LEHMAN BROTHERS INC//, POS AM, 1996-03-06

LEHMAN BROTHERS INC//
POS AM, 1996-03-06
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1996

POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 33-63613
POST-EFFECTIVE AMENDMENT NO. 2 TO REGISTRATION STATEMENT NO. 33-51837
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
POST-EFFECTIVE AMENDMENTS
TO
FORM S-3
REGISTRATION STATEMENTS
UNDER
THE SECURITIES ACT OF 1933
-------------------
LEHMAN BROTHERS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 13-2518466
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

THOMAS A. RUSSO, ESQ.
CHIEF LEGAL OFFICER
LEHMAN BROTHERS INC.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:

JENNIFER MARRE, ESQ. RAYMOND W. WAGNER, ESQ.
LEHMAN BROTHERS INC. SIMPSON THACHER & BARTLETT
3 WORLD FINANCIAL CENTER 425 LEXINGTON AVENUE
24TH FLOOR NEW YORK, NEW YORK 10017
NEW YORK, NEW YORK 10285

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of these Post-Effective Amendments, as
determined in light of market conditions.

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

PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS HEREIN
IS A COMBINED PROSPECTUS AND ALSO RELATES TO REGISTRATION STATEMENT NOS.
33-51837 AND 33-63613, PREVIOUSLY FILED WITH THE COMMISSION ON FORM S-3 AND
DECLARED EFFECTIVE MAY 18, 1994 AND NOVEMBER 8, 1995, RESPECTIVELY. IN
ADDITION, THESE AMENDMENTS CONSTITUTE POST-EFFECTIVE AMENDMENT NO. 2 TO
REGISTRATION STATEMENT NO. 33-51837 AND POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT NO. 33-63613.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION DATED MARCH 6, 1996
LEHMAN BROTHERS INC.
DEBT SECURITIES
------------------------

Lehman Brothers Inc. (the "Company") may offer from time to time unsecured
senior debt securities ("Senior Debt Securities") and unsecured senior
subordinated debt securities ("Senior Subordinated Debt Securities") and
(together, "Debt Securities") consisting of debentures, notes and/or other
evidences of indebtedness in one or more series for proceeds of up to
U.S.$825,000,000, or the equivalent thereof if any of the Senior Debt Securities
are denominated in a foreign currency or foreign currency unit.

The Senior Subordinated Debt Securities will (as hereinafter defined) rank
equally with all other senior subordinated indebtedness of the Company and are
subordinated to all Senior Indebtedness as defined in the Subordinated
Indenture. There is no limitation on the amount of Senior Indebtedness which may
be incurred by the Company.

The Debt Securities may be offered as separate series in amounts, at prices
and on terms to be determined at the time of sale. The Senior Debt Securities
may be sold for United States dollars, foreign currencies or foreign currency
units, and the principal of and interest, if any, on the Debt Securities may be
payable in United States dollars, foreign currencies or foreign currency units.
The Senior Subordinated Debt Securities may be sold only for, and may be payable
only in, United States dollars. The specific designation, priority, aggregate
principal amount, the currency or currency unit for which the Debt Securities
may be purchased, the currency or currency unit in which the principal and
interest, if any, is payable, the rate (or method of calculation) and time of
payment of interest, if any, authorized denominations, maturity, offering price,
any redemption terms, any listing on a securities exchange and the initial
public offering price and any other terms in connection with the offering and
sale of Debt Securities in respect of which this Prospectus is being delivered
are set forth in an applicable Prospectus Supplement.

The Senior Debt Securities may be issued in registered form or bearer form
with coupons attached. Senior Debt Securities in bearer form will be offered
only outside the United States to non-United States persons and to offices
located outside the United States of certain United States financial
institutions. See "Limitations on Issuance of Bearer Securities." The Senior
Subordinated Debt Securities may be issued only in registered form. In addition,
all or a portion of the Debt Securities of a series may be issued in global
form.

For a discussion of certain United States federal income tax consequences to
holders of Debt Securities, see "United States Taxation."

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

The Debt Securities may be sold through, or through underwriting syndicates
managed by, Lehman Brothers Inc. alone or with one or more other underwriters.
The applicable Prospectus Supplement sets forth the names of the specific
managing underwriter or underwriters and the members of the underwriting
syndicate, if any, involved in the sale of the Debt Securities in respect of
which this Prospectus is being delivered.
------------------------

This Prospectus, together with the applicable Prospectus Supplement, may
also be used by Lehman Brothers International (Europe) in connection with offers
and sales of Debt Securities related to market making transactions at negotiated
prices related to prevailing market prices at the time of sale or otherwise.
Lehman Brothers International (Europe) may act as principal or agent in such
transactions.

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

, 1996
<PAGE>
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION
CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PRELIMINARY PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE.
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "SEC"). Such reports and information may be inspected and copied
at the public reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the SEC:
New York Regional Office, 7 World Trade Center, New York, New York 10048; and
Chicago Regional Office, Suite 1400, Citicorp Center, 500 W. Madison Street,
Chicago, Illinois 60661-2511; and copies of such material can be obtained from
the Public Reference Section of the SEC, Washington, D.C. 20549, at prescribed
rates. In addition, reports and other information concerning the Company may be
inspected at the offices of the New York Stock Exchange, Inc. (the "NYSE") at 20
Broad Street, New York, New York 10005.

The Company has filed with the SEC registration statements on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statements") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statements, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further information,
reference is hereby made to the Registration Statements.

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

DOCUMENTS INCORPORATED BY REFERENCE

The Company's Annual Report on Form 10-K for the fiscal year ended November
30, 1995 filed by the Company with the SEC pursuant to the Exchange Act is
hereby incorporated by reference in this Prospectus.

Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities offered by an applicable
Prospectus Supplement shall be deemed to be incorporated by reference into this
Prospectus from the date of filing of such document. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the Registration
Statements and this Prospectus to the extent that a statement contained herein,
in an applicable Prospectus Supplement or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statements or this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner of any Debt Security, to whom a copy of this Prospectus is
delivered, upon the written or oral request of any such person, a copy of any or
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Mary Jo Capko,
the Controller's Office, Lehman Brothers Inc., 3 World Financial Center, 27th
Floor, New York, New York 10285 (telephone (212) 526-0660).

2
<PAGE>
THE COMPANY

The Company is one of the leading global investment banks serving
institutional, corporate, government and high net worth individual clients and
customers. The Company's worldwide headquarters in New York are complemented by
offices in additional locations in the United States, Europe, the Middle East,
Latin America and the Asia Pacific region. The Company also operates a
commodities trading and sales operation in London. Affiliates of the Company
provide investment banking and capital markets services in Europe and Asia.

The Company's business includes capital raising for clients through
securities underwriting and direct placements; corporate finance and strategic
advisory services; merchant banking; securities sales and trading; asset
management; research; and the trading of foreign exchange, derivative products
and certain commodities. The Company acts as a market marker in all major fixed
income and equity products in both the domestic and international markets. The
Company is a member of all principal securities and commodities exchanges in the
United States, as well as the National Association of Securities Dealers, Inc.
("NASD"). Affiliates of the Company hold memberships or associate memberships on
several principal international securities and commodities exchanges, including
the London, Tokyo, Hong Kong, Frankfurt and Milan stock exchanges.

The Company was incorporated in Delaware in 1965. The Company is a
wholly-owned subsidiary of Lehman Brothers Holdings Inc. ("Holdings"). The
Company's executive offices are located at 3 World Financial Center, New York,
New York 10285 (telephone (212) 526-7000). Unless the context otherwise
indicates, the term "Company" as used in this Prospectus includes Lehman
Brothers Inc. and its subsidiaries.

USE OF PROCEEDS

Except as otherwise may be set forth in an applicable Prospectus Supplement
accompanying this Prospectus, the Company intends to apply the net proceeds from
the sale of the Debt Securities to its general funds to be used for general
corporate purposes.

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth the ratio of earnings to fixed charges of the
Company for each of the three years in the period ended December 31, 1993, the
eleven months ended November 30, 1994 and the year ended November 30, 1995:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER ELEVEN MONTHS ENDED YEAR ENDED
31, NOVEMBER 30, NOVEMBER 30,
---------------------- ------------------- ------------
1991 1992 1993 1994 1995
---- ---- ---- ------------------- ------------
<S> <C> <C> <C> <C>
1.05 1.05 * * 1.01
</TABLE>

----------------
* Earnings were inadequate to cover fixed charges and would have had to
increase approximately $214 million in 1993 and $51 million in the eleven
months ended November 30, 1994 in order to cover the deficiencies for the
respective periods.

In computing the ratio of earnings to fixed charges, "earnings" consist of
earnings from continuing operations before income taxes and fixed charges.
"Fixed charges" consist principally of interest expense and one-third of office
rentals and one-fifth of equipment rentals, which are deemed to be
representative of the interest factor.

3
<PAGE>
DESCRIPTION OF SENIOR DEBT SECURITIES

The following description sets forth general terms and provisions of the
Senior Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Senior Debt Securities offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may or may
not apply to the Senior Debt Securities so offered will be described in the
Prospectus Supplement relating to such Senior Debt Securities.

The Senior Debt Securities are to be issued under an indenture, dated as of
October 23, 1995, between the Company and The Bank of New York, Trustee (the
"Senior Indenture"). A copy of the Senior Indenture is filed as an exhibit to
the Registration Statements of which this Prospectus is a part. This Prospectus
contains descriptions of all material provisions of the Senior Indenture. The
summaries of such provisions of the Senior Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Senior Indenture, including the definitions
therein of certain terms. Wherever particular provisions or defined terms of the
Senior Indenture are referred to, such provisions or defined terms are
incorporated herein by reference. All articles and sections of the Senior
Indenture, and all capitalized terms set forth below, have the meanings
specified in the Senior Indenture.

GENERAL

The Indenture does not limit the amount of Senior Debt Securities which may
be issued thereunder and provides that Senior Debt Securities may be issued from
time to time in one or more series.

Reference is made to an applicable Prospectus Supplement for the following
terms and other information with respect to the Senior Debt Securities being
offered thereby: (1) the title of such Senior Debt Securities; (2) any limit on
the aggregate principal amount of such Senior Debt Securities; (3) whether the
Senior Debt Securities are to be issuable as Registered Securities or Bearer
Securities or both, and if Bearer Securities are issued, whether Bearer
Securities may be exchanged for Registered Securities and the circumstances and
places for such exchange, if permitted; (4) whether the Senior Debt Securities
are to be issued in whole or in part in the form of one or more temporary or
permanent global Senior Debt Securities ("Global Securities") in registered or
bearer form and, if so, the identity of the depositary, if any, for such Global
Security or Securities; (5) the date or dates (or manner of determining the
same) on which such Senior Debt Securities will mature; (6) the rate or rates
(or manner of determining the same) at which such Senior Debt Securities will
bear interest, if any, and the date or dates from which such interest will
accrue; (7) the dates (or manner of determining the same) on which such interest
will be payable and the Regular Record Dates for such Interest Payment Dates for
Senior Debt Securities which are Registered Securities, and the extent to which,
or the manner in which, any interest payable on a temporary or permanent global
Senior Debt Security on an Interest Payment Date will be paid if other than in
the manner described under "Global Securities" below; (8) any mandatory or
optional sinking fund or analogous provisions; (9) each office or agency where,
subject to the terms of the applicable Senior Indenture as described below under
"Payment and Paying Agents", the principal of and premium, if any, and interest,
if any, on the Senior Debt Securities will be payable and each office or agency
where, subject to the terms of the Senior Indenture as described below under
"Denominations, Registration and Transfer," the Senior Debt Securities may be
presented for registration of transfer or exchange; (10) the date, if any, after
which, and the price or prices in the currency or currency unit in which, such
Senior Debt Securities are payable pursuant to any optional or mandatory
redemption provision; (11) any provisions for payment of additional amounts for
taxes and any provision for redemption, in the event the Company must comply
with reporting requirements in respect of a Senior Debt Security or must pay
such additional amounts in respect of any Senior Debt Security; (12) the terms
and conditions, if any, upon which the Senior Debt Securities of such series may
be repayable prior to maturity at the option of the holder thereof (which option
may be conditional) and the price or prices in the currency or currency unit in
which such Senior Debt Securities are payable; (13) the denominations in which
any Senior Debt Securities which are Registered Securities will be issuable if
other than denominations of $1,000 and any integral multiple thereof, and the
denomination or denominations in which any Senior Debt Securities which are
Bearer

4
<PAGE>
Securities will be issuable if other than the denomination of $5,000; (14) the
currency, currencies or currency units for which such Senior Debt Securities may
be purchased and the currency, currencies or currency units in which the
principal of and interest, if any, on such Senior Debt Securities may be
payable; (15) any index used to determine the amount of payments of principal of
and premium, if any, and interest, if any, on such Senior Debt Securities; (16)
the terms and conditions, if any, pursuant to which such Senior Debt Securities
may be converted or exchanged for other securities of the Company or any other
person; (17) the terms and conditions, if any, pursuant to which the principal
of and premium, if any, and interest, if any, on such Senior Debt Securities are
payable, at the election of the Company or the holder thereof, in securities or
other property; and (18) other terms of the Senior Debt Securities.

If any of the Senior Debt Securities are sold for foreign currencies or
foreign currency units or if the principal of or interest, if any, on any series
of Senior Debt Securities is payable in foreign currencies or foreign currency
units, the restrictions, elections, tax consequences, specific terms and other
information with respect to such issue of Senior Debt Securities and such
currencies or currency units will be set forth in an applicable Prospectus
Supplement relating thereto.

One or more series of Senior Debt Securities may be sold at a substantial
discount below their stated principal amount, bearing no interest or interest at
a rate which at the time of issuance is below market rates. Federal income tax
consequences and special considerations applicable to any such series are
described under "United States Taxation" and may be further described in an
applicable Prospectus Supplement.

The Senior Debt Securities will be unsecured obligations of the Company
constituting part of the senior debt of the Company (the "Senior Debt") and will
rank equally with all other unsecured debt of the Company except subordinated
debt.

DENOMINATIONS, REGISTRATION AND TRANSFER

Unless otherwise provided with respect to a series of Senior Debt
Securities, the Senior Debt Securities will be issuable as Registered Securities
without coupons and in denominations of $1,000 or any integral multiple thereof.
Senior Debt Securities of a series may be issuable in whole or in part in the
form of one or more Global Securities, as described below under "Global
Securities." One or more Global Securities will be issued in a denomination or
aggregate denominations equal to the aggregate principal amount of Senior Debt
Securities of the series to be represented by such Global Security or
Securities. If so provided with respect to a series of Senior Debt Securities,
Senior Debt Securities of such series will be issuable solely as Bearer
Securities with coupons attached or as both Registered Securities and Bearer
Securities. (Section 201).

In connection with the sale during the "restricted period" as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations
(generally, the first 40 days after the closing date and, with respect to unsold
allotments, until sold), no Bearer Security shall be mailed or otherwise
delivered to any location in the United States (as defined under "Limitations on
Issuance of Bearer Securities"). A Bearer Security in definitive form (including
interests in a permanent Global Security) may be delivered only if the Person
entitled to receive such Bearer Security furnishes written certification, in the
form required by the Indenture, to the effect that such Bearer Security is not
owned by or on behalf of a United States person (as defined under "Limitations
on Issuance of Bearer Securities"), or, if a beneficial interest in such Bearer
Security is owned by or on behalf of a United States person, that such United
States person (i) acquired and holds the Bearer Security through a foreign
branch of a United States financial institution, (ii) is a foreign branch of a
United States financial institution purchasing for its own account or resale
(and in either case, (i) or (ii), such financial institution agrees to comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder)
or (iii) is a financial institution purchasing for resale during the restricted
period only to non-United States persons outside the United States. (Sections
303, 304). See "Global Securities--Bearer Debt Securities" and "Limitations on
Issuance of Bearer Securities."

5
<PAGE>
Registered Securities of any series (other than a Global Security) will be
exchangeable for other Registered Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations. In
addition, if Senior Debt Securities of any series are issuable as both
Registered Securities and as Bearer Securities, at the option of the Holder upon
request confirmed in writing, and subject to the terms of the Senior Indenture,
definitive Bearer Securities (with all unmatured coupons, except as provided
below, and all matured coupons in default) of such series will be exchangeable
into definitive Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. Unless
otherwise indicated in an applicable Prospectus Supplement, any definitive
Bearer Security surrendered in exchange for a definitive Registered Security
between a Regular Record Date or a Special Record Date and the relevant date for
payment of interest shall be surrendered without the coupon relating to such
date for payment of interest and interest will not be payable in respect of the
definitive Registered Security issued in exchange for such definitive Bearer
Security, but will be payable only to the Holder of such coupon when due in
accordance with the terms of the Senior Indenture. (Section 305). Except as
provided in an applicable Prospectus Supplement, Bearer Securities will not be
issued in exchange for Registered Securities.

Senior Debt Securities may be presented for exchange as provided above, and
Registered Securities (other than a Global Security) may be presented for
registration of transfer (with the form of transfer endorsed thereon duly
executed), at the office of the Security Registrar or at the office of any
transfer agent designated by the Company for such purpose with respect to any
series of Senior Debt Securities and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the Senior Indenture. Such transfer or
exchange will be effected upon the Security Registrar or such transfer agent, as
the case may be, being satisfied with the documents of title and identity of the
person making the request. The Company has appointed the Trustee as Security
Registrar under the Senior Indenture. (Section 305). If a Prospectus Supplement
refers to any transfer agents (in addition to the Security Registrar) initially
designated by the Company with respect to any series of Senior Debt Securities,
the Company may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
except that, if Senior Debt Securities of a series are issuable only as
Registered Securities, the Company will be required to maintain a transfer agent
in each Place of Payment for such series and, if Senior Debt Securities of a
series are issuable as Bearer Securities, the Company will be required to
maintain (in addition to the Security Registrar) a transfer agent in a Place of
Payment for such series located outside the United States. The Company may at
any time designate additional transfer agents with respect to any series of
Senior Debt Securities. (Section 1002).

In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange Senior Debt Securities of any
series during a period beginning at the opening of business 15 days before any
selection of Senior Debt Securities of that series to be redeemed and ending at
the close of business on (A) if Senior Debt Securities of the series are
issuable only as Registered Securities, the day of mailing of the relevant
notice of redemption and (B) if Senior Debt Securities of the series are
issuable as Bearer Securities, the day of the first publication of the relevant
notice of redemption or, if Senior Debt Securities of the series are also
issuable as Registered Securities and there is no publication, the mailing of
the relevant notice of redemption; (ii) register the transfer of or exchange any
Registered Security, or portion thereof, called for redemption, except the
unredeemed portion of any Registered Security being redeemed in part; or (iii)
exchange any Bearer Security called for redemption, except to exchange such
Bearer Security for a Registered Security of that series and like tenor which is
immediately surrendered for redemption. (Section 305).

PAYMENT AND PAYING AGENTS

Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Bearer Securities will
be payable, subject to any applicable laws and regulations, at the offices of
such Paying Agents outside the United States as the Company may designate from
time to time, at the option of the Holder, by check or by transfer to an account

6
<PAGE>
maintained by the payee with a bank located outside the United States. (Sections
307 and 1002). Unless otherwise indicated in an applicable Prospectus
Supplement, payment of interest on Bearer Securities on any Interest Payment
Date will be made only against surrender of the coupon relating to such Interest
Payment Date. (Section 1001). No payment of interest on a Bearer Security will
be made unless on the earlier of the date of the first such payment by the
Company or the delivery by the Company of the Bearer Security in permanent form
(including interests in a permanent Global Security) (the "Certification Date"),
a written certificate in the form and to the effect described under
"Denominations, Registration and Transfer" is provided to the Company. No
payment with respect to any Bearer Security will 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. Notwithstanding the foregoing, payment of principal of (and
premium, if any) and interest on Bearer Securities denominated and payable in
U.S. dollars will be made at the office of the Company's Paying Agent in the
Borough of Manhattan, The City of New York if, and only if, payment of the full
amount thereof in U.S. dollars at all offices or agencies outside the United
States is illegal or effectively precluded by exchange controls or other similar
restrictions. (Section 1002).

Payment of principal of (and premium, if any) and any interest on Registered
Securities (other than a Global Security) will be made in U.S. dollars at the
office of such Paying Agent or Paying Agents as the Company may designate from
time to time, except that at the option of the Company payment of any interest
may be made (i) by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register or (ii) by wire transfer to
an account maintained by the Person entitled thereto as specified in the
Security Register. (Sections 305, 307, 1002). Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any instalment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest payment. (Section 307).

The principal corporate trust office of the Trustee under the applicable
Senior Indenture in The City of New York will be designated as the Company's
sole Paying Agent for payments with respect to Senior Debt Securities which are
issuable solely as Registered Securities and as the Company's Paying Agent in
the Borough of Manhattan, The City of New York, for payments with respect to
Senior Debt Securities (subject to the limitations described above in the case
of Bearer Securities) which may be issuable as Bearer Securities. Any Paying
Agents outside the United States and any other Paying Agents in the United
States initially designated by the Company for the Senior Debt Securities will
be named in an applicable Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agents or approve a change in the office through which any Paying Agent acts,
except that, if Senior Debt Securities of a series are issuable only as
Registered Securities, the Company will be required to maintain a Paying Agent
in each Place of Payment for such series, and if Senior Debt Securities of a
series may be issuable as Bearer Securities, the Company will be required to
maintain (i) a Paying Agent in the Borough of Manhattan, The City of New York
for payments with respect to any Registered Securities of the series (and for
payments with respect to Bearer Securities of the series in the circumstances
described above, but not otherwise), and (ii) a Paying Agent in a Place of
Payment located outside the United States where Senior Debt Securities of such
series and any coupons appertaining thereto may be presented and surrendered for
payment; provided that if the Senior Debt Securities of such series are listed
on The Luxembourg Stock Exchange (the "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 in Luxembourg or any other
required city located outside the United States, as the case may be, for the
Senior Debt Securities of such series. (Section 1002).

All moneys paid by the Company to a Paying Agent for the payment of
principal of (and premium, if any) or interest on any Senior Debt Security which
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company and the
Holder of such Senior Debt Security or any coupon will thereafter look only to
the Company for payment thereof. (Section 1003).

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GLOBAL SECURITIES

The Senior Debt Securities of a series may be issued in whole or in part in
the form of one or more Global Securities that will be deposited with or on
behalf of a depository (a "Depository") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued in either registered or
bearer form and in either temporary or permanent form.

The specific terms of the depository arrangement with respect to any Senior
Debt Securities of a series will be described in the Prospectus Supplement
relating to such series. The Company anticipates that the following provisions
will apply to all depository arrangements.

Senior Debt Securities which are to be represented by a Global Security in
registered form to be deposited with or on behalf of a Depository will be
registered in the name of such Depository or its nominee. Upon the issuance of a
Global Security in registered form, the Depository for such Global Security will
credit the respective principal amounts of the Senior Debt Securities
represented by such Global Security to the accounts of institutions that have
accounts with such depository or its nominee ("participants"). The accounts to
be credited shall be designated by the underwriters or agents of such Senior
Debt Securities or by the Company, if such Senior Debt Securities are offered
and sold directly by the Company. Ownership of beneficial interests in such
Global Securities will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in such Global Securities will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depository or its nominee for such Global Security. Ownership of beneficial
interests in Global Securities by persons that hold through participants will be
shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security.

So long as the Depository for a Global Security in registered form, or its
nominee, is the registered owner of such Global Security, such depository or
such nominee, as the case may be, will be considered the sole owner or holder of
the Senior Debt Securities represented by such Global Security for all purposes
under the Senior Indenture. Except as set forth below, owners of beneficial
interests in such Global Securities will not be entitled to have Senior Debt
Securities of the series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Senior
Debt Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Senior Indenture.

Payment of principal of, premium, if any, and any interest on Senior Debt
Securities registered in the name of or held by a Depository or its nominee will
be made to the Depository or its nominee, as the case may be, as the registered
owner or the holder of the Global Security. None of the Company, the Trustee,
any Paying Agent or the Security Registrar for such Senior Debt Securities will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. (Section 308).

The Company expects that the Depository for a permanent Global Security in
registered form, upon receipt of any payment of principal, premium or interest
in respect of a permanent Global Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of such Depository. The Company also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants.

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A Global Security in registered form may not be transferred except as a
whole by the Depository for such Global Security to a nominee of such depository
or by a nominee of such depository to such depository or another nominee of such
depository or by such depository or any such nominee to a successor of such
depository or a nominee of such successor. If a Depository for a permanent
Global Security in registered form is at any time unwilling or unable to
continue as depository and a successor depository is not appointed by the
Company within 90 days, the Company will issue Senior Debt Securities in
definitive form in exchange for all of the Global Securities representing such
Senior Debt Securities. In addition, the Company may at any time and in its sole
discretion determine not to have any Senior Debt Securities in registered form
represented by one or more Global Securities and, in such event, will issue
Senior Debt Securities in definitive form in exchange for all of the Global
Securities representing such Senior Debt Securities. (Section 305). Further, if
the Company so specifies with respect to the Senior Debt Securities of a series,
an owner of a beneficial interest in a Global Security representing Senior Debt
Securities of such series may, on terms acceptable to the Company and the
Depository for such Global Security, receive Senior Debt Securities of such
series in definitive form. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery in
definitive form of Senior Debt Securities of the series represented by such
Global Security equal in principal amount to such beneficial interest and to
have such Senior Debt Securities registered in its name (if the Senior Debt
Securities of such series are issuable as Registered Securities). Senior Debt
Securities of such series so issued in definitive form will be issued (a) as
Registered Securities in denominations, unless otherwise specified by the
Company, of $1,000 and integral multiples thereof if the Senior Debt Securities
of such series are issuable as Registered Securities, (b) as Bearer Securities
in the denomination, unless otherwise specified by the Company, of $5,000 if the
Senior Debt Securities of such series are issuable as Bearer Securities or (c)
as either Registered or Bearer Securities if the Senior Debt Securities of such
series are issuable in either form. (Section 305). See, however, "Limitations on
Issuance of Bearer Securities" below for a description of certain restrictions
on the issuance of a Bearer Security in definitive form in exchange for an
interest in a Global Security.

BEARER DEBT SECURITIES

If so specified in an applicable Prospectus Supplement, pending the
availability of a permanent Global Security, all or any portion of the Senior
Debt Securities of a series which may be issuable as Bearer Securities will
initially be represented by one or more temporary Global Securities, without
interest coupons, to be deposited with a common depositary in London for Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear") and Cedel Bank, societe anonyme ("Cedel") for
credit to the designated accounts. The interests of the beneficial owner or
owners in a temporary Global Security in bearer form will be exchangeable for:
(i) in whole, definitive Bearer Securities, (ii) in whole, Senior Debt
Securities to be represented thereafter by one or more permanent Global
Securities, in bearer form without interest coupons, and/or (iii) in whole or in
part, definitive Registered Securities, on or after the Exchange Date; provided,
however, that if definitive Bearer Securities have previously been issued in
exchange for an interest in a permanent Global Security in bearer form
representing Senior Debt Securities of the same series, then interests in such
Senior Debt Securities (with certain exceptions) shall only be exchangeable, in
whole, for definitive Bearer Securities, definitive Registered Securities, or
any combination thereof, representing Senior Debt Securities having the same
interest rate and Stated Maturity, but only upon written certification in the
form and to the effect described under "Denominations, Registration and
Transfer" unless such certification has been provided on an earlier interest
payment date. The beneficial owner of a Senior Debt Security represented by a
permanent Global Security in bearer form may, on or after the applicable
Exchange Date and upon 30 days' notice to the applicable Trustee given through
Euroclear or Cedel, exchange its interest in whole for definitive Bearer
Securities or, if specified in an applicable Prospectus Supplement, in whole or
in part, definitive Registered Securities of any authorized denomination,
provided, however, that if definitive Bearer Securities are issued in partial
exchange for Senior Debt Securities represented by such permanent Global
Security such issuance (with certain exceptions)

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shall give rise to the exchange of such permanent Global Security in whole for,
at the option of the Holders, definitive Bearer Securities, definitive
Registered Securities, or any combination thereof. 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 in connection with such
exchange. (Sections 303 and 304).

