon Company Request cease to be of further effect with respect to any
series of Securities specified in such Company Request (except as to any
surviving rights of registration of transfer or exchange of Securities of such
series expressly provided for herein or pursuant hereto and any right to receive
Additional Amounts, as provided in Section 1004), and the Trustee, upon receipt
of a Company Order, and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture as to
such series when

            (1) either

                  (A) all Securities of such series theretofore authenticated
            and delivered and all coupons, if any, appertaining thereto (other
            than (i) coupons appertaining to Bearer Securities surrendered for
            exchange for Registered Securities and

                                       32
<PAGE>

            maturing after such exchange, whose surrender is not required or has
            been waived as provided in Section 305, (ii) Securities and coupons
            of such series which have been destroyed, lost or stolen and which
            have been replaced or paid as provided in Section 306, (iii) coupons
            appertaining to Securities called for redemption and maturing after
            the relevant Redemption Date, whose surrender has been waived as
            provided in Section 1106, and (iv) Securities and coupons of such
            series for whose payment money has theretofore been deposited in
            trust or segregated and held in trust by the Company and thereafter
            repaid to the Company or discharged from such trust, as provided in
            Section 1003) have been delivered to the Trustee for cancellation;
            or

                  (B) all Securities of such series and, in the case of (i) or
            (ii) below, any coupons appertaining thereto not theretofore
            delivered to the Trustee for cancellation

                  (i)   have become due and payable, or

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

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

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

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

            (3) the Company has delivered to the Trustee an Officers'
      Certificate and an Opinion of Counsel, each stating that all conditions
      precedent herein provided for relating to the satisfaction and discharge
      of this Indenture as to such series have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee and any predecessor Trustee under
Section 606, the obligations of the Company to any Authenticating Agent under
Section 611 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.

                                       33
<PAGE>

            SECTION 402. Application of Trust Funds. Subject to the provisions
of the last paragraph of Section 1003, all money deposited with the Trustee
pursuant to Section 401 shall be held in trust and applied by it, in accordance
with the provisions of the Securities, the coupons and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest, if any,
for whose payment such money has been deposited with or received by the Trustee,
but such money need not be segregated from other funds except to the extent
required by law.

                                       34
<PAGE>

                                  ARTICLE FIVE

                                    REMEDIES

            SECTION 501. Events of Default. "Event of Default", wherever used
herein with respect to any particular series of Securities, means any one of the
following events (whatever the reason for such Event of Default and whether or
not it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):

            (1) default in the payment of any interest upon any Security of that
      series or of any coupon appertaining thereto, when such interest or coupon
      becomes due and payable, and continuance of such default for a period of
      30 days; or

            (2) default in the payment of the principal of (or premium, if any,
      on) any Security of that series when it becomes due and payable at its
      Maturity; or

            (3) default in the deposit of any sinking fund payment, when and as
      due by the terms of any Security of that series; or

            (4) default in the performance, or breach, of any covenant or
      agreement of the Company in this Indenture with respect to any Security of
      that series (other than a covenant or agreement a default in whose
      performance or whose breach is elsewhere in this Section specifically
      dealt with), and continuance of such default or breach for a period of 60
      days after there has been given, by registered or certified mail, to the
      Company by the Trustee or to the Company and the Trustee by the Holders of
      at least 25% in principal amount of the Outstanding Securities of that
      series a written notice specifying such default or breach and requiring it
      to be remedied and stating that such notice is a "Notice of Default"
      hereunder; or

            (5) the Company pursuant to or within the meaning of any Bankruptcy
      Law:

            (A)   commences a voluntary case,

            (B)   consents to the entry of an order for relief against it in an
                  involuntary case,

            (C)   consents to the appointment of a Custodian of it or for all or
                  substantially all of its property and such Custodian is not
                  discharged within 60 days, or

            (D)   makes a general assignment for the benefit of its creditors;
                  or

            (6) a court of competent jurisdiction enters an order or decree
      under any Bankruptcy Law that:

            (A)   is for relief against the Company in an involuntary case,

                                       35
<PAGE>

            (B)   appoints a Custodian of the Company or for all or
                  substantially all of its property, or

            (C)   orders the liquidation of the Company, and the order or decree
                  remains unstayed and in effect for 90 days; or

            (7) any other Event of Default provided with respect to Securities
      of that series.

The term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal or
State law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or other similar official under any Bankruptcy
Law.

            SECTION 502. Acceleration of Maturity; Rescission and Annulment. If
an Event of Default, other than an Event of Default under Section 501(5) or
501(6), with respect to Securities of any series at the time Outstanding occurs
and is continuing, then and in every such case the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities of that series
may declare the principal (or, if any Securities are Original Issue Discount
Securities or Indexed Securities, such portion of the principal as may be
specified in the terms thereof) of all the Securities of that series to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the Holders), and upon any such declaration such principal
or specified portion thereof shall become immediately due and payable.

            In the case of an Event of Default under Section 501(5) or 501(6),
all unpaid principal of and accrued interest on all Securities of any series
then outstanding shall be due and payable immediately without any declaration or
other act on the part of the Trustee.

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

            (1) the Company has paid or deposited with the Trustee a sum
      sufficient to pay in Dollars:

            (A)   all overdue installments of interest, if any, on all
                  Outstanding Securities of that series and any related coupons,

            (B)   the principal of (and premium, if any, on) all Outstanding
                  Securities of that series which have become due otherwise than
                  by such declaration of acceleration and interest thereon at
                  the rate or rates borne by or provided for in such Securities,

                                       36
<PAGE>

            (C)   to the extent that payment of such interest is lawful,
                  interest upon overdue installments of interest at the rate or
                  rates borne by or provided for in such Securities, and

            (D)   all sums paid or advanced by the Trustee hereunder and the
                  reasonable compensation, expenses, disbursements and advances
                  of the Trustee, its agents and counsel; and

            (2) all Events of Default with respect to Securities of that series,
      other than the nonpayment of the principal of (or premium, if any) or
      interest on Securities of that series which have become due solely by such
      declaration of acceleration, have been cured or waived as provided in
      Section 513.

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

            SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if:

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

            (2) default is made in the payment of the principal of (or premium,
      if any, on) any Security of any series at its Maturity,

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

            If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon Securities of such series and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon such Securities
of such series, wherever situated.

            If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Securities of such
series and any related coupons by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such

                                       37
<PAGE>

rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.

            SECTION 504. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Securities of any series
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of any overdue principal, premium or interest) shall
be entitled and empowered, by intervention in such proceeding or otherwise:

            (i) to file and prove a claim for the whole amount of principal (or
      in the case of Original Issue Discount Securities or Indexed Securities,
      such portion of the principal as may be provided for in the terms thereof)
      (and premium, if any) and interest, if any, owing and unpaid in respect of
      the Securities and to file such other papers or documents as may be
      necessary or advisable in order to have the claims of the Trustee
      (including any claim for the reasonable compensation, expenses,
      disbursements and advances of the Trustee, its agents and counsel) and of
      the Holders allowed in such judicial proceeding, and

            (ii) to collect and receive any moneys or other property payable or
      deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder of Securities of such series and coupons to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee and any predecessor Trustee, their agents and counsel, and any other
amounts due the Trustee or any predecessor Trustee under Section 606.

            Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
or coupon any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or coupons or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder of a
Security or coupon in any such proceeding.

            SECTION 505. Trustee May Enforce Claims Without Possession of
Securities or Coupons. All rights of action and claims under this Indenture or
any of the Securities or coupons may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or coupons or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and

                                       38
<PAGE>

counsel, be for the ratable benefit of the Holders of the Securities and coupons
in respect of which such judgment has been recovered.

            SECTION 506. Application of Money Collected. Any money collected by
the Trustee pursuant to this Article shall be applied in the following order, at
the date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, if any, upon
presentation of the Securities or coupons, or both, as the case may be, and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:

            FIRST: To the payment of all amounts due the Trustee and any
      predecessor Trustee under Section 606;

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

            THIRD: To the payment of the remainder, if any, to the Company or
      any other Person or Persons entitled thereto.

            SECTION 507. Limitation on Suits. No Holder of any Security of any
series or any related coupon shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:

            (1) such Holder has previously given written notice to the Trustee
      of a continuing Event of Default with respect to the Securities of that
      series;

            (2) the Holders of not less than 25% in principal amount of the
      Outstanding Securities of that series shall have made written request to
      the Trustee to institute proceedings in respect of such Event of Default
      in its own name as Trustee hereunder;

            (3) such Holder or Holders have offered to the Trustee reasonable
      indemnity against the costs, expenses and liabilities to be incurred in
      compliance with such request;

            (4) the Trustee for 60 days after its receipt of such notice,
      request and offer of indemnity has failed to institute any such
      proceeding; and

            (5) no direction inconsistent with such written request has been
      given to the Trustee during such 60-day period by the Holders of a
      majority in principal amount of the Outstanding Securities of that series;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb

                                       39
<PAGE>

or prejudice the rights of any other of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all such Holders.

            SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest. Notwithstanding any other provision in this Indenture, the
Holder of any Security or coupon shall have the right which is absolute and
unconditional to receive payment of the principal of (and premium, if any) and
(subject to Sections 305 and 307) interest, if any, on such Security or payment
of such coupon on the respective due dates expressed in such Security or coupon
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.

            SECTION 509. Restoration of Rights and Remedies. If the Trustee or
any Holder of a Security or coupon has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case the Company, the Trustee and the
Holders of Securities and coupons shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.

            SECTION 510. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities or coupons in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders of Securities or coupons is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.

            SECTION 511. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder of any Security or coupon to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders of Securities or coupons, as the
case may be.

            SECTION 512. Control by Holders of Securities. The Holders of a
majority in principal amount of the Outstanding Securities of any series shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the Securities of such series, provided
that

                                       40
<PAGE>

            (1) such direction shall not be in conflict with any rule of law or
      with this Indenture,

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

            (3) the Trustee need not take any action which might involve it in
      personal liability or be unjustly prejudicial to the Holders of Securities
      of such series not consenting.

            SECTION 513. Waiver of Past Defaults. The Holders of not less than a
majority in principal amount of the Outstanding Securities of any series may on
behalf of the Holders of all the Securities of such series and any related
coupons waive any past default hereunder with respect to such series and its
consequences, except a default

            (1) in the payment of the principal of (or premium, if any) or
      interest, if any, on any Security of such series or any related coupons,
      or

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

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

            SECTION 514. Waiver of Stay or Extension Laws. The Company covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.

                                   ARTICLE SIX

                                   THE TRUSTEE

            SECTION 601. Notice of Defaults. Within 90 days after the occurrence
of any Default hereunder with respect to the Securities of any series, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in the
case of a Default in the payment of the principal of (or premium, if any) or

                                       41
<PAGE>

interest, if any, on any Security of such series, or in the payment of any
sinking or purchase fund installment with respect to the Securities of such
series, the Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interests of the Holders of the
Securities and coupons of such series; and provided further that in the case of
any Default or breach of the character specified in Section 501(4) with respect
to the Securities and coupons of such series, no such notice to Holders shall be
given until at least 60 days after the occurrence thereof.

            SECTION 602. Certain Rights of Trustee. Subject to the provisions of
TIA Section 315(a) through 315(d):

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

            (2) Any request or direction of the Company mentioned herein shall
      be sufficiently evidenced by a Company Request or Company Order (other
      than delivery of any Security, together with any coupons appertaining
      thereto, to the Trustee for authentication and delivery pursuant to
      Section 303 which shall be sufficiently evidenced as provided therein) and
      any resolution of the Board of Directors may be sufficiently evidenced by
      a Board Resolution.

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

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

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

            (6) The Trustee shall not be bound to make any investigation into
      the facts or matters stated in any resolution, certificate, statement,
      instrument, opinion, report, notice, request, direction, consent, order,
      bond, debenture, note, coupon or other paper or

                                       42
<PAGE>

      document, but the Trustee, in its discretion, may make such further
      inquiry or investigation into such facts or matters as it may see fit,
      and, if the Trustee shall determine to make such further inquiry or
      investigation, it shall be entitled to examine the books, records and
      premises of the Company, personally or by agent or attorney.

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

            (8) The Trustee shall not be liable for any action taken, suffered
      or omitted by it in good faith and believed by it to be authorized or
      within the discretion or rights or powers conferred upon it by this
      Indenture.

            The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.

            SECTION 603. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificate of authentication, and in any coupons shall be taken as the
statements of the Company, and neither the Trustee nor any Authenticating Agent
assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities or coupons, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder and that the statements made by it in a
Statement of Eligibility on Form T-1 supplied to the Company are true and
accurate, subject to the qualifications set forth therein. Neither the Trustee
nor any Authenticating Agent shall be accountable for the use or application by
the Company of Securities or the proceeds thereof.

            SECTION 604. May Hold Securities. The Trustee, any Paying Agent,
Security Registrar, Authenticating Agent or any other agent of the Company, in
its individual or any other capacity, may become the owner or pledgee of
Securities and coupons and, subject to TIA Sections 310(b) and 311, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such
other agent.

            SECTION 605. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.

            SECTION 606. Compensation and Reimbursement. The Company agrees:

                                       43
<PAGE>

            (1) To pay to the Trustee from time to time such compensation for
      all services rendered by it hereunder as has been agreed upon in writing
      (which compensation shall not be limited by any provision of law in regard
      to the compensation of a trustee of an express trust).

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

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

            As security for the performance of the obligations of the Company
under this Section, the Trustee shall have a claim prior to the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of (or premium, if any) or interest,
if any, on particular Securities or any coupons.

            When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 501(5) or (6) occurs, the expenses and
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

            SECTION 607. Corporate Trustee Required; Eligibility. There shall at
all times be a Trustee hereunder which shall be eligible to act as Trustee under
TIA Section 310(a)(1) and shall have a combined capital and surplus of at least
$50,000,000. If such Corporation publishes reports of condition at least
annually, pursuant to law or the requirements of Federal, State, Territorial or
District of Columbia supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.

            SECTION 608. Resignation and Removal; Appointment of Successor.

            (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.

                                       44
<PAGE>

            (b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company.

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

            (d) If at any time:

            (1) the Trustee shall fail to comply with the provisions of TIA
      Section 310(b) after written request therefor by the Company or by any
      Holder of a Security who has been a bona fide Holder of a Security for at
      least six months, or

            (2) the Trustee shall cease to be eligible under Section 607 and
      shall fail to resign after written request therefor by the Company or by
      any Holder of a Security who has been a bona fide Holder of a Security for
      at least six months, or

            (3) the Trustee shall become incapable of acting or shall be
      adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
      property shall be appointed or any public officer shall take charge or
      control of the Trustee or of its property or affairs for the purpose of
      rehabilitation, conservation or liquidation,

then, in any such case, (i) the Company by or pursuant to a Board Resolution may
remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities and
the appointment of a successor Trustee or Trustees.

            (e) If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of a notice
of resignation or the delivery of an Act of removal, the Trustee resigning or
being removed may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

            (f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause with
respect to the Securities of one or more series, the Company, by or pursuant to
a Board Resolution, shall promptly appoint a successor Trustee or Trustees with
respect to the Securities of that or those series (it being understood that any
such successor Trustee may be appointed with respect to the Securities of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Securities of any particular series). If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Securities of any series shall
be appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the successor Trustee with respect to the Securities
of such series and to that extent supersede the

                                       45
<PAGE>

successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders of Securities and accepted appointment in the manner hereinafter
provided, any Holder of a Security who has been a bona fide Holder of a Security
of such series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to Securities of such series.

            (g) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
in the manner provided for notices to the Holders of Securities in Section 106.
Each notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.

            SECTION 609. Acceptance of Appointment by Successor. (a) In case of
the appointment hereunder of a successor Trustee with respect to all Securities,
every such successor Trustee shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder, subject nevertheless to its claim, if any, provided for in
Section 606.

            (b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates;

                                       46
<PAGE>

but, on request of the Company or any successor Trustee, such retiring Trustee
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder with respect to the Securities
of that or those series to which the appointment of such successor Trustee
relates.

            (c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.

            (d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.

            SECTION 610. Merger, Conversion, Consolidation or Succession to
Business. Any Corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any Corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
Corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such Corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities or coupons shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities or coupons so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities or coupons. In case any Securities or coupons
shall not have been authenticated by such predecessor Trustee, any such
successor Trustee may authenticate and deliver such Securities or coupons, in
either its own name or that of its predecessor Trustee, with the full force and
effect which this Indenture provides for the certificate of authentication of
the Trustee.

            SECTION 611. Appointment of Authenticating Agent. At any time when
any of the Securities remain Outstanding, the Trustee may appoint an
Authenticating Agent or Agents with respect to one or more series of Securities
which shall be authorized to act on behalf of the Trustee to authenticate
Securities of such series issued upon exchange, registration of transfer or
partial redemption thereof, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Any such appointment
shall be evidenced by an instrument in writing signed by a Responsible Officer
of the Trustee, a copy of which instrument shall be promptly furnished to the
Company. Wherever reference is made in this Indenture to the authentication and
delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and, except as may
otherwise be provided pursuant to Section 301, shall at all times be a bank or
trust company or Corporation organized and doing business and in good standing
under the laws of the United States of America or of any State or the District
of Columbia, authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of not less than

                                       47
<PAGE>

$1,500,000 and subject to supervision or examination by Federal or State
authorities. If such Authenticating Agent publishes reports of condition at
least annually, pursuant to law or the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.

            Any Corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any Corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such Corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or further act
on the part of the Trustee or the Authenticating Agent.

            An Authenticating Agent for any series of Securities may at any time
resign by giving written notice of resignation to the Trustee for such series
and to the Company. The Trustee for any series of Securities may at any time
terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 106. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.

            The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation including reimbursement of its reasonable expenses
for its services under this Section.

