<Page>
USA EDUCATION, INC.
$3,000,000,000 MEDIUM-TERM NOTES, SERIES A
DISTRIBUTION AGREEMENT
OCTOBER , 2001
USA Education, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell, from time to time, its medium-term debt securities (the
"Notes") in an aggregate amount up to U.S. $3,000,000,000, and agrees with each
person serving as an agent under this Agreement (individually, an "Agent",
and collectively, the "Agents") all as set forth herein. Subject to the terms
and conditions stated herein and the reservation by the Company of the right
to sell the Notes directly on its own behalf, the Company hereby (i) appoints
each Agent as an agent of the Company for the purpose of soliciting and
receiving offers to purchase Notes from the Company pursuant to Section 2(a)
hereof and (ii) agrees that whenever it determines to sell Notes directly to
any Agent as principal, it will enter into a separate agreement (each a
"Terms Agreement"), substantially in the form of Annex I hereto, relating to
such sale in accordance with Section 2(b) hereof (unless the Company and such
Agent shall otherwise agree). This Distribution Agreement shall not be
construed to create either an obligation on the part of the Company to sell
any Notes or an obligation of any of the Agents to purchase Notes as
principal.
The Notes will be issued under an indenture, dated as of October 1,
2000, as amended or supplemented from time to time (the "Indenture"), between
the Company and The Chase Manhattan Bank, as Trustee (the "Trustee"). The
Notes shall have the currency, denomination, maturities, interest rates, if
any, redemption provisions and other terms set forth in the Prospectus
referred to below, as it may be amended or supplemented from time to time.
The Notes will be issued, and the terms and rights thereof established, from
time to time, by the Company in accordance with the Indenture and the
Administrative Procedures attached hereto as Annex II, as the procedures may
be amended from time to time by written agreement between the Agents and the
Company (the "Procedures") and, if applicable, will be specified in a Terms
Agreement.
1. The Company hereby represents and warrants to, and agrees with,
each Agent that:
(a) A registration statement on Form S-3 (Registration No.
333-63164) in respect of U.S. $3,000,000,000 aggregate principal
amount (or the equivalent in foreign currency or currency units) of
debt securities, common stock, preferred stock and warrants of the
Company, including the Notes, has been filed with the Securities and
Exchange Commission (the "Commission"). Such registration statement and
any post-effective amendment relating to the Notes, each in the form
heretofore delivered or to be delivered to the Agents, have been
declared effective by the Commission. No other document with respect to
such registration statement has heretofore been filed or transmitted
for filing with the Commission (other than the prospectuses filed
pursuant to Rule 424(b) of the rules and regulations of the Commission,
each in the form heretofore delivered to the Agents and such other
documents as may be related to securities other than the Notes). No
stop order suspending the effectiveness of such registration statement
has been issued and no proceeding for that purpose has been initiated
or threatened by the Commission. For purposes hereof, any preliminary
prospectus included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission, is hereinafter called a "Preliminary Prospectus", the
various parts of such registration statement, including all exhibits
thereto and all documents incorporated by reference at the time such
part of the registration statement became effective but excluding Form
T-1, each as amended at the time such part became effective, is
hereinafter collectively called the "Registration Statement;" the
prospectus (including, if applicable, any prospectus supplement)
relating to the Notes, in the form
1
<Page>
in which it has most recently been filed with the Commission on or
prior to the date of this Agreement, is hereinafter called the
"Prospectus;" any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus, including any supplement to
the Prospectus that sets forth only the terms of a particular issue of
Notes hereinafter called a "Pricing Supplement", shall be deemed to
refer to and include any documents filed after the date of such
Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated therein by reference; any reference to any amendment to
the Registration Statement shall be deemed to refer to and include any
annual report of the Company filed pursuant to Section 13(a) or 15(d)
of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration
Statement and any reference to the Prospectus, as amended or
supplemented, shall be deemed to refer to the Prospectus as amended or
supplemented (including by the applicable Pricing Supplement filed in
accordance with Section 4(a) hereof), in relation to the Notes sold
pursuant to this Agreement, in the form in which it is filed or
transmitted for filing with the Commission pursuant to Rule 424(b) of
Regulation C under the Securities Act, including any documents
incorporated by reference therein as of the date of such filing);
(b) (i) The documents incorporated by reference in the
Prospectus, as amended or supplemented, when they became effective or
were filed with the Commission, as the case may be, complied as to form
in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act") or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder,
and none of such documents, when they became effective or were so
filed, as the case may be, contained, in the case of documents which
became effective under the Securities Act, an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and, in the case of documents which were filed under the Exchange Act
with the Commission, an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, and (ii) any further documents so filed and
incorporated by reference in the Prospectus, when such documents become
effective or are filed with the Commission, as the case may be, will
comply as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain, in the
case of documents which become effective under the Securities Act, an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and in the case of documents which are filed
under the Exchange Act with the Commission, an untrue statement of
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by any Agent expressly for use in
the Prospectus, as amended or supplemented, to relate to a particular
issuance of Notes or other securities registered under the Registration
Statement;
(c) The Registration Statement and the Prospectus conformed, and
any further amendments or supplements thereto will, when they become
effective or are filed with the Commission, as the case may be,
conform, in all material respects to the requirements of the Securities
Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
in the case of the Registration Statement and any amendment thereto and
as of the applicable filing date in the case of the Prospectus and any
amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in
2
<Page>
reliance upon and in conformity with information furnished in writing to
the Company by any Agent expressly for use in the Prospectus, as amended
or supplemented, to relate to a particular issuance of Notes or other
securities registered under the Registration Statement;
(d) (i) The Company has not sustained, since the date of the
latest audited financial statements included or incorporated by
reference in the Prospectus, any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus and (ii) since the respective dates as
of which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or
long-term debt of the Company or any material adverse change in or
affecting the general affairs, financial position or results of
operations of the Company and its subsidiaries, taken as a whole,
otherwise than as set forth or contemplated in the Prospectus.