Unless otherwise specified in an applicable Prospectus Supplement, interest
in respect of any portion of a temporary Global Security in bearer form payable
in respect of an Interest Payment Date occurring prior to the issuance of a
permanent Global Security in bearer form will be paid to each of Euroclear and
Cedel with respect to the portion of the temporary Global Security in bearer
form held for its account. Each of Euroclear and Cedel will undertake in such
circumstances to credit such interest received by it in respect of a temporary
Global Security in bearer form to the respective accounts for which it holds
such temporary Global Security in bearer form as of the relevant Interest
Payment Date, but only upon receipt in each case of written certification, in
the form and to the effect described under "Denomination, Registration and
Transfer."

LIMITATION ON LIENS

So long as any Senior Debt Securities remain outstanding, unless an
applicable Prospectus Supplement relating thereto provides otherwise, the
Company will not, and will not permit any Designated Subsidiary (as defined
below), directly or indirectly, to create, issue, assume, incur or guarantee any
indebtedness for money borrowed which is secured by a mortgage, pledge, lien,
security interest or other encumbrance of any nature on any of the present or
future common stock of a Designated Subsidiary unless the Senior Debt Securities
and, if the Company so elects, any other indebtedness of the Company ranking at
least pari passu with the Senior Debt Securities, shall be secured equally and
ratably with (or prior to) such other secured indebtedness for money borrowed so
long as it is outstanding. (Section 1005).

The term "Designated Subsidiary" means any present or future consolidated
subsidiary of the Company, the consolidated net worth of which constitutes at
least 5% of the consolidated net worth of the Company. As of January 31, 1996,
the Company's Designated Subsidiaries were Lehman Commercial Paper Inc.,
Structured Assets Securities Corporation, LB I Group Inc. and Lehman Brothers
Financial Products Inc.

EVENTS OF DEFAULT

Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Debt Securities, the following are Events of Default
under the Senior Indenture with respect to Senior Debt Securities of such
series: (a) failure to pay principal of or premium, if any, on any Senior Debt
Security of that series when due; (b) failure to pay interest, if any, on any
Senior Debt Security of that series and any related coupons when due, continued
for 30 days; (c) failure to deposit any sinking fund payment or analogous
obligation, when due, continued for 30 days, in respect of any Senior Debt
Security of that series; (d) failure to perform any other covenant of the
Company in the Senior Indenture (other than a covenant included in the Senior
Indenture solely for the benefit of a series of Senior Debt Securities other
than that series), continued for 90 days after written notice as provided in the
Senior Indenture; and (e) certain events in bankruptcy, insolvency or
reorganization in respect of the Company. (Section 501). An Event of Default
with respect to a particular series of Senior Debt Securities does not
necessarily constitute an Event of Default with respect to any other series of
Senior Debt Securities issued under the same or another Senior Indenture. The
Trustee may withhold notice to the Holders of any series of Senior Debt
Securities of any default with respect to such series (except in the payment of
principal, premium or interest, if any) if it considers such withholding to be
in the interests of such Holders. (Section 602).

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If an Event of Default with respect to Senior Debt Securities of any series
at the time outstanding occurs and is continuing, unless the principal of all of
the Senior Debt Securities of such series shall have already become due and
payable, either the Trustee or the Holders of at least 25% in principal amount
of the outstanding Senior Debt Securities of that series may declare the
principal amount (or, if the Senior Debt Securities of that series are (i)
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms of the series, or (ii) Indexed Securities or Dual
Currency Securities, the amount determined in accordance with the specified
terms of the series) of all the Senior Debt Securities of that series to be due
and payable immediately. At any time after a declaration of acceleration with
respect to Senior Debt Securities of any series has been made, but before a
judgment or decree based on acceleration has been obtained and entered, the
Holders of a majority in principal amount of the outstanding Senior Debt
Securities of that series may, under certain circumstances, rescind and annul
such acceleration. (Section 502). For information as to waiver of defaults, see
"Meetings, Modification and Waiver."

The Senior Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during default to act with the required
standard of care, to exercise any of its rights or powers under such Senior
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 603). Subject
to such provisions for indemnification of the Trustee, the Holders of a majority
in principal amount of the outstanding Senior Debt Securities of any series will
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 Senior Debt Securities of that
series. (Section 512).

The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Senior Indenture and as to any default in such performance. (Section 1006).

SATISFACTION AND DISCHARGE

The Senior Indenture provides that the Company shall be discharged from its
obligations under the Senior Debt Securities of such series (with certain
exceptions) at any time prior to the Stated Maturity or redemption thereof when
(a) the Company has irrevocably deposited with the Trustee, in trust, (i)
sufficient funds in the currency or currency unit in which the Senior Debt
Securities of such series are payable to pay the principal of (and premium, if
any), and interest, if any, to Stated Maturity (or redemption) on, the Senior
Debt Securities of such series, or (ii) such amount of direct obligations of, or
obligations the principal of and interest, if any, on which are fully guaranteed
by, the government which issued the currency in which the Senior Debt Securities
of such series are payable, and which are not subject to prepayment, redemption
or call, as will, together with the predetermined and certain income to accrue
thereon without consideration of any reinvestment thereof, be sufficient to pay
when due the principal of (and premium, if any), and interest, if any, to Stated
Maturity (or redemption) on, the Senior Debt Securities of such series, or (iii)
such combination of such funds and securities as described in (i) and (ii),
respectively, as will, together with the predetermined and certain income to
accrue on any such securities as described in (ii), be sufficient to pay when
due the principal of (and premium, if any), and interest, if any, to Stated
Maturity (or redemption) on, the Senior Debt Securities of such series and (b)
the Company has paid all other sums payable with respect to the Senior Debt
Securities of such series and (c) certain other conditions are met. Upon such
discharge, the Holders of the Senior Debt Securities of such series shall no
longer be entitled to the benefits of the Indenture, except for certain rights,
including registration of transfer and exchange of the Senior Debt Securities of
such series and replacement of lost, stolen or mutilated Senior Debt Securities,
and shall look only to such deposited funds or obligations for payment.
(Sections 401 and 403).

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DEFEASANCE OF CERTAIN OBLIGATIONS

If the terms of the Senior Debt Securities of any series so provide, the
Company may omit to comply with the restrictive covenants in Section 801
("Company May Consolidate, Etc., Only on Certain Terms"), Section 1005
("Limitations on Liens on Common Stock of Designated Subsidiaries") and any
other specified covenant and any such omission with respect to such Sections
shall not be an Event of Default with respect to the Senior Debt Securities of
such series, if (a) the Company has irrevocably deposited with the applicable
Trustee, in trust, (i) sufficient funds in the currency or currency unit in
which the Senior Debt Securities of such series are payable to pay the principal
of (and premium, if any), and interest, if any, to Stated Maturity (or
redemption) on, the Senior Debt Securities of such series, or (ii) such amount
of direct obligations of, or obligations the principal of and interest, if any,
on which are fully guaranteed by, the government which issued the currency in
which the Senior Debt Securities of such series are payable and which are not
subject to prepayment, redemption or call, as will, together with the
predetermined and certain income to accrue thereon without consideration of any
reinvestment thereof, be sufficient to pay when due the principal of (and
premium, if any), and interest, if any, to Stated Maturity (or redemption) on,
the Senior Debt Securities of such series or, (iii) such combination of such
funds and securities as described in (i) and (ii), respectively, as will,
together with the predetermined and certain income to accrue on any such
securities as described in (ii), be sufficient to pay when due the principal of
(and premium, if any), and interest, if any, to Stated Maturity (or redemption)
on, the Senior Debt Securities of such series and (b) certain other conditions
are met. The obligations of the Company under the Senior Indenture with respect
to the Senior Debt Securities of such series, other than with respect to the
covenants referred to above shall remain in full force and effect. (Section
1009).

MEETINGS, MODIFICATION AND WAIVER

Modifications and amendments of the Senior Indenture may be made by the
Company and the Trustee with the consent of the Holders of not less than 66 2/3%
in principal amount of the Outstanding Debt Securities of each series issued
under the Senior Indenture affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of the
Holder of each Outstanding Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or any instalment of principal of or interest, if
any, on, any Senior Debt Security, (b) reduce the principal amount of, or the
premium, if any, or interest, if any, on, any Senior Debt Security, (c) change
any obligation of the Company to pay additional amounts, (d) reduce the amount
of principal of an Original Issue Discount Security payable upon acceleration of
the Maturity thereof, (e) adversely affect the right of repayment or repurchase,
if any, at the option of the Holder, (f) reduce the amount, or postpone the date
fixed for, any payment under any sinking fund or analogous provision, (g) change
the place or currency or currency unit of payment of principal of or premium, if
any, or interest, if any, on any Senior Debt Security, (h) change or eliminate
the right, if any, to elect payment in a coin or currency or currency unit other
than that in which Senior Debt Securities which are Registered Securities are
denominated or stated to be payable, (i) impair the right to institute suit for
the enforcement of any payment on or with respect to any Senior Debt Security,
(j) reduce the percentage in principal amount of Outstanding Debt Securities of
any series, the consent of the Holders of which is required for modification or
amendment of the Senior Indenture or for waiver of compliance with certain
provisions of the Senior Indenture or for waiver of certain defaults, (k) reduce
the requirements contained in the Senior Indenture for quorum or voting, or (l)
change any obligation of the Company to maintain an office or agency in the
places and for the purposes required in the Senior Indenture. (Section 902).

The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Senior Debt Securities of that series waive, insofar as that series is
concerned, compliance by the Company with certain restrictive provisions of the
Senior Indenture. (Section 1007). The Holders of not less than a majority in
principal amount of the

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Outstanding Debt Securities of any series may on behalf of the Holders of all
Senior Debt Securities of that series and any coupons appertaining thereto waive
any past default under the Senior Indenture with respect to that series, except
a default in the payment of the principal of or premium, if any, or interest, if
any, on any Senior Debt Security of that series or in the payment of any sinking
fund instalment or analogous obligation or in respect of a provision which under
the Senior Indenture cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security of that series affected. (Section 513).

The Senior Indenture contains provisions for convening meetings of the
Holders of Senior Debt Securities of a series if Senior Debt Securities of that
series are issuable as Bearer Securities. (Section 1301). A meeting may be
called at any time by the applicable Trustee, and also, upon request, by the
Company or Holders of at least 10% in principal amount of the Outstanding Debt
Securities of such series, in any such case upon notice given in accordance with
"Notices" below. (Section 1302). Except as limited by the proviso in the second
preceding paragraph, any resolution presented at a meeting or adjourned meeting
at which a quorum is present may be adopted by the affirmative vote of the
Holders of a majority in principal amount of the Outstanding Debt Securities of
that series; provided, however, that, except as limited by the proviso in the
second preceding paragraph, any resolution with respect to any consent or waiver
which may be given by the Holders of not less than 66 2/3% in principal amount
of the Outstanding Debt Securities of a series may be adopted at a meeting or an
adjourned meeting at which a quorum is present only by the affirmative vote of
66 2/3% in principal amount of the Outstanding Debt Securities of that series;
and provided, further, that, except as limited by the proviso in the second
preceding paragraph, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of Outstanding Debt Securities of a series
may be adopted at a meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Senior Debt Securities of any series duly held in accordance with the applicable
Senior Indenture will be binding on all Holders of Senior Debt Securities of
that series and the related coupons. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders of
not less than 66 2/3% in principal amount of the Outstanding Debt Securities of
a series, the persons holding or representing 66 2/3% in principal amount of the
Outstanding Debt Securities of such series will constitute a quorum.(Section
1304).

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Company may, without the consent of any Holders of Outstanding Debt
Securities, consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate or merge with or into, or transfer or lease its assets substantially
as an entirety to, the Company, provided that (i) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
which acquires or leases the assets of the Company substantially as an entirety
is organized under the laws of any United States jurisdiction and assumes the
Company obligations on the Senior Debt Securities and under the Senior
Indenture, (ii) after giving effect to the transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing, and (iii) certain other
conditions are met. (Section 801).

NOTICES

Except as may otherwise be set forth in an applicable Prospectus Supplement
relating to a series of Senior Debt Securities, notices to Holders of Bearer
Securities will be given by publication in a daily

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newspaper in the English language of general circulation in The City of New York
and in London, and so long as such Bearer Securities are listed on the Stock
Exchange and the Stock Exchange shall so require, in a daily newspaper of
general circulation in Luxembourg or, if not practical, elsewhere in Western
Europe. Such publication is expected to be made in The Wall Street Journal, the
Financial Times and the Luxemburger Wort. Notices to Holders of Registered
Securities will be given by mail to the addresses of such Holders as they appear
in the Security Register. (Sections 101 and 106).

TITLE

Title to any temporary global Senior Debt Security, any permanent global
Senior Debt Security, any Bearer Securities and any coupons appertaining thereto
will 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 and the registered owner of any Registered Security as the absolute owner
thereof (whether or not such Senior Debt Security or coupon shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308).

REPLACEMENT OF DEBT SECURITIES AND COUPONS

Any mutilated Senior Debt Security or a Senior Debt Security with a
mutilated coupon appertaining thereto will be replaced by the Company at the
expense of the Holder upon surrender of such Senior Debt Security to the
Trustee. Senior Debt Securities or coupons that become destroyed, stolen or lost
will be replaced by the Company at the expense of the Holder upon delivery to
the Trustee of the Senior Debt Security and coupons or evidence of the
destruction, loss or theft thereof satisfactory to the Company and the Trustee;
in the case of any coupon which becomes destroyed, stolen or lost, such coupon
will be replaced by issuance of a new Senior Debt Security in exchange for the
Senior Debt Security to which such coupon appertains. In the case of a
destroyed, lost or stolen Senior Debt Security or coupon an indemnity
satisfactory to the Trustee and the Company may be required at the expense of
the Holder of such Senior Debt Security or coupon before a replacement Senior
Debt Security will be issued. (Section 306).

CONCERNING THE TRUSTEES

The Company and its affiliates maintain bank accounts, borrow money and have
other customary banking relationships with the Trustee.

LIMITATIONS ON ISSUANCE OF BEARER SECURITIES

In compliance with United States federal tax laws and regulations, Bearer
Securities may not be offered or sold during the restricted period (as defined
under "Description of Senior Debt Securities-- Denominations, Registration and
Transfer"), or delivered in definitive form in connection with a sale during the
restricted period, in the United States or to United States persons other than
to (a) the United States office of (i) an international organization (as defined
in Section 7701(a)(18) of the Code), (ii) a foreign central bank (as defined in
Section 895 of the Code), or (iii) any underwriter, agent, or dealer offering or
selling Bearer Securities during the restricted period (a "Distributor")
pursuant to a written contract with the issuer or with another Distributor, that
purchases Bearer Securities for resale or for its own account and agrees to
comply with the requirements of Section 165(j)(3)(A), (B), or (C) of the Code,
or (b) the foreign branch of a United States financial institution purchasing
for its own account or for resale, which institution agrees to comply with the
requirements of Section 165(j)(3)(A), (B), or (C) of the Code. In addition, a
sale of a Bearer Security may be made during the restricted period to a United
States person who acquired and holds the Bearer Security on the Certification
Date through a foreign branch of a United States financial institution that
agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the Code. Any Distributor (including an affiliate of a Distributor) offering or
selling Bearer Securities during the restricted period must agree not to offer
or sell Bearer Securities in the United States or to United States persons
(except as discussed above) and must employ procedures reasonably designed to
ensure that its employees or agents directly engaged in selling Bearer
Securities are aware of these restrictions.

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Bearer Securities and their interest coupons will bear a legend
substantially to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Section 165(j) and 1287(a) of the
Internal Revenue Code."

Purchasers of Bearer Securities may be affected by certain limitations under
United States tax laws. See "United States Taxation--Backup Withholding."

As used herein, "United States person" means 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 and an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia) and its possessions including Puerto Rico,
the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern
Mariana Islands. The term "Non-United States Holder" means any Holder which is
not an United States person.

DESCRIPTION OF SENIOR SUBORDINATED DEBT SECURITIES

The following description sets forth certain general terms and provisions of
the Senior Subordinated Debt Securities to which any Prospectus Supplement may
relate. The particular terms of the Senior Subordinated Debt Securities offered
by any Prospectus Supplement and the extent, if any, to which such general
provisions may or may not apply to the Senior Subordinated Debt Securities so
offered will be described in the Prospectus Supplement relating to such Senior
Subordinated Debt Securities.

The Securities are to be issued under an indenture, dated as of March 1,
1996 (the "Subordinated Indenture") between the Company and The First National
Bank of Chicago, as trustee (the "Trustee"). The form of the Subordinated
Indenture is filed as an exhibit to the Registration Statements of which this
Prospectus is a part. This Prospectus contains descriptions of all material
provisions of the Subordinated Indenture. The summaries of such provisions of
the Subordinated Indenture do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all the provisions of the
Subordinated Indenture, including the definitions therein of certain terms.
Wherever particular provisions or defined terms of the Subordinated Indenture
are referred to, such provisions or defined terms are incorporated herein by
reference. All articles and sections of the Subordinated Indenture, and all
capitalized terms set forth below, have the meanings specified in the
Subordinated Indenture.

GENERAL

The Subordinated Indenture does not limit the aggregate principal amount of
Senior Subordinated Debt Securities which may be issued thereunder and provides
that Senior Subordinated Debt Securities may be issued thereunder from time to
time in one or more series. The Senior Subordinated Debt Securities will be
unsecured obligations of the Company and will rank equally with all indebtedness
of the Company designated as Senior Subordinated Indebtedness. At January 31,
1996, approximately $3.1 billion of Senior Subordinated Indebtedness (on an
unconsolidated basis) was outstanding.

Reference is made to the Prospectus Supplement relating to the particular
series of Senior Subordinated Debt Securities offered thereby for the following
terms of such Senior Subordinated Debt Securities: (1) the title of such Senior
Subordinated Debt Securities; (2) any limit on the aggregate principal amount of
such Senior Subordinated Debt Securities; (3) the date or dates (or manner of
determining the same) on which such Senior Subordinated Debt Securities will
mature; (4) the rate or rates (which may be fixed or variable) (or manner of
determining the same) per annum at which such Senior Subordinated Debt
Securities will bear interest, if any, and the date from which such interest

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will accrue and the dates on which such interest will be payable (the "Interest
Payment Dates") and the Regular Record Dates for such Interest Payment Dates;
(5) any mandatory or optional sinking fund or obligation to purchase or
analogous provisions; (6) the price or prices at which and the terms and
conditions upon which such Senior Subordinated Debt Securities may be redeemed,
as a whole or in part, at the option of the Company; (7) any additional
restrictive convenants included for the benefit of the Holders of such Senior
Subordinated Debt Securities; (8) any additional Events of Acceleration or
Events of Default provided with respect to such Senior Subordinated Debt
Securities; (9) if such Senior Subordianted Debt Securities are issuable as
Senior Subordinated Debt Securities the payment of principal of (and premium, if
any) and/or interest due thereon is determined with reference to rates of
exchange, prices, indices or other similar methods, the manner in which the
amount of payments of principal of (and premium, if any) and/or interest due
thereon shall be determined; (10) if such Senior Subordinated Debt Securities
may be converted into or exchanged for other securities of the Company or any
other person, the terms and conditions pursuant to which such Senior
Subordinated Debt Securities may be converted or exchanged; (11) if the
principal of (or premium, if any) or interest, if any, on such Senior
Subordinated Debt Securities are to be payable, at the election of the Company
or a Holder thereof, in securities or other property, the type and amount of
such securities or other property, or the method by which such amount shall be
determined, and the periods within which, and the terms and conditions upon
which, any such election may be made; (12) whether such Senior Subordinated Debt
Securities shall be issued in whole or in part in the form of a global Security
or Securities and, in such case, the Depositary for such global Security or
Securities, whether such global form shall be permanent or temporary and the
particular provisions applicable thereto; and (13) any other terms of such
Senior Subordinated Debt Securities.

The Subordinated Indenture provides the Company with the ability, in
addition to the ability to issue Senior Subordinated Debt Securities with terms
different from those of Senior Subordinated Debt Securities previously issued,
to "reopen" a previous issue of Senior Subordinated Debt Securities and issue
additional Senior Subordinated Debt Securities of such series. (Section 3.1).

Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal of and premium, if any, and interest, if any, on the Senior
Subordinated Debt Securities (other than a Global Security) offered thereby will
be payable, and such Senior Subordinated Debt Securities will be exchangeable
and transfers thereof will be registrable, at the office of the Trustee at the
address designated in the Prospectus Supplement, provided that, at the option of
the Company, payment of interest may be made by check mailed to the address of
the Person entitled thereto as it appears in the Security Register. (Sections
3.5, 3.7 and 3.9).

Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Senior Subordinated Debt Securities offered thereby will be issued only in
fully registered form without coupons in denominations of $1,000 or any integral
multiple thereof. (Section 3.2). Senior Subordinated Debt Securities of a series
may be issuable in whole or in part in the form of one or more Global Securities
as described below under "Global Securities." One or more Global Securities will
be issued in denomination, or in aggregate denomination, equal to the aggregate
principal amount of Senior Subordinated Debt Securities of the series to be
represented by such Global Security or Securities. No service charge will be
made for any transfer or exchange of such Senior Subordinated Debt Securities,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. (Section 3.5).

Securities may be issued under the Subordinated Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount from the
principal amount thereof. "Original Issue Discount Security" means any security
which provides for an amount less than the principal amount thereof to be due
and payable following an Event of Acceleration or an Event of Default. (Section
1.1). If the Senior Subordinated Debt Securities are Original Issue Discount
Securities or are treated as issued with original issue discount for federal
income tax purposes, special federal income tax,

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accounting and other considerations applicable thereto will be described in the
Prospectus Supplement relating thereto.

RESTRICTIONS ON PAYMENT

The Company's obligation to pay the Senior Subordinated Debt Securities at
maturity shall be suspended if, after giving effect to such payment, the
Company's net capital would be reduced below its Applicable Minimum Capital or
its adjusted net capital. The Company's Applicable Minimum Capital and adjusted
net capital are the minimum amounts of capital to be maintained by the Company
as required by the rules and regulations of various domestic exchanges, boards
of trade and governmental agencies to which it is subject in order to permit
payment of subordinated debt capital. If such obligation is suspended for more
than six months, the Company will be required to liquidate its business. If any
principal payment is made on the Senior Subordinated Debt Securities at a time
when the Company's net capital is below its Applicable Minimum Capital, the
Holders of the Senior Subordinated Debt Securities are required to repay to the
Company, its successors or assigns, the sum so paid; provided however, that any
suit for such recovery must be commenced within two years of the date of such
payment. (Sections 7.2(b) and 12.3).

The Company may not make any optional redemptions of the Senior Subordinated
Debt Securities without the consent of various domestic exchanges and boards of
trade or if the Company's net capital will be reduced below certain minimum
requirements. If any principal payment is made on the Senior Subordinated Debt
Securities notwithstanding the foregoing, the Holders of the Senior Subordinated
Debt Securities are required to repay to the Company, its successors or assigns,
the sum so paid, provided, however, that any suit for such recovery must be
commenced within two years of the date of such payment. (Section 12.3).

REDEMPTION

Unless otherwise indicated in the Prospectus Supplement relating thereto, if
the Senior Subordinated Debt Securities offered thereby should cease to
constitute "net capital" for purposes of the Net Capital Rule (as hereinafter
defined), then the Company at any time may redeem for cash such Senior
Subordinated Debt Securities in whole or in part at their principal amount (or,
if the Senior Subordinated Debt Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) plus accrued interest, if any. (Section 12.2).

SUBORDINATION

The payment of the principal of, premium, if any, and interest, if any, on
the Senior Subordinated Debt Securities is expressly subordinated, to the extent
and in the manner set forth in the Subordinated Indenture, in right of payment
to the prior payment of all Senior Indebtedness. "Senior Indebtedness" includes
all Indebtedness (as defined below) of the Company, to the extent unsecured,
arising out of any matter or event occurring prior to the date on which any
payment on or in respect of any Debt Securities matures and becomes due and
payable, which has not in whole or in part been subordinated in right of payment
to any other Indebtedness of the Company. "Indebtedness" means all obligations
which would be treated as liabilities in accordance with generally accepted
accounting principles. By reason of such subordination, upon the maturity of any
Senior Indebtedness, full payment in accordance with the terms thereof must be
made or provided for before any payment of principal or interest, if any, or
premium, if any, is made upon the Senior Subordinated Debt Securities and, in
the event of bankruptcy, assignment for benefit of creditors, liquidation,
reorganization or other marshalling of assets and liabilities of the Company,
payment of the principal and interest, if any, and/or premium, if any, on the
Senior Subordinated Debt Securities will be subordinated to the prior payment in
full of all Senior Indebtedness, and nothing shall be paid to the Holders of the
Senior Subordinated Debt Securities

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unless all amounts due to the Holders of Senior Indebtedness has been paid or
provided for. (Sections 4.1 and 4.2).

There is no limitation in the Subordinated Indenture on the amount of Senior
Indebtedness or other Indebtedness that may exist. At January 31, 1996, Senior
Indebtedness (on an unconsolidated basis) was approximately $147 billion and
total assets of the Company (on an unconsolidated basis) were approximately $152
billion. The Prospectus Supplement related to a particular series of Senior
Subordinated Debt Securities will set forth the amount of Senior Indebtedness
then outstanding.

JUNIOR INDEBTEDNESS

The Senior Subordinated Debt Securities will be senior in right of payment
to certain Indebtedness of the Company designated as subordinated debt in the
respective instrument or plan document pursuant to which such Indebtedness was
issued or incurred. (Section 4.11). At January 31, 1996,
approximately $215 million of such subordinated debt (on an unconsolidated
basis) was outstanding.

FINANCIAL COVENANTS

The Company may pay dividends on its common stock (with the exception of
dividends paid in common stock) only to the extent that the aggregate of such
dividends paid subsequent to June 30, 1978 does not exceed the sum of (i)
$5,000,000, (ii) the aggregate Consolidated Net Income earned since that date,
(iii) the net proceeds of the sale since that date of common stock of the
Company and (iv) the net proceeds of indebtedness sold since that date which was
thereafter converted into common stock of the Company. (Section 5.5).

EVENTS OF DEFAULT AND ACCELERATION AND NOTICE THEREOF

The Holders of a majority in aggregate principal amount of the outstanding
Senior Subordinated Debt Securities of a series will have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee with respect to the Securities of such series.
The Trustee or the Holders of not less than 25% in aggregate principal amount of
the outstanding Senior Subordinated Debt Securities of a series may, if an Event
of Acceleration as defined in the Subordinated Indenture occurs with respect to
Senior Subordinated Debt Securities of that series, declare, by notice in
writing, the principal amount (or, if the Senior Subordinated Debt Securities of
that series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all
Outstanding Securities of that series and the interest accrued thereon to be due
and payable on the last business day of the sixth calendar month following such
notice (but not earlier than the first anniversary of the date of issuance of
such Senior Subordinated Debt Securities in any event) and, if such Event of
Acceleration is not cured by the Company prior to such last business day, the
Outstanding Senior Subordinated Debt Securities of that series will be due and
payable on that date. In case an Event of Default with respect to Senior
Subordinated Debt Securities of any series shall occur, the principal amount
(or, if the Senior Subordinated Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) of all Outstanding Securities of that
series will become immediately due and payable. Subject to provisions requiring
the exercise of the degree of care a prudent man would show in the conduct of
his own affairs, the Trustee will be under no obligation to exercise any of its
rights or powers under the Subordinated Indenture at the request of any of the
Holders of Senior Subordinated Debt Securities unless they shall have offered to
the Trustee reasonable security or indemnity. Except as specifically provided in
the Subordinated Indenture, nothing therein relieves the Trustee from liability
for its own negligent action, its own negligent failure to act or its own wilful
misconduct. (Sections 7.2(a), 7.3, 7.14, 8.1 and 8.3(e)).

The following events constitute Events of Acceleration as defined in the
Subordinated Indenture with respect to any series of Senior Subordinated Debt
Securities: failure for 30 days to pay interest

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upon any Senior Subordindated Debt Security of that series when due; failure to
pay principal or premium, if any, on any Senior Subordinated Debt Security of
that series when due; failure for 60 days after notice to perform a certain
covenant in the Subordinated Indenture; and, subject to certain conditions,
acceleration of the maturity of Indebtedness of the Company constituting net
capital aggregating more that $10,000,000 upon default thereon. Events of
Default include: bankruptcy, liquidation and similar proceedings and the failure
for 15 consecutive days to maintain the minimum amount of net capital under the
Net Capital Rule necessary to permit the Company to carry on its business as a
broker-dealer. (Section 7.1).