            If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to or in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication substantially in the
following form:

                                       48
<PAGE>

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

                                       FIRST UNION NATIONAL BANK,
                                               as Trustee

                                       By _______________________________
                                             as Authenticating Agent

                                       By  _______________________________
                                             Authorized Signatory

                                  ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

            SECTION 701. Disclosure of Names and Addresses of Holders. Every
Holder of Securities or coupons, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
Authenticating Agent nor any Paying Agent nor any Security Registrar shall be
held accountable by reason of the disclosure of any information as to the names
and addresses of the Holders of Securities in accordance with TIA Section 312,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under TIA Section 312(b).

            SECTION 702. Reports by Trustee. Within 60 days after May 15 of each
year commencing with the first May 15 after the first issuance of Securities
pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of
Securities as provided in TIA Section 313(c) a brief report dated as of such May
15 if required by TIA Section 313(a).

            A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange, if any, upon which
the Securities are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee of the listing of the Securities on any stock
exchange.

            SECTION 703. Reports by Company. The Company will:

            (1) file with the Trustee, within 15 days after the Company is
      required to file the same with the Commission, copies of the annual
      reports and of the information, documents, and other reports (or copies of
      such portions of any of the foregoing as the Commission may from time to
      time by rules and regulations prescribe) which the Company may be required
      to file with the Commission pursuant to Section 13 or Section 15(d) of the
      Securities Exchange Act of 1934; or, if the Company is not required to
      file information, documents or reports pursuant to either of such
      Sections, then it will

                                       49
<PAGE>

      file with the Trustee and the Commission, in accordance with rules and
      regulations prescribed from time to time by the Commission, such of the
      supplementary and periodic information, documents and reports which may be
      required pursuant to Section 13 of the Securities Exchange Act of 1934 in
      respect of a security listed and registered on a national securities
      exchange as may be prescribed from time to time in such rules and
      regulations;

            (2) file with the Trustee and the Commission, in accordance with
      rules and regulations prescribed from time to time by the Commission, such
      additional information, documents and reports with respect to compliance
      by the Company with the conditions and covenants of this Indenture as may
      be required from time to time by such rules and regulations; and

            (3) transmit by mail to the Holders of Securities, within 30 days
      after the filing thereof with the Trustee, in the manner and to the extent
      provided in TIA Section 313(c), such summaries of any information,
      documents and reports required to be filed by the Company pursuant to
      paragraphs (1) and (2) of this Section as may be required by rules and
      regulations prescribed from time to time by the Commission.

            SECTION 704. Calculation of Original Issue Discount. Upon request of
the Trustee, the Company shall file with the Trustee promptly at the end of each
calendar year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods), if any, accrued on Outstanding
Securities as of the end of such year.

                                  ARTICLE EIGHT

                  CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER

            SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge with or into any other
Corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:

            (1) either the Company shall be the continuing Corporation, or the
      Corporation (if other than the Company) formed by such consolidation or
      into which the Company is merged or the Person which acquires by
      conveyance or transfer the properties and assets of the Company
      substantially as an entirety shall expressly assume, by an indenture
      supplemental hereto, executed and delivered to the Trustee, in form
      satisfactory to the Trustee, the due and punctual payment of the principal
      of (and premium, if any) and interest, if any, on all the Securities and
      the performance of every covenant of this Indenture on the part of the
      Company to be performed or observed;

            (2) immediately after giving effect to such transaction, no Default
      or Event of Default shall have happened and be continuing; and

            (3) the Company and the successor Person have delivered to the
      Trustee an Officers' Certificate and an Opinion of Counsel each stating
      that such consolidation,

                                       50
<PAGE>

      merger, conveyance or transfer and such supplemental indenture comply with
      this Article and that all conditions precedent herein provided for
      relating to such transaction have been complied with.

            SECTION 802. Successor Person Substituted. Upon any consolidation or
merger, or any conveyance or transfer of the properties and assets of the
Company substantially as an entirety in accordance with Section 801, the
successor Corporation formed by such consolidation or into which the Company is
merged or the successor Person to which such conveyance or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
had been named as the Company herein; and in the event of any such conveyance or
transfer, the Company shall be discharged from all obligations and covenants
under this Indenture and the Securities and coupons and may be dissolved and
liquidated.

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

            SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Securities or coupons, the Company, when
authorized by or pursuant to a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:

            (1) to evidence the succession of another Person to the Company and
      the assumption by any such successor of the covenants of the Company
      herein and in the Securities contained; or

            (2) to add to the covenants of the Company for the benefit of the
      Holders of all or any series of Securities (and if such covenants are to
      be for the benefit of less than all series of Securities, stating that
      such covenants are expressly being included solely for the benefit of such
      series) or to surrender any right or power herein conferred upon the
      Company; or

            (3) to add any additional Events of Default for the benefit of the
      Holders of all or any series of Securities (and if such Events of Default
      are to be for the benefit of less than all series of Securities, stating
      that such Events of Default are expressly being included solely for the
      benefit of such series); provided, however, that in respect of any such
      additional Events of Default such supplemental indenture may provide for a
      particular period of grace after default (which period may be shorter or
      longer than that allowed in the case of other defaults) or may provide for
      an immediate enforcement upon such default or may limit the remedies
      available to the Trustee upon such default or may limit the right of the
      Holders of a majority in aggregate principal amount of that or those
      series of Securities to which such additional Events of Default apply to
      waive such default; or

                                       51
<PAGE>

            (4) to add to or change any of the provisions of this Indenture to
      provide that Bearer Securities may be registrable as to principal, to
      change or eliminate any restrictions on the payment of principal of or any
      premium or interest on Bearer Securities, to permit Bearer Securities to
      be issued in exchange for Registered Securities, to permit Bearer
      Securities to be issued in exchange for Bearer Securities of other
      authorized denominations or to permit or facilitate the issuance of
      Securities in uncertificated form; provided that any such action shall not
      adversely affect the interests of the Holders of Securities of any series
      or any related coupons in any material respect; or

            (5) to change or eliminate any of the provisions of this Indenture;
      provided that any such change or elimination shall become effective only
      when there is no Security Outstanding of any series created prior to the
      execution of such supplemental indenture which is entitled to the benefit
      of such provision; or

            (6) to secure the Securities pursuant to the requirements of Section
      801, or otherwise; or

            (7) to establish the form or terms of Securities of any series and
      any related coupons as permitted by Sections 201 and 301, including the
      provisions and procedures relating to Securities convertible into or
      exchangeable for any securities of any Person (including the Company); or

            (8) to evidence and provide for the acceptance of appointment
      hereunder by a successor Trustee with respect to the Securities of one or
      more series and to add to or change any of the provisions of this
      Indenture as shall be necessary to provide for or facilitate the
      administration of the trusts hereunder by more than one Trustee; or

            (9) to cure any ambiguity, to correct or supplement any provision
      herein which may be inconsistent with any other provision herein, or to
      make any other provisions with respect to matters or questions arising
      under this Indenture; provided that such action shall not adversely affect
      the interests of the Holders of Securities of any series or any related
      coupons in any material respect; or

            (10) to supplement any of the provisions of this Indenture to such
      extent as shall be necessary to permit or facilitate the defeasance and
      discharge of any series of Securities pursuant to Sections 401, 1402 and
      1403; provided that any such action shall not adversely affect the
      interests of the Holders of Securities of such series and any related
      coupons or any other series of Securities in any material respect.

            SECTION 902. Supplemental Indentures with Consent of Holders. With
the consent of the Holders of not less than a majority in principal amount of
all Outstanding Securities affected by such supplemental indenture, by Act of
said Holders delivered to the Company and the Trustee, the Company, when
authorized by or pursuant to a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this

                                       52
<PAGE>

Indenture or of modifying in any manner the rights of the Holders of Securities
and any related coupons under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:

            (1) change the Stated Maturity of the principal of (or premium, if
      any, on) or any installment of principal of or interest on, any Security,
      subject to the provisions of Section 309; or reduce the principal amount
      thereof or the rate of interest (or change the manner of calculating the
      rate of interest, thereon, or any premium payable upon the redemption
      thereof, or change any obligation of the Company to pay Additional Amounts
      pursuant to Section 1004 (except as contemplated by Section 801(1) and
      permitted by Section 901(1)), or reduce the portion of the principal of an
      Original Issue Discount Security or Indexed Security that would be due and
      payable upon a declaration of acceleration of the Maturity thereof
      pursuant to Section 502 or the amount thereof provable in bankruptcy
      pursuant to Section 504, or adversely affect any right of repayment at the
      option of the Holder of any Security, or change any Place of Payment where
      any Security or any premium or interest thereon is payable, or impair the
      right to institute suit for the enforcement of any such payment on or
      after the Stated Maturity thereof (or, in the case of redemption or
      repayment at the option of the Holder, on or after the Redemption Date or
      the Repayment Date, as the case may be), or adversely affect any right to
      convert or exchange any Security as may be provided pursuant to Section
      301 herein, or

            (2) reduce the percentage in principal amount of the Outstanding
      Securities of any series, the consent of whose Holders is required for any
      such supplemental indenture, or the consent of whose Holders is required
      for any waiver with respect to such series (of compliance with certain
      provisions of this Indenture or certain defaults hereunder and their
      consequences) provided for in this Indenture, or reduce the requirements
      of Section 1504 for quorum or voting, or

            (3) modify any of the provisions of this Section, Section 513 or
      Section 1006, except to increase any such percentage or to provide that
      certain other provisions of this Indenture cannot be modified or waived
      without the consent of the Holder of each Outstanding Security affected
      thereby.