(e) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus.
(f) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares or capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable.
(g) The Notes have been duly authorized, and, when issued and
delivered pursuant to this Agreement and any Terms Agreement or other
agreement by an Agent to purchase Notes as principal, will have been
duly executed, authenticated, issued and delivered and will constitute
valid and legally binding obligations of the Company entitled to the
benefits provided by the Indenture, which will be substantially in the
form filed as an exhibit to the Registration Statement; the Indenture
has been duly authorized and duly qualified under the Trust Indenture
Act and constitutes a valid and legally binding instrument, enforceable
in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; and the Indenture conforms and the Notes will
conform to the descriptions thereof contained in the Prospectus as
amended or supplemented to relate to such issuance of Notes.
(h) The issue and sale of the Notes and the compliance by the
Company with all of the provisions of the Notes, the Indenture, this
Agreement and any Terms Agreement or other agreement by an Agent to
purchase Notes as principal, and the consummation of the transactions
herein and therein contemplated, will not conflict with or result in a
breach which would constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company, under the terms of any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Company is a party or by which the Company may
be bound or to which any property or assets of the Company, is subject,
nor will such action result in any violation of the provisions of the
Certificate of Incorporation, as amended, or the By-Laws of the Company
or, to the best of its knowledge, any statute or any order, rule or
regulation applicable to the Company or any court or any Federal, State
or other regulatory authority or governmental agency or body having
jurisdiction over the Company or any of its properties, and no consent,
approval, authorization, order, registration or qualification of, or
filing with, any such court or regulatory agency or body is required
for the issuance and sale of the Notes or the consummation by the
Company of the transactions contemplated by this Agreement, any Terms
Agreement or other agreement by an Agent to purchase Notes as principal
or the Indenture, except such as have been obtained, or will have been
obtained prior to the Commencement Date, under the Securities Act and
the Trust Indenture Act and such other consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the
solicitation by the Agents of offers to purchase Notes from the Company
and
3
<Page>
with purchases of Notes by the Agents as principal, as the case may be,
in each case in the manner contemplated hereby.
(i) The Company is not (i) in violation of its Certificate of
Incorporation or By-laws or (ii) in default in, and no condition exists
which with the giving of notice, the lapse of time or both would a
constitute a default in, the performance or observance of any
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, or other agreement
or instrument to which it is a party or by which it or any of its
properties may be bound, except for violations or defaults which
individually and in the aggregate are not material to the Company and
its subsidiaries taken as a whole.
(j) The statements set forth in the Prospectus under the caption
"Description of Debt Securities" and "Description of Notes", insofar as
they purport to constitute a summary of the terms of the Notes, under
the caption "Taxation", and under the caption "Plan of Distribution",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate and complete.
(k) Immediately after the settlement of any sale of Notes by the
Company resulting from solicitation by such Agent hereunder and
immediately after any Time of Delivery (as defined below) relating to a
sale to an Agent as principal, the aggregate principal amount of Notes
issued and sold by the Company hereunder or under any Terms Agreement
or other agreement by an Agent to purchase Notes as principal and of
any securities of the Company (other than such Notes) issued and sold
pursuant to the Registration Statement will not exceed the amount of
securities registered under the Registration Statement.
(l) Other than as set forth in or incorporated by reference into
the Prospectus, there are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or to which
any property of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries; and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(m) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Securities Act and the rules and
regulations of the Commission thereunder.
(n) The Company is not and, after giving effect to the offering
and sale of the Notes, will not be an "investment company", as such
term is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(o) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes.
2. (a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, each
Agent hereby, severally and not jointly, agrees to act as an agent of the
Company, to use its reasonable efforts to solicit offers to purchase the
Notes from the Company upon the terms and conditions set forth in the
Prospectus relating to the Notes, as amended or supplemented from time to
time, and in the Procedures. So long as this Agreement shall remain in effect
with respect to any Agent, the Company shall not, without the consent of such
Agent, solicit or accept offers to purchase, or sell, any debt securities
with a maturity at the time of original issuance of 9 months to 30 years
except pursuant to this Agreement, pursuant to any Terms Agreement or other
agreement by an Agent to purchase Notes as principal, pursuant to a private
4
<Page>
placement not constituting a public offering under the Act or in connection
with a firm commitment underwriting pursuant to an underwriting agreement
that does not provide for a continuous offering of medium-term debt
securities.