The Subordinated Indenture provides that the Trustee shall, within 90 days
after the occurrence of an event described in the preceding paragraph (without
regard to any period of grace as therein specified or any requirement for the
giving of notice) or the failure of the Company to duly observe or perform any
provision of the Subordinated Indenture with respect to Senior Subordinated Debt
Securities of any series, give to the Holders of the outstanding Senior
Subordinated Debt Securities of that series notice of all uncured defaults known
to it with respect to Senior Subordinated Debt Securities of that series
(including both Events of Default and Events of Acceleration); provided that,
except in the case of default in the payment of principal or interest, if any,
on any of the Subordinated Debt Securities of that series or the payment of any
sinking fund installment, the Trustee shall be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interests of the Holders of the outstanding Senior Subordinated Debt
Securities of that series. (Section 8.2).

The Company must deliver to the Trustee annually an officers' certificate
stating whether or not the signers thereof have obtained knowledge of any
existing default by the Company in the performance or fulfillment of the
covenants, agreements and obligations contained in the Subordinated Indenture
with respect to any series of Senior Subordinated Debt Securities and, if so,
specifying each such default and the nature thereof. (Section 5.6).

MODIFICATION OF THE SUBORDINATED INDENTURE

Modifications and amendments of the Subordinated Indenture may be made by
the Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the outstanding Senior Subordinated
Debt Securities of each series affected thereby; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
outstanding Senior Subordinated Debt Security affected thereby: (a) change the
stated maturity date of the principal of, or any installment of principal of or
interest, if any, on, any Senior Subordinated Debt Security; (b) reduce the
principal amount of, or the premium (if any) or interest, if any, on, any Senior
Subordinated Debt Security; (c) adversely affect any right of repayment at the
option of the Holder of any Senior Subordinated Debt Security, or reduce the
amount of, or postpone the date fixed for, the payment of any sinking fund or
analogous obligation; (d) reduce the amount of principal of an Original Issue
Discount Security payable upon acceleration of the Maturity thereof; (e) change
the place or currency of payment of principal of, or premium (if any) or
interest, if any, on, any Senior Subordinated Debt Security; (f) impair the
right to institute suit for the enforcement of any payment on or with respect to
any Senior Subordinated Debt Security; or (g) reduce the percentage in principal
amount of outstanding Senior Subordinated Debt Securities of any series, the
consent of the Holders of which is required for modification or amendment of the
Subordinated Indenture or for waiver of compliance with certain provisions of
the Subordinated Indenture or for waiver of certain defaults. (Section 10.2).

The Holders of not less than a majority in aggregate principal amount of the
outstanding Senior Subordinated Debt Securities of any series may on behalf of
the Holders of all Senior Subordinated Debt Securities of that series waive,
insofar as that series is concerned, compliance by the Company with certain
restrictive covenants of the Subordinated Indenture. (Section 5.7). The Holders
of a majority in aggregate principal amount of the outstanding Senior
Subordinated Debt Securities of any

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series may on behalf of the Holders of all Senior Subordinated Debt Securities
of that series waive any past default under the Subordinated Indenture with
respect to that series, except a default in the payment of the principal of, or
the premium (if any) or interest, if any, on, any Senior Subordinated Debt
Security of that series or in respect of a provision which under the
Subordinated Indenture cannot be modified or amended without the consent of the
Holder of each outstanding Senior Subordinated Debt Security of that series
affected. (Section 7.15).

SATISFACTION AND DISCHARGE

The Subordinated Indenture may be fully satisfied and discharged not earlier
than two years after payment of all outstanding Senior Subordinated Debt
Securities shall have been made or duly provided for. (Section 6.1).

GLOBAL SECURITIES

The Senior Subordinated Debt Securities of a series may be issued in whole
or in part in the form of one or more Global Securities that will be deposited
with or on behalf of a depository (a "Depository") identified in the Prospectus
Supplement relating to such series. Global Securities will be issued in
registered form in either temporary or permanent form.

The specific terms of the depository arrangement with respect to any Senior
Subordinated Debt Securities of a series will be described in the Prospectus
Supplement relating to such series. The Company anticipates that the following
provisions will apply to all depository arrangements.

Senior Subordinated Debt Securities which are to be represented by a Global
Security to be deposited with or on behalf of a Depository will be registered in
the name of such Depository or its nominee. Upon the issuance of a Global
Security, the Depository for such Global Security will credit the respective
principal amounts of the Senior Subordinated Debt Securities represented by such
Global Security to the accounts of institutions that have accounts with such
depository or its nominee ("participants"). The accounts to be credited shall be
designated by the underwriters or agents of such Senior Subordinated Debt
Securities or by the Company, if such Senior Subordinated Debt Securities are
offered and sold directly by the Company. Ownership of beneficial interests in
such Global Securities will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in such Global Securities will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depository or its nominee for such Global Security. Ownership of beneficial
interests in Global Securities by persons that hold through participants will be
shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security.

So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Senior
Subordinated Debt Securities represented by such Global Security for all
purposes under the Subordinated Indenture. Except as set forth below, owners of
beneficial interests in such Global Securities will not be entitled to have
Senior Subordinated Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Senior Subordinated Debt Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the Subordinated Indenture.

Payment of principal of, and premium, if any, and any interest on Senior
Subordinated Debt Securities registered in the name of or held by a Depository
or its nominee will be made to the Depository or its nominee, as the case may
be, as the registered owner or the holder of the Global

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Security. None of the Company, the Trustee, any Paying Agent or the Security
Registrar for such Senior Subordinated Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. (Section 3.11).

The Company expects that the Depository for a permanent Global Security,
upon receipt of any payment of principal, premium or interest in respect of a
permanent Global Security, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depository. The Company also expects that payments by participants to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such participants.

A Global Security may not be transferred except as a whole by the Depository
for such Global Security to a nominee of such depository or by a nominee of such
depository to such depository or another nominee of such depository or by such
depository or any such nominee to a successor of such depository or a nominee of
such successor. If a Depository for a permanent Global Security is at any time
unwilling or unable to continue as depository and a successor depository is not
appointed by the Company within 90 days, the Company will issue Senior
Subordianted Debt Securities in definitive form in exchange for all of the
Global Securities representing such Senior Subordinated Debt Securities. In
addition, the Company may at any time and in its sole discretion determine not
to have any Senior Subordinated Debt Securities represented by one or more
Global Securities and, in such event, will issue Senior Subordinated Debt
Securities in definitive form in exchange for all of the Global Securities
representing such Senior Subordinated Debt Securities. (Section 3.5). Further,
if the Company so specifies with respect to the Senior Subordinated Debt
Securities of a series, an owner of a beneficial interest in a Global Security
representing Senior Subordinated Debt Securities of such series may, on terms
acceptable to the Company and the Depository for such Global Security, receive
Senior Subordinated Debt Securities of such series in definitive form. In any
such instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of Senior Subordinated Debt
Securities of the series represented by such Global Security equal in principal
amount to such beneficial interest and to have such Senior Subordinated Debt
Securities registered in its name. Senior Subordinated Debt Securities of such
series so issued in definitive form will be issued as registered securities in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples thereof. (Section 3.5).

CERTAIN INFORMATION RELATING TO THE TRUSTEE

The Company and its affiliates maintain bank accounts, borrow money and have
other customary banking relationships with the Trustee.

UNITED STATES TAXATION

In the opinion of Simpson Thacher & Bartlett, special United States tax
counsel to the Company, the following discussion is an accurate summary of the
material United States federal income tax consequences of the purchase,
ownership and disposition of Debt Securities as of the date hereof. Except where
noted, it deals only with Debt Securities held as capital assets by United
States Holders and does not deal with special situations, such as those of
dealers in securities or currencies, financial institutions, life insurance
companies, persons holding Debt Securities as a part of a hedging or conversion
transaction or a straddle or United States Holders whose "functional currency"
is not the U.S. dollar. Furthermore, the discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and
regulations, rulings and judicial decisions thereunder as of the date

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hereof, and such authorities may be repealed, revoked or modified so as to
result in federal income tax consequences different from those discussed below.
Any special United States federal income tax considerations relevant to a
particular issue of Debt Securities will be provided in the applicable
Prospectus Supplement. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR
DISPOSITION OF DEBT SECURITIES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS
WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION.

PAYMENTS OF INTEREST

Except as set forth below, interest on a Debt Security will generally be
taxable to a United States Holder as ordinary income at the time it is paid or
accrued in accordance with the United States Holder's method of accounting for
tax purposes. As used herein, a "United States Holder" of a Debt Security means
a holder that 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 any political subdivision thereof, or an estate or trust the
income of which is subject to United States federal income taxation regardless
of its source. A "Non-United States Holder" is a holder that is not a United
States Holder.

ORIGINAL ISSUE DISCOUNT

United States Holders of Debt Securities issued with original issue discount
("OID") will be subject to special tax accounting rules, as described in greater
detail below. United States Holders of such Debt Securities should be aware that
they generally must include OID in gross income in advance of the receipt of
cash attributable to that income. However, United States Holders of such Debt
Securities generally will not be required to include separately in income cash
payments received on the Debt Securities, even if denominated as interest, to
the extent such payments do not constitute qualified stated interest (as defined
below). Debt Securities issued with OID will be referred to as "Original Issue
Discount Debt Securities." Notice will be given in the applicable Prospectus
Supplement when the Company determines that a particular Debt Security will be
an Original Issue Discount Debt Security.

This summary is based upon final Treasury regulations applicable to debt
instruments issued with OID (the "OID Regulations"). The following discussion
does not address Debt Securities providing for contingent payments other than
Debt Securities that bear qualified stated interest.

A Debt Security with an "issue price" that is less than its stated
redemption price at maturity (the sum of all payments to be made on the Debt
Security other than "qualified stated interest") will be issued with OID if such
difference is at least 0.25 percent of the stated redemption price at maturity
multiplied by the number of complete years to maturity. The "issue price" of
each Debt Security in a particular offering will be the first price at which a
substantial amount of that particular offering is sold (other than to an
underwriter, placement agent or wholesaler). The term "qualified stated
interest" means stated interest that is unconditionally payable in cash or in
property (other than debt instruments of the issuer) at least annually at a
single fixed rate or, subject to certain conditions, based on one or more
indices. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
Notice will be given in the applicable Prospectus Supplement when the Company
determines that a particular Debt Security will bear interest that is not
qualified stated interest.

In the case of a Debt Security issued with de minimis OID (i.e., discount
that is not OID because it is less than 0.25 percent of the stated redemption
price at maturity multiplied by the number of complete years to maturity), the
United States Holder generally must include such de minimis OID in income as
principal payments on the Debt Securities are made in proportion to the stated
principal amount of the Debt Security. Any amount of de minimis OID that has
been included in income shall be treated as capital gain.

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Original Issue Discount Debt Securities that may be redeemed prior to their
stated maturity at the option of the Company and/or at the option of the Holder
may be subject to rules that differ from the general rules discussed herein.
Persons considering the purchase of Original Issue Discount Debt Securities with
such features should carefully examine the applicable Prospectus Supplement and
should consult their own tax advisors with respect to such features since the
tax consequences with respect to OID will depend, in part, on the particular
terms and features of the Debt Securities.

United States Holders of Original Issue Discount Debt Securities with a
maturity upon issuance of more than one year must, in general, include OID in
income in advance of the receipt of some or all of the related cash payments.
The amount of OID includible in income by the initial United States Holder of an
Original Issue Discount Debt Security is the sum of the "daily portions" of OID
with respect to the Debt Security for each day during the taxable year or
portion of the taxable year in which such United States Holder held such Debt
Security ("accrued OID"). The daily portion is determined by allocating to each
day in any "accrual period" a pro rata portion of the OID allocable to that
accrual period. The "accrual period" for an Original Issue Discount Debt
Security may be of any length and may vary in length over the term of the Debt
Security, provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs on the first day or the final
day of an accrual period. The amount of OID allocable to any accrual period is
an amount equal to the excess, if any, of (a) the product of the Debt Security's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period) over (b) the
sum of any qualified stated interest allocable to the accrual period. OID
allocable to a final accrual period is the difference between the amount payable
at maturity (other than a payment of qualified stated interest) and the adjusted
issue price at the beginning of the final accrual period. Special rules will
apply for calculating OID for an initial short accrual period. The "adjusted
issue price" of a Debt Security at the beginning of any accrual period is equal
to its issue price increased by the accrued OID for each prior accrual period
(determined without regard to the amortization of any acquisition or bond
premium, as described below) and reduced by any payments made on such Debt
Security (other than qualified stated interest) on or before the first day of
the accrual period. Under these rules, a United States Holder will have to
include in income increasingly greater amounts of OID in successive accrual
periods. The Company is required to provide information returns stating the
amount of OID accrued on Debt Securities held of record by persons other than
corporations and other exempt Holders.

In the case of an Original Issue Discount Debt Security that is a floating
rate Debt Security, both the "yield to maturity" and "qualified stated interest"
will be determined solely for purposes of calculating the accrual of OID as
though the Debt Security will bear interest in all periods at a fixed rate
generally equal to the rate that would be applicable to interest payments on the
Debt Security on its date of issue or, in the case of certain floating rate Debt
Securities, the rate that reflects the yield to maturity that is reasonably
expected for the Debt Security. Additional rules may apply if interest on a
floating rate Debt Security is based on more than one interest index. Persons
considering the purchase of Floating Rate Debt Securities should carefully
examine the applicable Prospectus Supplement and should consult their own tax
advisors regarding the U.S. federal income tax consequences of the holding and
disposition of such Debt Securities.

United States Holders may elect to treat all interest on any Debt Security
as OID and calculate the amount includible in gross income under the constant
yield method described above. For the purposes of this election, interest
includes stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium. The election is to be made for
the taxable year in which the United States Holder acquired the Debt Security,
and may not be revoked without the consent of the Internal Revenue Service (the
"IRS"). UNITED STATES HOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS ABOUT
THIS ELECTION.

23
<PAGE>
SHORT-TERM DEBT SECURITIES

In the case of Original Issue Discount Debt Securities having a term of one
year or less ("Short-Term Debt Securities"), under the OID Regulations all
payments (including all stated interest) will be included in the stated
redemption price at maturity and, thus, United States Holders will generally be
taxable on the discount in lieu of stated interest. The discount will be equal
to the excess of the stated redemption price at maturity over the issue price of
a Short-Term Debt Security, unless the United States Holder elects to compute
this discount using tax basis instead of issue price. In general, individuals
and certain other cash method United States Holders of a Short-Term Debt
Security are not required to include accrued discount in their income currently
unless they elect to do so. United States Holders that report income for federal
income tax purposes on the accrual method and certain other United States
Holders are required to accrue discount on such Short-Term Debt Securities (as
ordinary income) on a straight-line basis, unless an election is made to accrue
the discount according to a constant yield method based on daily compounding. In
the case of a United States Holder that is not required, and does not elect, to
include discount in income currently, any gain realized on the sale, exchange or
retirement of the Short-Term Debt Security will be ordinary income to the extent
of the discount accrued through the date of sale, exchange or retirement. In
addition, a United States Holder that does not elect to currently include
accrued discount in income may be required to defer deductions for a portion of
the United States Holder's interest expense with respect to any indebtedness
incurred or continued to purchase or carry such Debt Securities.

MARKET DISCOUNT

If a United States Holder purchases a Debt Security (other than an Original
Issue Discount Debt Security) for an amount that is less than its stated
redemption price at maturity or, in the case of an Original Issue Discount Debt
Security, its adjusted issue price, the amount of the difference will be treated
as "market discount" for federal income tax purposes, unless such difference is
less than a specified de minimis amount. Under the market discount rules, a
United States Holder will be required to treat any principal payment on, or any
gain on the sale, exchange, retirement or other disposition of, a Debt Security
as ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such Debt Security
at the time of such payment or disposition. In addition, the United States
Holder may be required to defer, until the maturity of the Debt Security or its
earlier disposition in a taxable transaction, the deduction of all or a portion
of the interest expense on any indebtedness incurred or continued to purchase or
carry such Debt Security.

Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Debt Security, unless
the United States Holder elects to accrue on a constant interest method. A
United States Holder of a Debt Security may elect to include market discount in
income currently as it accrues (on either a ratable or constant interest
method), in which case the rule described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.

ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM

A United States Holder that purchases a Debt Security for an amount that is
greater than its adjusted issue price but equal to or less than the sum of all
amounts payable on the Debt Security after the purchase date other than payments
of qualified stated interest will be considered to have purchased such Debt
Security at an "acquisition premium." Under the acquisition premium rules, the
amount of OID which such holder must include in its gross income with respect to
such Debt Security for any taxable year will be reduced by the portion of such
acquisition premium properly allocable to such year.

A United States Holder that purchases a Debt Security for an amount in
excess of the sum of all amounts payable on the Debt Security after the purchase
date other than qualified stated interest will be considered to have purchased
such Debt Security at a "premium" and will not be required to include

24
<PAGE>
any OID in income. A United States Holder generally may elect to amortize the
premium over the remaining term of the Debt Security on a constant yield method.
The amount amortized in any year will be treated as a reduction of the United
States Holder's interest income from the Debt Security. Bond premium on a Debt
Security held by a United States Holder that does not make such an election will
decrease the gain or increase the loss otherwise recognized on disposition of
the Debt Security. The election to amortize premium on a constant yield method
once made applies to all debt obligations held or subsequently acquired by the
electing United States Holder on or after the first day of the first taxable
year to which the election applies and may not be revoked without the consent of
the IRS.

SALE, EXCHANGE AND RETIREMENT OF DEBT SECURITIES

A United States Holder's tax basis in a Debt Security will, in general, be
the United States Holder's cost therefor, increased by OID, market discount or
any discount with respect to a Short-Term Debt Security previously included in
income by the United States Holder and reduced by any amortized premium and any
cash payments on the Debt Security other than qualified stated interest. Upon
the sale, exchange or retirement of a Debt Security, a United States Holder will
recognize gain or loss equal to the difference between the amount realized upon
the sale, exchange or retirement (less any accrued qualified stated interest,
which will be taxable as such) and the adjusted tax basis of the Debt Security.
Except as described above with respect to certain Short-Term Debt Securities or
with respect to market discount, such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Debt Security has been held for more than one year. Under current
law, net capital gains of individuals are, under certain circumstances, taxed at
lower rates than items of ordinary income. The deductibility of capital losses
is subject to limitations.

NON-UNITED STATES HOLDERS

Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:

(a) no withholding of United States federal income tax will be required
with respect to the payment by the Company or any Paying Agent of principal,
premium, if any, or interest (which for purposes of this discussion includes
OID) on a Debt Security owned by a Non-United States Holder, provided (i)
that the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote within the meaning of section 871(h)(3) of the Code
and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to the Company through stock
ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on a Debt Security is described in section 881(c)(3)(A) of the Code
and (iv) in the case of a Registered Security, the beneficial owner
satisfies the statement requirement (described generally below) set forth in
section 871(h) and section 881(c) of the Code and the regulations
thereunder;

(b) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-United States Holder
upon the sale, exchange or retirement of a Debt Security; and

(c) a Debt Security beneficially owned by an individual who at the time
of death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the company entitled
to vote within the meaning of section 871(h)(3) of the Code and provided
that the interest payments with respect to such Debt Security would not have
been, if received at the time of such individual's death, effectively
connected with the conduct of a United States trade or business by such
individual.

To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Debt Security, or a financial institution holding the Debt
Security on behalf of such owner, must provide, in accordance

25
<PAGE>
with specified procedures, a paying agent of the Company with a statement to the
effect that the beneficial owner is not a U.S. person, citizen or resident.
Pursuant to current temporary Treasury regulations, these requirements will be
met if (1) the beneficial owner provides his name and address, and certifies,
under penalties of perjury, that he is not a U.S. person, citizen or resident
(which certification may be made on an Internal Revenue Service Form W-8 (or
successor form)) or (2) a financial institution holding the Debt Security on
behalf of the beneficial owner certifies, under penalties of perjury, that such
statement has been received by it and furnishes a paying agent with a copy
thereof.

If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of premium, if
any, and interest (including OID) made to such Non-United States Holder will be
subject to a 30% withholding tax unless the beneficial owner of the Debt
Security provides the Company or its paying agent, as the case may be, with a
properly executed (1) Internal Revenue Service Form 1001 (or successor form)
claiming an exemption from withholding under the benefit of a tax treaty or (2)
Internal Revenue Service Form 4224 (or successor form) stating that interest
paid on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States.

If a Non-United States Holder is engaged in a trade or business in the
United States and premium, if any, or interest (including OID) on the Debt
Security is effectively connected with the conduct of such trade or business,
the Non-United States Holder, although exempt from the withholding tax discussed
above, will be subject to United States federal income tax on such interest and
OID on a net income basis in the same manner as if it were a United States
Holder. In addition, if such holder is a foreign corporation, it may be subject
to a branch profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose, such
premium, if any, and interest (including OID) on a Debt Security will be
included in such foreign corporation's earnings and profits.

Any gain or income realized upon the sale, exchange or retirement of a Debt
Security will not be subject to United States federal income tax if (i) such
gain or income is not effectively connected with a trade or business in the
United States of the Non-United States Holder, and (ii) in the case of a Non-
United States Holder who is an individual, either such individual is not present
in the United States for 183 days or more in the taxable year of such sale,
exchange or retirement, or certain other conditions are not met.

BACKUP WITHHOLDING AND INFORMATION REPORTING

In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium paid on Debt Securities and to
the proceeds of sale of a Debt Security made to United States Holders other than
certain exempt recipients (such as corporations). A 31% backup withholding tax
will apply to such payments if the United States Holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income.

No information reporting on IRS Form 1099 or backup withholding will be
required with respect to payments made by the Company or any paying agent to
Non-United States Holders (1) if those payments are made outside of the United
States on Bearer Securities or (2) on Registered Securities with respect to
which a statement described in (a)(iv) under "Non-United States Holders" has
been received and the payor does not have actual knowledge that the beneficial
owner is a United States person. However, interest (including OID) paid to a
Non-United States Holder on a Registered Security will be required to be
reported annually on IRS Form 1042-S.

In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, OID or premium on a Debt Security are paid
or collected by a foreign office of a custodian, nominee or other foreign agent
on behalf of the beneficial owner of such Debt Security, or if a foreign office
of a broker (as defined in applicable Treasury regulations) pays the proceeds of
the sale of a Debt Security to the owner thereof. If, however, such nominee,
custodian, agent or broker is, for

26
<PAGE>
United States federal income tax purposes, a U.S. person, a controlled foreign
corporation or a foreign person that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States,
such payments will not be subject to backup withholding but will be subject to
information reporting, unless (1) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a U.S.
person and certain other conditions are met or (2) the beneficial owner
otherwise establishes an exemption. Temporary Treasury regulations provide that
the Treasury is considering whether backup withholding will apply with respect
to such payments of principal, interest or the proceeds of a sale that are not
subject to backup withholding under the current regulations. Under proposed
Treasury regulations not currently in effect backup withholding will not apply
to such payments absent actual knowledge that the payee is a United States
person.

Payments of principal, interest, OID and premium on a Debt Security paid to
the beneficial owner of a Debt Security by a United States office of a
custodian, nominee or agent, or the payment by the United States office of a
broker of the proceeds of sale of a Debt Security, will be subject to both
backup withholding and information reporting unless the beneficial owner
provides the statement referred to in (a)(iv) above and the payor does not have
actual knowledge that the beneficial owner is a United States person or
otherwise establishes an exemption.

Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.

CAPITAL REQUIREMENTS

As registered broker-dealers, the Company and certain of its subsidiaries
(the "Regulated Subsidiaries") are subject to the SEC's net capital rule (Rule
15c3-1, the "Net Capital Rule"), promulgated under the Exchange Act. The
Exchange monitors the application of the Net Capital Rule by the Company, and
the NASD monitors the application of the Net Capital Rule by the Regulated
Subsidiaries. The Company and the Regulated Subsidiaries compute net capital
under the alternative method of the Net Capital Rule which requires the
maintenance of minimum net capital, as defined. A broker-dealer may be required
to reduce its business if its net capital is less than 4% of aggregate debit
balances and may also be prohibited from expanding its business or paying cash
dividends if resulting net capital would be less than 5% of aggregate debit
balances. In addition, the Net Capital Rule does not allow withdrawal of
subordinated capital if net capital would be less than 5% of such debit
balances.

The Net Capital Rule also limits the ability of broker-dealers to transfer
large amounts of capital to parent companies and other affiliates. Under the Net
Capital Rule equity capital can not be withdrawn from a broker-dealer without
the prior approval of the SEC when net capital after the withdrawal would be
less than 25% of its securities positions haircuts (which are deductions from
capital of certain specified percentages of the market value of securities to
reflect the possibility of a market decline prior to disposition). In addition,
the Net Capital Rule requires broker-dealers to notify the SEC and the
appropriate self-regulatory organization two business days before a withdrawal
of excess net capital if the withdrawal would exceed the greater of $500,000 or
30% of the broker-dealer's excess net capital, and two business days after a
withdrawal that exceeds the greater of $500,000 or 20% of excess net capital.
Finally, the Net Capital Rule authorizes the SEC to order a freeze on the
transfer of capital if a broker-dealer plans a withdrawal of more than 30% of
its excess net capital and the SEC believes that such a withdrawal would be
detrimental to the financial integrity of the firm or would jeopardize the
broker-dealer's ability to pay its customers.

Compliance with the Net Capital Rule could limit those operations of the
Company and its Regulated Subsidiaries that require the intensive use of
capital, such as underwriting and trading activities and the financing of
customer account balances.

The Company is subject to other domestic and international regulatory
requirements with which it is required to comply.

27
<PAGE>
OUTSTANDING SUBORDINATED DEBT INSTRUMENTS

The Company has issued various subordinated debt instruments in a form, and
to persons, approved by the NYSE in accordance with the provisions of NYSE Rule
325. When issued, the Debt Securities shall constitute such subordinated debt.
The Company is permitted to treat such subordinated debt as capital for the
purposes of the Net Capital Rule and NYSE Rule 325. The instruments evidencing
such subordinated debt provide that they shall be subordinated and junior in
right of payment to the prior payment in full, or provision for such payment, of
all obligations to all other present and future creditors of the Company (except
for other subordinated debt similarly subordinated).

PLAN OF DISTRIBUTION

The Company may sell Debt Securities through, or through underwriting
syndicates managed by, Lehman Brothers Inc. ("Lehman Brothers") alone or with
one or more other underwriters. The specific managing underwriter or
underwriters with respect to the offer and sale of Debt Securities are set forth
on the cover of a Prospectus Supplement relating to such Debt Securities and the
members of the underwriting syndicate, if any, are named in such Prospectus
Supplement. Only the underwriters so named in a Prospectus Supplement are
underwriters, in connection with the Debt Securities offered thereby. The
Prospectus Supplement also describes the discounts and commissions to be allowed
or paid to the underwriters, all other items constituting underwriting
compensation, the discounts and commissions to be allowed or paid to dealers, if
any, and the exchanges, if any, on which the Debt Securities will be listed.

The Debt Securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The obligations of the
underwriters to purchase such Debt Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
Debt Securities of the series offered by the Prospectus Supplement if any of
such Debt Securities are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time. To the extent, if any, that Debt Securities to be purchased
by Lehman Brothers, as underwriter, are not sold by it at the public offering
price set forth in the Prospectus Supplement, the Company, as issuer of such
Debt Securities, will not receive the full amount of net proceeds of such Debt
Securities set forth on the cover of the Prospectus Supplement.

If so indicated in the Prospectus Supplement, the Company will authorize the
underwriters to solicit offers by certain institutional investors to purchase
Debt Securities providing for payment and delivery on a future date specified in
the Prospectus Supplement. There may be limitations on the minimum amount which
may be purchased by any such institutional investor or on the portion of the
aggregate principal amount of the particular Debt Securities which may be sold
pursuant to such arrangements. Institutional investors to which such offers may
be made, when authorized, include commercial and savings banks, insurance
companies, pension funds, educational and charitable institutions and such other
institutions as may be approved by the Company. The obligations of any such
purchasers pursuant to such delayed delivery and payment arrangements will not
be subject to any conditions except (i) the purchase by an institution of the
particular Debt Securities shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject, and (ii) the Company shall have sold to such underwriters the total
principal amount of such Debt Securities less the principal amount thereof
covered by such arrangements. Underwriters will not have any responsibility in
respect of the validity of such arrangements or the performance of the Company
or such institutional investors thereunder.