            It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.

            A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

            The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record

                                       53
<PAGE>

date is fixed, the Holders on such record date, or their duly designated
proxies, and only such Persons, shall be entitled to consent to such
supplemental indenture, whether or not such Holders remain Holders after such
record date; provided, that unless such consent shall have become effective by
virtue of the requisite percentage having been obtained prior to the date which
is 90 days after such record date, any such consent previously given shall
automatically and without further action by any Holder be canceled and of no
further effect.

            SECTION 903. Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modification thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.

            SECTION 904. Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder and of any
coupon appertaining thereto shall be bound thereby.

            SECTION 905. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act as then in effect.

            SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall, if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.

                                   ARTICLE TEN

                                    COVENANTS

            SECTION 1001. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders of each series
of Securities that it will duly and punctually pay the principal of (and
premium, if any) and interest, if any, on the Securities of that series in
accordance with the terms of such series of Securities, any coupons appertaining
thereto and this Indenture. Any interest due on Bearer Securities on or before
Maturity, other than Additional Amounts, if any, payable as provided in Section
1004 in respect of principal of (or premium, if any, on) such a Security, shall
be payable only upon presentation

                                       54
<PAGE>

and surrender of the several coupons for such interest installments as are
evidenced thereby as they severally mature. Unless otherwise specified with
respect to Securities of any series pursuant to Section 301, at the option of
the Company, all payments of principal may be paid by check to the registered
Holder of the Registered Security or other person entitled thereto against
surrender of such Security. Unless otherwise specified as contemplated by
Section 301 with respect to any series of Securities, any interest due on Bearer
Securities on or before Maturity shall be payable only upon presentation and
surrender of the several coupons for such interest installments as are evidenced
thereby as they severally mature.

            SECTION 1002. Maintenance of Office or Agency. If Securities of a
series are issuable only as Registered Securities, the Company shall maintain in
each Place of Payment for any series of Securities an office or agency where
Securities of that series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration of transfer or
exchange, where Securities of that series that are convertible or exchangeable
may be surrendered for conversion or exchange, as applicable, and where notices
and demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served. If Securities of a series are issuable as
Bearer Securities, the Company will maintain (A) in the Borough of Manhattan,
The City of New York, an office or agency where any Registered Securities of
that series may be presented or surrendered for payment, where any Registered
Securities of that series may be surrendered for registration of transfer, where
Securities of that series may be surrendered for exchange, where Securities of
that series that are convertible or exchangeable may be surrendered for
conversion or exchange, as applicable, and where notices and demands to or upon
the Company in respect of the Securities of that series and this Indenture may
be served and where Bearer Securities of that series and related coupons may be
presented or surrendered for payment in the circumstances described in the
following paragraph (and not otherwise), (B) subject to any laws or regulations
applicable thereto, in a Place of Payment for that series which is located
outside the United States, an office or agency where Securities of that series
and related coupons may be presented and surrendered for payment; provided,
however, that if the Securities of that series are listed on the Luxembourg
Stock Exchange or any other stock exchange located outside the United States and
such stock exchange shall so require, the Company will maintain a Paying Agent
for the Securities of that series in Luxembourg or any other required city
located outside the United States, as the case may be, so long as the Securities
of that series are listed on such exchange, and (C) subject to any laws or
regulations applicable thereto, in a Place of Payment for that series located
outside the United States an office or agency where any Registered Securities of
that series may be surrendered for registration of transfer, where Securities of
that series may be surrendered for exchange, where Securities of that series
that are convertible or exchangeable may be surrendered for conversion or
exchange, as applicable and where notices and demands to or upon the Company in
respect of the Securities of that series and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of each such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, except that Bearer Securities of that series and the related coupons
may be presented and surrendered for payment at the offices specified in the
Security, in London,

                                       55
<PAGE>

England, and the Company hereby appoints the same as its agent to receive such
respective presentations, surrenders, notices and demands, and the Company
hereby appoints the Trustee its agent to receive all such presentations,
surrenders, notices and demands.

            Unless otherwise specified with respect to any Securities pursuant
to Section 301, no payment of principal, premium or interest on Bearer
Securities shall be made at any office or agency of the Company in the United
States or by check mailed to any address in the United States or by transfer to
an account maintained with a bank located in the United States; provided,
however, that, if the Securities of a series are payable in Dollars, payment of
principal of (and premium, if any) and interest, if any, on any Bearer Security
shall be made at the office of the Company's Paying Agent in the Borough of
Manhattan, The City of New York, if (but only if) payment in Dollars of the full
amount of such principal, premium or interest, as the case may be, at all
offices or agencies outside the United States maintained for such purpose by the
Company in accordance with this Indenture, is illegal or effectively precluded
by exchange controls or other similar restrictions.

            The Company may from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all of such purposes, and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in accordance with the requirements set forth above for
Securities of any series for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency. Unless otherwise specified with
respect to any Securities pursuant to Section 301 with respect to a series of
Securities, the Company hereby designates as Places of Payment for each series
of Securities the office or agency of the Company in the Borough of Manhattan,
The City of New York, and initially appoints the Trustee at its Corporate Trust
Office as Paying Agent in such city and as its agent to receive all such
presentations, surrenders, notices and demands.

            SECTION 1003. Money for Securities Payments to Be Held in Trust. If
the Company shall at any time act as its own Paying Agent with respect to any
series of any Securities and any related coupons, it will, on or before each due
date of the principal of (or premium, if any) or interest, if any, on any of the
Securities of that series, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum in Dollars (except as otherwise specified
pursuant to Section 301 for the Securities of such series) sufficient to pay the
principal (and premium, if any) and interest, if any, on Securities of such
series so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.

            Whenever the Company shall have one or more Paying Agents for any
series of Securities and any related coupons, it will, on or before each due
date of the principal of (or premium, if any) or interest, if any, on any
Securities of that series, deposit with a Paying Agent a sum (in Dollars, as
described in the preceding paragraph) sufficient to pay the principal (or
premium, if any) or interest, if any, so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such principal, premium or
interest and (unless such Paying Agent is the Trustee) the Company will promptly
notify the Trustee of its action or failure so to act.

                                       56
<PAGE>

            The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.

            Except as otherwise provided in the Securities of any series, any
money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of (or premium, if any) or
interest, if any, on any Security of any series and remaining unclaimed for two
years after such principal, premium or interest has become due and payable shall
be paid to the Company upon Company Request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment of such principal, premium or interest on any Security, without interest
thereon, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in an Authorized Newspaper, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.

            SECTION 1004. Additional Amounts. If the Securities of a series
provide for the payment of Additional Amounts, the Company will pay to the
Holder of a Security of such series or any coupon appertaining thereto
Additional Amounts as may be specified as contemplated by Section 301. Whenever
in this Indenture there is mentioned, in any context, the payment of the
principal of (or premium, if any) or interest, if any, on any Security of any
series or payment of any related coupon or the net proceeds received on the sale
or exchange of any Security of any series, such mention shall be deemed to
include mention of the payment of Additional Amounts provided by the terms of
such series established pursuant to Section 301 to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof
pursuant to such terms and express mention of the payment of Additional Amounts
(if applicable) in any provisions hereof shall not be construed as excluding
Additional Amounts in those provisions hereof where such express mention is not
made.

            Except as otherwise specified as contemplated by Section 301, if the
Securities of a series provide for the payment of Additional Amounts, at least
10 days prior to the first Interest Payment Date with respect to that series of
Securities (or if the Securities of that series will not bear interest prior to
Maturity, the first day on which a payment of principal premium is made), and at
least 10 days prior to each date of payment of principal, premium or interest if
there has been any change with respect to the matters set forth in the
below-mentioned Officers' Certificate, the Company will furnish the Trustee and
the Company's principal Paying Agent or Paying Agents, if other than the
Trustee, with an Officers' Certificate instructing the Trustee and such Paying
Agent or Paying Agents whether such payment of principal, premium or interest on
the Securities of that series shall be made to Holders of Securities of that
series or any related coupons who are not United States persons without
withholding for or on account of any tax,

                                       57
<PAGE>

assessment or other governmental charge described in the Securities of the
series. If any such withholding shall be required, then such Officers'
Certificate shall specify by country the amount, if any, required to be withheld
on such payments to such Holders of Securities of that series or related coupons
and the Company will pay to the Trustee or such Paying Agent the Additional
Amounts required by the terms of such Securities. In the event that the Trustee
or any Paying Agent, as the case may be, shall not so receive the
above-mentioned certificate, then the Trustee or such Paying Agent shall be
entitled (i) to assume that no such withholding or deduction is required with
respect to any payment of principal or interest with respect to any Securities
of a series or related coupons until it shall have received a certificate
advising otherwise and (ii) to make all payments of principal and interest with
respect to the Securities of a series or related coupons without withholding or
deductions until otherwise advised. The Company covenants to indemnify the
Trustee and any Paying Agent for, and to hold them harmless against, any loss,
liability or expense reasonably incurred without negligence or bad faith on
their part arising out of or in connection with actions taken or omitted by any
of them in reliance on any Officers' Certificate furnished pursuant to this
Section or in reliance on the Company's not furnishing such an Officers'
Certificate.