Subject to the provisions of this Section 2 and to the Procedures,
offers for the purchase of Notes may be solicited by each Agent, as agent for
the Company, at such time and in such amounts as such Agent deems advisable;
provided, however, that the Company reserves the right to sell, and may
solicit and accept offers to purchase, Notes directly on its own behalf or
through other agents, dealers or underwriters, and to appoint additional
persons from time to time to serve as Agents under this Agreement.
Each Agent agrees that it will not solicit an offer to purchase Notes
or deliver any of the Notes in any jurisdiction outside the United States of
America except under circumstances that will result in compliance with the
applicable laws thereof. Each Agent understands that no action has been taken
to permit a public offering in any jurisdiction outside the United States of
America where action would be required for such purpose. The Agents further
undertake that in connection with the distribution of Notes denominated in
any foreign currency or currency unit, they will as agents, directly or
indirectly, not solicit offers to purchase and as principals under any Terms
Agreement or otherwise, directly or indirectly, not offer, sell or deliver,
such Notes in or to residents of the country issuing such currency, except as
permitted by applicable law.
The Company reserves the right, in its sole discretion, to instruct the
Agents to suspend at any time, for any period of time or permanently, the
solicitation of offers to purchase the Notes. As soon as practicable, but in
any event not less than one business day after receipt of notice from the
Company, the Agents will suspend solicitation of offers to purchase Notes
from the Company until such time as the Company has advised them that such
solicitation may be resumed. During the period of time that such solicitation
is suspended, the Company shall not be required to deliver any opinions,
letters or certificates in accordance with Sections 4(e), (g) and (h) hereof.
Upon advising the Agents that such solicitation may be resumed, however, the
Company shall simultaneously provide the documents required to be delivered
by Sections 4(e), (g) and (h) hereof, and the Agents shall have no obligation
to solicit offers to purchase the Notes until such documents have been
received by the Agents. In addition, any failure by the Company to comply
with its obligation to deliver documents required by Sections 4(e), (g) and
(h) hereof shall give each Agent the right to terminate its obligations under
this Agreement to solicit offers to purchase Notes hereunder as agent.
The Company agrees to pay each Agent, at the time of settlement of any
sale of a Note by the Company, the purchase of which is solicited by such
Agent, a commission in United States dollars (which, in the case of Notes
denominated in other than United States dollars, shall be based upon the
Market Exchange Rate (as defined below) for such currency or currency unit at
the time of any acceptance of an offer to purchase a Note) in such amount as
may from time to time be negotiated between such Agent and the Company).
Notwithstanding anything herein to the contrary, if, at or prior to the
time of settlement, the Company and an Agent have entered into, or such Agent
has arranged for the Company to enter into, a contract with respect to the
sale of the currency (other than United States dollars) or currency unit in
which a Note has been denominated and the purchase of which was solicited by
such Agent, the commission in United States dollars payable by the Company to
such Agent shall be based upon the same exchange rate set forth in such
contract.
The authorized denominations of Notes denominated in a currency or
currency unit other than United States dollars shall be the equivalent, as
determined by the Market Exchange Rate for such currency or currency unit on
the business day immediately preceding the date on which the offer for such
5
<Page>
Notes is accepted, of U.S. $1,000 (rounded down to an integral multiple of
10,000 units of such currency or currency unit), and any larger amount.
The authorized denominations of Notes denominated in United States
dollars shall be U.S. $1,000 and any larger amount in integral multiples of
$1,000 or such other amount as may be set forth in a Pricing Supplement for
the Notes.
The "Market Exchange Rate" on a given date for a given foreign currency
means the noon buying rate in New York City for cable transfers in such
currency as certified for customs purposes by the Federal Reserve Bank of New
York on such date; provided, however, that in the case of European Currency
Units, Market Exchange Rate means, unless otherwise agreed by the Company and
the Agents, the rate of exchange determined by the Council of European
Communities (or any successor thereto) as published on such date or the most
recently available date in the Official Journal of the European Communities
(or any successor publication).
Unless otherwise agreed between the Company and each Agent, each Agent
shall communicate to the Company, orally or in writing, each offer to
purchase Notes received by it as Agent, other than those rejected by such
Agent. Each Agent may, in its discretion reasonably exercised, reject any
offer received by it in whole or in part. Any such rejection shall not be
deemed a breach of the Agent's agreements under this Agreement. The Company
shall have the sole right to accept offers to purchase Notes and may reject
any proposed purchase of Notes.
(b) Each sale of Notes to any Agent as principal shall be made in
accordance with the terms of this Agreement and (unless the Company and such
Agent shall otherwise agree) a Terms Agreement, which shall be substantially
in the form of Annex 1 hereto, which will provide for the sale of such Notes
to, and the purchase thereof by, such Agent. A Terms Agreement may also
specify certain provisions relating to the re-offering of such Notes by such
Agent; the commitment of any Agent to purchase Notes as principal, whether
pursuant to any Terms Agreement or otherwise, shall be deemed to have been
made on the basis of the representations and warranties of the Company herein
contained and shall be subject to the terms and conditions herein set forth.