The underwriters may be entitled under agreements entered into with the
Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the underwriters may be required to make in respect

28
<PAGE>
thereof. The underwriters may engage in transactions with, or perform services
for, the Company in the ordinary course of business.

Each underwriter will represent and agree that (i) it has not offered or
sold and will not offer or sell any Debt Securities to persons in the United
Kingdom except to persons whose ordinary activities involve then in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) it complied and will comply with all applicable provisions
of the Financial Services Act 1986 and the Regulations with respect to anything
done by it in relation to the Debt Securities in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on to any person in the United Kingdom any document received by it
in connection with the issue of the Debt Securities if that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such document may
otherwise lawfully be issued or passed on.

This Prospectus, together with an applicable Prospectus Supplement, may also
be used by Lehman Brothers International (Europe) ("LBIE") in connection with
offers and sales of Securities related to market making transactions, by and
through LBIE, at negotiated prices related to prevailing market prices at the
time of sale or otherwise. LBIE may act as principal or agent in such
transactions.

The underwriting arrangements for any offering of the Debt Securities will
comply with the requirements of Schedule E of the By-Laws of the NASD regarding
an NASD member firm underwriting its own securities. Pursuant to Section 5 of
Schedule E to the By-Laws of the NASD, the net proceeds to be received by the
Company from the sale of the Debt Securities shall be placed in a duly
established escrow account and shall not be released therefrom or used by the
Company in any manner until the Company has filed with the NASD a computation of
net capital in the manner required by and meeting the requirements of Section 5
of Schedule E.

ERISA MATTERS

The Company may be considered a "party in interest" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and a
"disqualified person" under corresponding provisions of the Code, with respect
to certain employee benefit plans. Certain transactions between an employee
benefit plan and a party in interest or disqualified person may result in
"prohibited transactions" within the meaning of ERISA and the Code. ANY EMPLOYEE
BENEFIT PLAN PROPOSING TO INVEST IN THE DEBT SECURITIES SHOULD CONSULT WITH ITS
LEGAL COUNSEL.

LEGAL OPINIONS

Unless otherwise indicated in an applicable Prospectus Supplement relating
to Debt Securities, the validity of the Debt Securities offered hereby will be
passed upon for the Company by Karen M. Muller, Esq., Deputy General Counsel of
the Company, and for any underwriter by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), 425 Lexington Avenue, New
York, New York 10017. Simpson Thacher & Bartlett acts as counsel in various
matters for Lehman Brothers Holdings Inc., the Company and certain of their
subsidiaries.

INDEPENDENT ACCOUNTANTS

The consolidated financial statements and schedules of the Company for the
year ended November 30, 1995, for the eleven months ended November 30, 1994, and
for the year ended December 31, 1993 appearing in the Company's Report on Form
10-K for the year ended November 30, 1995, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial statements and
schedules are, and audited financial statements included in subsequently filed
documents will be, incorporated herein by reference in reliance upon the reports
of Ernst & Young LLP pertaining to such financial statements (to the extent
covered by consents filed with the Securities and Exchange Commission) given
upon the authority of such firm as experts in accounting and auditing.

29
<PAGE>
_________________________________________ ___________________________________
_________________________________________ ___________________________________

NO DEALER, SALESPERSON OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR
ANY AGENT OR UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR LEHMAN BROTHERS, INC.
A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE OF THIS
PROSPECTUS.

______________________ DEBT SECURITIES

TABLE OF CONTENTS

PAGE
----
[S] [C]
Available Information................. 2
Documents Incorporated by Reference... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Senior Debt
Securities.......................... 4
Limitations on Issuance of Bearer ________________
Securities.......................... 14
Description of Senior Subordinated PROSPECTUS
Debt Securities..................... 15
United States Taxation................ 21 , 1996
Capital Requirements.................. 27 ________________
Outstanding Subordinated Debt
Instruments......................... 28
Plan of Distribution.................. 28
ERISA Matters......................... 29
Legal Opinions........................ 29
Independent Accountants............... 29

_________________________________________ __________________________________
_________________________________________ __________________________________

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 16. EXHIBITS

The Exhibit Index on page E-1 is hereby incorporated by reference.

II-1
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Post-Effective
Amendment No. 2 to Registration Statement No. 33-51837 and Post-Effective
Amendment No. 1 to Registration Statement No. 33-63613 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of March, 1996.

LEHMAN BROTHERS INC.

By /s/ MICHAEL R. MILVERSTED
...................................
Michael R. Milversted
Treasurer

II-2
<PAGE>
POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, these
Post-Effective Amendments have been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- -------------------------------- --------------

<S> <C> <C>
* Chairman of the Board, Chief March 6, 1996
........................................ Executive Officer, and
Richard S. Fuld, Jr. Director (principal executive
officer)

* Chief Operating Officer, March 6, 1996
........................................ President and Director
T. Christopher Pettit

* Chief Financial Officer and March 6, 1996
........................................ Director (principal financial
Robert Matza officer)

* (principal accounting officer) March 6, 1996
........................................
David Goldfarb

* Director March 6, 1996
........................................
Roger S. Berlind

* Director March 6, 1996
........................................
Philip Caldwell

* Director March 6, 1996
........................................
Howard L. Clark, Jr.

* Director March 6, 1996
........................................
Sherman R. Lewis, Jr.

* Director March 6, 1996
........................................
Malcolm Wilson
</TABLE>

*By /s/ MICHAEL MILVERSTED
............................................................................
(Michael Milversted)
(Attorney-in-Fact)

II-3
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
FILED HEREWITH(-)
EXHIBIT OR INCORPORATED BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------------
<C> <S> <C>

4(a) --Form of Subordinated Indenture between the
Registrant and The First National Bank of Chicago,
as Trustee (the "Trustee"), with respect to the
Registrant's Senior Subordinated Debt Securities... --

4(b) --Forms of Senior Subordinated Debt Securities.......... Included in Exhibit 4(a)
above

12 --Computation of ratio of earnings to fixed
charges............................................ Exhibit 12 to the
Registrant's Annual Report
on Form 10-K for the fiscal
year ended November 30,
1995

25(a) --Form T-1 Statement of Eligibility under Trust
Indenture Act of 1939 of the First National Bank of
Chicago............................................ --
</TABLE>

EXHIBIT 4(a)

LEHMAN BROTHERS INC.

AND

The First National Bank of Chicago Trustee

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

INDENTURE

Dated as of March 1, 1996

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

<PAGE>

Lehman Brothers Inc.

Reconciliation and tie between Trust Indenture Act of 1939

Trust Indenture
Act Section Indenture Section

Sec.310(a)(1) . . . . . . . . . . . . . . . . . 8.9
(a)(2) . . . . . . . . . . . . . . . . . . 8.9
(a)(3) . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . . . . . . . 8.9
(b) . . . . . . . . . . . . . . . . . . . . 8.8
8.10
Sec.311(a) . . . . . . . . . . . . . . . . . . 8.13(a)
(b) . . . . . . . . . . . . . . . . . . . . 8.13(b)
(b)(2) . . . . . . . . . . . . . . . . . . 9.3(a)(2)
9.3(b)
Sec.312(a) . . . . . . . . . . . . . . . . . . 9.1
9.2(a)
(b) . . . . . . . . . . . . . . . . . . . . 9.2(b)
(c) . . . . . . . . . . . . . . . . . . . . 9.2(c)
Sec.313(a) . . . . . . . . . . . . . . . . . . 9.3(a)
(b) . . . . . . . . . . . . . . . . . . . . 9.3(b)
(c) . . . . . . . . . . . . . . . . . . . . 9.3(a), 9.3(b)
(d) . . . . . . . . . . . . . . . . . . . . 9.3(c)
Sec.314(a) . . . . . . . . . . . . . . . . . . 9.4
(b) . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . 1.2
(c)(2) . . . . . . . . . . . . . . . . . . 1.2
(c)(3) . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . 1.2
Sec.315(a) . . . . . . . . . . . . . . . . . . 8.1(a)
(b) . . . . . . . . . . . . . . . . . . . . 8.2
9.3(a)(6)
(c) . . . . . . . . . . . . . . . . . . . . 8.1(b)
(d) . . . . . . . . . . . . . . . . . . . . 8.1(c)
(d)(1) . . . . . . . . . . . . . . . . . . 8.1(a)(1)
(d)(2) . . . . . . . . . . . . . . . . . . 8.1(c)(2)
(d)(3) . . . . . . . . . . . . . . . . . . 8.1(c)(3)
(e) . . . . . . . . . . . . . . . . . . . . 7.16
Sec.316(a) . . . . . . . . . . . . . . . . . . 1.1
(a)(1)(A) . . . . . . . . . . . . . . . . . 7.2
7.14
(a)(1)(B) . . . . . . . . . . . . . . . . . 7.15
(a)(2) . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . 7.10
Sec.317(a)(1) . . . . . . . . . . . . . . . . 7.5
(a)(2) . . . . . . . . . . . . . . . . . . 7.6
(b) . . . . . . . . . . . . . . . . . . . . 5.3
Sec.318(a) . . . . . . . . . . . . . . . . . . 1.7

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

<PAGE>

TABLE OF CONTENTS
-----------------

Page
----

PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . 1

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION . . . . . . . . 1
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . 2
Applicable Minimum Capital . . . . . . . . 2
Bankruptcy Act . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . 2
Commission . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . 3
Company Request" or "Company Order . . . . 3
Consolidated Net Income . . . . . . . . . 3
Corporate Trust Office . . . . . . . . . . 3
corporation . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . . . 3
Depositary . . . . . . . . . . . . . . . . 3
domestic . . . . . . . . . . . . . . . . . 3
Event of Acceleration" and "Event of
Default" . . . . . . . . . . . . . . . . 4
Exchange . . . . . . . . . . . . . . . . . 4
Holder . . . . . . . . . . . . . . . . . . 4
Indebtedness . . . . . . . . . . . . . . . 4
Indenture . . . . . . . . . . . . . . . . 4
Indexed Security . . . . . . . . . . . . . 4
interest . . . . . . . . . . . . . . . . . 4
Interest Payment Date . . . . . . . . . . 5
Maturity . . . . . . . . . . . . . . . . . 5
Net Capital Rule . . . . . . . . . . . . . 5
Officers' Certificate . . . . . . . . . . 5
Opinion of Counsel . . . . . . . . . . . . 5
Original Issue Discount Security . . . . . 5
Outstanding . . . . . . . . . . . . . . . 5
Paying Agent . . . . . . . . . . . . . . . 6
Person . . . . . . . . . . . . . . . . . . 6
Place of Payment . . . . . . . . . . . . . 6
Predecessor Security . . . . . . . . . . . 7
Redemption Date . . . . . . . . . . . . . 7
Redemption Price . . . . . . . . . . . . . 7
Regular Record Date . . . . . . . . . . . 7
Responsible Officer . . . . . . . . . . . 7
Securities . . . . . . . . . . . . . . . . 7

<PAGE>

Security Register" and "Security
Registrar . . . . . . . . . . . . . . . 7
Senior Indebtedness . . . . . . . . . . . 7
SIPA . . . . . . . . . . . . . . . . . . . 8
SIPC . . . . . . . . . . . . . . . . . . . 8
Special Record Date . . . . . . . . . . . 8
Stated Maturity . . . . . . . . . . . . . 8
Subordinated Payment . . . . . . . . . . . 8
Subsidiary . . . . . . . . . . . . . . . . 8
Trustee . . . . . . . . . . . . . . . . . 8
Trust Indenture Act . . . . . . . . . . . 8
Vice President . . . . . . . . . . . . . . 8
SECTION 1.2 Compliance Certificates and Opinions . . . 9
SECTION 1.3 Form of Documents Delivered to Trustee . . 9
SECTION 1.4 Acts of Holders . . . . . . . . . . . . . . 10
SECTION 1.5 Notices, Etc., to Trustee and Company . . . 11
SECTION 1.6 Notice to Holders; Waiver . . . . . . . . . 11
SECTION 1.7 Conflict with Trust Indenture Act . . . . . 12
SECTION 1.8 Effect of Headings and Table of Contents . 12
SECTION 1.9 Separability Clause . . . . . . . . . . . . 12
SECTION 1.10 Benefits of Indenture . . . . . . . . . . 12
SECTION 1.11 Governing Law . . . . . . . . . . . . . . 12
SECTION 1.12 Legal Holidays . . . . . . . . . . . . . . 12

ARTICLE TWO

SECURITY FORMS . . . . . . . . . . 13
SECTION 2.1 Forms Generally . . . . . . . . . . . . . . 13
SECTION 2.2 Form of Face of Security . . . . . . . . . 13
SECTION 2.3 Form of Reverse of Security . . . . . . . . 15
SECTION 2.4 Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . 21
SECTION 2.5 Issuance of Global Securities . . . . . . . 22

ARTICLE THREE

THE SECURITIES . . . . . . . . . . 22
SECTION 3.1 Amount Unlimited; Issuable in Series . . . 22
SECTION 3.2 Denominations . . . . . . . . . . . . . . . 25
SECTION 3.3 Execution, Authentication, Delivery and
Dating . . . . . . . . . . . . . . . . . 25
SECTION 3.4 Temporary Securities . . . . . . . . . . . 27
SECTION 3.5 Registration, Registration of Transfer and
Exchange . . . . . . . . . . . . . . . . 27
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . . . 30
SECTION 3.7 Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . . . 31
SECTION 3.8 Persons Deemed Owners . . . . . . . . . . . 32
SECTION 3.9 Cancellation . . . . . . . . . . . . . . . 33
SECTION 3.10 Computation of Interest . . . . . . . . . 33
SECTION 3.11 CUSIP Numbers . . . . . . . . . . . . . . 33

ARTICLE FOUR

<PAGE>

Page
----

SUBORDINATION OF SECURITIES . . . . . . . 34
SECTION 4.1 Securities Subordinate to Senior
Indebtedness . . . . . . . . . . . . . . 34
SECTION 4.2 Payment of Securities on Dissolution,
etc. . . . . . . . . . . . . . . . . . . 34
SECTION 4.3 Subrogation of Holders to Rights of
Holders of Senior Indebtedness . . . . . 35
SECTION 4.4 Securities May Be Paid Prior to
Dissolution, etc. . . . . . . . . . . . . 36
SECTION 4.5 No Waiver of Subordination Provisions . . . 36
SECTION 4.6 Authorization to Trustee to Take Action to
Effectuate Subordination . . . . . . . . 36
SECTION 4.7 Senior Indebtedness May Be Renewed or
Extended, etc. . . . . . . . . . . . . . 37
SECTION 4.8 Trustee to Have no Fiduciary Duty to
Holders of Senior Indebtedness . . . . . 37
SECTION 4.9 Rights of Trustee as Holder of Senior
Indebtedness . . . . . . . . . . . . . . 37
SECTION 4.10 Notice to Trustee . . . . . . . . . . . . 38
SECTION 4.11 Securities Ranking with Certain
Indebtedness . . . . . . . . . . . . . . 38

ARTICLE FIVE

COVENANTS . . . . . . . . . . . . 39
SECTION 5.1 Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . . . 39
SECTION 5.2 Maintenance of Office or Agency . . . . . . 39
SECTION 5.3 Money for Securities Payments to Be Held
in Trust . . . . . . . . . . . . . . . . 40
SECTION 5.4 Corporate Existence . . . . . . . . . . . . 42
SECTION 5.5 Limitation on Dividends and Common Stock
Distributions . . . . . . . . . . . . . . 42
SECTION 5.6 Statement by Officers as to Default . . . . 42
SECTION 5.7 Waiver of Certain Covenants . . . . . . . . 43
SECTION 5.8 Calculation of Original Issue Discount . . 43

ARTICLE SIX

SATISFACTION AND DISCHARGE . . . . . . . 43
SECTION 6.1 Satisfaction and Discharge of Indenture . . 43
SECTION 6.2 Application of Trust Money . . . . . . . . 45

ARTICLE SEVEN

REMEDIES OF THE TRUSTEE AND HOLDERS
UPON EVENTS OF ACCELERATION AND DEFAULT . . . . 45

SECTION 7.1 Events of Acceleration and Default
Defined . . . . . . . . . . . . . . . . . 45
SECTION 7.2 Action if Event of Acceleration;
Suspension of Payment . . . . . . . . . . 47

SECTION 7.3 Action if Event of Default . . . . . . . . 51

- iii -

<PAGE>

Page
----

SECTION 7.4 Rescission of Acceleration . . . . . . . . 52
SECTION 7.5 Collection of Indebtedness and Suit for
Enforcement by Trustee . . . . . . . . . 53
SECTION 7.6 Trustee May File Proofs of Claim . . . . . 54
SECTION 7.7 Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . 55
SECTION 7.8 Application of Money Collected . . . . . . 55
SECTION 7.9 Limitation on Suits . . . . . . . . . . . . 55
SECTION 7.10 Unconditional Right of Holders to Receive
Principal, Premium and Interest . . . . . 56
SECTION 7.11 Restoration of Rights and Remedies . . . . 56
SECTION 7.12 Rights and Remedies Cumulative . . . . . . 57
SECTION 7.13 Delay or Omission Not Waiver . . . . . . . 57
SECTION 7.14 Control by Holders . . . . . . . . . . . . 57
SECTION 7.15 Waiver of Past Defaults . . . . . . . . . 57
SECTION 7.16 Undertaking for Costs . . . . . . . . . . 58
SECTION 7.17 Waiver of Stay or Extension Laws . . . . . 58

ARTICLE EIGHT

THE TRUSTEE . . . . . . . . . . . 59

SECTION 8.1 Certain Duties and Responsibilities . . . . 59
SECTION 8.2 Notice of Defaults . . . . . . . . . . . . 60
SECTION 8.3 Certain Rights of Trustee . . . . . . . . . 61
SECTION 8.4 Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . . . 62
SECTION 8.5 May Hold Securities . . . . . . . . . . . . 62
SECTION 8.6 Money Held in Trust . . . . . . . . . . . . 62
SECTION 8.7 Compensation and Reimbursement . . . . . . 62
SECTION 8.8 Disqualification; Conflicting Interests . . 63
SECTION 8.9 Corporate Trustee Required; Different
Trustees for Different Series;
Eligibility . . . . . . . . . . . . . . . 63
SECTION 8.10 Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . 64
SECTION 8.11 Acceptance of Appointment by Successor . . 66
SECTION 8.12 Merger, Consolidation or Succession to
Business . . . . . . . . . . . . . . . . 67
SECTION 8.13 Preferential Collection of Claims
Against Company . . . . . . . . . . . . 67

ARTICLE NINE

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . 71

SECTION 9.1 Company to Furnish Trustee Names and
Addresses of Holders . . . . . . . . . . 71
SECTION 9.2 Preservation of Information;
Communications to Holders . . . . . . . . 72
SECTION 9.3 Reports by Trustee . . . . . . . . . . . . 73
SECTION 9.4 Reports by Company . . . . . . . . . . . . 75

- iv -

<PAGE>

Page
----

ARTICLE TEN

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . 76

SECTION 10.1 Consolidations or Mergers of Company and
Sales or Transfers of Property of
Company Permitted Subject to Certain
Conditions . . . . . . . . . . . . . . . 76
SECTION 10.2 Rights and Duties of Successor
Corporations . . . . . . . . . . . . . . 76
SECTION 10.3 Opinion of Counsel . . . . . . . . . . . . 77

ARTICLE ELEVEN

SUPPLEMENTAL INDENTURES . . . . . . . . 77

SECTION 11.1 Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . . . . . 77
SECTION 11.2 Supplemental Indentures with Consent of
Holders . . . . . . . . . . . . . . . . . 78
SECTION 11.3 Execution of Supplemental Indentures . . . 79
SECTION 11.4 Effect of Supplemental Indentures . . . . 80
SECTION 11.5 Conformity with Trust Indenture Act . . . 80
SECTION 11.6 Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . 80

ARTICLE TWELVE

REDEMPTION OF SECURITIES . . . . . . . . 80

SECTION 12.1 Applicability of Article . . . . . . . . . 80
SECTION 12.2 Election to Redeem; Notice to Trustee . . 81
SECTION 12.3 Limitations on Redemption; Recovery of
Certain Payments . . . . . . . . . . . . 81
SECTION 12.4 Selection by Trustee of Securities to Be
Redeemed . . . . . . . . . . . . . . . . 84
SECTION 12.5 Notice of Redemption . . . . . . . . . . . 84
SECTION 12.6 Deposit of Redemption Price . . . . . . . 85
SECTION 12.7 Securities Payable on Redemption Date . . 85
SECTION 12.8 Securities Redeemed in Part . . . . . . . 86

ARTICLE THIRTEEN

SINKING FUNDS . . . . . . . . . . . 86

SECTION 13.1 Applicability of Article . . . . . . . . . 86
SECTION 13.2 Satisfaction of Sinking Fund Payments
with Securities . . . . . . . . . . . . . 87
SECTION 13.3 Redemption of Securities for Sinking
Fund . . . . . . . . . . . . . . . . . . 87

- v -

<PAGE>

Page
----

ARTICLE FOURTEEN

MISCELLANEOUS PROVISIONS . . . . . . . . 87

SECTION 14.1 Successors and Assigns of Company Bound
by Indenture . . . . . . . . . . . . . . 87
SECTION 14.2 Act of Board, Committee or Officer of
Successor Corporation Valid . . . . . . 88
SECTION 14.3 Surrender of Powers by Company . . . . . . 88
SECTION 14.4 Indenture May Be Executed in
Counterparts . . . . . . . . . . . . . . 88
SECTION 14.5 No Security or Right of Set-Off . . . . . 88
SECTION 14.6 No Reliance on Exchange; Arbitration
under Exchange Rules; etc. . . . . . . . 89
SECTION 14.7 Acceptance of Trusts by Trustee . . . . . 90

- vi -

<PAGE>

INDENTURE, dated as of March 1, 1996, between LEHMAN BROTHERS INC., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), and the THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association duly organized and existing under the laws of the
United States, as Trustee.

RECITALS OF THE COMPANY

The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured, senior
subordinated debentures, notes or other evidences of indebtedness (herein called
the "Securities") unlimited as to principal amount, to bear such rates of
interest, to mature at such time or times, to be issued in one or more series
and to have such other provisions as in this Indenture provided.

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 or of series
thereof, as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION

SECTION 1.1 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 One have the meanings assigned
to them in this Article One 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;

(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with

<PAGE>
generally accepted accounting principles in the United States of America, and,
except as otherwise herein expressly provided, the term "generally accepted
accounting principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles as are generally accepted in the
United States of America at the date of such computation; 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 Eight, are defined in that
Article.

"Act", when used with respect to any Holder, has the meaning specified
in Section 1.4.

"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.

"Applicable Minimum Capital" has the meaning specified in Section
7.2(b)(v).

"Bankruptcy Act" means Title 11 of the United States Code, entitled
Bankruptcy, or any successor statute.

"Board of Directors" means either the board of directors of the
Company or any committee of that Board duly authorized to act hereunder or
any directors and/or officers of the Company to whom that board or
committee shall have delegated its authority.

"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.

"Business Day", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in that Place of Payment are authorized or
obligated by law to close.

<PAGE>
"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 the 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 at such
time.

"Company" means Lehman Brothers Inc., and, subject to the provisions
of Article Ten, shall also include its successors and assigns.

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

"Consolidated Net Income" means the net income (or net deficit) of the
Company and its consolidated subsidiaries, determined on a consolidated
basis in accordance with generally accepted accounting principles.

"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be
administered.

"corporation" includes corporations, associations, companies and
business trusts.

"Defaulted Interest" has the meaning specified in Section 3.7.

"Depositary" means, with respect to the Securities of any series
issuable or issued in the form of a global Security, the Person designated
as Depositary by the Company pursuant to Section 3.1 until a successor
Depositary shall have been appointed pursuant to Section 3.5, and
thereafter "Depositary" shall mean or include each Person who is then a
Depositary hereunder, and if at any time there is more than one such
Person, "Depositary" as used with respect to the Securities of any such
series shall mean the Depositary with respect to the Securities of that
series.

"domestic", when used with reference to an exchange, board of trade,
clearing association or similar organization, means such an organization
governed by the laws or regulations of the United States of America or any
department or agency thereof, and when used with reference to a
governmental agency or body shall mean an agency or body organized under
the laws of the United States of America.

<PAGE>
"Event of Acceleration" and "Event of Default" have the meanings
specified in Section 7.1.

"Exchange" means the regulatory body having responsibility for
inspecting or examining the Company in connection with the Company's
compliance with the financial responsibility requirements of Section 13(c)
of the Securities Investor Protection Act and Section 17(d) of the
Securities Exchange Act of 1934, which body at the date of the execution
and delivery of this Indenture is the New York Stock Exchange, Inc.
References herein to Exchange shall also be deemed to refer to the Chicago
Mercantile Exchange, the Chicago Board of Trade, The Comex Clearing
Association, Inc. and to any other domestic exchange, board of trade,
clearing association or similar organization of which the Company is a
member, or with which it has qualified for privileges (including any
"designated self-regulatory organization" as defined in Section 1.3(ff) of
the regulations under the Commodity Exchange Act) and which requires such
reference as a condition to treating the Securities as part of the
Company's net capital as computed for the purposes of said organization.

"Holder" means a Person in whose name a Security of any series is
registered in the Security Register.

"Indebtedness" of a Person shall mean all obligations of such Person
which would be treated as liabilities in accordance with generally accepted
accounting principles.

"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 and shall include the terms of particular series of Securities
established as contemplated by Section 3.1.

"Indexed Security" means any Security as to which the amount of
payments of principal (and premium, if any) and/or interest due thereon is
determined with reference to the rate of exchange between the currency or
currency unit in which the Security is denominated and any other specified
currency or currency unit, to the relationship between two or more
currencies or currency units, to the price of one or more specified
securities or commodities, to one or more securities or commodities
exchange indices or other indices or by other similar methods or formulas,
all as specified in accordance with Section 3.1.

"interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means
interest payable after Maturity.

<PAGE>
"Interest Payment Date", when used with respect to any Security of any
series, means the Stated Maturity of an instalment of interest on such
Security.

"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an instalment of principal becomes
due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption or
otherwise.

"Net Capital Rule" has the meaning specified in Section 7.2(b)(i)
hereof. The terms "aggregate indebtedness," "aggregate debit items,"
"secured demand note," "subordination agreements," and "net capital" are
used as each is defined or otherwise given meaning in the Net Capital Rule.

"Officers' Certificate" means a certificate signed by the Chairman of
the Board, any Vice Chairman of the Board, the President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or
an Assistant Secretary, of the Company, and delivered to the Trustee.

"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.

"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable
following an Event of Acceleration or an Event of Default pursuant to
Section 7.2(a) or Section 7.3.

"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 cancelled by the Trustee or
delivered to the Trustee for cancellation;

(ii) Securities for whose payment or redemption 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; 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; and

<PAGE>
(iii) Securities which have been paid pursuant to Section 3.6 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 Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (a) the
principal amount of an Original Issue Discount Security that may be counted
in making such determination and that shall be deemed to be Outstanding for
such purposes shall be equal to the amount of the principal thereof that
could be declared to be due and payable pursuant to the terms of such
Original Issue Discount Security at the time the taking of such action by
the Holders of such requisite principal amount is evidenced to the Trustee
as provided in Section 1.4(a), (b) the principal amount of any Indexed
Security that shall be deemed to be the face amount thereof unless the
specified terms of such Indexed Security provide otherwise and (c)
Securities owned beneficially by the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor, other
than Securities purchased in connection with the distribution or trading
thereof, shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or
waiver, only Securities which the Trustee 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 such other obligor.

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

"Person" means any individual, corporation, partnership, joint ven-
ture, 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 any
series, means the place or places where the principal of (and premium, if
any) and interest on the

<PAGE>
Securities of that series are payable as specified as contemplated by Section
3.1.

"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, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for or
in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed
to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.

"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption 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 this
Indenture.

"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that
purpose as contemplated by Section 3.1.

"Responsible Officer," when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors,
the chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer,
the cashier, any assistant cashier, any trust officer or assistant trust
officer, the controller or any assistant controller or any other officer of
the Trustee customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.

"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.

"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.

"Senior Indebtedness" when used in relation to a Subordinated Payment
or in connection with provisions relating to such Subordinated Payment
means Indebtedness of the Company, to the extent unsecured, arising out of
any matter or event occurring prior to the date on which such Subordinated
Payment matures and becomes due and payable,

<PAGE>
which has not in whole or in part been subordinated in right of payment to any
other Indebtedness of the Company.