            SECTION 1005. Statement as to Compliance. The Company will deliver
to the Trustee, within 120 days after the end of each fiscal year, a brief
certificate from the principal executive officer, principal financial officer or
principal accounting officer as to his or her knowledge of the Company's
compliance with all conditions and covenants under this Indenture. For purposes
of this Section 1005, such compliance shall be determined without regard to any
period of grace or requirement of notice under this Indenture.

            SECTION 1006. Waiver of Certain Covenants. The Company may omit in
any particular instance to comply with any term, provision or condition, and as
specified pursuant to Section 301(13) for Securities of any series, in any
covenants of the Company added to Article Ten pursuant to Section 301(12) or
Section 301 (13) in connection with the Securities of a series, if before or
after the time for such compliance the Holders of at least a majority in
principal amount of all outstanding Securities, by Act of such Holders, waive
such compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.

                                 ARTICLE ELEVEN

                            REDEMPTION OF SECURITIES

            SECTION 1101. Applicability of Article. Securities of any series
which are redeemable before their Stated Maturity shall be redeemable in
accordance with their terms and (except as otherwise specified as contemplated
by Section 301 for Securities of any series) in accordance with this Article.

                                       58
<PAGE>

            SECTION 1102. Election to Redeem; Notice to Trustee. The election of
the Company to redeem any Securities shall be evidenced by or pursuant to a
Board Resolution. In case of any redemption at the election of the Company of
less than all of the Securities of any series, the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date and of the principal amount of Securities of such series to be
redeemed. In the case of any redemption of Securities prior to the expiration of
any restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.

            SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If
less than all the Securities of any series issued on the same day with the same
terms are to be redeemed, the particular Securities to be redeemed shall be
selected not more than 60 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities of such series issued on such date with the same
terms not previously called for redemption, by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to the minimum authorized denomination for Securities of that
series or any integral multiple thereof) of the principal amount of Securities
of such series of a denomination larger than the minimum authorized denomination
for Securities of that series.

            The Trustee shall promptly notify the Company and the Security
Registrar (if other than itself) in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.

            For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.

            SECTION 1104. Notice of Redemption. Notice of redemption shall be
given in the manner provided in Section 106, not less than 30 days nor more than
60 days prior to the Redemption Date, unless a shorter period is specified by
the terms of such series established pursuant to Section 301, to each Holder of
Securities to be redeemed, but failure to give such notice in the manner herein
provided to the Holder of any Security designated for redemption as a whole or
in part, or any defect in the notice to any such Holder, shall not affect the
validity of the proceedings for the redemption of any other such Security or
portion thereof.

            Any notice that is mailed to the Holders of Registered Securities in
the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the Holder receives the notice.

            All notices of redemption shall state:

            (1) the Redemption Date,

                                       59
<PAGE>

            (2) the Redemption Price and accrued interest, if any, to the
      Redemption Date payable as provided in Section 1106,

            (3) if less than all Outstanding Securities of any series are to be
      redeemed, the identification (and, in the case of partial redemption, the
      principal amount) of the particular Security or Securities to be redeemed,

            (4) in case any Security is to be redeemed in part only, the notice
      which relates to such Security shall state that on and after the
      Redemption Date, upon surrender of such Security, the Holder will receive,
      without a charge, a new Security or Securities of authorized denominations
      for the principal amount thereof remaining unredeemed,

            (5) that on the Redemption Date, the Redemption Price and accrued
      interest, if any, to the Redemption Date payable as provided in Section
      1106 will become due and payable upon each such Security, or the portion
      thereof, to be redeemed and, if applicable, that interest thereon shall
      cease to accrue on and after said date,

            (6) the Place or Places of Payment where such Securities, together
      in the case of Bearer Securities with all coupons appertaining thereto, if
      any, maturing after the Redemption Date, are to be surrendered for payment
      of the Redemption Price and accrued interest, if any,

            (7) that the redemption is for a sinking fund, if such is the case,

            (8) that, unless otherwise specified in such notice, Bearer
      Securities of any series, if any, surrendered for redemption must be
      accompanied by all coupons maturing subsequent to the date fixed for
      redemption or the amount of any such missing coupon or coupons will be
      deducted from the Redemption Price, unless security or indemnity
      satisfactory to the Company, the Trustee for such series and any Paying
      Agent is furnished,

            (9) if Bearer Securities of any series are to be redeemed and any
      Registered Securities of such series are not to be redeemed, and if such
      Bearer Securities may be exchanged for Registered Securities not subject
      to redemption on this Redemption Date pursuant to Section 305 or
      otherwise, the last date, as determined by the Company, on which such
      exchanges may be made, and

            (10) the CUSIP number of such Security, if any.

            Notice of redemption of Securities to be redeemed shall be given by
the Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company.

            SECTION 1105. Deposit of Redemption Price. On or prior to any
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, which it may not do
in the case of a sinking fund payment under Article Twelve, segregate and hold
in trust as provided in Section 1003) an amount of money in Dollars sufficient
to pay on the Redemption Date the Redemption Price of,

                                       60
<PAGE>

and (unless otherwise specified pursuant to Section 301) accrued interest on,
all the Securities or portions thereof which are to be redeemed on that date.

            SECTION 1106. Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified in Dollars (together with accrued interest, if any, to the
Redemption Date), and from and after such date (unless the Company shall default
in the payment of the Redemption Price and accrued interest, if any) such
Securities shall if the same were interest-bearing cease to bear interest and
the coupons for such interest appertaining to any Bearer Securities so to be
redeemed, except to the extent provided below, shall be void. Upon surrender of
any such Security for redemption in accordance with said notice, together with
all coupons, if any, appertaining thereto maturing after the Redemption Date,
such Security shall be paid by the Company at the Redemption Price, together
with accrued interest, if any, to the Redemption Date; provided, however, that
installments of interest on Bearer Securities whose Stated Maturity is on or
prior to the Redemption Date shall be payable only at an office or agency
located outside the United States (except as otherwise provided in Section 1002)
and, unless otherwise specified as contemplated by Section 301, only upon
presentation and surrender of coupons for such interest; and provided further
that installments of interest on Registered Securities whose Stated Maturity is
prior to (or, if specified pursuant to Section 301, on) the Redemption Date
shall be payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 307.

            If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date, such
Security may be paid after deducting from the Redemption Price an amount equal
to the face amount of all such missing coupons, or the surrender of such missing
coupon or coupons may be waived by the Company and the Trustee if there be
furnished to them such security or indemnity as they may require to save each of
them and any Paying Agent harmless. If thereafter the Holder of such Security
shall surrender to the Trustee or any Paying Agent any such missing coupon in
respect of which a deduction shall have been made from the Redemption Price,
such Holder shall be entitled to receive the amount so deducted; provided,
however, that interest represented by coupons shall be payable only at an office
or agency located outside the United States (except as otherwise provided in
Section 1002) and, unless otherwise specified as contemplated by Section 301,
only upon presentation and surrender of those coupons.

            If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the Redemption Price shall, until paid, bear
interest from the Redemption Date at the rate of interest set forth in such
Security or, in the case of Original Issue Discount Security, at the Yield to
Maturity of such Security.

            SECTION 1107. Securities Redeemed in Part. Any Registered Security
which is to be redeemed only in part (pursuant to the provisions of this Article
or of Article Twelve) shall be surrendered at a Place of Payment therefor (with,
if the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in

                                       61
<PAGE>

writing) and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge a new Security or
Securities of the same series, of any authorized denomination as requested by
such Holder in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered. However, if
less than all the Securities of any series with differing issue dates, interest
rates and stated maturities are to be redeemed, the Company in its sole
discretion shall select the particular Securities to be redeemed and shall
notify the Trustee in writing thereof at least 45 days prior to the relevant
redemption date.

                                 ARTICLE TWELVE

                                  SINKING FUNDS

            SECTION 1201. Applicability of Article. The provisions of this
Article shall be applicable to any sinking fund for the retirement of Securities
of a series except as otherwise specified as contemplated by Section 301 for
Securities of such series.

            The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of such Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of any Securities of any
series, the cash amount of any mandatory sinking fund payment may be subject to
reduction as provided in Section 1202. Each sinking fund payment shall be
applied to the redemption of Securities of any series as provided for by the
terms of Securities of such series.

            SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company may, in satisfaction of all or any part of any mandatory sinking
fund payment with respect to the Securities of a series, (1) deliver Outstanding
Securities of such series (other than any previously called for redemption)
together in the case of any Bearer Securities of such series with all unmatured
coupons appertaining thereto and (2) apply as a credit Securities of such series
which have been redeemed either at the election of the Company pursuant to the
terms of such Securities or through the application of permitted optional
sinking fund payments pursuant to the terms of such Securities, as provided for
by the terms of such Securities; provided that such Securities so delivered or
applied as a credit have not been previously so credited. Such Securities shall
be received and credited for such purpose by the Trustee at the applicable
Redemption Price specified in such Securities for redemption through operation
of the sinking fund and the amount of such mandatory sinking fund payment shall
be reduced accordingly.