Each Terms Agreement shall specify the principal amount of Notes to be
purchased by any Agent pursuant thereto, the price to be paid to the Company
for such Notes, any provisions relating to rights of, and default by,
underwriters acting together with such Agent in the re-offering of the Notes
and the time and date and place of delivery of and payment for such Notes;
and such Terms Agreement shall also specify any requirements for opinions of
counsel, accountants' letters and officers' certificates pursuant to Section
6 hereof. Terms Agreements may take the form of an exchange of any standard
form of written telecommunication between any Agent and the Company,
including by telecopy or telex. The Company and any Agent who is a party to a
Terms Agreement agree to exchange copies of such Terms Agreement as promptly
as practicable after they have entered into such Terms Agreement pursuant to
the foregoing exchange of written telecommunication. Each Agent proposes to
offer Notes purchased by it as principal for sale at prevailing market prices
or prices related thereto at the time of sale, which may be equal to, greater
than or less than the price at which such Notes are purchased by such Agent
from the Company. The Agents may utilize a selling or dealer group in
connection with the re-offering of the Notes purchased as principal.
Each time and date of delivery of and payment for Notes to be purchased
by an Agent as principal, whether set forth in a Terms Agreement or in
accordance with the Procedures, is referred to herein as a "Time of Delivery."
(c) Procedural details relating to the issue and delivery of Notes, the
solicitation of offers to purchase Notes, and the payment in each case
therefor, shall be as set forth in the Procedures. The provisions of the
Procedures shall apply to all transactions contemplated hereunder other than
those made pursuant to a Terms Agreement. Each of the Agents and the Company
agrees to perform the respective
6
<Page>
duties and obligations specifically provided to be performed by each of them
in the Procedures. The Company will furnish to the Trustee a copy of the
Procedures as from time to time in effect.
3. The documents required to be delivered pursuant to Section 6 hereof
shall be delivered at the offices of the Company, 11600 Sallie Mae Drive,
Reston, Virginia 20193, at 11:00 a.m., New York City time, on the date of
this Agreement, or at such other date and time as the Agents and the Company
agree (such time and date being referred to herein as the "Commencement
Date"). In no event shall the Commencement Date be later than the day prior
to the date (i) on which solicitation of offers to purchase Notes is
commenced or (ii) on which the initial Terms Agreement is executed.
4. The Company hereby covenants and agrees with each Agent:
(a) Prior to the termination of the offering of the Notes,
(i) to make no amendment or supplement to the Registration
Statement or the Prospectus (except for a Pricing Supplement or a
prospectus supplement or other amendment or supplement relating
to securities other than the Notes) without first having
furnished the Agents with a copy of the proposed form thereof and
given the Agents a reasonable opportunity to review and comment
on the same and if the Prospectus is amended or supplemented as a
result of the filing under the Exchange Act of any document
incorporated by reference in the Prospectus, no Agent shall be
obligated to solicit offers to purchase Notes so long as it is
not reasonably satisfied with such document;
(ii) to prepare, with respect to any Notes to be sold
through or to such Agent pursuant to this Agreement, a Pricing
Supplement with respect to such Notes substantially in a form
previously approved by the Agents and to file such Pricing
Supplement pursuant to Rule 424(b) under the Securities Act not
later than the close of business of the Commission on the fifth
business day after the date on which such Pricing Supplement is
first used or the date of determination of the offering price;
(iii) to file promptly all reports and any definitive proxy
or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act for so long as the delivery of a prospectus
is required in connection with the offering or sale of the Notes,
(iv) for so long as the delivery of a prospectus is required
in connection with the offering or sale of the Notes, to advise
the Agents promptly after the Company receives notice thereof,
of: (A) the time when any amendment to the Registration Statement
has been filed or has become effective or any supplement to the
Prospectus or any amended Prospectus (other than any Pricing
Supplement that relates to Notes not purchased through or by such
Agent or a prospectus supplement or other amendment or supplement
relating to securities other than the Notes) has been filed with
the Commission, and to confirm such advice in writing, (B) the
issuance by the Commission of any stop order or of any order
preventing or suspending the use of any prospectus relating to
the Notes; (C) the suspension of the qualification of the Notes
for offering or sale in any jurisdiction; (D) the initiation or
threatening of any proceeding for any such purpose; or (E) any
request by the Commission for the amending or supplementing of
the Registration Statement or Prospectus or for additional
information (other than in relation to securities other than the
Notes);
7
<Page>
(v) in the event of the issuance of any such stop order or
of any such order preventing or suspending the use of any such
prospectus or suspending any such qualification, to use promptly
its best efforts to obtain its withdrawal;
(vi) notify the Agents promptly in writing of any
downgrading, or on its receipt of any notice of (A) any intended
or potential downgrading or (B) any review or possible change
that does not indicate an improvement in the rating accorded any
of the securities of, or guaranteed by, the Company by any
"nationally recognized statistical rating organization", as such
term is defined for purposes of Rule 436(g)(2) under the
Securities Act; and
(vii) to make generally available to the holders of the
Notes and to the Agents as soon as practicable, but in any event
not later than eighteen months after the effective date of the
Registration Statement (as defined in Rule 158(c) under the Act),
an earnings statement of the Company and its subsidiaries (which
need not be audited) complying with Section 11(a) of the Act and
the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158).