"SIPA" means the Securities Investor Protection Act of 1970, as
amended.

"SIPC" means the Securities Investor Protection Corporation estab-
lished under SIPA, or any successor corporation or agency thereunder.

"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.

"Stated Maturity", when used with respect to any Security or any
instalment of principal thereof or interest thereon, means (i) the date
specified in such Security as the fixed date on which the principal of such
Security or such instalment of principal or interest is due and payable and
(ii) the Redemption Date for any Security or portion thereof called for
redemption pursuant to any mandatory sinking fund or analogous obligation.

"Subordinated Payment" has the meaning specified in Section 4.1.

"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or
by one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such
voting power by reason of any contingency.

"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument and, subject to the provisions of Article
Eight hereof shall also include its successors and assigns as Trustee
hereunder. If there shall be at any one time more than one Trustee
hereunder, "Trustee" shall mean each such Trustee and shall apply to each
such Trustee only with respect to those series of Securities with respect
to which it is serving as Trustee.

"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990, as in force at the date
as of which this instrument was executed, except as provided in Section
10.5.

"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or
a word or words added before or after the title "vice president."

<PAGE>
SECTION 1.2 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 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 condi-
tion or covenant provided for in this Indenture (other than certificates
provided pursuant to Section 5.6) shall include:

(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition 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 covenant or condition
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 1.3 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 with respect 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 a certificate or Opinion of
Counsel, or representations by counsel,

<PAGE>
unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the matters
upon which his certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel or representation by counsel 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 with respect 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 with respect 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 1.4 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 may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 8.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.

(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.

<PAGE>
(d) 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 or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.

SECTION 1.5 Notices, Etc., to Trustee and Company.
-------------------------------------

Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,

(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or

(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any other
address previously furnished in writing to the Trustee by the Company.

SECTION 1.6 Notice to Holders; Waiver.
-------------------------

Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given if in writing and mailed, first-class postage
prepaid, to each 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 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. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.

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

<PAGE>
SECTION 1.7 Conflict with Trust Indenture Act.
---------------------------------

If any provision hereof limits, qualifies or conflicts with the duties
imposed by any of Sections 310 through 317, inclusive, of the Trust Indenture
Act through the operation of Section 318(c) thereof, such imposed duties shall
control.

SECTION 1.8 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 1.9 Separability Clause.
-------------------

In case any provision in this Indenture or in the Securities of any
series shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions (or of the other series of
Securities) shall not in any way be affected or impaired thereby.

SECTION 1.10 Benefits of Indenture.
---------------------

Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders and to the extent provided in Article Four, the
holders of Senior Indebtedness, any benefit or any legal or equitable right,
remedy or claim under this Indenture.

SECTION 1.11 Governing Law.
-------------

This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflict of laws principles thereof.

SECTION 1.12 Legal Holidays.
--------------

In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of a Security of any series shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of such
Securities) payment of interest or principal (and premium, 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 or Redemption Date, or at the Stated
Maturity, provided that no interest shall accrue for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be.

<PAGE>
ARTICLE TWO

SECURITY FORMS

SECTION 2.1 Forms Generally.
---------------

The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of such
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action 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 Company
Order contemplated by Section 3.3 for the authentication and delivery of such
Securities.

The Trustee's certificates of authentication shall be in substantially
the form set forth in this Article.

The definitive Securities of each series shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.

SECTION 2.2 Form of Face of Security.
------------------------

LEHMAN BROTHERS INC.

No. __ $_____

[If the Security is a global Security, insert--THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. UNLESS AND
UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM,
THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO SUCH DEPOSITORY
OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO
A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS
SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF

<PAGE>
TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]

LEHMAN BROTHERS INC., a corporation duly organized and existing under
the laws of Delaware (herein called the "Company," which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ___________________ or registered assigns,
the principal sum of ________________ Dollars on ______________________ [If the
Security is to bear interest prior to Maturity, insert--, and to pay interest
thereon from ________________ or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on
__________________ and _______________ in each year, commencing
__________________, at the rate of __% per annum, until the principal hereof is
paid or made available for payment [If applicable insert--, and (to the extent
that the payment of such interest shall be legally enforceable) at the rate of
__% per annum on any overdue principal and premium and on any overdue instalment
of interest]. The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be paid
to the Person in whose name this Security (or one or more Predecessor Securi-
ties) is registered at the close of business on the Regular Record Date for such
interest, which shall be the ___________ or ___________ (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture].

[If the Security is not to bear interest prior to Maturity, insert--
The principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of ___% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
default in payment to the date

<PAGE>
payment of such principal has been made or duly provided for. Interest on any
overdue principal shall be payable on demand. Any such interest on any overdue
principal that is not so paid on demand shall bear interest at the rate of __%
per annum (to the extent that the payment of such interest shall be legally
enforceable), which shall accrue from the date of such demand for payment to the
date payment of such interest has been made or duly provided for, and such
interest shall also be payable on demand.]

Payment of the principal of (and premium, if any) and [if applicable,
insert--any such] interest on this Security will be made at the office or agency
of the Company maintained for that purpose in the [Borough of Manhattan, the
City of New York], in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts
[if applicable, insert--; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register].

Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

Dated:

LEHMAN BROTHERS INC.

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

Attest:

- --------------------------------
Secretary

SECTION 2.3 Form of Reverse of Security.
---------------------------

This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of March 1, 1996 (herein called the
"Indenture"),

<PAGE>
between the Company and The First National Bank of Chicago, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof [, limited in aggregate principal amount to $ ].
-------

[if applicable, insert--The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert--
(1) on _______________ in any year commencing with the year _____ and ending
with the year _____ through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [on
or after ____________, 19__], as a whole or in part, at the election of the
Company, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed [on or before ______, ______%, and if redeemed]
during the 12-month period beginning ___________ of the years indicated,

Redemption Redemption
Year Price Year Price
---- ----- ---- -----

and thereafter at a Redemption Price equal to ___% of the principal amount,
together in the case of any such redemption [if applicable, insert--(whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]

[If applicable, insert--The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ______________ in
any year commencing with the year _______________ and ending with the year
______________ through operation of the sinking fund for this series at the
Redemption Prices for redemption through operation of the sinking fund
(expressed as percentages of the principal amount) set forth in the table below,
and (2) at any time [on or after ____________], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal

<PAGE>
amount) set forth in the table below: If redeemed during the 12-month period
beginning __________ of the years indicated,

Redemption Price
For Redemption Redemption Price For
Through Operation Redemption Otherwise
of the Than Through Operation
Year Sinking Fund of the Sinking Fund
---- ------------ -------------------

and thereafter at a Redemption Price equal to ___% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]

[Notwithstanding the foregoing, the Company may not, prior to
____________, redeem any Securities of this series as contemplated by [Clause
(2) of] the preceding paragraph as a part of, or in anticipation of, any
refunding operation by the application, directly or indirectly, of moneys
borrowed having an interest cost to the Company (calculated in accordance with
generally accepted financial practice) of less than __% per annum.]

[The sinking fund for this series provides for the redemption on
___________ in each year beginning with the year ___________ and ending with the
year __________ of [not less than] $____________ [("mandatory sinking fund") and
not more than $_________] aggregate principal amount of Securities of this
series. [Securities of this series acquired or redeemed by the Company otherwise
than through [mandatory] sinking fund payments may be credited against
subsequent [mandatory] sinking fund payments otherwise required to be made.]]

In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.

The indebtedness evidenced by the Securities of this series, together
with [if applicable, insert--any] interest accrued thereon and premium, if any,
is, to the extent provided in the Indenture, subordinate and subject in right of
payment to

<PAGE>
the prior payment in full of all Senior Indebtedness, as defined in the
Indenture, and this Security is issued subject to the provisions of the
Indenture, and each Holder hereof, by accepting the same, agrees to and shall be
bound by such provisions and authorizes and directs the Trustee in his behalf to
take such action as may be necessary or appropriate to acknowledge or effectuate
the subordination as provided in the Indenture and appoints the Trustee his
attorney-in-fact for any and all such purposes.

As provided in the Indenture, the Company's obligation to pay the
principal of the Securities of this series at Stated Maturity [if applicable,
insert--or pursuant to the mandatory sinking fund] shall be suspended if, after
giving effect to such payment and the payment of certain other subordinated
debt, the Company's "net capital" would be reduced below the minimum amounts of
capital to be maintained by the Company as required by the various domestic
exchanges, boards of trade and governmental agencies to which it is subject, all
with the effect and to the extent provided in the Indenture. [If applicable,
insert--Optional redemptions are subject to similar suspensions and to the
requirement that permission therefor of the Exchange (as defined in the
Indenture) has been obtained.] If payment is made of the principal of the
Securities of this series notwithstanding the foregoing, the Holders of the
Securities so paid are required to repay to the Company, its successors or
assigns, the sum so paid; provided, however, that any suit for such recovery
-------- -------
must be commenced within two years of the date of such payment. Each Holder
hereof, by accepting the same, agrees to be bound by such provisions.

[If the Security is not an Original Issue Discount Security, insert-
- -In case an Event of Default or an Event of Acceleration, as defined in the
Indenture, with respect to Securities of this series shall have occurred and be
continuing, the principal of all of the Securities of this series, in the case
of an Event of Default, shall become, or in the case of an Event of
Acceleration, may be declared and in accordance with such declaration shall
become, due and payable and such acceleration or declaration may in certain
events be rescinded, in the manner, with the effect and subject to the
conditions provided in the Indenture.]

[If the Security is an Original Issue Discount Security, insert--In
case an Event of Default or an Event of Acceleration, as defined in the
Indenture, with respect to Securities of this series shall have occurred and
shall be continuing, an amount of principal of the Securities of this series, in
the case of an Event of Default, shall become, or in the case of an Event of
Acceleration, may be declared and in accordance with such declaration shall
become, due and payable and such Event of Default or Event of Acceleration may
in certain events be rescinded, in the manner and with the effect and subject to
the conditions provided in the Indenture. Such amount

<PAGE>
shall be equal to--insert formula for determining the amount. Upon payment (i)
of the amount of principal so declared or becoming due and payable and (ii) of
interest on any overdue principal and overdue interest (in each case to the
extent that the payment of such interest shall be legally enforceable), all of
the Company's obligations in respect of the payment of the principal of and
interest, if any, on the Securities of this series shall terminate.]

The Securities may be redeemed, at the option of the Company, as a
whole or from time to time in part, upon the notice referred to below, at a
redemption price equal to [if the Security is not an Original Issue Discount
Security, insert--the principal amount thereof, together with interest accrued
to the date fixed for redemption] [if the Security is an Original Issue Discount
Security, insert--such amount as shall be equal to-insert formula for
determining the amount], provided, that such redemption may only be made at a
time when the Securities shall have ceased to be treated as part of the
Company's net capital within the meaning of the Net Capital Rule or of the
regulations under the Commodity Exchange Act as a result of a change in the Net
Capital Rule or such regulations, as the case may be.

The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefore or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.

Except as hereinabove provided, no reference herein to the Indenture
and no provision of this Security or of the Indenture shall alter or impair (as
among the Company, its creditors other than the holders of Senior Indebtedness,
as defined in the Indenture, and the Holders of the Securities) the obligation
of the Company, which is absolute and unconditional, to pay the principal of
(and premium, if any) and interest on this Security at the time and place and at
the rate and in the coin or currency herein prescribed.

<PAGE>
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest, if any, on this Security are payable, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

The Securities of this series are issuable only in registered form
without coupons in denominations of $______ and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this 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 this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

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

SECTION 2.4 Form of Trustee's Certificate of Authentication.
-----------------------------------------------

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

The First National Bank of Chicago
----------------------------------------
as Trustee

By
----------------------------------------------------
Authorized Officer

<PAGE>

SECTION 2.5 Issuance of Global Securities.
-----------------------------

If Securities of a series are issuable in whole or in part in global
form, as established pursuant to Section 3.1, then such global 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 from time to time endorsed thereon and that the
aggregate amount of Outstanding Securities represented thereby may from time to
time be reduced to reflect exchanges or increased to reflect the issuance of
additional Securities of such series. Any endorsement of a global Security to
reflect the amount, or any increase or decrease in the amount, of Outstanding
Securities represented thereby shall be made 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 3.3.
Beneficial owners of Securities shall not be entitled to certificates for global
Securities as to which they are the beneficial owners. Any instructions by the
Company with respect to a Security in global form need not comply with Section
1.2.

Global Securities may be issued only in registered form and in either
temporary or permanent form.

ARTICLE THREE

THE SECURITIES

SECTION 3.1 Amount Unlimited; Issuable in Series.
------------------------------------

The aggregate principal amount of Securities which may be authen-
ticated and delivered under this Indenture is unlimited.

The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series:

(1) the title of the Securities of such series (which shall distin-
guish the Securities of such series from all other series of Securities);

(2) any limit upon the aggregate principal amount of the Securities
of such series which 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, or in
respect of, other securities of such series pursuant to Section 3.4, 3.5,
3.6, 11.6, 12.3 or 12.8);

<PAGE>
(3) the date or dates (or manner of determining the same) on which
the principal of the Securities of such series is payable (which, if so
provided in such Board Resolution or supplemental indenture, may be
determined by the Company from time to time and set forth in the Securities
of the series issued from time to time);

(4) the rate or rates (or manner of determining the same) at which
the Securities of such series shall bear interest, if any, including the
rate of interest applicable on overdue payments of principal or interest,
if different from the rate of interest stated in the title of the Security
and the date or dates from which such interest shall accrue (which, in
either case or both, if so provided in such Board Resolution or
supplemental indenture, may be determined by the Company from time to time
and set forth in the Securities of the series issued from time to time),
the Interest Payment Dates on which such interest shall be payable (or
manner of determining the same) and the Regular Record Date for the
interest payable on any Interest Payment Date, 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, in addition to or other than the
Borough of Manhattan, The City of New York, where the principal of (and
premium, if any) and interest on Securities of such series shall be
payable;

(6) the price or prices at which the Securities of the series are
payable, and the period or periods within which and the terms and
conditions upon which Securities of the series may be redeemed, as a whole
or in part, at the option of the Company;

(7) the obligation, if any, of the Company to redeem, purchase or
repay Securities of such series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which Securities of such series shall be redeemed 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 denominations in which Securities of such series shall be
issuable;

(9) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 7.2
or Section 7.3;

<PAGE>
(10) any Event of Acceleration or Event of Default with respect to
the Securities of such series, if not set forth herein;

(11) if the Securities of such series are issuable as Indexed
Securities, the manner in which the amount of payments of principal of (and
premium, if any) and/or interest due thereon shall be determined;

(12) if the Securities of such series may be converted into or
exchanged for other securities of the Company or any other Person, the
terms and conditions pursuant to which the Securities of such series may be
converted or exchanged;

(13) if the principal of (or premium, if any) or interest, if any, on
the Securities of such series are to be payable, at the election of the
Company or a Holder thereof, in securities or other property, the type and
amount of such securities or other property, or the method by which such
amount shall be determined, and the periods within which, and the terms and
conditions upon which, any such election may be made;

(14) whether the Securities of the series shall be issued in whole or
in part in the form of a global Security or Securities and, in such case,
the Depositary for such global Security or Securities, whether such global
form shall be permanent or temporary and the particular provisions
applicable thereto;

(15) any other terms of such series (which terms shall not be
inconsistent with the provisions of this Indenture).

All Securities of any one series shall be substantially identical
except as to denomination, the rate of interest, if any, Stated Maturity and the
date from which interest, if any, shall accrue which may be determined by the
Company from time to time as to Securities of a series if so provided in or
established pursuant to the authority granted in a Board Resolution or in any
supplemental indenture hereto and except as may otherwise be provided in or
pursuant to such Board Resolution 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 for issuances of additional Securities of such series.

If any of the terms of such series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
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 such series.

<PAGE>

SECTION 3.2 Denominations.
-------------

The Securities of each series shall be issuable in registered form
without coupons in denominations of $1,000 and any integral multiple thereof, or
in such other denominations and amounts as may from time to time be fixed by or
pursuant to a Board Resolution.

SECTION 3.3 Execution, Authentication, Delivery and Dating.
----------------------------------------------

The Securities shall be executed on behalf of the Company by its
Chairman of the Board, one of its Vice Chairmen of the Board, its President or
one of its Vice Presidents, under its corporate seal reproduced thereon attested
by its Secretary or one of its Assistant Secretaries. The signature of any of
these officers on the Securities may be manual or facsimile.

Securities 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.

At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series 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. If any
Security shall be represented by a definitive global Security, then for purposes
of this Section and Section 3.4, the notation of a beneficial owner's interest
therein upon original issuance of such Security shall be deemed to be delivery
in connection with the original issuance of such beneficial owner's interest in
such permanent global Security. If all the Securities of any one series are not
to be issued at one time and if a Board Resolution or supplemental indenture
relating to such series shall so permit, such Company Order may set forth
procedures acceptable to the Trustee for the issuance of such Securities,
including, without limitation, procedures with respect to interest rate, Stated
Maturity, date of issuance and date from which interest, if any, shall accrue.
If the form or terms of the Securities of such series have been established in
or pursuant to one or more Board Resolutions as permitted by Sections 2.1 and
3.1, in authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 8.1) shall be
fully protected in relying upon, an Opinion of Counsel stating,

(a) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted

<PAGE>

by Section 2.1, that such form has been established in conformity with the
provisions of this Indenture;

(b) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 3.1, that such terms
have been established in conformity with the provisions of this Indenture;
and

(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.

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 or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.

If the Company shall establish pursuant to Section 3.1 that the
Securities of a series are to be issued in whole or in part in the form of one
or more global Securities, then the Company shall execute and the Trustee shall,
in accordance with this Section and a Company Order for the authentication and
delivery of such global Securities with respect to such series, authenticate and
deliver one or more global Securities in permanent or temporary form that (i)
shall represent and shall be denominated in an aggregate amount equal to the
aggregate principal amount of the Outstanding Securities of such series to be
represented by one or more global Securities, (ii) shall be registered in the
name of the Depositary for such global Security or Securities or the nominee of
such Depositary and (iii) shall be delivered by the Trustee to such Depositary
or pursuant to such Depositary's instructions.

Each Depositary designated pursuant to Section 3.1 for a global
Security must, at the time of its designation and at all times while it serves
as Depositary, be a clearing agency registered under the Securities Exchange Act
of 1934 and any other applicable statute or regulation.

Notwithstanding the provisions of Section 3.1 and the foregoing
provisions of this Section 3.3, if all Securities of a series are not to be
originally issued at one time, it shall not be necessary to deliver the
Officers' Certificate otherwise

<PAGE>

required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to the foregoing provisions of this Section 3.3 at
or prior to the time of authentication of each Security of such series if such
documents are delivered at or prior to the authentication upon original issuance
of the first Security of such series to be issued.

Each Security shall be dated the date of its authentication.

No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.

SECTION 3.4 Temporary Securities.
--------------------

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,
reproduced or otherwise produced, in any authorized denomination, substantially
of the tenor of the definitive Securities in lieu of which they are issued and
with such appropriate insertions, omissions, substitutions and other variations
as the officers executing such Securities may determine, as evidenced by their
execution of such Securities.

If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series and of a like Stated Maturity and with like
terms and provisions 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, 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 and of a
like Stated Maturity and with like terms and provisions. 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.

SECTION 3.5 Registration, Registration of Transfer and Exchange.
---------------------------------------------------

<PAGE>

The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby initially
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.

Upon surrender for registration of transfer of any Security of any
series at the office or agency in a Place of Payment for such 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 Securities of
the same series, of any authorized denominations and of a like aggregate
principal amount and of a like Stated Maturity and with like terms and
provisions.

At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
a like aggregate principal amount and of a like Stated Maturity and with like
terms and provisions, upon surrender of the Securities to be exchanged at such
office or agency. 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.

All Securities issued upon any registration of transfer or exchange of
Securities shall be the 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 Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) 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 exchange of Securities, other than
exchanges pursuant to Section 3.4, 11.6, 12.3 or 12.8 not involving any
transfer.

The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series for a period of 10 days next preceding
any date fixed for the payment

<PAGE>

of Defaulted Interest, (ii) to issue, register the transfer of or exchange
Securities of any series for a period of 15 days next preceding the day of the
mailing of a notice of redemption of Securities of that series selected for
redemption under Section 12.4 and ending at the close of business on the day of
such mailing, or (iii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.

If at any time the Depositary for the Securities of a series notifies
the Company that it is unwilling or unable to continue as Depositary for the
Securities of such series or if at any time the Depositary for the Securities of
such series shall no longer be eligible under Section 3.3, the Company shall
appoint a successor Depositary with respect to the Securities of such series.
If a successor Depositary for the Securities of such series is not appointed by
the Company within 90 days after the Company receives such notice or becomes
aware of such ineligibility, the Company's election pursuant to Section 3.1(15)
shall no longer be effective with respect to the Securities of such series and
the Company will execute, and the Trustee, upon receipt of a Company Order for
the authentication and delivery of definitive Securities of such series, will
authenticate and deliver Securities of such series of like tenor and terms in
definitive form in an aggregate principal amount equal to the principal amount
the global Security or Securities representing such Securities.

The Company may at any time and in its sole discretion determine that
the Securities of any series issued in the form of one or more global Securities
shall no longer be represented by such global Security or Securities. In such
event, the Company will execute, and the Trustee, upon receipt of a Company
Order for the authentication and delivery of definitive Securities of such
series, will authenticate and deliver Securities of such series of like tenor
and terms in definitive form in an aggregate principal amount equal to the
principal amount in exchange for the global Security or Securities representing
such Securities.

If specified by the Company pursuant to Section 3.1 with respect to a
series of Securities, the Depositary for such series of Securities may surrender
a global Security for such series of Securities in exchange in whole or in part
for Securities of such series of like tenor and terms in definitive form, on
such terms as are acceptable to the Company, the Trustee and such Depositary.
Thereupon, the Company shall execute, and the Trustee upon receipt of a Company
Order for the authentication and delivery of definitive Securities of such
series, will authenticate and deliver, without service charge:

(a) to each Person specified by such Depositary a new Security or
Securities of the same series, of like tenor and terms and of any
authorized denomination as requested by such Person in aggregate principal
amount equal to and in

<PAGE>

exchange for such Person's beneficial interest in the global Security; and

(b) to such Depositary a new global Security of like tenor and terms
and in an authorized denomination equal to the difference, if any, between
the principal amount of the surrendered global Security and the aggregate
principal amount of Securities delivered to Holders thereof.

Upon the exchange of a global Security for Securities in definitive
form, such global Security shall be cancelled by the Trustee. Securities issued
in exchange for a global Security pursuant to this Section shall be registered
in such names and in such authorized denominations, and delivered to such
addresses, as the Depositary for such global Security, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Trustee in writing. The Trustee shall deliver such Securities to the Persons in
whose names such Securities are so registered or to the Depositary.

Notwithstanding any other provision of this Section, unless and until
it is exchanged in whole or in part for Securities in definitive form, a global
Security representing all or a portion of the Securities of a series may not be
transferred except as a whole by the Depositary for such series to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor Depositary for such series or a nominee of such successor Depositary.

SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------

If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of the like tenor and principal
amount and of like Stated Maturity and with like terms and provisions and
bearing a number not contemporaneously outstanding.

If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent or either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security 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, a new Security of the same series and of like tenor and principal
amount and of like Stated Maturity and with like terms and provisions and
bearing a number not contemporaneously outstanding.

<PAGE>

In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.

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 issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security 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 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.

SECTION 3.7 Payment of Interest; Interest Rights Preserved.
----------------------------------------------

Interest on any Security which 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 option of the Company, interest on the Securities of any series
that bear interest may be paid by mailing a check to the address of the person
entitled thereto as such address shall appear in the Security Register.

Any interest on any Security of any series which 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 Holder
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 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.

<PAGE>

The Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of such series and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money 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 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 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 so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the 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).

(2) The Company may make payment of any Defaulted Interest on the
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.

Subject to the foregoing provisions of this Section, 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 3.8 Persons Deemed Owners.
---------------------

Prior to due presentment of a 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 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 Section 3.7) interest on such Security and

<PAGE>

for all other purposes whatsoever, whether or not such 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.

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 global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests, and they shall be fully
protected in acting or refraining from acting on any such information provided
by the Depositary.

SECTION 3.9 Cancellation.
------------

All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled 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 all Securities so delivered shall be promptly cancelled by the
Trustee. Notwithstanding any other provision of this Indenture to the contrary,
in the case of a series all the Securities of which are not to be originally
issued at one time, a Security of such series shall not be deemed to have been
Outstanding at any time hereunder if and to the extent that, subsequent to the
authentication and delivery thereof, such Security is delivered to the Trustee
for cancellation by the Company or any agent thereof upon the failure of the
original purchaser thereof to make payment therefor against delivery thereof,
and any Security so delivered to the Trustee shall be promptly cancelled by it.
No Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Securities shall be destroyed by the Trustee
and a certificate of destruction delivered to the Company unless the Trustee is
otherwise directed by a Company Order.

SECTION 3.10 Computation of Interest.
-----------------------

Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.

SECTION 3.11 CUSIP Numbers.
-------------

The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to

<PAGE>

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 a 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

SUBORDINATION OF SECURITIES

SECTION 4.1 Securities Subordinate to Senior Indebtedness.
---------------------------------------------

The Company covenants and agrees, and each Holder, by his acceptance
thereof, likewise covenants and agrees, that anything to the contrary herein
notwithstanding, the following subordination provisions contained in this
Article Four shall be applicable to each payment of principal, premium, if any,
and interest, if any, required to be made on Securities of any series and each
optional or mandatory sinking fund or redemption payment (each such payment
being hereinafter referred to as a "Subordinated Payment").

SECTION 4.2 Payment of Securities on Dissolution, etc.
-----------------------------------------

The right of the Holders to receive payment of each Subordinated
Payment shall be subordinate in right of payment and subject to the prior
payment or provision for payment in full of all Senior Indebtedness owing to
other present and future creditors of the Company at the time of such
Subordinated Payment and in the event of the appointment of a receiver or
trustee of the Company or Insolvency of the Company (as hereinafter defined),
its liquidation pursuant to SIPA or otherwise, including liquidation deemed to
have commenced under Section 7.2, its bankruptcy, assignment for the benefit of
creditors, reorganization whether or not pursuant to bankruptcy laws or any
other marshalling of the assets and liabilities of the Company (any such event
being herein referred to as "Insolvency Proceedings"), such Holders shall not be
entitled on account of such Subordinated Payment to participate or share ratably
or otherwise in the distribution of the assets of the Company until all Senior
Indebtedness shall have been fully satisfied or provision has been made
therefor, it being understood that provision shall be deemed, for purposes of
this Section 4.2, to have been made for payment in full of all Senior
Indebtedness if the assets of the Company available to pay the same shall be
adequate in amount to satisfy all Senior Indebtedness fully, regardless of
whether any assets shall have been liquidated or shall be in any manner set
aside for that purpose. To give effect to the foregoing, in case of Insolvency
Proceedings, any distribution of assets of the Company or dividends to which
such

<PAGE>

Holders would be entitled on account of such Subordinated Payment except for
these subordination provisions shall be paid or delivered pro rata to the
holders of Senior Indebtedness until such holders have received from all sources
the equivalent to payment in full of such Senior Indebtedness or provision for
such payment has been made, and such Holders shall, to the extent of such
distributions or dividends so paid or delivered to the holders of Senior
Indebtedness, be subrogated to the rights of the holders of such Senior
Indebtedness to further distributions and dividends on account thereof. The
term "Insolvency of the Company" when used herein in relation to any
Subordinated Payment shall mean insolvency (within the meaning of Section
101(32) of the Bankruptcy Act) of the Company.

Upon any payment or distribution of assets of the Company referred to
in this Section 4.2, the Trustee and the Holders shall be entitled to rely upon
a certificate of the liquidating trustee or agent or other person making any
such payment or distribution, delivered to the Trustee or to the Holders, for
the purpose of ascertaining the persons entitled to participate in such payment
or distribution, the holders of the Senior Indebtedness and other indebtedness
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article Four.

The consolidation or merger of the Company with or into another
corporation or any sale or transfer of its properties and assets as an entirety
or substantially as an entirety to another Person upon the terms and conditions
provided in Article Ten shall not be deemed to be Insolvency Proceedings for the
purposes of this Section 4.2 if such other corporation or Person shall, as a
part of such consolidation, merger, sale or transfer, comply with the conditions
respecting such event set forth in Article Ten.