            SECTION 1203. Redemption of Securities for Sinking Fund. Not less
than 60 days prior to each sinking fund payment date for Securities of any
series, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing mandatory sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash in Dollars and the portion thereof,
if any, which is to be satisfied by delivering and crediting Securities of that
series pursuant to

                                       62
<PAGE>

Section 1202, and the optional amount, if any, to be added in cash to the next
ensuing mandatory sinking fund payment, and will also deliver to the Trustee any
Securities to be so delivered and credited. If such Officers' Certificate shall
specify an optional amount to be added in cash to the next ensuing mandatory
sinking fund payment, the Company shall thereupon be obligated to pay the amount
therein specified. Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1106 and 1107.

                                ARTICLE THIRTEEN

                       REPAYMENT AT THE OPTION OF HOLDERS

            SECTION 1301. Applicability of Article. Repayment of Securities of
any series before their Stated Maturity at the option of Holders thereof shall
be made in accordance with the terms of such Securities and (except as otherwise
specified by the terms of such series established pursuant to Section 301) in
accordance with this Article.

            SECTION 1302. Repayment of Securities. Securities of any series
subject to repayment in whole or in part at the option of the Holders thereof
will, unless otherwise provided in the terms of such Securities, be repaid at
the Repayment Price thereof, together with interest, if any, thereon accrued to
the Repayment Date specified in or pursuant to the terms of such Securities. The
Company covenants that on or before the Repayment Date it will deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money in Dollars sufficient to pay the Repayment Price of, and (unless otherwise
specified pursuant to Section 301) accrued interest on, all the Securities or
portions thereof, as the case may be, to be repaid on such date.

            SECTION 1303. Exercise of Option. Securities of any series subject
to repayment at the option of the Holders thereof will contain an "Option to
Elect Repayment" form on the reverse of such Securities. To be repaid at the
option of the Holder, any Security so providing for such repayment, with the
"Option to Elect Repayment" form on the reverse of such Security duly completed
by the Holder (or by the Holder's attorney duly authorized in writing), must be
received by the Company at the Place of Payment therefor specified in the terms
of such Security (or at such other place or places of which the Company shall
from time to time notify the Holders of such Securities) not earlier than 45
days nor later than 30 days prior to the Repayment Date. If less than the entire
Repayment Price of such Security is to be repaid in accordance with the terms of
such Security, the portion of the Repayment Price of such Security to be repaid,
in increments of the minimum denomination for Securities of such series, and the
denomination or denominations of the Security or Securities to be issued to the
Holder for the portion of such Security surrendered that is not to be repaid,
must be specified. Any Security providing for repayment at the option of the
Holder thereof may not be repaid in part if, following such repayment, the
unpaid principal amount of such Security would be less than the

                                       63
<PAGE>

minimum authorized denomination of Securities of the series of which such
Security to be repaid is a part. Except as otherwise may be provided by the
terms of any Security providing for repayment at the option of the Holder
thereof, exercise of the repayment option by the Holder shall be irrevocable
unless waived by the Company.

            SECTION 1304. When Securities Presented for Repayment Become Due and
Payable. If Securities of any series providing for repayment at the option of
the Holders thereof shall have been surrendered as provided in this Article and
as provided by or pursuant to the terms of such Securities, such Securities or
the portions thereof, as the case may be, to be repaid shall become due and
payable and shall be paid by the Company on the Repayment Date therein
specified, and on and after such Repayment Date (unless the Company shall
default in the payment of such Securities on such Repayment Date) such
Securities shall, if the same were interest-bearing, cease to bear interest and
the coupons for such interest appertaining to any Bearer Securities so to be
repaid, except to the extent provided below, shall be void. Upon surrender of
any such Security for repayment in accordance with such provisions, together
with all coupons, if any, appertaining thereto maturing after the Repayment
Date, the Repayment Price of such Security so to be repaid shall be paid by the
Company, together with accrued interest, if any, to the Repayment Date;
provided, however, that coupons whose Stated Maturity is on or prior to the
Repayment Date shall be payable only at an office or agency located outside the
United States (except as otherwise provided in Section 1002) and, unless
otherwise specified pursuant to Section 301, only upon presentation and
surrender of such coupons; and provided further that installments of interest on
Registered Securities, whose Stated Maturity is prior to (or, if specified
pursuant to Section 301, on) the Repayment Date shall be payable (but without
interest thereon, unless the Company shall default in the payment thereof) to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.

            If any Bearer Security surrendered for repayment shall not be
accompanied by all appurtenant coupons maturing after the Repayment Date, such
Security may be paid after deducting from the amount payable therefor as
provided in Section 1302 an amount equal to the face amount of all such missing
coupons, or the surrender of such missing coupon or coupons may be waived by the
Company and the Trustee if there be furnished to them such security or indemnity
as they may require to save each of them and any Paying Agent harmless. If
thereafter the Holder of such Security shall surrender to the Trustee or any
Paying Agent any such missing coupon in respect of which a deduction shall have
been made as provided in the preceding sentence, such Holder shall be entitled
to receive the amount so deducted; provided, however, that interest represented
by coupons shall be payable only at an office or agency located outside the
United States (except as otherwise provided in Section 1002) and, unless
otherwise specified as contemplated by Section 301, only upon presentation and
surrender of those coupons.

            If any Security surrendered for repayment shall not be so repaid
upon surrender thereof, the Repayment Price shall, until paid, bear interest
from the Repayment Date at the rate of interest set forth in such Security or,
in the case of an Original Issue Discount Security, at the Yield to Maturity of
such Security.

                                       64
<PAGE>

            SECTION 1305. Securities Repaid in Part. Upon surrender of any
Registered Security which is to be repaid in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder of such
Security, without service charge and at the expense of the Company, a new
Registered Security or Securities of the same series, of any authorized
denomination specified by the Holder, in an aggregate principal amount equal to
and in exchange for the portion of the principal of such Security so surrendered
which is not to be repaid.

                                ARTICLE FOURTEEN

                       DEFEASANCE AND COVENANT DEFEASANCE

            SECTION 1401. Applicability of Article; Company's Option to Effect
Defeasance or Covenant Defeasance. If pursuant to Section 301 provision is made
for either or both of (a) defeasance of the Securities of or within a series
under Section 1402 or (b) covenant defeasance of the Securities of or within a
series under Section 1403, then the provisions of such Section or Sections, as
the case may be, together with the other provisions of this Article (with such
modifications thereto as may be specified pursuant to Section 301 with respect
to any Securities), shall be applicable to such Securities and any coupons
appertaining thereto, and the Company may at its option by Board Resolution, at
any time, with respect to such Securities and any coupons appertaining thereto,
elect to have Section 1402 (if applicable) or Section 1403 (if applicable) be
applied to such Outstanding Securities and any coupons appertaining thereto upon
compliance with the conditions set forth below in this Article.

            SECTION 1402. Defeasance and Discharge. Upon the Company's exercise
of the above option applicable to this Section with respect to any Securities of
or within a series, the Company shall be deemed to have been discharged from its
obligations with respect to such Outstanding Securities and any coupons
appertaining thereto on the date the conditions set forth in Section 1404 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Outstanding Securities and any coupons
appertaining thereto, which shall thereafter be deemed to be "Outstanding" only
for the purposes of Section 1405 and the other Sections of this Indenture
referred to in clauses (A) and (B) of this Section, and to have satisfied all
its other obligations under such Securities and any coupons appertaining thereto
and this Indenture insofar as such Securities and any coupons appertaining
thereto are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of such Outstanding Securities and any coupons appertaining
thereto to receive, solely from the trust fund described in Section 1404 and as
more fully set forth in such Section, payments in respect of the principal of
(and premium, if any) and interest, if any, on such Securities and any coupons
appertaining thereto when such payments are due, (B) the Company's obligations
with respect to such Securities under Sections 305, 306, 1002 and 1003 and with
respect to the payment of Additional Amounts, if any, on such Securities as
contemplated by Section 1004, (C) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and (D) this Article. Subject to compliance
with this Article Fourteen, the

                                       65
<PAGE>

Company may exercise its option under this Section notwithstanding the prior
exercise of its option under Section 1403 with respect to such Securities and
any coupons appertaining thereto. Money and securities held in trust pursuant to
this Section 1402 shall not be subject to Article Sixteen.

            SECTION 1403. Covenant Defeasance. Upon the Company's exercise of
the above option applicable to this Section with respect to any Securities of or
within a series, the Company shall be released from any obligations under any
covenant specified pursuant to Section 301, with respect to such Outstanding
Securities and any coupons appertaining thereto on and after the date the
conditions set forth in Section 1404 are satisfied (hereinafter, "covenant
defeasance"), and such Securities and any coupons appertaining thereto shall
thereafter be deemed to be not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with such covenant, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to such Outstanding Securities and any
coupons appertaining thereto, the Company may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such Section or such other covenant, whether directly or indirectly, by reason
of any reference elsewhere herein to any such Section or such other covenant or
by reason of reference in any such Section or such other covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 501(4) or 501(7) or
otherwise, as the case may be, but, except as specified above, the remainder of
this Indenture and such Securities and any coupons appertaining thereto shall be
unaffected thereby.