(b) So long as any Notes are outstanding, to furnish to the
Agents copies of all reports or other communications (financial or
other) furnished to stockholders of the Company and, as soon as they
are available, copies of any reports and financial statements furnished
to or filed with the Commission or any national securities exchange on
which any class of securities of the Company is listed.
(c) Promptly from time to time to take such action as the Agents
reasonably may request to qualify the Notes for offering and sale under
the securities laws of such jurisdictions as the Agents may request and
to comply with such laws so as to permit the continuance of sales and
dealings therein for as long as may be necessary to complete the
distribution or sale of the Notes provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction;
(d) To furnish the Agents with copies of the Registration
Statement and each amendment thereto relating to any Notes to be sold
pursuant to this Agreement, and with copies of the Prospectus, as
amended or supplemented, other than any Pricing Supplement (except as
provided in the Procedures), in the form in which it is filed with the
Commission pursuant to Rule 424 under the Securities Act or in the form
first used to confirm sales which was not required to be filed pursuant
to Rule 424 under the Securities Act, and with copies of the documents
incorporated by reference therein, all in such quantities as the Agents
may from time to time reasonably request, and, if the delivery of a
prospectus is required at any time in connection with the offering or
sale of the Notes (including Notes purchased from the Company by such
Agent as principal) and if at such time any event shall have occurred
as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such same period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated
by reference in the Prospectus in order to comply with the Securities
Act, the Exchange Act or the Trust Indenture Act, to (i) promptly
notify the Agents to suspend solicitation of offers to purchase Notes
from the Company (and, if so notified, the Agents shall promptly cease
such solicitations), (ii) prepare and cause to be filed with the
Commission, an amendment or supplement to the Registration Statement or
the Prospectus as then amended or supplemented that will correct such
statement or omission or effect such compliance and (iii) supply such
Prospectus as then amended or supplemented to the Agents in such
quantities as the Agents may reasonably request; if such
8
<Page>
amendment or supplement, and any documents, certificates and opinions
furnished to the Agents pursuant to Section 6 in connection with the
preparation or filing of such amendment or supplement are reasonably
satisfactory in all respects to the Agents, the Agents will, upon the
filing of such amendment or supplement with the Commission and upon the
effectiveness of an amendment to the Registration Statement if such an
amendment is required, resume the Agents obligation to solicit offers
to purchase Notes hereunder; if such amendment or supplement, or any
documents, certificates and opinions furnished to the Agents pursuant
to Section 6 in connection with the preparation or filing of such
amendment or supplement, are not satisfactory to the Agents, the Agents
will as promptly as reasonably practicable notify the Company in
writing;
(e) Quarterly following the filing of the Company's Form 10-K or
Form 10-Q, each time the Registration Statement or the Prospectus shall
be amended or supplemented (other than by a Pricing Supplement or in
relation to securities other than the Notes), each other time a
document filed under the Securities Act or the Exchange Act is
incorporated by reference into the Prospectus (other than by reference
of the Company's proxy statement for its annual meeting of shareholders
or of a filing by the Company of a Current Report on Form 8-K under the
Exchange Act, unless in the Agents' reasonable judgment, the
information contained in such documents are of such a character that
certificates of officers referred to below should be furnished, as the
case may be), and each time the Company sells Notes to an Agent as
principal and the applicable Terms Agreement or other agreement by an
Agent to purchase Notes as principal specifies the delivery of an
opinion of Company's counsel under this Section 4(e) as a condition to
the purchase of Notes pursuant to such Terms Agreement or other
agreement, the Company shall furnish or cause to be furnished to the
Agents the written opinion of the counsel to the Company, who may be an
employee of the Company or of any affiliate, dated each such date, in
form and substance satisfactory to the Agents in the Agents' reasonable
judgment to the effect that such Agents may rely on the opinion of such
counsel referred to in Section 6(c)(ii) hereof which was last furnished
to such Agents to the same extent as though it were dated the date of
such letter authorizing reliance (except that the statements in such
last opinion shall be deemed to relate to the Registration Statement
and the Prospectus as amended and supplemented to such date) or, in
lieu of such opinion, an opinion of the same tenor as the opinion of
such counsel referred to in Section 6(c)(ii) hereof, but modified to
relate to the Registration Statement and the Prospectus as amended and
supplemented to such date;
(f) Quarterly following the filing of the Company's Form 10-K or
Form 10-Q, each time the Registration Statement or the Prospectus shall
be amended or supplemented (other than by a Pricing Supplement or in
relation to securities other than the Notes), each other time a
document filed under the Securities Act or the Exchange Act is