SECTION 4.3 Subrogation of Holders to Rights of Holders of Senior
-----------------------------------------------------
Indebtedness.
- ------------

Subject to the payment or provision for payment in full of all Senior
Indebtedness as provided in Section 4.2, the Holders shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until the Securities shall be so paid in full and no such payments or
distributions to the holders of Senior Indebtedness (or any trustee therefor)
shall, as among the Company, its creditors other than the holders of Senior
Indebtedness, and the Holders, be deemed to be a payment by the Company to or on
account of the Securities, it being understood that the provisions of this
Article Four are and are intended solely for the purpose of defining the
relative rights of the Holders, on the one hand, and the holders of the Senior
Indebtedness, on the other hand. Nothing contained in this Article Four or
elsewhere in this

<PAGE>

Indenture or in the Securities of any series is intended to or shall impair, as
among the Company, its creditors other than the holders of Senior Indebtedness,
and the Holders, the obligation of the Company, which is unconditional and
absolute, to pay to the Holders the principal of and premium, if any, and
interest, if any, on the Securities as and when the same shall become due and
payable in accordance with their terms, or to affect the relative rights of the
Holders and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
an Event of Default or Event of Acceleration under this Indenture, subject to
the rights, if any, under this Article Four, of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.

SECTION 4.4 Securities May Be Paid Prior to Dissolution, etc.
------------------------------------------------

Nothing contained in this Article Four or elsewhere in this Indenture,
or in any of the Securities of any series, (a) shall prevent the Company, at any
time except under the conditions described in Article Seven or Section 4.2 or
12.3, from making payments of principal of, premium, if any, or interest, if
any, on the Securities of any series, or (b) shall prevent the application by
the Trustee (or any Paying Agent other than the Company) of any moneys deposited
with it hereunder to the payment of or on account of the principal of, premium,
if any, or interest, if any, on the Securities of any series if the Trustee or
such Paying Agent, as the case may be, did not (at the later of (i) the date of
such deposit or (ii) the day prior to the date of such payment) have written
notice of any event prohibiting the making of such payment, or (c) shall be
construed as preventing the occurrence of any Event of Default or Event of
Acceleration under Section 7.1.

SECTION 4.5 No Waiver of Subordination Provisions.
-------------------------------------

No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder, or
by any non-compliance by the Company with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof any such holder may have or
be otherwise charged with.

SECTION 4.6 Authorization to Trustee to Take Action to Effectuate
-----------------------------------------------------
Subordination.
- -------------

Each Holder of Securities by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate, as

<PAGE>

between the Holders and the holders of the Senior Indebtedness, the
subordination as provided in this Article Four and appoints the Trustee his
attorney-in-fact for any and all such purposes.

SECTION 4.7 Senior Indebtedness May Be Renewed or Extended, etc.
----------------------------------------------------

Any renewal or extension of the time of payment of any Senior
Indebtedness or the exercise by the holders of Senior Indebtedness of any of
their rights under the Senior Indebtedness, including without limitation the
waiver of default thereunder, or any amendments of Senior Indebtedness (or of
any agreement relating thereto), or any increases in the principal amount of
Senior Indebtedness outstanding (under existing agreements or otherwise), may be
made or done all without notice to or assent from the Holders or the Trustee.

No compromise, alteration, amendment, modification, extension, renewal
or other change of, or waiver, consent or other action in respect of, any
liability or obligation under or in respect of, or any of the terms, covenants
or conditions of, any indenture or other instrument under which any Senior
Indebtedness is outstanding or of such Senior Indebtedness, and no granting of
any security and no release of property securing any Senior Indebtedness,
whether or not such grant of security or release is in accordance with the
provisions of any applicable document, shall in any way alter or affect any of
the provisions of this Article Four or of the Securities of any series relating
to the subordination thereof.

SECTION 4.8 Trustee to Have no Fiduciary Duty to Holders of Senior
------------------------------------------------------
Indebtedness.
- ------------

With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Four, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall
not be liable to any holder of Senior Indebtedness if it shall pay over or
deliver to the Holders, the Company or any other Person moneys or assets to
which any holder of Senior Indebtedness shall be entitled by virtue of this
Article Four or otherwise.

SECTION 4.9 Rights of Trustee as Holder of Senior Indebtedness.
--------------------------------------------------

The Trustee shall be entitled to all rights set forth in this Article
Four in respect of any Senior Indebtedness at any time held by it, to the same
extent as any other holder of Senior Indebtedness and nothing in Section 8.13 or
elsewhere in this Indenture shall be construed to deprive the Trustee of any of
its

<PAGE>

rights as such holder. Nothing in this Article Four shall apply to claims of or
payments to the Trustee under or pursuant to Section 8.7.

SECTION 4.10 Notice to Trustee.
-----------------

The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment of
moneys to or by the Trustee in respect of Securities of any series pursuant to
the provisions of this Article Four or otherwise. Notwithstanding the
provisions of this Article Four or any other provision of this Indenture, for
all purposes of this Indenture the Trustee shall not be charged with knowledge
of the existence of any Event of Acceleration or Event of Default or of any fact
or condition which would prohibit the making of any payment of money to or by
the Trustee in respect of Securities of any series pursuant to the provisions of
this Article Four or otherwise, unless and until the Trustee shall have received
written notice thereof from the Company, from the Holders of not less than 25%
in aggregate principal amount of Securities of such series at the time
outstanding, or from a holder or holders of Senior Indebtedness or from any
indenture trustee therefor, nor shall the Trustee be charged with knowledge of
the elimination of the fact or condition preventing any such payment unless and
until the Trustee shall have received an Officers' Certificate to such effect.

The Trustee shall be entitled to rely on and shall be fully protected
in acting upon the delivery to it of a written notice by a Person representing
himself to be a holder of Senior Indebtedness (or an indenture trustee on behalf
of such holder) to establish that such notice has been given by a holder of
Senior Indebtedness or an indenture trustee on behalf of any such holder. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Four, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article Four.

SECTION 4.11 Securities Ranking with Certain Indebtedness.
--------------------------------------------

(a) The Securities shall be senior in right of payment and in
liquidation to the following Indebtedness of the Company (i) the Company's
obligations in respect of its 10 3/4% Subordinated Notes held by various
subsidiaries of the Company; and (ii) the Company's obligations under any
deferred compensation plan for its employees.

<PAGE>
(b) The Securities shall not be senior in right of payment to the
Indebtedness represented by (i) the Company's obligations in respect of its
10 3/4% Senior Subordinated Notes and 7.62% Senior Subordinated Notes held by
various subsidiaries of the Company; (ii) the Company's obligations in respect
of its Floating Rate Subordinated Notes held by LBI Group Inc., an indirect
wholly owned subsidiary of Lehman Brothers Holdings Inc.; (iii) the Company's
11 5/8% Senior Subordinated Debentures due May 15, 2005; (iv) the Company's
10 3/4% Senior Subordinated Notes due April 29, 1996; (v) the Company's 9 7/8%
Senior Subordinated Notes due October 15, 2000; (vi) the Company's 10% Senior
Subordinated Notes due 1999; (vii) the Company's 7.125% Senior Subordinated
Notes due July 15, 2002; (viii) the Company's 9 1/2% Senior Subordinated Notes
due June 15, 1997; (ix) the Company's Floating Rate Senior Subordinated Notes
due May 17, 1996; (x) the Company's 7 3/8% Senior Subordinated Notes due August
15, 1997; (xi) the Company's 7 5/8% Senior Subordinated Notes due August 1,
1998; (xii) the Company's 5 3/4% Senior Subordinated Notes due November 15,
1998; (xiii) the Company's 5.04% Senior Subordinated Notes due December 15,
2003; (xiv) the Company's 7.00% Senior Subordinated Notes due May 15, 1997; and
(xv) the Company's 8.125% Senior Subordinated Notes due February 1, 2001, all of
which Indebtedness is intended to rank pari passu in right of payment and in
liquidation to the Securities.

ARTICLE FIVE

COVENANTS

SECTION 4.12 Payment of Principal, Premium and Interest.
------------------------------------------

The Company covenants and agrees for the benefit 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 the Securities and this Indenture.

SECTION 4.13 Maintenance of Office or Agency.
-------------------------------

The Company will 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 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 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 for the Securities of each series with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust

<PAGE>

Office of such Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands with respect
to the Securities of such series.

The Company may also 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 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 each Place of Payment 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.

SECTION 4.14 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 Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
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 such
series of its action or failure so to act.

Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of (and
premium, if any) or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium, if any) or
interest 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 for such series) the Company will promptly notify the
Trustee of its action or failure so to act.

The Company will cause each Paying Agent for any series of Securities
other than the Trustee for such series to execute and deliver to such Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will:

(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;

<PAGE>
(2) give such Trustee notice of any default by the Company (or any
other obligor upon the Securities of that series) in the making of any
payment of principal (and premium, if any) or interest on the Securities of
that series; and

(3) at any time during the continuance of any such default, upon the
written request of such Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.

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 for the
Securities of the appropriate series all sums held in trust by the Company or
such Paying Agent, such sums to be held by such 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 such Trustee, such Paying Agent shall
be released from all further liability with respect to such money.

Any money deposited with the Trustee of such series or any Paying
Agent, or then held by the Company in trust for the payment of the principal of
(and premium, if any) or interest on any Security of any series and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall be paid to the Company on 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 thereof, and all liability of such 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 such
-------- -------
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 a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in the Borough of Manhattan, The City of New York,
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 4.15 Corporate Existence.
-------------------

Subject to Article Ten, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
-------- -------
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of

<PAGE>

the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.

SECTION 4.16 Limitation on Dividends and Common Stock Distributions.
------------------------------------------------------

The Company will not, except as provided below in this Section,
declare or pay any dividend or make any distribution on or to the holders of its
common stock except dividends or distributions payable in shares of common stock
of the Company if, upon giving effect to such dividend or distribution, the
aggregate amount declared, paid or expended for all such purposes subsequent to
June 30, 1978 shall exceed the sum of (i) $5,000,000, plus (ii) the aggregate
Consolidated Net Income earned subsequent to June 30, 1978, plus (iii) the net
proceeds of the sale after June 30, 1978 of common stock (or rights or warrants
to purchase or subscribe therefor) of the Company, plus (iv) the net proceeds of
the sale after June 30, 1978 of indebtedness of the Company which thereafter has
been converted into shares of common stock of the Company. Nothing contained in
the foregoing provisions of this Section 5.5 shall prevent the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
said declaration complied with the provisions hereof. In the case of shares of
common stock issued for property other than cash, or any distribution made other
than in cash, the proceeds received by the Company or the distributed property,
as the case may be, for the purpose hereof shall be deemed the fair value of
such property as determined by the Board of Directors.

SECTION 4.17 Statement by Officers as to Default.
-----------------------------------

The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an officers'
certificate of the principal executive officer, principal financial or principal
accounting officer of the Company, stating whether or not to the best knowledge
of the signers thereof the Company is in default in the performance and
observance of any of the terms, provisions and conditions of this Indenture, and
if the Company shall be in default, specifying all such defaults and the nature
and status thereof of which they may have knowledge. For purposes of this
Section 5.6, any such default shall be determined without regard to any period
of grace or requirement of notice provided under this Indenture.

In addition, the Company shall file with the Trustee written notice of
the occurrence of any default or Event of Default within five Business Days of
its becoming aware of any such default or Event of Default.

SECTION 4.18 Waiver of Certain Covenants.
---------------------------

<PAGE>

The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 5.4 and 5.5, with respect to
the Securities of any series if before the time for such compliance the Holders
of at least a majority in aggregate principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either 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 for the Securities of such series in respect of any such term,
provision or condition shall remain in full force and effect.

SECTION 4.19 Calculation of Original Issue Discount.
--------------------------------------

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) accrued or Outstanding Securities as
of the end of such year.

ARTICLE SIX

SATISFACTION AND DISCHARGE

SECTION 5.1 Satisfaction and Discharge of Indenture.
---------------------------------------

This Indenture shall upon Company Request cease to be of further
effect with respect to the Securities of any series (except as to any surviving
rights of registration of transfer or exchange of Securities of such series
herein expressly provided for), and the Trustee for the Securities of such
series, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, which instruments
shall be reasonably requested by the Company, when

(1) either

(A) all the Securities of such series theretofore authenticated
and delivered (other than (i) Securities of such series which have
been destroyed, lost or stolen and which have been replaced or paid as
provided in Section 3.6 and (ii) Securities 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 5.3) have been
delivered to such Trustee for cancellation; or

<PAGE>

(B) all such Securities of such series not theretofore delivered
to the Trustee for cancellation

(i) have become due and payable, or

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

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

and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with such Trustee as trust funds
in trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to
such Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities of
such series 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 in connection with Outstanding
Securities of such series to such 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
have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee for the Securities of such series
under Section 8.7, and, if money shall have been deposited with such Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of such
Trustee under Section 6.2 and the last paragraph of Section 5.3 shall survive.

Notwithstanding the foregoing provisions of this Section 6.1, all of
the provisions of this Indenture shall continue to remain in effect (and this
Indenture shall not be satisfied and discharged) for a period of two years from
the later of (i) the date upon which payment of all outstanding Securities of
any such series (other than any authenticated and delivered pursuant to Section
12.3) shall have been made in accordance with the terms hereof, and (ii) the
date upon which payment is made of all Securities of any such series issued or
issuable pursuant to Section 12.3.

<PAGE>

SECTION 5.2 Application of Trust Money.
--------------------------

Subject to the provisions of the last paragraph of Section 5.3, all
money deposited with the Trustee for the Securities of any series pursuant to
Section 6.1 shall be held in trust and applied by it, in accordance with the
provisions of the Securities 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 the Trustee.

ARTICLE SEVEN

REMEDIES OF THE TRUSTEE AND HOLDERS
UPON EVENTS OF ACCELERATION AND DEFAULT

SECTION 6.1 Events of Acceleration and Default Defined.
------------------------------------------

The occurrence after the date hereof, with respect to Securities of
any series, of any of the events specified in clauses (a) through (d) below
shall constitute an "Event of Acceleration" with respect to Securities of such
series, and the occurrence after the date hereof of any of the events specified
in clauses (e) through (g) below shall constitute an "Event of Default" with
respect to Securities of such series, that is to say:

(a) failure to make payment of any instalment of interest, if any,
upon any Securities of such series as and when the same shall become due
and payable, and continuance of such failure for a period of 30 days
(whether or not such failure shall be by reason of the operation of the
provisions of Article Four); or

(b) failure to make payment of the principal of (and premium, if any,
on) any Securities of such series as and when the same shall become due and
payable, or would have become due and payable but for the provisions of
Section 7.2(b) or Section 12.3, at a Stated Maturity or upon optional
redemption (and whether or not such failure shall be by reason of the
operation of the provisions of Article Four or Section 12.3); or

(c) failure on the part of the Company to duly observe or perform the
provisions of Section 5.5 for a period of 60 consecutive days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Company by the Trustee for the
Securities of such series, or to the Company and such Trustee by the

<PAGE>

Holders of at least 25% in aggregate principal amount of Securities of such
series at the time outstanding; or

(d) any Indebtedness of the Company exceeding $5,000,000 in the
aggregate, in the case of Securities initially issued prior to May 27,
1994, or exceeding $10,000,000 in the aggregate, in the case of Securities
initially issued on or after May 27, 1994, and constituting part of the
Company's net capital shall become due and payable prior to the date or
dates on which the same would otherwise become due and payable solely by
reason of the existence of an event of default or acceleration applicable
to such Indebtedness (but not including the exercise of any "put" or
similar right accorded to any holder of such Indebtedness), and such
acceleration shall not be rescinded or annulled or such accelerated
Indebtedness shall not be refunded with Indebtedness constituting net
capital having no earlier maturity than the accelerated Indebtedness, all
within 15 days after written notice to the Company requiring such action
from the Trustee for such series or to the Company and to the Trustee for
such series from the Holders of not less than 25% in aggregate principal
amount of Securities of such series then outstanding; or

(e) if the Company is not operating pursuant to the alternative net
capital requirements provided for in paragraph (f) of the Net Capital Rule,
the ratio of aggregate indebtedness of the Company to its net capital as
determined pursuant to the Net Capital Rule shall exceed 15 to 1 (or such
greater ratio as may be established by the Exchange (or any other domestic
exchange, board of trade, clearing association or similar organization of
which the Company is a member) or a domestic governmental agency or other
body having appropriate authority as the minimum ratio that a broker or
dealer is required to maintain in order to conduct business) for a period
of not less than 15 consecutive business days, commencing on the date the
Company first determines and notifies the Exchange, or the Exchange or the
Securities and Exchange Commission first determines and notifies the
Company, that such ratio is in excess of 15 to 1 or such greater ratio, as
the case may be; or, if the Company is operating pursuant to the
alternative net capital requirements provided for in paragraph (f) of the
Net Capital Rule, its net capital shall be less than 2 percent of aggregate
debit items computed in accordance with the Net Capital Rule (or such
lesser amount as may be established by the Exchange (or any other domestic
exchange, board of trade, clearing association or similar organization of
which the Company is a member) or a domestic governmental agency or body
having appropriate jurisdiction as the minimum amount that a broker or
dealer is required to maintain in order to conduct business) for a period
of not less than 15 consecutive business days, commencing on the date the
Company first determines and notifies the Exchange,

<PAGE>

or the Exchange or the Securities and Exchange Commission first determines
and notifies the Company, that its net capital is less than such amount or
such lesser amount, as the case may be; or

(f) the making of an application by SIPC for a decree adjudicating
that customers of the Company are in need of protection under SIPA and
seeking the appointment of a receiver or trustee or similar officer of the
Company and the failure of the Company to obtain the dismissal of such
application within 30 days; or

(g) the dissolution or insolvency of the Company or the making of an
assignment for the benefit of creditors by the Company or the commencement
of any proceedings (by petition, application, answer, consent or otherwise)
by the Company to be adjudicated a bankrupt or for the appointment of a
receiver or trustee or similar officer for it or for a substantial part of
its property or for reorganization, an arrangement, composition or other
relief under the Bankruptcy Act or the taking of corporate action by the
Company for any such purpose, or a liquidation pursuant to SIPA or
otherwise, a liquidation deemed to have commenced under subsection (b) of
Section 7.2, any other marshalling of the assets or liabilities of the
Company or the commencement against the Company of any of the
aforementioned proceedings and in such latter case the consent thereto by
the Company or its admission of the material allegations thereof or the
continuance of such proceedings undismissed for a period of 60 days.

SECTION 6.2 Action if Event of Acceleration; Suspension of Payment.
------------------------------------------------------

(a) In case of the occurrence of any Event of Acceleration with
respect to Securities of any series, the principal amount (or, if the Securities
of that series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all of the
Securities of that series with accrued interest, if any (and premium, if any),
shall, to the extent not already due and payable and if and only if such Event
of Acceleration continues unremedied (or is not waived as provided in Section
7.15) on the last business day of the sixth full calendar month referred to
below in this Section 7.2, become and be immediately due and payable (without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by the Company) on the last business day of the sixth full
calendar month after the date on which a declaration to such effect mailed or
delivered by either the Trustee for such series or the Holders of not less than
25% in aggregate principal amount of Securities of such series then outstanding
is received by the Company and the Exchange (and by such Trustee if such notice
is given by the Holders) (the last business day of such sixth calendar month

<PAGE>

after such declaration is received being herein referred to as the "Accelerated
Maturity Date"); provided, however, that if such last business day of such sixth
-------- -------
calendar month shall occur prior to the first anniversary date of the original
issuance of Securities of such series, the Accelerated Maturity Date of such
Securities shall be postponed to that date; provided, further, that if on the
-------- -------
Accelerated Maturity Date the obligation of the Company to pay the entire unpaid
principal amount of such Securities is suspended by the provisions of the next
succeeding subsection (b) then such Securities shall not be due and payable and
shall not mature until the day after the Accelerated Maturity Date; and
provided, further, that payment of principal of (and premium, if any) and
- -------- -------
interest, if any, on the Securities shall remain subordinated to the extent
provided in Article Four.

(b) The obligation of the Company to pay the entire unpaid principal
amount of Securities of any series or any portion thereof or to make any
optional or mandatory sinking fund or redemption payment which would otherwise
have been then due shall, whether or not a declaration sent pursuant to
subsection (a) of this Section 7.2 shall have been received and notwithstanding
the occurrence of any Event of Acceleration, be suspended for any period of time
(but in no case beyond the day after the Accelerated Maturity Date if a
declaration sent as provided in subsection (a) of this Section 7.2 has been
received) during which after giving effect to payment of such principal, or
optional or mandatory sinking fund or redemption payment (together with (1) the
payment of any other obligation under subordination agreements of the Company
payable at or prior to the payment of such principal, or optional or mandatory
sinking fund or redemption payment, and (2) the return of any secured demand
note, and the collateral therefor held by the Company and returnable at or prior
to the payment thereof):

(i) if the Company is not operating pursuant to the alternative net
capital requirements provided for in paragraph (f) of Rule 15c3-1 (herein
as from time to time in effect and including any successor rule the "Net
Capital Rule") under the Securities Exchange Act of 1934, as amended (the
"Act"), the aggregate indebtedness of the Company would exceed 1200 per
centum of its net capital (or its "adjusted net capital" as defined in the
regulations under the Commodity Exchange Act) as those terms are defined in
the Net Capital Rule as in effect at the time payment is to be made or such
lesser per centum as may be made applicable to the Company from time to
time by the Exchange (or any other domestic exchange, board of trade,
clearing association or similar organization of which the Company is a
member) or a domestic governmental agency or body having appropriate
authority, or

(ii) if the Company is operating pursuant to the alternative net
capital requirements provided for in paragraph (f) of the Net Capital Rule,
the net capital of

<PAGE>

the Company (or its "adjusted net capital" as defined in the regulations
under the Commodity Exchange Act) would be less than the greater of (A) 5
per centum of aggregate debit items computed in accordance with Exhibit A
to Rule 15c3-3 under the Act or any successor rule as in effect at the time
payment is to be made, or (B) 6 per centum of the funds required to be
segregated by the Company pursuant to the Commodity Exchange Act and the
regulations thereunder and the foreign futures or foreign options secured
amount, less the market value of commodity options purchased by option
customers on or subject to the rules of a contract market or a foreign
board of trade; provided, however, the deduction for each option customer
-------- -------
shall be limited to the amount of customer funds in such option customer's
[account(s) and the foreign futures and foreign options secured amounts]
(if greater), or any successor regulations as in effect at the time such
payment is to be made, or in either case such greater per centum as may be
made applicable to the Company from time to time by the Exchange (or any
other domestic exchange, board of trade, clearing association or similar
organization of which the Company is a member) or a domestic governmental
agency or body having appropriate authority, or

(iii) its net capital (or its "adjusted net capital" as defined in
the regulations under the Commodities Exchange Act), as defined in the Net
Capital Rule as in effect at the time payment is to be made, would be less
than 120 per centum of any minimum dollar amount required by the Net
Capital Rule (or the regulations under the Commodity Exchange Act) as in
effect at such time or such greater dollar amount as may be made applicable
to the Company by the Exchange (or any other domestic exchange, board of
trade, clearing association or similar organization of which the Company is
a member) or a domestic governmental agency or body having appropriate
authority, or

(iv) if the Company guarantees, endorses, carries or clears spe-
cialist or market maker transactions in options listed on a national
securities exchange or facility of a national securities association, the
amounts required to be deducted and maintained as required by the
provisions of paragraphs (a)(6)(v), (a)(7)(iv) or (c)(2)(x)(b)(1) of the
Net Capital Rule would exceed 1000 per centum of its net capital (or its
"adjusted net capital" as defined in the regulations under the Commodity
Exchange Act) as defined in the Net Capital Rule as in effect at the time
such payment is made or such lesser per centum as may be made applicable to
the Company by the Exchange (or any other domestic exchange, board of
trade, clearing association or similar organization of which the Company is
a member) or a domestic governmental agency or body having appropriate
authority, or

(v) the Company's net capital (or its "adjusted net capital" as
defined in the regulations under the Commodity

<PAGE>

Exchange Act) would be less than the "minimum capital requirements" of the
Chicago Board of Trade (or any other domestic exchange, board of trade,
clearing association or similar organization of which the Company is a
member) or a domestic governmental agency or body having appropriate
authority (the net capital necessary to enable the Company to comply with
such minimum amounts as specified in this clause (v) and in clauses (i)
through (iv) above is herein referred to as the "Applicable Minimum
Capital"), or

(vi) the Company's "adjusted net capital" would be reduced below the
amount required by the Chicago Mercantile Exchange (or any other domestic
exchange, board of trade, clearing association or similar organization of
which the Company is a member) or a domestic governmental agency or body
having appropriate authority.

To the extent required under the Capital Requirements of the Chicago
Board of Trade, for purposes of this Section 7.2, the computation of the
Company's net capital as provided for in subsections (b)(i), (b)(ii), (b)(iii)
and (b)(iv) hereof shall be deemed to exclude from current assets (A) an amount
equal to guarantee deposits with clearing organizations, other than the Chicago
Board of Trade, which are required to be excluded from the computation of
current assets pursuant to Section 211 of the Capital Requirements of the
Chicago Board of Trade to the extent such deposits cannot be used for margin
purposes, and (B) the amount computed in accordance with Chicago Board of Trade
Regulation 221.05. Neither the entire unpaid principal amount of Securities of
any series nor any portion thereof (pursuant to a notice of redemption or
otherwise) shall be deemed to have matured and become due and payable during any
period of time during which the Company's obligation to pay such principal
amount or portion is suspended under this Section 7.2(b); provided, however,
-------- -------
that no such suspension shall extend beyond the day after the Accelerated
Maturity Date if a declaration has been mailed or delivered pursuant to
subsection (a) of this Section 7.2 and has been received. If the obligation of
the Company to pay the entire unpaid principal amount of the Securities of any
series or any portion thereof is ever suspended under this Section 7.2(b) for a
period of six consecutive months or such longer period as may be granted by the
Holders of not less than a majority in principal amount of the Securities of
that series then outstanding hereunder, the Company shall take whatever steps
are necessary to effect the rapid and orderly liquidation of its business and
the Company also agrees to take such steps, if not theretofore taken, on the day
after the Accelerated Maturity Date. For the purposes of this Article Seven a
liquidation as described in subsection (g) of Section 7.1 shall be deemed to
have commenced on the day after the earlier of (i) the Accelerated Maturity Date
and (ii) the last day of the six-month period (or longer period, if any, granted
by the Holders of not less than a majority in aggregate principal amount of the
Securities of that series then outstanding hereunder) of

<PAGE>

suspension under this Section 7.2(b) of the obligation of the Company to pay the
principal of the Securities of that series or any portion thereof.

(c) If pursuant to the terms of the immediately preceding subsection
(b) the Company's obligation to pay the unpaid principal amount of the
Securities of any series is suspended, the Company and the Holders of the
Securities of that series then outstanding hereunder recognize and agree that
the Company may be summarily suspended by the Exchange.

(d) If pursuant to Section 7.2(b) there is a suspension of the
obligation of the Company to pay all or any portion of the principal amount of
Securities of any series as to which the giving of notice of redemption shall
have been completed as provided in Section 12.5, there shall be a suspension of
like duration of the obligation of the Company which would otherwise have
matured on the date fixed for redemption to pay premium, if any, and to pay
accrued interest, if any, on Securities of that series or portions thereof, but
such suspension shall not affect the Company's obligation to pay any semi-annual
instalment of interest on Securities of that series or portions thereof which
instalment becomes payable on or prior to the date such suspension terminates.

(e) The Company shall furnish to the Trustee for the Securities of
such series, as promptly as practicable after the termination of each suspension
of any obligation of the Company pursuant to Section 7.2(b) (other than a
termination occurring on the day after the Accelerated Maturity Date), an
Officers' Certificate certifying as to such termination. Upon any such
termination referred to in the preceding sentence, the Company's obligation
which had theretofore been suspended shall be reinstated and, subject to the
provisions of this Article Seven and Articles Four and Twelve, the Company shall
make such payments as promptly as practicable.

SECTION 6.3 Action if Event of Default.
--------------------------

In case an Event of Default with respect to Securities of any series
shall occur, then, notwithstanding the provisions of subsection (b) of Section
7.2, the entire unpaid principal amount (or, if the Securities of that series
are Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms of that series) of the Securities of such series
and accrued interest, if any, thereon shall forthwith mature and become due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby waived by the Company; provided, however, that payment of principal
-------- -------
of (and premium, if any) and interest, if any, on the Securities of such series
shall remain subordinated to the extent provided in Article Four. For the
purposes of the Company's secured demand notes and other subordination
agreements, a liquidation shall be

<PAGE>

deemed to have commenced on the date an Event of Default shall occur.