            SECTION 1404. Conditions to Defeasance or Covenant Defeasance. The
following shall be the conditions to application of Section 1402 or Section 1403
to any Outstanding Securities of or within a series and any coupons appertaining
thereto:

            (a) The Company shall irrevocably have deposited or caused to be
      deposited with the Trustee (or another trustee satisfying the requirements
      of Section 607 who shall agree to comply with the provisions of this
      Article Fourteen applicable to it) as trust funds in trust for the purpose
      of making the following payments, specifically pledged as security for,
      and dedicated solely to, the benefit of the Holders of such Securities and
      any coupons appertaining thereto, (1) an amount in Dollars, or (2)
      Government Obligations applicable to such Securities and coupons
      appertaining thereto which, through the scheduled payment of principal and
      interest in respect thereof in accordance with their terms will provide,
      not later than one day before the due date of any payment of principal of
      (and premium, if any) and interest, if any, on such Securities and any
      coupons appertaining thereto, money in an amount, or (3) a combination
      thereof in an amount, sufficient, in the opinion of a nationally
      recognized firm of independent public accountants expressed in a written
      certification thereof delivered to the Trustee, to pay and discharge, and
      which shall be applied by the Trustee (or other qualifying trustee) to pay
      and discharge, (i) the principal of (and premium, if any) and interest, if
      any, on such Outstanding Securities and any coupons appertaining thereto
      on the Stated Maturity of such principal or installment of principal or
      interest and (ii) any mandatory sinking fund payments or analogous
      payments applicable to such Outstanding Securities and any

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<PAGE>

      coupons appertaining thereto on the day on which such payments are due and
      payable in accordance with the terms of this Indenture and of such
      Securities and any coupons appertaining thereto.

            (b) Such defeasance or covenant defeasance shall not result in a
      breach or violation of, or constitute a default under, this Indenture or
      any other material agreement or instrument to which the Company is a party
      or by which it is bound.

            (c) No Default or Event of Default with respect to such Securities
      and any coupons appertaining thereto shall have occurred and be continuing
      on the date of such deposit or, insofar as Sections 501(5) and 501(6) are
      concerned, at any time during the period ending on the 91st day after the
      date of such deposit (it being understood that this condition shall not be
      deemed satisfied until the expiration of such period).

            (d) In the case of an election under Section 1402, the Company shall
      have delivered to the Trustee an Opinion of Counsel stating that (i) the
      Company has received from, or there has been published by, the Internal
      Revenue Service a ruling, or (ii) since the date of execution of this
      Indenture, there has been a change in the applicable Federal income tax
      law, in either case to the effect that, and based thereon such opinion
      shall confirm that, the Holders of such Outstanding Securities and any
      coupons appertaining thereto will not recognize income, gain or loss for
      Federal income tax purposes as a result of such defeasance and will be
      subject to Federal income tax on the same amounts, in the same manner and
      at the same times as would have been the case if such defeasance had not
      occurred.

            (e) In the case of an election under Section 1403, the Company shall
      have delivered to the Trustee an Opinion of Counsel to the effect that the
      Holders of such Outstanding Securities and any coupons appertaining
      thereto will not recognize income, gain or loss for Federal income tax
      purposes as a result of such covenant defeasance and will be subject to
      Federal income tax on the same amounts, in the same manner and at the same
      times as would have been the case if such covenant defeasance had not
      occurred.

            (f) The Company shall have delivered to the Trustee an Officers'
      Certificate and an Opinion of Counsel, each stating that all conditions
      precedent to the defeasance under Section 1402 or the covenant defeasance
      under Section 1403 (as the case may be) have been complied with and an
      Opinion of Counsel to the effect that either (i) as a result of a deposit
      pursuant to subsection (a) above and the related exercise of the Company's
      option under Section 1402 or Section 1403 (as the case may be),
      registration is not required under the Investment Company Act of 1940, as
      amended, by the Company, with respect to the trust funds representing such
      deposit or by the trustee for such trust funds or (ii) all necessary
      registrations under said Act have been effected.

            (g) Notwithstanding any other provisions of this Section, such
      defeasance or covenant defeasance shall be effected in compliance with any
      additional or

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<PAGE>

      substitute terms, conditions or limitations which may be imposed on the
      Company in connection therewith pursuant to Section 301.

            SECTION 1405. Deposited Money and Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last
paragraph of Section 1003, all money and Government Obligations (or other
property as may be provided pursuant to Section 301) (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in
respect of any Outstanding Securities of any series and any coupons appertaining
thereto shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and any coupons appertaining thereto and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities and any coupons appertaining
thereto of all sums due and to become due thereon in respect of principal (and
premium, if any) and interest, if any, but such money need not be segregated
from other funds except to the extent required by law.

            The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Government Obligations
deposited pursuant to Section 1404 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of such Outstanding Securities and any coupons
appertaining thereto.

            Anything in this Article to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or Government Obligations (or other property and any proceeds
therefrom) held by it as provided in Section 1404 which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect a
defeasance or covenant defeasance, as applicable, in accordance with this
Article.

                                 ARTICLE FIFTEEN

                        MEETINGS OF HOLDERS OF SECURITIES

            SECTION 1501. Purposes for Which Meetings May Be Called. If
Securities of a series are issuable as Bearer Securities, a meeting of Holders
of Securities of such series may be called at any time and from time to time
pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series.

            SECTION 1502. Call, Notice and Place of Meetings. (a) The Trustee
may at any time call a meeting of Holders of Securities of any series for any
purpose specified in Section 1501, to be held at such time and at such place in
the Borough of Manhattan, The City of New York or in London as the Trustee shall
determine. Notice of every meeting of Holders of Securities of any series,
setting forth the time and the place of such meeting and in general terms

                                       68
<PAGE>

the action proposed to be taken at such meeting, shall be given, in the manner
provided in Section 106, not less than 21 nor more than 180 days prior to the
date fixed for the meeting.

            (b) In case at any time the Company, pursuant to a Board Resolution,
or the Holders of at least 10% in principal amount of the Outstanding Securities
of any series shall have requested the Trustee to call a meeting of the Holders
of Securities of such series for any purpose specified in Section 1501, by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have made the first publication
of the notice of such meeting within 21 days after receipt of such request or
shall not thereafter proceed to cause the meeting to be held as provided herein,
then the Company or the Holders of Securities of such series in the amount above
specified, as the case may be, may determine the time and the place in the
Borough of Manhattan, The City of New York or in London for such meeting and may
call such meeting for such purposes by giving notice thereof as provided in
subsection (a) of this Section.

            SECTION 1503. Persons Entitled to Vote at Meetings. To be entitled
to vote at any meeting of Holders of Securities of any series, a Person shall be
(1) a Holder of one or more Outstanding Securities of such series, or (2) a
Person appointed by an instrument in writing as proxy for a Holder or Holders of
one or more Outstanding Securities of such series by such Holder or Holders. The
only Persons who shall be entitled to be present or to speak at any meeting of
Holders of Securities of any series shall be the Persons entitled to vote at
such meeting and their counsel, any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.

            SECTION 1504. Quorum; Action. The Persons entitled to vote a
majority in principal amount of the Outstanding Securities of a series shall
constitute a quorum for a meeting of Holders of Securities of such series;
provided, however, that if any action is to be taken at such meeting with
respect to a consent or waiver which this Indenture expressly provides may be
given by the Holders of not less than a specified percentage in principal amount
of the Outstanding Securities of a series, the Persons entitled to vote such
specified percentage in principal amount of the Outstanding Securities of such
series shall constitute a quorum. In the absence of a quorum within 30 minutes
of the time appointed for any such meeting, the meeting shall, if convened at
the request of Holders of Securities of such series, be dissolved. In any other
case the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10 days
as determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 1502(a), except that such notice need be given only
once not less than five days prior to the date on which the meeting is scheduled
to be reconvened. Notice of the reconvening of any adjourned meeting shall state
expressly the percentage, as provided above, of the principal amount of the
Outstanding Securities of such series which shall constitute a quorum.

            Except as limited by the proviso to Section 902, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is
present as aforesaid may be

                                       69
<PAGE>

adopted by the affirmative vote of the Holders of a majority in principal amount
of the Outstanding Securities of that series; provided, however, that, except as
limited by the proviso to Section 902, any resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action which this Indenture expressly provides may be made, given or taken by
the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities of a series may be adopted at a
meeting or an adjourned meeting duly reconvened and at which a quorum is present
as aforesaid by the affirmative vote of the Holders of such specified percentage
in principal amount of the Outstanding Securities of that series.

            Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related coupons,
whether or not present or represented at the meeting.

            Notwithstanding the foregoing provisions of this Section 1504, if
any action is to be taken at a meeting of Holders of Securities of any series
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that this Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage in principal amount of all
Outstanding Securities affected thereby, or of the Holders of such series and
one or more additional series:

            (i) there shall be no minimum quorum requirement for such meeting;
      and

            (ii) the principal amount of the Outstanding Securities of such
      series that vote in favor of such request, demand, authorization,
      direction, notice, consent, waiver or other action shall be taken into
      account in determining whether such request, demand, authorization,
      direction, notice, consent, waiver or other action has been made, given or
      taken under this Indenture.