incorporated by reference into the Prospectus (other than by reference
of the Company's proxy statement for its annual meeting of shareholders
or of a filing by the Company of a Current Report on Form 8-K under the
Exchange Act, unless in the Agents' reasonable judgment, the
information contained in such documents are of such a character that
certificates of officers referred to below should be furnished, as the
case may be), and each time the Company sells Notes to an Agent as
principal pursuant to a Terms Agreement or other agreement by an Agent
to purchase Notes as principal (if such Terms Agreement or other
agreement specifies the delivery of an opinion or opinions by
Cadwalader, Wickersham & Taft, counsel to the Agents, as a condition to
the purchase of Notes pursuant to such Terms Agreement or other
agreement), the Company shall furnish to such counsel such papers and
information as they may reasonably request to enable them to furnish to
such Agent the opinion or opinions referred to in Section 6(c)(iii)
hereof;
(g) Quarterly following the filing of the Company's Form 10-K or
Form 10-Q, each time the Registration Statement or the Prospectus shall
be amended or supplemented (other than by a Pricing Supplement or in
relation to securities other than the Notes), each other time a
document filed under the Securities Act or the Exchange Act is
incorporated by reference into the Prospectus (other than by reference
of the Company's proxy statement for its annual meeting of shareholders
or of a filing by the Company of a Current Report on Form 8-K under the
Exchange
9
<Page>
Act, unless in the Agents' reasonable judgment, the information contained
in such documents are of such a character that certificates of officers
referred to below should be furnished, as the case may be), and each
time the Company sells Notes to an Agent as principal and the
applicable Terms Agreement or other agreement by an Agent to purchase
Notes as principal specifies the delivery of an accountant's letter
under this Section 4(g) as a condition to the purchase of Notes
pursuant to such Terms Agreement or other agreement, the Company shall
cause the independent certified public accountants who have certified
the financial statements of the Company and its subsidiaries included
or incorporated by reference in the Registration Statement to furnish
the Agents a letter or letters, dated each such date, in form
satisfactory to the Agents, of the same tenor as the letter referred to
in Section 6(c)(iv) hereof (modified in the case of amended or
supplemented financial information to reflect such amended and
supplemental financial information included or incorporated by
reference in the Registration Statement and the Prospectus, as amended
or supplemented to the date of such letter, provided that if the
Registration Statement or the Prospectus is amended or supplemented
solely to include or incorporate by reference unaudited quarterly
financial information, the scope of such letter, which shall be
satisfactory in form and substance to the Agents, may be limited to
relate to such unaudited financial information unless any other
accounting, financial or statistical information included or
incorporated by reference therein is of a character that, in the
reasonable judgment of the Agents, such letter should address such
other information); provided however, that, with respect to any
financial information or other matter, such letter may reconfirm as
true and correct as such date as though made at and as of such date,
rather than repeat, statements with respect to such financial
information or other matter made in the letter referred to in Section
6(c)(iv) hereof which was last furnished to the Agents;
(h) Quarterly following the filing of the Company's Form 10-K or
Form 10-Q, each time the Registration Statement or the Prospectus shall
be amended or supplemented (other than by a Pricing Supplement or in
relation to securities other than the Notes), each other time a
document filed under the Securities Act or the Exchange Act is
incorporated by reference into the Prospectus (other than by reference
of the Company's proxy statement for its annual meeting of shareholders
or of a filing by the Company of a Current Report on Form 8-K under the
Exchange Act, unless in the Agents' reasonable judgment, the
information contained in such documents are of such a character that
certificates of officers referred to below should be furnished, as the
case may be), and each time the Company sells Notes to an Agent as
principal and the applicable Terms Agreement or other agreement by an
Agent to purchase Notes as principal specifies the delivery of a
certificate under this Section 4(h) as a condition to the purchase of
Notes pursuant to such Terms Agreement or other agreement, the Company
shall furnish or cause to be furnished to the Agents a certificate,
dated the date of each such supplement, amendment, incorporation or
Time of Delivery relating to such sale, as the case may be, in such
form and executed by such officers of the Company as shall be
satisfactory to the Agents, to the effect that the statements contained
in the certificates referred to in Section 6(c)(v) hereof which were
last furnished to the Agents are true and correct at such date as
though made at and as of such date (except that such statements shall
be deemed to relate to the Registration Statement and the Prospectus as
amended and supplemented to such date) or, in lieu of such certificate,
certificates of the same tenor as the certificates referred to in
Section 6(c)(v), but modified to relate to the Registration Statement
and the Prospectus as amended and supplemented to such date.