SECTION 6.4 Rescission of Acceleration.
--------------------------

At any time after a declaration of acceleration of maturity with
respect to Securities of any series has been made as provided in Section 7.2, or
after the maturity of Securities of any series shall have been accelerated and
the same shall have become due and payable as provided in Section 7.3, and
before a judgment or decree for payment of the money due has been obtained by
the Trustee for the Securities of such series as hereinafter in this Article
provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of such series, by written notice to the Company and such
Trustee, may rescind and annul such declaration and its consequences, and may
rescind and annul the acceleration of the maturity of Securities of such series
which have become due and payable as provided in Section 7.3 and its
consequences, if

(1) the Company has paid or deposited with the Trustee for the
Securities of such series a sum sufficient to pay

(A) all overdue interest on all Securities of that series,

(B) the principal of (and premium, if any, on) any Securities of
such series which have become due otherwise than by such acceleration
of maturity and interest thereon at the rate or rates prescribed
therefor in such Securities,

(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and

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

and

(2) all Events of Acceleration and Events of Default with respect to
Securities of that series, other than the nonpayment of the principal of
Securities of such series which have become due solely by such declaration
of acceleration or as provided in Section 7.3, have been cured or waived as
provided in Section 7.15.

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

<PAGE>

SECTION 6.5 Collection of Indebtedness and Suit for Enforcement by
-------------------------------------------------------
Trustee.
- -------

Subject to the provisions of Article Four and Sections 7.2(b) and
12.3, the Company covenants that if

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

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

(3) default is made in the making or satisfaction of any sinking fund
payment or analogous obligation when the same becomes due pursuant to the
terms of any Securities of any series,

the Company will, upon demand of the Trustee for the Securities of such series,
pay to it, for the benefit of the Holders of such Securities, the whole amount
then due and payable on such Securities for principal, including any sinking
fund payment or analogous obligations (and premium, if any), and interest, if
any, and, to the extent that payment of such interest shall be legally
enforceable, interest on any overdue principal (and premium, if any) and on any
overdue interest, at the rate or rates prescribed therefor 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 such Trustee, its agents and counsel.

If the Company fails to pay such amounts forthwith upon such demand,
the Trustee for the Securities of such series, 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, may prosecute such proceeding to judgment or final
decree and may enforce the same against the Company or any other obligor upon
such Securities 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, wherever situated.

If an Event of Acceleration or an Event of Default with respect to
Securities of any series occurs and is continuing, the Trustee for the
Securities of such series may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as such Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the

<PAGE>

exercise of any power granted herein, or to enforce any other proper remedy.

SECTION 6.6 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 of any series or the property of the Company or of such other obligor
or their creditors, the Trustee for the Securities of such series (irrespective
of whether the principal of the Securities of such series shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether such Trustee shall have made any demand on the Company for the payment
of overdue principal 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
(and premium, if any) and interest, if any, owing and unpaid in respect of
the Securities of such series and to file such other papers or documents as
may be necessary or advisable in order to have the claims of such Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of such Trustee, its agents and counsel) and of
the Holders of the Securities of such series 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 to make such payments to the Trustee for such series and, in the
event that such Trustee shall consent to the making of such payments directly to
the Holders, to pay to such Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of such Trustee, its agents
and counsel, and any other amounts due such Trustee under Section 8.7.

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

SECTION 6.7 Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities.
- ----------

<PAGE>

All rights of action and claims under this Indenture or the Securities
of any series may be prosecuted and enforced by the Trustee for the Securities
of such series without the possession of any of the Securities of such series or
the production thereof in any proceeding relating thereto, and any such
proceeding instituted by such 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 such Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.

SECTION 6.8 Application of Money Collected.
------------------------------

Any money collected by the Trustee for the Securities of any series
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by such 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 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 such Trustee under
Section 8.7; and

SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest, if any, on such Securities
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 amounts due and payable on such Securities for principal (and
premium, if any) and interest, if any, respectively.

SECTION 6.9 Limitation on Suits.
-------------------

No Holder of any Security of any series 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
for the Securities of such series of a continuing Event of Acceleration or
Event of Default with respect to the Securities of that series;

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

<PAGE>

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

(4) such 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 such Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities of
that series;

it being understood and intended that no one or more of such Holders of
Securities of such securities shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other of such Holders of Securities of such
securities, 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 of such
Holders of the Securities of such series.

SECTION 6.10 Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- --------------------

Notwithstanding any other provision in this Indenture, the Holder of a
Security of any series shall have the right, which is absolute and
unconditional, to receive payment (subject to the provisions of Article Four and
Sections 7.2(b) and 12.3) of the principal of (and premium, if any) and (subject
to Section 3.7) interest on such Security on the Stated Maturity or Maturities
expressed in such Security (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 6.11 Restoration of Rights and Remedies.
----------------------------------

If any Trustee or any Holder 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
such Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, such Trustee and the Holders
shall be restored severally and respectively to their former positions hereunder
and thereafter all rights and remedies of such Trustee and the Holders shall
continue as though no such proceeding had been instituted.

<PAGE>

SECTION 6.12 Rights and Remedies Cumulative.
------------------------------

Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee for the Securities of any series or to the Holders of such Securities 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 6.13 Delay or Omission Not Waiver.
----------------------------

No delay or omission of the Trustee for the Securities of any series
or of the Holders of such Securities to exercise any right or remedy accruing
upon any Event of Acceleration or Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Acceleration or Event of
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to such Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by such Trustee or by the
Holders, as the case may be.

SECTION 6.14 Control by Holders.
------------------

The Holders of a majority in aggregate 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 for the Securities of such series, or exercising any trust or power
conferred on such Trustee, with respect to the Securities of such series,
provided that
- --------

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

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

SECTION 6.15 Waiver of Past Defaults.
-----------------------

The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities of any series may on behalf of the Holders of all
the Securities of such series waive any past Event of Acceleration or Event of
Default hereunder with respect to such series and its consequences except a
default

<PAGE>

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

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

Upon any such waiver, such Event of Acceleration or Event of Default
shall cease to exist, and any Event of Acceleration or 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
impair any right consequent thereon.

SECTION 6.16 Undertaking for Costs.
---------------------

All parties to this Indenture agree, and each Holder of a Security of
any series by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against such Trustee for
the Securities of any series for any action taken, suffered or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Company, to any suit
instituted by such Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in aggregate principal amount of
the Outstanding Securities of any series, or to any suit instituted by any
Holder for the enforcement of the payment of the principal of (or premium, if
any) or interest, if any, on any Security on or after the Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on or
after the Redemption Date).

SECTION 6.17 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 for the Securities of any series, but will
suffer and permit the execution of every such power as though no such law had
been enacted.

<PAGE>

ARTICLE EIGHT

THE TRUSTEE

SECTION 7.1 Certain Duties and Responsibilities.
-----------------------------------

(a) Except during the continuance of an Event of Acceleration or
Event of Default,

(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and

(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.

(b) In case an Event of Acceleration or Event of Default has occurred
and is continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.

(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
------

(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;

(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;

(3) the Trustee for the Securities of any series shall not be liable
with respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of a majority in principal
amount of the Outstanding Securities of such series, determined as provided
in Section 7.14, relating to the time, method and place of conducting any
proceeding for any remedy available

<PAGE>

to such Trustee, or exercising any trust or power conferred upon such Trus-
tee, under this Indenture with respect to the Securities of such series;
and

(4) no provision of this Indenture shall require the Trustee 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.

(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.

SECTION 7.2 Notice of Defaults.
------------------

Within 90 days after the occurrence of any default hereunder with
respect to the Securities of any series, the Trustee for such series shall
transmit by mail to all Holders of Securities of such series, as their names and
addresses appear in the Security Register, notice of such default hereunder with
respect to such series known to such Trustee, unless such default shall have
been cured or waived (the term "defaults" for the purposes of this Section 8.2
being hereby defined to be (x) the events specified in clauses (a), (b), (c),
(d), (e), (f) and (g) of Section 7.1, not including any periods of grace
provided for therein and irrespective of any giving of written notice as
specified in clause (c) or (d) of Section 7.1, and (y) the failure by the
Company to duly observe or perform any provision of this Indenture exclusive of
any such failure included in clauses (a), (b) and (c) of Section 7.1); provided,
--------
however, that, except in the case of a default in the payment of the principal
- -------
of (or premium, if any) or interest, if any, on any Security of such series or
in the payment of any sinking fund installment with respect to Securities of
such series, such 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 of Responsible Officers of such Trustee in good faith determines
that the withholding of such notice is in the interest of the Holders of
Securities of such series; and provided, further, that in the case of any
-------- -------
default of the character specified in Section 7.1 (c) with respect to Securities
of such series, no such notice to Holders shall be given until at least 30 days
after the occurrence thereof

SECTION 7.3 Certain Rights of Trustee.
-------------------------

Subject to the provisions of Section 8.1:

(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution,

<PAGE>

certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;

(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;

(c) 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 an Officers' Certificate;

(d) the Trustee may consult with counsel and the written 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;

(e) the Trustee for the Securities of any series 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 the
Securities of such series pursuant to this Indenture, unless such Holders
shall have offered to such Trustee reasonable security or indemnity against
the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;

(f) 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, other evidence of indebtedness or other paper or
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; and

(g) 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.

<PAGE>

SECTION 7.4 Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------

The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.

SECTION 7.5 May Hold Securities.
-------------------

The Trustee, any Paying Agent, any Security Registrar or any other agent of
the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities of any series and, subject to Sections 8.8 and 8.13, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar or such other agent.

SECTION 7.6 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 7.7 Compensation and Reimbursement.
------------------------------

The Company agrees

(1) to pay to the Trustee for the Securities of any series from time
to time reasonable compensation for all services rendered by it hereunder
(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 the
Trustee for the Securities of any series upon its request for all
reasonable expenses, disbursements and advances incurred or made by such
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; and

(3) to indemnify the Trustee for the Securities of any series, and to
hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with
the acceptance or

<PAGE>

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.

SECTION 7.8 Disqualification; Conflicting Interests.
---------------------------------------

The Trustee for the Securities shall be subject to the provisions of
Section 310(b) of the Trust Indenture Act during the period of time required
thereby. Nothing herein shall prevent the Trustee from filing with the
Commission the application referred to in the penultimate paragraph of Section
310(b) of the Trust Indenture Act. In determining whether the Trustee has a
conflicting interest as defined in Section 310(b) of the Trust Indenture Act
with respect to the Securities of any series, there shall be excluded Securities
of any particular series of Securities other than that series.

SECTION 7.9 Corporate Trustee Required; Different Trustees for
--------------------------------------------------
Different Series; Eligibility.
- -----------------------------

There shall at all times be a Trustee hereunder for the Securities of
each series which shall be a corporation organized and doing business under the
laws of the United States of America, any State thereof or the District of
Columbia, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal, State or District of Columbia authority.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of said 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. A different Trustee may be
appointed by the Company for each series of Securities prior to the issuance of
such Securities. If the initial Trustee for any series of Securities is to be
other than The First National Bank of Chicago, the Company and such Trustee
shall, prior to the issuance of such Securities, execute and deliver an
indenture supplemental hereto, which shall provide for the appointment of such
Trustee as Trustee for the Securities of such series and 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. Neither
the Company nor any Person directly or indirectly controlling, controlled by or
under common control with the Company shall serve as Trustee upon any
Securities. If at any time the Trustee for the Securities of any series shall
cease to be eligible in accordance with the

<PAGE>
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article Eight.

SECTION 7.10 Resignation and Removal; Appointment of Successor.
-------------------------------------------------

(a) No resignation or removal of the Trustee for the Securities of
any series and no appointment of a successor Trustee for the Securities of such
series pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 8.11.

(b) The Trustee, or any trustee or trustees hereafter appointed for
the Securities of any series, may resign at any time with respect to the
Securities of one or more or all such series of the Securities by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee for the Securities of any series required by Section 8.11 shall not have
been delivered to the Trustee for such series within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee for such
series.

(c) The Trustee for the Securities of any series may be removed at
any time with respect to one or more or all such series by Act of the Holders of
a majority in principal amount of the Outstanding Securities of such one or more
series (each voting as a class), delivered to the Trustee and to the Company.
If the instrument of acceptance by a successor Trustee required by Section 8.11
shall not have been delivered to the Trustee within 30 days after such removal,
the Trustee so removed may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.

(d) If at any time:

(1) the Trustee for the Securities of any series shall fail to comply
with Section 310(b) of the Trust Indenture Act pursuant to Section 8.8 with
respect to such series after written request therefor by the Company or by
any Holder of Securities of such series who has been a bona fide Holder of
a Security of such series for at least six months unless the Trustee's duty
to resign is stayed in accordance with the provisions of Section 310(b) of
the Trust Indenture Act, or

(2) such Trustee shall cease to be eligible under Section 8.9 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or

<PAGE>

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

then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 7.16, any Holder of a Security of such
series who has been a bona fide Holder of such 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 such Trustee for the Securities of
any such series and the appointment of a successor Trustee for such series.

(e) If the Trustee for the Securities of any series shall resign, be
removed or become incapable of acting, or if a vacancy shall occur in the office
of Trustee for the Securities of any series for any cause, with respect to the
Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee for the Securities of such series and all
comply with the applicable requirements of Section 8.11. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee for the Securities of such 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 in accordance with the applicable requirements of Section
8.11, become the successor Trustee for such series and supersede the successor
Trustee appointed by the Company. If no successor Trustee for the Securities of
such series shall have been so appointed by the Company or the Holders and
accepted appointment in the manner required by Section 8.11, any Holder 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 the Securities of such series.

(f) 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 for the Securities of such series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register. Each notice shall include the name of such successor Trustee
and the address of its Corporate Trust Office.

<PAGE>

SECTION 7.11 Acceptance of Appointment by Successor.
--------------------------------------

(a) Every successor Trustee appointed hereunder 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 the 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.

(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
predecessor Trustee and each successor Trustee for the Securities of any
applicable series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which shall
contain such provisions as shall be necessary or desirable to confirm that all
the rights, powers, trusts and duties of the predecessor Trustee for the
Securities of any series as to which the predecessor Trustee is not retiring
shall continue to be vested in the predecessor Trustee, and 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.

(c) Upon request of any such successor Trustee for the Securities of
any series, 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 for the Securities of any series shall
accept its appointment unless at the time of such acceptance such successor
Trustee shall be qualified and eligible under this Article Eight.

SECTION 7.12 Merger, Consolidation or Succession to Business.
-----------------------------------------------

Any corporation into which the Trustee for the Securities of any
series may be merged or converted or with which it may be consolidated, or any
corporation resulting from any

<PAGE>
merger, conversion or consolidation to which such Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such Trustee, shall be the successor of the Trustee for such series
hereunder, provided such corporation shall be, with respect to such series,
otherwise qualified and eligible under this Article Eight, 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 of any series shall have been authenticated, but
not delivered, by the Trustee for such series then in office, any successor by
merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.

SECTION 7.13 Preferential Collection of Claims Against Company.
-------------------------------------------------

(a) Subject to Subsection (b) of this Section, if the Trustee for the
Securities of any series shall be or shall become a creditor, directly or
indirectly, secured or unsecured, of the Company within three months prior to a
default, as defined in Subsection (c) of this Section, or subsequent to such a
default, then, unless and until such default shall be cured, such Trustee shall
set apart and hold in a special account for the benefit of such Trustee
individually, the Holders of the Securities of such series and the holders of
other indenture securities, as defined in Subsection (c) of this Section:

(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such three months' period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
paragraph (2) of this Subsection, or from the exercise of any right of
set-off which such Trustee could have exercised if a petition in bankruptcy
had been filed by or against the Company upon the date of such default; and

(2) all property received by such Trustee in respect of any claims as
such creditor, either as security therefor, or in satisfaction or
compensation thereof, or otherwise, after the beginning of such three
months' period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Company and
------- -------
its other creditors in such property or such proceeds.

Nothing herein contained, however, shall affect the right of such Trustee:

<PAGE>
(A) to retain for its own account (i) payments made on account of any
such claim by any Person (other than the Company) who is liable thereon,
and (ii) the proceeds of the bona fide sale of any such claim by such
Trustee to a third Person, and (iii) distributions made in cash, securities
or other property in respect of claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
the Federal Bankruptcy Act or applicable State law;

(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such three months' period;

(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such three
months' period and such property was received as security therefor
simultaneously with the creation thereof, and if such Trustee shall sustain
the burden of proving that at the time such property was so received such
Trustee had no reasonable cause to believe that a default, as defined in
Subsection (c) of this Section, would occur within three months; or

(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such claim as
provided in paragraph (B) or (C), as the case may be, to the extent of the
fair value of such property.

For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such three months' period for property held as security
at the time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released, and, to the
extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any pre-existing claim of such Trustee as such creditor, such claim shall have
the same status as such pre-existing claim.

If such Trustee shall be required to account, the funds and the
property held in such special account and the proceeds thereof shall be
apportioned among such Trustee, the Holders of the Securities of such series and
the holders of other indenture securities in such manner that such Trustee, the
Holders of such Securities and the holders of other indenture securities
realize, as a result of payments from such special account and payments of
dividends on claims filed against the Company in bankruptcy or receivership or
in proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, the same percentage of their respective claims, figured
before crediting

<PAGE>
to the claim of such Trustee anything on account of the receipt by it from the
Company of the funds and property in such special account and before crediting
to the respective claims of such Trustee and the Holders of such Securities and
the holders of other indenture securities dividends on claims filed against the
Company in bankruptcy or receivership or in proceedings for reorganization
pursuant to the Federal Bankruptcy Act or applicable State law, but after
crediting thereon receipts on account of the indebtedness represented by their
respective claims from all sources other than from such dividends and from the
funds and property so held in such special account. As used in this paragraph,
with respect to any claim, the term "dividends" shall include any distribution
with respect to such claim, in bankruptcy or receivership or proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable State law,
whether such distribution is made in cash, securities or other property, but
shall not include any such distribution with respect to the secured portion, if
any, of such claim. The court in which such bankruptcy, receivership or
proceedings for reorganization is pending shall have jurisdiction (i) to
apportion among such Trustee, the Holders of such Securities and the holders of
other indenture securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the fairness of
the distributions to be made to such Trustee and the Holders of such Securities
and the holders of other indenture securities with respect to their respective
claims, in which event it shall not be necessary to liquidate or to appraise the
value of any securities or other property held in such special account or as
security for any such claim, or to make a specific allocation of such
distributions as between the secured and unsecured portions of such claims, or
otherwise to apply the provisions of this paragraph as a mathematical formula.

Any Trustee which has resigned or been removed with respect to any
series of Securities after the beginning of such three months' period shall be
subject to the provisions of this Subsection with respect to the Securities of
such series as though such resignation or removal had not occurred. If any
Trustee has resigned or been removed prior to the beginning of such three
months' period, it shall be subject to the provisions of this Subsection with
respect to such series if and only if the following conditions exist:

(i) the receipt of property or reduction of claim, which would have
given rise to the obligation to account, if such Trustee had continued as
Trustee for the Securities of such series, occurred after the beginning of
such three months' period; and

<PAGE>

(ii) such receipt of property or reduction of claim occurred within
three months after such resignation or removal.

(b) There shall be excluded from the operation of Subsection (a) of
this Section a creditor relationship arising from:

(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by such Trustee;

(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances surrounding
the making thereof is given to the Holders of the Securities of the
applicable series of Securities at the time and in the manner provided in
this Indenture;

(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;

(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction, as defined in Subsection (c) of this
Section;

(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Company; and

(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper, as defined in Subsection (c) of
this Section.

(1) the term "default" means any failure to make payment in full of
the principal of or interest on any of the Securities of the applicable
series or upon the other indenture securities when and as such principal or
interest becomes due and payable;

<PAGE>

(2) the term "other indenture securities" means securities upon which
the Company is an obligor outstanding under any other indenture (i) under
which such Trustee is also trustee, (ii) which contains provisions
substantially similar to the provisions of this Section, and (iii) under
which a default exists at the time of the apportionment of the funds and
property held in such special account;

(3) the term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;

(4) the term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by such Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation;

(5) the term "Company" means any obligor upon the Securities; and

(6) the term "Federal Bankruptcy Act" means the Bankruptcy Act or
Title 11 of the United States Code.

ARTICLE NINE

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 8.1 Company to Furnish Trustee Names and Addresses
----------------------------------------------
of Holders.
- ----------

The Company will furnish or cause to be furnished to the Trustee for
the Securities of each series

(a) semi-annually, either (i) not later than March 31 and September
30 in each year in the case of Original Issue Discount Securities of any
series which by their terms do not bear interest prior to Maturity, or (ii)
not more than 15 days after each Regular Record Date in the case of
Securities of any other series, a list, each in such form as such Trustee
may reasonably require, of the names and

<PAGE>
addresses of the Holders of Securities of such series as of the preceding
March 16 or September 15 or as of such Regular Record Date, as the case may
be; and

(b) at such other times as such Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list
of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;

excluding from any such list names and addresses received by such Trustee in its
- ---------
capacity as Security Registrar.

SECTION 8.2 Preservation of Information; Communications to Holders.
------------------------------------------------------

(a) The Trustee for the Securities of each series shall preserve, in
as current a form as is reasonably practicable, the names and addresses of
Holders of the Securities of such series contained in the most recent list
furnished to such Trustee as provided in Section 9.1 and the names and addresses
of Holders received by such Trustee if such Trustee be the Securities Registrar
for such series. Such Trustee may destroy any list furnished to it as provided
in Section 9.1 upon receipt of a new list so furnished.

(b) If three or more holders of the Securities of any series (herein
referred to as "applicants") apply in writing to the Trustee for such series,
and furnish to such Trustee reasonable proof that each such applicant has owned
a Security of such series for a period of at least six months preceding the date
of such application, and such application states that the applicants desire to
communicate with other Holders of any series with respect to their rights under
this Indenture or under the Securities of any series and is accompanied by a
copy of the form of proxy or other communication which such applicants propose
to transmit, then such Trustee shall, within five business days after the
receipt of such application, at its election, either

(i) afford such applicants access to the information preserved at
the time by such Trustee and any other Trustee in accordance with
subsection (a) of this Section 9.2, or

(ii) inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time
by such Trustee in accordance with subsection (a) of this Section 9.2, and
as to the approximate cost of mailing to such Holders the form of proxy or
other communication, if any, specified in such application.

If such Trustee shall elect not to afford such applicants access to
such information, such Trustee shall, upon the written request of such
applicants, mail to each Holder whose

<PAGE>
name and address appear in the information preserved at the time by such Trustee
in accordance with subsection (a) of this Section 9.2 a copy of the form of
proxy or other communication which is specified in such request, with reasonable
promptness after a tender to such Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender such Trustee shall mail to such
applicants and file with the Commission, together with a copy of the material to
be mailed, a written statement to the effect that, in the opinion of such
Trustee, such mailing would be contrary to the best interest of such Holders or
would be in violation of applicable law. Such written statement shall specify
the basis of such opinion. If the Commission, after opportunity for a hearing
upon the objections specified in the written statement so filed, shall enter an
order refusing to sustain any of such objections or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all the objections so sustained
have been met and shall enter an order so declaring, such Trustee shall mail
copies of such material to all such Holders with reasonable promptness after the
entry of such order and the renewal of such tender; otherwise such Trustee shall
be relieved of any obligation or duty to such applicants respecting their
application.

(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with subsection (b) of this Section 9.2, 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
subsection (b) of this Section 9.2.

SECTION 8.3 Reports by Trustee.
------------------

(a) Within 60 days after the first January 15 occurring subsequent to
the initial issuance of the Securities of any series hereunder and within 60
days after January 15 in each year thereafter, the Trustee for the Securities of
such series shall transmit by mail to all Holders of such series, as their names
and addresses appear in the Security Register, a brief report dated as of such
January 15 with respect to any of the following events which may have occurred
within the prior 12 months (but if no such event has occurred within such period
no report need be transmitted):

(1) any change to its eligibility under Section 8.9 and its
qualifications under Section 8.8;

<PAGE>

(2) the creation of any material change to a relationship specified
in Section 310(b)(1) through Section 310(b)(10) of the Trust Indenture Act;

(3) the character and amount of any advances (and if such Trustee
elects so to state, the circumstances surrounding the making thereof) made
by such Trustee (as such) which remain unpaid on the date of such report,
and for the reimbursement of which it claims or may claim a lien or charge,
prior to that of the Securities of any series, on any property or funds
held or collected by it as Trustee, except that such Trustee shall not be
required (but may elect) to report such advances if such advances so
remaining unpaid aggregate not more than 1/2 of 1% of the principal amount
of the Securities Outstanding for which it is Trustee on the date of such
report;

(4) the amount, interest rate and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Securities of any series) to such Trustee in its individual capacity, on
the date of such report, with a brief description of any property held as
collateral security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in Section 8.13(b)(2), (3),
(4) or (6);

(5) any change to the property and funds, if any, physically in the
possession of such Trustee as such on the date of such report;

(6) any additional issue of Securities of such series which such
Trustee has not previously reported; and

(7) any action taken by such Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Securities of any series, except action in respect
of a default, notice of which has been or is to be withheld by such Trustee
in accordance with Section 8.2.

(b) The Trustee for the Securities of each series shall transmit by
mail to all Holders of the Securities of such series, as their names and
addresses appear in the Security Register, a brief report with respect to the
character and amount of any advances (and if such Trustee elects so to state,
the circumstances surrounding the making thereof) made by such Trustee (as such)
since the date of the last report transmitted pursuant to Subsection (a) of this
Section (or if no such report has yet been so transmitted, since the date of
execution of this instrument) for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities of any series, on
property or funds held or collected by it as Trustee and which it has not
previously reported pursuant to this Subsection, except that such Trustee shall
not be required (but

<PAGE>
may elect) to report such advances if such advances remaining unpaid at any time
aggregate 10% or less of the principal amount of the Securities Outstanding for
which it is Trustee at such time, such report to be transmitted within 90 days
after such time.

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

SECTION 8.4 Reports by Company.
------------------

The Company shall:

(1) file with the Trustee for the Securities of each series, 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 said Sections, then it shall file with such 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 such 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 all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and reports
required to be filed by the Company pursuant to paragraphs (1) and (2) of
this Section 9.4 as may be required by rules and regulations prescribed
from time to time by the Commission.

<PAGE>

ARTICLE TEN

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 9.1 Consolidations or Mergers of Company and Sales or
-------------------------------------------------
Transfers of Property of Company Permitted Subject to Certain Conditions.
- ------------------------------------------------------------------------

Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the Company), or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale or transfer
(or successive sales or transfers) of the property and assets of the Company (or
of its successor or successors) as an entirety or substantially as an entirety,
to any other corporation (whether or not affiliated with the Company) authorized
to acquire the same; provided, however, that the corporation formed by such
-------- -------
consolidation or into which the Company shall have been merged or which shall
have acquired such property and assets shall be a corporation organized under
the laws of the United States or of any State thereof; and provided, further,
-------- -------
and the Company hereby covenants and agrees, that upon any such consolidation,
merger, sale or transfer, the due and punctual payment of the principal of (and
premium, if any) and interest, if any, on all of the Securities, according to
their tenor, and the due and punctual performance and observance of all the
terms, covenants and conditions of this Indenture to be kept or performed by the
Company, shall be expressly assumed, by an indenture supplemental hereto,
satisfactory in form to the Trustee for the Securities of each series, executed
and delivered to such Trustee by the corporation formed by such consolidation,
or into which the Company shall have been merged, or by the corporation which
shall have acquired such property and assets; and in the event of any such sale
or transfer, the predecessor Company shall be released from all liability
hereunder and under the Securities and may be dissolved, wound up and liquidated
at any time thereafter.

SECTION 9.2 Rights and Duties of Successor Corporations.
-------------------------------------------

In case of any such consolidation, merger, sale or transfer and upon
the execution by the successor corporation of an indenture supplemental hereto,
as provided in Section 10.1, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had been named herein
as the party of the first part; and any order, certificate, statement, request,
instructions, advice or resolutions of the Board of Directors or officers of the
Company provided for in this Indenture may be made by like officials of such
successor corporation.