            SECTION 1505. Determination of Voting Rights; Conduct and
Adjournment of Meetings. (a) Notwithstanding any provisions of this Indenture,
the Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities of a series in regard to proof of the
holding of Securities of such series and of the appointment of proxies and in
regard to the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations,
the holding of Securities shall be proved in the manner specified in Section 104
and the appointment of any proxy shall be proved in the manner specified in
Section 104 or by having the signature of the Person executing the proxy
witnessed or guaranteed by any trust company, bank or banker authorized by
Section 104 to certify to the holding of Bearer Securities. Such regulations may
provide that written instruments appointing proxies, regular on their face, may
be presumed valid and genuine without the proof specified in Section 104 or
other proof.

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<PAGE>

            (b) The Trustee shall, by an instrument in writing appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Holders of Securities as provided in Section 1502(b), in which
case the Company or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.

            (c) At any meeting each Holder of a Security of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of the
Outstanding Securities of such series held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman of the meeting
to be not Outstanding. The chairman of the meeting shall have no right to vote,
except as a Holder of a Security of such series or proxy.

            (d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1502 at which a quorum is present may be adjourned from time
to time by Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting, and the
meeting may be held as so adjourned without further notice.

            SECTION 1506. Counting Votes and Recording Action of Meetings. The
vote upon any resolution submitted to any meeting of Holders of Securities of
any series shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities of such series or of their
representatives by proxy and the principal amounts and serial numbers of the
Outstanding Securities of such series held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record, at least in duplicate, of
the proceedings of each meeting of Holders of Securities of any Series shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
fact, setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 1502 and, if applicable, Section 1504.
Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Company and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.

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<PAGE>

                                    * * * * *

            This Indenture may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.

            IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.

                                      PUBLIC SERVICE ELECTRIC AND GAS COMPANY

                                      By /s/ Morton A. Plawner
                                         -------------------------------------
[SEAL]                                   Vice President and Treasurer

Attest:

 /s/  E. J. Biggins, Jr.
------------------------------
        [Secretary]

                                      FIRST UNION NATIONAL BANK,
                                                       as Trustee

                                      By /s/  F. Gallagher
                                         -------------------------------------
                                         Vice President

[SEAL]

Attest:

/s/  Rick Barnes
------------------------------
[Assistant Secretary]

                                       72
<PAGE>

STATE OF NEW JERSEY        )
                           ) ss:
COUNTY OF ESSEX            )

            On the 5th day of December, 2000, before me personally came Morton
A. Plawner to me known, who, being by me duly sworn, did depose and say that he
resides at 25 Narrows Way, Monroe, New Jersey 08831; that he is Vice President
and Treasurer of Public Service Electric and Gas Company, one of the
Corporations described in and which executed the foregoing instrument; that he
knows the seal of said Corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said Corporation; and that he signed his name thereto by like
authority.

[Notarial Seal]

                                         /s/ Cherri Weldon
                                         -------------------------------------
                                         Cherri Weldon
                                         Notary Public of New Jersey
                                         My Commission Expires June 4, 2003

STATE OF NEW JERSEY        )
                           ) ss:
COUNTY OF ESSEX            )

            On the 6th day of December, 2000, before me personally came Frank
Gallagher, to me known, who, being by me duly sworn, did depose and say that he
resides at 670 Eighth Street, Secaucus, NJ 07094; that he is a Vice President of
First Union National Bank, one of the Corporations described in and which
executed the foregoing instrument; that he knows the seal of said Corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said Corporation; and that he
signed his name thereto by like authority.

[Notarial Seal]

                                         /s/ Jacquelyn E. Coyle
                                         -------------------------------------
                                         Jacquelyn E. Coyle
                                         Notary Public of New Jersey
                                         My Commission Expires July 22, 2002

                                       73
<PAGE>

                                    EXHIBIT A

                             FORMS OF CERTIFICATION

                                   EXHIBIT A-1

               FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED
                TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST
                       PAYABLE PRIOR TO THE EXCHANGE DATE

                                   CERTIFICATE

              [Insert title or sufficient description of Securities
                                to be delivered]

            This is to certify that, as of the date hereof, and except as set
forth below, the above-captioned Securities held by you for our account (i) are
owned by person(s) that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States federal income taxation regardless of its
source ("United States person(s)"), (ii) are owned by United States person(s)
that are (a) foreign branches of United States financial institutions (financial
institutions, as defined in United States Treasury Regulations Section
1.165-12(c)(1)(v) are herein referred to as "financial institutions") purchasing
for their own account or for resale, or (b) United States person(s) who acquired
the Securities through foreign branches of United States financial institutions
and who hold the Securities through such United States financial institutions on
the date hereof (and in either case (a) or (b), each such United States
financial institution hereby agrees, on its own behalf or through its agent,
that you may advise Public Service Electric and Gas Company or its agent that
such financial institution will comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign financial institution(s) for purposes of resale during the restricted
period (as defined in United States Treasury Regulations Section
1.163-5(c)(2)(i)(D)(7)), and, in addition, if the owner is a United States or
foreign financial institution described in clause (iii) above (whether or not
also described in clause (i) or (ii)), this is to further certify that such
financial institution has not acquired the Securities for purposes of resale
directly or indirectly to a United States person or to a person within the
United States or its possessions.

            As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.

                                      A-1
<PAGE>

            We undertake to advise you promptly by tested telex on or prior to
the date on which you intend to submit your certification relating to the
above-captioned Securities held by you for our account in accordance with your
Operating Procedures if any applicable statement herein is not correct on such
date, and in the absence of any such notification it may be assumed that this
certification applies as of such date.

            This certificate excepts and does not relate to [U.S.$] of such
interest in the above-captioned Securities in respect of which we are not able
to certify and as to which we understand an exchange for an interest in a
Permanent Global Security or an exchange for and delivery of definitive
Securities (or, if relevant, collection of any interest) cannot be made until we
do so certify.

            We understand that this certificate may be required in connection
with certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.

Dated:_________________, 19__

[To be dated no earlier than the 15th day prior to (i) the Exchange Date or (ii)
the relevant Interest Payment Date occurring prior to the Exchange Date, as
applicable]

                                         [Name of Person Making Certification]

                                         _____________________________________
                                         (Authorized Signatory)
                                         Name:
                                         Title:

                                      A-2
<PAGE>

                                   EXHIBIT A-2

                FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND
               CLEARSTREAM BANK IN CONNECTION WITH THE EXCHANGE OF
                    A PORTION OF A TEMPORARY GLOBAL SECURITY
                       OR TO OBTAIN INTEREST PAYABLE PRIOR
                              TO THE EXCHANGE DATE

                                   CERTIFICATE

              [Insert title or sufficient description of Securities
                                to be delivered]

            This is to certify that, based solely on written certifications that
we have received in writing, by tested telex or by electronic transmission from
each of the persons appearing in our records as persons entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
in the form attached hereto, as of the date hereof, [U.S.$] principal amount of
the above-captioned Securities (i) is owned by person(s) that are not citizens
or residents of the United States, domestic partnerships, domestic corporations
or any estate or trust the income of which is subject to United States Federal
income taxation regardless of its source ("United States person(s)"), (ii) is
owned by United States person(s) that are (a) foreign branches of United States
financial institutions (financial institutions, as defined in U.S. Treasury
Regulations Section 1.165-12(c)(1)(v) are herein referred to as "financial
institutions") purchasing for their own account or for resale, or (b) United
States person(s) who acquired the Securities through foreign branches of United
States financial institutions and who hold the Securities through such United
States financial institutions on the date hereof (and in either case (a) or (b),
each such financial institution has agreed, on its own behalf or through its
agent, that we may advise Public Service Electric and Gas Company or its agent
that such financial institution will comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and
the regulations thereunder), or (iii) is owned by United States or foreign
financial institution(s) for purposes of resale during the restricted period (as
defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)),
and, to the further effect, that financial institutions described in clause
(iii) above (whether or not also described in clause (i) or (ii)) have certified
that they have not acquired the Securities for purposes of resale directly or
indirectly to a United States person or to a person within the United States or
its possessions.

            As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.

            We further certify that (i) we are not making available herewith for
exchange (or, if relevant, collection of any interest) any portion of the
temporary global Security representing

                                      A-2-1
<PAGE>

the above-captioned Securities excepted in the above-referenced certificates of
Member Organizations and (ii) as of the date hereof we have not received any
notification from any of our Member Organizations to the effect that the
statements made by such Member Organizations with respect to any portion of the
part submitted herewith for exchange (or, if relevant, collection of any
interest) are no longer true and cannot be relied upon as of the date hereof.

            We understand that this certification is required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.

Dated:________________, 20__

[To be dated no earlier than the Exchange Date or the relevant Interest Payment
Date occurring prior to the Exchange Date, as applicable]

                                     [Morgan Guaranty Trust Company of New York,
                                        Brussels Office,] as Operator of the
                                        Euroclear System

                                     [Clearstream]

By __________________________

                                     A-2-2

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