(i) That each acceptance by the Company of an offer to purchase
Notes hereunder (including any purchase by an Agent as principal
pursuant to an agreement other than a Terms Agreement, and each
execution and delivery by the Company of a Terms Agreement with an
Agent) shall be deemed to be an affirmation to such Agent that the
representations and warranties of the Company contained in or made
pursuant to this Agreement are true and correct as of the date of such
acceptance hereunder or of such Terms Agreement, as the case may be, as
though made at and as of such date, and an undertaking that such
representations and warranties will be true and correct as of the Time
of Delivery relating to the sale of such Notes and as of the settlement
date for the Notes relating to such acceptance, as the case may be, as
though made at
10
<Page>
and as of such date (except that such representations and warranties
shall be deemed to relate to the Registration Statement and the
Prospectus, as amended and supplemented, relating to such Notes); and
(j) If specified in any Terms Agreement or any other agreement
under which an Agent agrees to purchase Notes as principal, the Company
covenants and agrees with each Agent that, during the period beginning
from the date of such Terms Agreement or other agreement and continuing
to and including the later of (i) the termination of the trading
restrictions for the Notes purchased thereunder, of which termination
such Agent or Agents party to the Terms Agreement or other agreement,
as the case may be, agree to give the Company prompt notice confirmed
in writing and (ii) the Time of Delivery for such Notes, not to offer,
sell, contract to sell or otherwise dispose of any debt securities of
the Company which (A) mature nine months or more after such Time of
Delivery, (B) mature within six months of the maturity of such Notes,
(C) bear interest at the same interest rate or with reference to the
same interest rate index and (D) are denominated in the same currency
or currency unit specified in such Terms Agreement or other agreement,
without the prior written consent of such Agent or Agents, which
consent shall not be unreasonably withheld, except pursuant to
arrangements of which such Agent or Agents have been advised by the
Company prior to the time of execution of such Terms Agreement or other
agreement, as the case may be, which advice is confirmed in writing
(which may be by telecopy or telex, receipt acknowledged) to such Agent
or Agents by the end of the business day following the date of such
Terms Agreement or other agreement, as the case may be.
5. The Company covenants and agrees with each Agent that the Company
will pay or cause to be paid, whether or not any sale of Notes is
consummated, the following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Notes under the Securities Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus, the Prospectus, any Pricing Supplements and any
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Agents; (ii) the cost of printing or reproducing this
Agreement, any Terms Agreement, any Indenture, any Blue Sky and legal
investment surveys and any other documents in connection with the offering,
purchase, sale and delivery of the Notes; (iii) all fees, disbursements and
expenses in connection with the qualification of the Notes for offering and
sale under state securities laws as provided in Section 4(c) hereof and in
connection with any Blue Sky and legal investment surveys; (iv) all fees
charged by security rating services for rating the Notes; (v) any filing fees
incident to any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Notes; (vi) the cost of
preparing, issuing, executing, authenticating and delivering the Notes; (vii)
the fees and expenses of any Trustee and any transfer or paying agent of the
Company and the fees and disbursements of counsel for any Trustee or such
agent in connection with the Indenture and the Notes; (viii) on a monthly
basis all out-of-pocket expenses (including advertising expenses) incurred by
such Agent connected with the solicitation of offers to purchase and the sale
of Notes so long as such Agent has received the prior written approval of the
Company for such expenses; and (ix) all other costs and expenses incident to
the performance of the Company's obligations hereunder (other than costs and
expenses incurred by any Agent) which are not otherwise specifically provided
for in this Section 5.
6. The obligation of each Agent, as agent of the Company, at any time
("Solicitation Time") to solicit offers to purchase the Notes and the
obligation of each Agent to purchase Notes as principal pursuant to any Terms
Agreement or any other agreement by an Agent to purchase Notes as principal
shall in each case be subject, in such Agent's discretion, to the conditions
that:
(a) All representations and warranties of the Company herein (or,
in the case of an obligation of an Agent under a Terms Agreement or
other agreement by an Agent to purchase Notes as principal, in or
incorporated by reference in such Terms Agreement or other agreement)
are true and correct at and as of the Commencement Date, and any
applicable date
11
<Page>
referred to in Section 4(h) hereof that is prior to the Solicitation
Time or Time of Delivery for such Notes, and as of the Solicitation
Time or Time of Delivery for such Notes;
(b) Prior to the Solicitation Time or Time of Delivery for such
Notes, as the case may be, the Company shall have performed all of its
obligations hereunder theretofore to be performed; and
(c) The following additional conditions have been met:
(i) (A) With respect to any Notes sold at or prior to
the Solicitation Time or Time of Delivery, as the case may be,
the Prospectus as amended or supplemented (including the Pricing
Supplement) with respect to such Notes shall have been filed with
the Commission pursuant to Rule 424(b) under the Act within the
applicable time period prescribed for such filing by the rules
and regulations under the Act and in accordance with Section 4(a)
hereof; (B) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding
for that purpose shall have been initiated or threatened by the
Commission; and (C) all requests for additional information on
the part of the Commission shall have been complied with to the
Agent's reasonable satisfaction;
(ii) Counsel to the Company, who may be an employee of
the Company or any affiliate, shall have furnished to the Agents
such counsel's written opinion, dated the Commencement Date, each
Time of Delivery to the extent the applicable Terms Agreement or
other agreement by an Agent to purchase Notes as principal
requires an opinion, and the date of effectiveness of each
amendment or the filing of each supplement to the Registration
Statement or the Prospectus (including the filing under the
Securities Act or the Exchange Act of documents incorporated by
reference in the Prospectus as amended or supplemented but
excluding amendments or supplements (i) providing solely for a
change in the interest rates, redemption provisions, amortization
schedules or maturities offered on the Notes or for a change which
the Agents deem to be immaterial, (ii) relating to an offering of
securities other than the Notes, (iii) constituting a Pricing