<PAGE>

Nothing contained in this Indenture or in any of the Securities shall
prevent the Company from merging into itself, or acquiring by purchase or
otherwise all or any part of the property of, any other corporation (whether or
not affiliated with the Company).

SECTION 9.3 Opinion of Counsel.
------------------

The Trustee for the Securities of each series, subject to the provi-
sions of Section 8.1, may receive an Opinion of Counsel as conclusive evidence
that any such consolidation, merger, sale or transfer, and any such assumption,
complies with the provisions of this Article Ten.

ARTICLE ELEVEN

SUPPLEMENTAL INDENTURES

SECTION 10.1 Supplemental Indentures Without Consent of Holders.
--------------------------------------------------

Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee for the Securities of any or all series, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to such Trustee, for any of the
following purposes:

(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; 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 Acceleration or Events of
Default; or

(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities of any series in bearer form, registrable or not registrable as
to principal, and with or without interest coupons; or

(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination
--------

<PAGE>
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; or

(7) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 and 3.1; or

(8) to evidence and provide for the acceptance of appointment
hereunder of a Trustee other than The First National Bank of Chicago, as
Trustee for a series of Securities 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, pursuant to the requirements of Section 8.9; or

(9) 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, pursuant to the requirements
of Section 8.11(b); or

(10) 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 such action shall not adversely affect the
--------
interests of the Holders of Securities of any series in any material
respect.

SECTION 10.2 Supplemental Indentures with Consent of Holders.
-----------------------------------------------

Subject to Section 13.6, with the consent of the Holders of not less
than a majority in aggregate principal amount of the Outstanding Securities of
each series affected by such supplemental indenture, by Act of said Holders
delivered to the Company and the Trustee for the Securities of such series, the
Company, when authorized by a Board Resolution, and the Trustee for each series
of Securities affected thereby 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 Indenture or of
modifying in any manner the rights of the Holders of Securities of such series
under this Indenture; provided, however, that no such supplemental indenture
-------- -------
shall, without the consent of the Holder of each Outstanding Security affected
thereby,

<PAGE>

(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the principal
of an Original Issue Discount Security that would be due and payable upon
an Event of Acceleration or an Event of Default pursuant to Sections 7.2(a)
and 7.3, or adversely affect any right of repayment at the option of the
Holder of any Security, or reduce the amount of, or postpone the date fixed
for, the payment of any sinking fund or analogous obligation, or change any
Place of Payment where, or the coin or currency in which, any Security or
any premium or the 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, on or after the
Redemption Date), 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 (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or

(3) modify any of the provisions of this Section, Section 7.15 or
Section 5.7, 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; provided, however, that this clause shall not be deemed to require
-------- -------
the consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section and Section 5.7, or the
deletion of this proviso, in accordance with the requirements of Sections
8.11(b) and 11.1(8).

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.

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.

<PAGE>

SECTION 10.3 Execution of Supplemental Indentures.
------------------------------------

In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee for the Securities of any
series shall be entitled to receive, and (subject to Section 8.1) 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. Such
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects such Trustee's own rights, duties or immunities under
this Indenture or otherwise.

SECTION 10.4 Effect of Supplemental Indentures.
---------------------------------

Upon the execution of any supplemental indenture under this Article
Eleven, this Indenture shall be modified in accordance therewith but only with
respect to the Securities of each series affected by such supplemental
indenture, and such supplemental indenture shall form a part of this Indenture
for all purposes; and every Holder of Securities of any such series theretofore
or thereafter authenticated and delivered hereunder shall be bound thereby.

SECTION 10.5 Conformity with Trust Indenture Act.
-----------------------------------

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

SECTION 10.6 Reference in Securities to Supplemental Indentures.
--------------------------------------------------

Securities of any series authenticated and delivered after the execu-
tion of any supplemental indenture pursuant to this Article Eleven may, and
shall if required by the Trustee for the Securities of such series, bear a
notation in form approved by such 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 such Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by such Trustee in exchange for
Outstanding Securities of such series.

<PAGE>

ARTICLE TWELVE

REDEMPTION OF SECURITIES

SECTION 11.1 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 3.1 for Securities of any series)
in accordance with this Article.

SECTION 11.2 Election to Redeem; Notice to Trustee.
-------------------------------------

Subject to the provisions of Section 11.3, Securities of any series
may be redeemed, at the option of the Company, as a whole or from time to time
in part, upon the notice referred to below, at a redemption price equal to the
principal amount thereof, together with interest accrued to the date fixed for
redemption, or in the case of an Original Issue Discount Security, such portion
of the principal amount thereof as may be specified in the terms of that series;
provided, however, that such redemption may only be made at a time when the
- -------- -------
Securities shall have ceased to be treated as part of the Company's net capital
within the meaning of the Net Capital Rule or of the regulations under the Com-
modity Exchange Act as a result of a change in the Net Capital Rule or such
regulations, as the case may be.

The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company 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 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 11.3 Limitations on Redemption; Recovery of Certain Payments.
-------------------------------------------------------

(a) No payment of all or any portion of the principal amount of
Securities of any series shall be made in connection with any optional
redemption or optional sinking fund payment of such Securities pursuant to
Section 12.2 (any such payment being made herein called an "Optional
Redemption") unless the Company shall have received the prior written permission
of the Exchange

<PAGE>
and, in the case of any Optional Redemption prior to the first anniversary date
of the original issuance of such Securities, of the Securities and Exchange
Commission and the Commodity Futures Trading Commission, in either case if
required by such Commission. Furthermore, no Optional Redemption shall be made
if after giving effect thereto (and to all other payments of principal of
outstanding subordination agreements of the Company, including the return of any
secured demand note and the collateral therefor held by the Company, the
maturity or accelerated maturity of which is scheduled to occur within six
months after the date such Optional Redemption is to occur pursuant to the
provisions of Section 12.2 or on or prior to the Stated Maturity for payment of
the principal amount of Securities of such series disregarding such proposed
Optional Redemption, whichever date is earlier) without reference to any
projected profit or loss of the Company,

(i) if the Company is not operating pursuant to the alterative net
capital requirement provided for in paragraph (f) of the Net Capital Rule,
the aggregate indebtedness of the Company would exceed 1000 per centum of
its net capital (or its "adjusted net capital" as defined in the
regulations under the Commodity Exchange Act) as those terms are defined in
the Net Capital Rule as in effect at the time such Optional Redemption is
to be made, or

(ii) if the Company is operating pursuant to such alterative net
capital requirement, its net capital (or its "adjusted net capital" as
defined in the regulations under the Commodity Exchange Act) would be less
than the greater of (A) 5 per centum of aggregate debit items computed in
accordance with Exhibit A to Rule 15c3-3 under the Securities Exchange Act
of 1934, as amended, or any successor rule as in effect at such time, or
(B) 7 per centum of the funds required to be segregated by the Company
pursuant to the Commodity Exchange Act and the regulations thereunder and
the foreign futures or foreign options secured amount, less the market
value of commodity options purchased by option customers on or subject to
the rules of a contract market or a foreign board of trade; provided,
--------
however, the deduction for each option customer shall be limited to the
-------
amount of customer funds in such option customer's account(s) and the
foreign futures and foreign options secured amounts (if greater), or any
successor regulation as in effect at such time, or

(iii) its net capital (or its "adjusted net capital" as defined in
the regulations under the Commodity Exchange Act), as defined in the Net
Capital rule, is less than 120 per centum of any minimum dollar amount
required by the Net Capital Rule (or the regulations under the Commodity
Exchange Act) as in effect at the time such Optional Redemption is to be
made, or

<PAGE>

(iv) if the Company guarantees, endorses, carries or clears spe-
cialist or market maker transactions in options listed on a national
securities exchange or facility of a national securities association, the
amounts required to be deducted and maintained as required by the
provisions of paragraphs (a)(6)(v), (a)(7)(iv) or (c)(2)(x)(b)(1) of the
Net Capital Rule would exceed 1000 per centum of its net capital (or its
"adjusted net capital" as defined in the regulations under the Commodity
Exchange Act) as defined in the net Capital Rule as in effect at the time
such payment is made or such lesser per centum as may be made applicable to
the Company by the Exchange (or any other domestic exchange, board of
trade, clearing association or similar organization of which the Company is
a member) or a domestic governmental agency or body having appropriate
authority, or

(v) the Company's net capital (or its "adjusted net capital" as
defined in the regulations under the Commodity Exchange Act) would be less
than the "minimum capital requirements" of the Chicago Board of Trade (or
any other domestic exchange, board of trade, clearing association or
similar organization of which the Company is a member) or a domestic
governmental agency or body having appropriate authority.

To the extent required under the Capital Requirements of the Chicago
Board of Trade, for purposes of this Section 11.3, the computation of the
Company's net capital as provided for in subsections (a)(i), (a)(ii), (a)(iii)
and (a)(iv) hereof shall be deemed to exclude from current assets (A) an amount
equal to guarantee deposits with clearing organizations, other than the Chicago
Board of Trade, which are required to be excluded from the computation of
current assets pursuant to Section 211 of the Capital Requirements of the
Chicago Board of Trade to the extent such deposits cannot be used for margin
purposes, and (B) the amount computed in accordance with Chicago Board of Trade
Regulation 221.05.

If an Optional Redemption is made of all or any part of the principal
of any Security of any series and if the Company's net capital immediately prior
to such payment is less than the amount required to permit such payment pursuant
to the foregoing provisions of this Section 11.3, the Holder agrees irrevocably
by acceptance of such Security (whether or not such Holder had any knowledge or
notice of such fact at the time of any such Optional Redemption) to repay the
Company, its successors or assigns, the sum so paid to be held by the Company
pursuant to the provisions hereof (and, upon such repayment, the Company shall
execute, and upon the order of the Company the Trustee shall authenticate and
deliver to such Holder, a Security in respect of such repayment of the same
series and in a like principal amount) as if such Optional Redemption had never
been made; provided, however, that any suit for the recovery of any such
-------- -------
Optional Redemption must be

<PAGE>

commenced within two years of the date of such Optional Redemption.

(b) If payment is made of all or any part of the principal of Securi-
ties of any series at maturity, or any Security of that series, and if
immediately after any such payment the Company's net capital is less than the
Applicable Minimum Capital (as defined in Section 7.2(b)(v)), the Holder of any
such Security by accepting such Security agrees irrevocably (whether or not such
Holder had any knowledge or notice of such fact at the time of any such payment)
to repay to the Company, its successors or assigns, the sum so paid to be held
by the Company pursuant to the provisions hereof (and, upon such repayment, the
Company shall execute, and upon the order of the Company the Trustee shall
authenticate and deliver to such Holder, a Security in respect of such repayment
of the same series and in a like principal amount) as if such payment had never
been made; provided, however, that any suit for the recovery of any such payment
-------- -------
must be commenced within two years of the date of such payment.

SECTION 11.4 Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------

If less than all the Securities of any series 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 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 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 Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.

SECTION 11.5 Notice of Redemption.
--------------------

Notice of redemption shall be given by first-class mail, postage
prepaid (or, at the option of the Company, by certified mail, return receipt
requested), mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each

<PAGE>

Holder of Securities of the series to be redeemed, at his address appearing in
the Security Register.

All notices of redemption shall identify the Securities to be redeemed
(including by CUSIP number) and shall state:

(1) the Redemption Date,

(2) the Redemption Price,

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

(4) that on the Redemption Date the Redemption Price will, subject to
the provisions of Section 7.2(b) and Section 11.3, become due and payable
upon each such Security to be redeemed and, if applicable, that interest
thereon will cease to accrue on and after said date,

(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and

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

Notice of redemption of Securities to be redeemed at the election of
the Company 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 11.6 Deposit of Redemption Price.
---------------------------

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, segregate and hold in trust as provided in Section 5.3) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.

The Company further covenants that at least 60 days prior to the
Redemption Date it will file with the Trustee an Officers' Certificate stating
that such redemption is not prohibited by any of the provisions of this
Indenture (which statement shall be confirmed by a further Officers' Certificate
at the Redemption Date) and such Officers' Certificate shall be

<PAGE>

accompanied by a copy, certified by the Secretary or any Assistant Secretary of
the Company as true and correct, of the written permission of the Exchange
required by the provisions of Section 11.3(a); provided, however, that in the
-------- -------
event such permission has not been obtained prior to the filing of such
Officers' Certificate, such Officers' Certificate shall be accompanied by a
statement to such effect and an undertaking to furnish to the Trustee a copy of
such permission, certified as aforesaid, prior to the Redemption Date. The
obligation of the Trustee to pay the Redemption Price on the Redemption Date and
thereafter is subject to its receipt of the aforesaid Officers' Certificate and
certified copy of the permission required by Section 11.3(a).

SECTION 11.7 Securities Payable on Redemption Date.
-------------------------------------

Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, subject to the provisions of Section 7.2(b) and Section
11.3, become due and payable on the Redemption Date at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security
for redemption in accordance with said notice, such Security shall, subject to
the provisions of Section 7.2(b) and Section 12.3, be paid by the Company at the
Redemption Price, together with accrued interest to the Redemption Date;
provided, however, that installments of interest whose Stated Maturity is on or
- -------- -------
prior to 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 3.7.

If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.

SECTION 11.8 Securities Redeemed in Part.
---------------------------

Any Security which is to be redeemed only in part 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 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 and of a like Stated
Maturity and with like terms and provisions, 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.

<PAGE>

ARTICLE THIRTEEN

SINKING FUNDS

SECTION 12.1 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 3.1 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 Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 12.2. 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 12.2 Satisfaction of Sinking Fund Payments with Securities.
-----------------------------------------------------

The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a 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, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such Securities have not been previously so credited.
--------
Such Securities shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.

SECTION 12.3 Redemption of Securities for Sinking Fund.
-----------------------------------------

Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing 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 and the portion thereof, if any,
which is to be satisfied by delivering and

<PAGE>

crediting Securities of that series pursuant to Section 12.2 and will also
deliver to the Trustee any Securities to be so delivered. 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 11.4 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 11.5. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
11.7 and 11.8.

ARTICLE FOURTEEN

MISCELLANEOUS PROVISIONS

SECTION 13.1 Successors and Assigns of Company Bound by Indenture.
-----------------------------------------------------

All the covenants, stipulations, promises and agreements in this
Indenture contained by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not, and the provisions hereof shall bind the
heirs, executors, administrators, successors and assigns of the Holders.

SECTION 13.2 Act of Board, Committee or Officer of Successor
-----------------------------------------------
Corporation Valid.
- -----------------

Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any corporation that shall at the time be
the lawful successor of the Company.

SECTION 13.3 Surrender of Powers by Company.
------------------------------

The Company by instrument in writing executed by authority of a
majority of its Board of Directors and delivered to the Trustee may surrender
any of the powers reserved to the Company hereunder and thereupon such power so
surrendered shall terminate both as to the Company and as to any successor
corporations.

SECTION 13.4 Indenture May Be Executed in Counterparts.
-----------------------------------------

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

<PAGE>

SECTION 13.5 No Security or Right of Set-Off.
-------------------------------

(i) No Trustee for or Holders of the Securities of any series has
taken and will not take or assert as security for the payment of any Security,
any security interest in or lien, whether created by contract, statute or
otherwise, upon any property in which the Company may have an interest, which is
or may at any time be in such Trustee's or such Holders' possession or subject
to such Trustee's or such Holders' control; (ii) such Trustee and such Holders
waive, and will not seek to obtain payment of any Security in whole or in part
by exercising any right of set-off it may assert or possess, whether created by
contract, statute or otherwise unless provision shall have been made for the
payment in full of all senior indebtedness at the time outstanding; and (iii)
such Trustee agrees that any agreement between the Company and such Trustee
shall be deemed amended hereby to the extent necessary so as not to be
inconsistent with the provisions of this Section. This Section applies to such
Trustee's and such Holders' rights regarding only the Securities issued under
this Indenture, and such Trustee and such Holders do not waive any right of
set-off or any rights under any security or other agreement executed by the
Company regarding any other liability or obligation of the Company to such
Trustee or such Holders.

SECTION 13.6 No Reliance on Exchange; Arbitration under Exchange
---------------------------------------------------
Rules; etc.
- -----------

The Holders by accepting the Securities of any series irrevocably
agree and acknowledge that: (i) the acquisition of the Securities is not made in
reliance upon the standing of the Company as a member organization of the
Exchange or upon the Exchange's surveillance of the Company's financial position
or its compliance with the rules of the Exchange; (ii) such Holders are not
relying upon the Exchange to provide any information concerning or relating to
the Company and the Exchange has no responsibility to disclose to the Holders
any information concerning or relating to the Company which it may now, or at
any future time, have; and (iii) neither the Exchange, its Special Trust Fund,
nor any director, officer, trustee or employee of the Exchange or said Trust
Fund shall be liable to the Holders with respect to the Securities or the
repayment thereof or of any interest thereon.

To the extent permitted by applicable law and subject to the provi-
sions of Section 4.3, (i) any controversy arising out of or relating to the
Securities or this Indenture shall be submitted to and settled by arbitration
pursuant to the Constitution and Rules of the New York Stock Exchange, Inc., and
(ii) the Company and the Holders and the Trustees shall be conclusively bound by
such arbitration.

The proceeds of the Securities shall be dealt with in all respects as
capital of the Company, shall be subject to the

<PAGE>

risks of its business, and may be deposited in an account or accounts in the
Company's name in any bank or trust company.

Subject to the terms hereof, neither this Indenture nor the Securities
shall be subject to cancellation by the Company or the Holders nor shall the
same be terminated, rescinded or modified by mutual consent or otherwise (i)
without the prior written consent of the Exchange or (ii) if the effect thereof
would be inconsistent with the requirements of the Net Capital Rule (or the net
capital regulations under the Commodity Exchange Act).

So long as the Company shall be a futures commission merchant as that
term is defined in the Commodity Exchange Act, the Company agrees, consistent
with the requirements of Section 1.17(h) of the regulations of the Commodity
Futures Trading Commission (the "CFTC"), that (i) whenever prior written notice
by the Company to the Exchange is required pursuant to the provisions of this
Indenture, the same prior written notice shall be given by the Company to (a)
the CFTC at its principal office in Washington, D.C., Attention Chief Accountant
of Division of Trading and Markets, and (b) the commodity exchange of which the
Company is a member and which is then designated by the CFTC as the Company's
designated self-regulatory organization (the "DSRO"), and (ii) whenever prior
written consent, permission or approval of the Exchange is required pursuant to
the provisions of this Indenture, the Company shall also obtain the prior
written consent, permission or approval of the CFTC and the DSRO, and (iii)
whenever the Company receives written notice of acceleration of maturity of the
Securities of any series pursuant to the provisions of this Indenture, the
Company shall promptly give written notice thereof to the CFTC at the address
above stated and to the DSRO; all to the extent required by the CFTC or the
DSRO, as the case may be, at the time of such action.

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 usury 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 laws and covenants
(to the extent it may lawfully do so) that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee as a result of any such
laws, but will suffer and permit the execution of every such power as though no
such laws had been enacted.

SECTION 13.7 Acceptance of Trusts by Trustee.
-------------------------------

The First National Bank of Chicago, hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.

<PAGE>
IN WITNESS WHEREOF, LEHMAN BROTHERS INC. has caused this Indenture to
be signed in its corporate name and acknowledged by its Chairman of the Board,
President or one of its Vice Presidents, and its corporate seal to be affixed
hereunto, duly attested by its Secretary or an Assistant Secretary; and The
First National Bank if Chicago, has caused this Indenture to be signed and
acknowledged by one of its Vice Presidents and its corporate seal to be affixed
hereunto, duly attested by one of its authorized officers.

LEHMAN BROTHERS INC.

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

(SEAL)
Attest:

-----------------------------
Assistant Secretary

THE FIRST NATIONAL BANK OF CHICAGO

By
--------------------------------
Name:
Title: Vice President

(SEAL)
Attest:

----------------------------
Title:

<PAGE>

STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }

On the [ ] day of [ ], in the year 1996, before
me, personally came [ ], to me known, who, being by
me duly sworn, did depose and say that he is the [
] of Lehman Brothers Inc., 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 bearing the corporate name of said corporation is such
corporate seal; that it was so affixed by order of the Board of
Directors of said corporation; and that he signed his name
thereto by like order.

-----------------------
Notary Public

STATE OF ILLINOIS }
} ss.:
COUNTY OF COOK }

On the [ ] day of [ ], in the year 1996, before me,
personally came [ ], to me known, who, being by me
duly sworn, did depose and say that he is a Vice President of The
First National Bank of Chicago, 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 instru-
ment bearing the corporate name of said corporation is such
corporate seal; that it was so affixed by the Board of Directors
of said corporation; and that he signed his name thereto by like
authority.

----------------------
Notary Public

EXHIBIT 25(a)

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM T-1
--------

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
-----

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

THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)

A National Banking Association 36-0899825
(I.R.S. employer
identification number)

One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)

The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312) 732-6919
(Name, address and telephone number of agent for service)

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

LEHMAN BROTHERS, INC.
(Exact name of obligor as specified in its charter)

Delaware 13-25-18466
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)

3 World Financial Center
New York, New York 10285
(Address of principal executive offices) (Zip Code)

Debt Securities
(Title of Indenture Securities)

<PAGE>

Item 1. General Information. Furnish the following
--------------------
information as to the trustee:

(a) Name and address of each examining or
supervising authority to which it is subject.

Comptroller of Currency, Washington, D.C.,
Federal Deposit Insurance Corporation,
Washington, D.C., The Board of Governors of
the Federal Reserve System, Washington D.C.

(b) Whether it is authorized to exercise
corporate trust powers.

The trustee is authorized to exercise corporate
trust powers.

Item 2. Affiliations With the Obligor. If the obligor
------------------------------
is an affiliate of the trustee, describe each
such affiliation.

No such affiliation exists with the trustee.

Item 16. List of exhibits. List below all exhibits filed as a
-----------------
part of this Statement of Eligibility.

1. A copy of the articles of association of the
trustee now in effect.*

2. A copy of the certificates of authority of the
trustee to commence business.*

3. A copy of the authorization of the trustee to
exercise corporate trust powers.*

4. A copy of the existing by-laws of the trustee.*

5. Not Applicable.

6. The consent of the trustee required by
Section 321(b) of the Act.

<PAGE>
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.

8. Not Applicable.

9. Not Applicable.

Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 4th day of March, 1996.

THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE

BY /S/ R. D. MANELLA

R.D. MANELLA
VICE PRESIDENT

* EXHIBIT 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING
IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF
CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE
CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418).

<PAGE>

EXHIBIT 6

THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT

March 4, 1996

Securities and Exchange Commission
Washington, D.C. 20549

Gentlemen:

In connection with the qualification of a supplemental indenture between Lehman
Brothers, Inc. and The First National Bank of Chicago, the undersigned, in
accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended,
hereby consents that the reports of examinations of the undersigned, made by
Federal or State authorities authorized to make such examinations, may be
furnished by such authorities to the Securities and Exchange Commission upon its
request therefor.

Very truly yours,

THE FIRST NATIONAL BANK OF CHICAGO

BY: /S/ R. D. MANELLA

R.D. MANELLA
VICE PRESIDENT

<PAGE>

EXHIBIT 7

Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/95
Address: One First National Plaza, Suite 0460 ST-BK: 17-1630
City, State Zip: Chicago, IL 60670-0460 FFIEC 031
FDIC Certificate No.: 0/3/6/1/8 Page RC-1
---------

CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1995

All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.

SCHEDULE RC--BALANCE SHEET
<TABLE><CAPTION>
C400
DOLLAR AMOUNTS IN ------
THOUSANDS RCFD BIL MIL THOU <-
------------------ ---- -------------- -----

<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository
institutions (from Schedule RC-A):
a. Noninterest-bearing balances and
currency and coin(1) . . 0081 4,003,995 1.a.
b. Interest-bearing balances(2) . . . . . . . 0071 9,240,284 1.b.
2. Securities
a. Held-to-maturity securities
(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities
(from Schedule RC-B, column D) . . . . . . . 1773 827,134 2.b.
3. Federal funds sold and
securities purchased under agreements to
resell in domestic offices of the bank and
its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold . . . . . . . . . . . . 0276 3,287,844 3.a.
b. Securities purchased under
agreements to resell . . . . . . . . . . . . 0277 612,400 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of
unearned income (from
Schedule RC-C) . . . . . . . . . . . . . . . RCFD 2122 16,463,126 4.a.
b. LESS: Allowance for loan and
lease losses . . . . . . . . . . . . . . . . RCFD 3123 353,777 4.b.
c. LESS: Allocated transfer
risk reserve . . . . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of
unearned income, allowance,
and reserve (item 4.a minus
4.b and 4.c) . . . . . . . . . . . . . . . . 2125 16,109,349 4.d.
5. Assets held in trading accounts . . . . . . 3545 12,379,396 5.
6. Premises and fixed assets
(including capitalized leases) . . . . . . . 2145 591,753 6.
7. Other real estate owned
(from Schedule RC-M) . . . . . . . . . . . . 2150 8,796 7.
8. Investments in unconsolidated
subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . 2130 40,560 8.
9. Customers' liability to this
bank on acceptances outstanding . . . . . . 2155 524,918 9.
10. Intangible assets (from Schedule RC-M) . . . 2143 101,011 10.
11. Other assets (from Schedule RC-F) . . . . 2160 1,633,056 11.
12. Total assets (sum of items 1 through 11) . . 2170 49,360,496 12.
- ------------------

(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.

<PAGE>
Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/95
Address: One First National Plaza, Suite 0460 ST-BK: 17-1630
City, State Zip: Chicago, IL 60670-0460 FFIEC 031
FDIC Certificate No.: 0/3/6/1/8 Page RC-2
---------

<CAPTION>
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
------------------ --------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of
columns A and C from Schedule RC-E,
part 1) . . . RCON 2200 15,174,243 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . RCON 6631 6,217,164 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . RCON 6636 8,957,079 13.a.(2)
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs (from Schedule
RC-E, part II) . . . . . . . . . . . . . . . . RCFN 2200 14,435,503 13.b.
(1) Noninterest bearing . . . . . . . . . . . . RCFN 6631 625,206 13.b.(1)
(2) Interest-bearing RCFN 6636 13,810,297 13.b.(2)
14. Federal funds purchased and securities
sold under agreements to repurchase in
domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . RCFD 0278 2,449,282 14.a.
b. Securities sold under agreements to repurchase RCFD 0279 880,215 14.b.
15. a. Demand notes issued to the U.S. Treasury RCON 2840 93,942 15.a.
b. Trading Liabilities . . . . . . . . . . . . . . RCFD 3548 7,523,265 15.b.
16. Other borrowed money:
a. With original maturity of one year or less . . . RCFD 2332 1,897,370 16.a.
b. With original maturity of more than one year . RCFD 2333 383,807 16.b.
17. Mortgage indebtedness and obligations
under capitalized leases . . . . . . . . . . . . . RCFD 2910 280,522 17.
18. Bank's liability on acceptance executed
and outstanding . . . . . . . . . . . . . . . . . . RCFD 2920 524,918 18.
19. Subordinated notes and debentures . . . . . . . . . RCFD 3200 1,225,000 19.
20. Other liabilities (from Schedule RC-G) . . . . . . RCFD 2930 1,444,364 20.
21. Total liabilities (sum of items 13 through 20) . . RCFD 2948 46,312,431 21.
22. Limited-Life preferred stock and related surplus RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred
stock) . . . . . . . . . . . . . . . . . . . . . . RCFD 3839 2,320,126 25.
26. a. Undivided profits and capital reserves . . . . . RCFD 3632 519,849 26.a.
b. Net unrealized holding gains
(losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . RCFD 8434 7,315 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 (83) 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 3,048,065 28.
29. Total liabilities, limited-life preferred stock,
and equity capital (sum of items 21, 22, and 28) RCFD 3300 49,360,496 29.
</TABLE>

Memorandum
To be reported only with the March Report of Condition.

1. Indicate in the box at the right the number of the
statement below that best describes the most comprehensive
level of auditing work performed for the bank by
independent external auditors as of any date during 1993 . . Number
RCFD 6724 N/A M.1.

1 = Independent audit of the bank conducted in accordance
with generally accepted auditing standards by a certified
public accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company
conducted in accordance with generally accepted auditing
standards by a certified public accounting firm which
submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)

4 = Directors' examination of the bank performed by other
external auditors (may be required by state chartering
authority)
5 = Review of the bank's financial statements by external
auditors
6 = Compilation of the bank's financial statements by external
auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- -------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6