Supplement, (iv) setting forth or incorporating by reference
financial statements or other information as of and for a fiscal
quarter or (v) relating solely to the incorporation by reference
of the Company's proxy statement for its annual meeting of
shareholders or of a filing by the Company of a Current Report on
Form 8-K under the Exchange Act, unless in the case of clauses
(iv) or (v) above, in the Agents' reasonable judgment, such
financial statements or other information contained in such
documents are of such a character that an opinion of counsel
should be furnished), as the case may be, in form and substance
satisfactory to the Agents in the Agents' reasonable judgment to
the effect that:
(A) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, with power and
authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus as
amended or supplemented;
(B) The Company has an authorized capitalization as set
forth in the Prospectus as amended or supplemented and all
of the issued and outstanding shares of capital stock of
the Company have been duly and validly authorized and
issued and are fully paid and non-assessable;
(C) Each of this Agreement and any applicable Terms
Agreement or other agreement by an Agent to purchase Notes
as principal has been duly authorized, executed and delivered
on the part of the Company;
12
<Page>
(D) The Notes have been duly authorized and, when duly
executed, authenticated, issued and delivered by the
Company, will constitute valid and legally binding
obligations of the Company, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors'
rights and to general equity principles, and the Notes will
conform to the descriptions thereof in the Prospectus as
amended or supplemented;
(E) The Indenture has been duly authorized, executed and
delivered on the part of the Company and constitutes a
valid and binding instrument in accordance with its terms
subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equity principles, and has been qualified under the Trust
Indenture Act, and the Indenture conforms to the
description thereof in the Prospectus as amended or
supplemented;
(F) The issue and sale of the Notes , the compliance by the
Company with all of the provisions of the Notes, the
Indenture, this Agreement and any applicable Terms
Agreement or other agreement by an Agent to purchase Notes
as principal, and the consummation of the transactions
herein and therein contemplated will not (a) conflict with
or result in any breach which would constitute a default
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the
Company pursuant to the terms of, any indenture, loan
agreement or other material agreement or instrument known
to such counsel to which the Company is a party or by which
the Company may be bound or to which any property or assets
of the Company, is subject, (b) result in any violation of
the provisions of the Certificate of Incorporation, as
amended, or the By-Laws of the Company or (c) to the best
of the knowledge of such counsel, result in any violation
of any statute or any order, rule or regulation applicable
to the Company of any court or any Federal, State or other
regulatory authority or other governmental body having
jurisdiction over the Company and any of its properties;
(G) To the best knowledge of such counsel, no consent,
approval, authorization, order, registration or
qualification of or filing with, any court or any
governmental agency or body is required for solicitation of
offers to purchase Notes, the issue and sale of the Notes
except as have been obtained or made under the Securities
Act, the Exchange Act, the Trust Indenture Act and
securities laws of the various states or other
jurisdictions which are applicable to the issue and sale of
the Notes, as the case may be, in each case in the manner
contemplated by this Agreement;
(H) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or
any of its subsidiaries is a party or to which any property
of the Company or any of its subsidiaries is subject,
which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the current or future
consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries,
taken as a whole; and to the best of such counsel's
knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others;
13
<Page>
(I) The Company is not in violation of its Certificate of
Incorporation or By-laws or in default in the performance
or observance of any material obligation, covenant or
condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of
its properties may be bound;
(J) The statements set forth in the Prospectus or the
Prospectus Supplement under the caption "Description of Debt
Securities" and "Description of the Notes We May Offer",
insofar as they purport to constitute a summary of the terms
of the Notes, under the caption "United States Federal
Taxation", and under the captions "Plan of Distribution" and
"Supplemental Plan of Distribution" as they relate to the
Notes and insofar as they purport to describe the provisions
of the laws and documents referred to therein, are accurate,
complete and fair;
(K) The Company is not and, after giving effect to the
offering and sale of the Notes, will not be, an "investment
company" within the meaning of the Investment Company Act
of 1940, as amended;
(L) The documents incorporated by reference in the
Prospectus inasmuch as those documents relate to the Notes
(other than the financial statements and related schedules
therein, as to which such counsel need express no opinion),
when they became effective or were filed with the
Commission, as the case may be, complied as to form in all
material respects with the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations
of the Commission thereunder; and they have no reason to
believe that any of such documents, when they became
effective or were so filed, as the case may be, contained
an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary
to make the statements therein not misleading, and, in the
case of other documents which were filed under the Act or
the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made when
such documents were so filed, not misleading;
(M) The Registration Statement and the Prospectus as
amended or supplemented and any further amendments or
supplements thereto made by the Company prior to the date
of such opinion in as much as those documents relate to the
Notes (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) comply as to form in all material respects with
the requirements of the Act and the Trust Indenture Act and
the rules and regulations thereunder; although they do not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement or the Prospectus, except for those referred to
in the opinion in subsection (j) of this Section 6(ii),
they have no reason to believe that, as of its effective
date, the Registration Statement or any further amendment
or supplement thereto made by the Company prior to the date
of such opinion (other than the financial statements and
related schedules therein, as to which such counsel need
express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading or that, as of the date of such
opinion, the Prospectus as amended or supplemented or any
further amendment or supplement thereto made by the Company
prior to the date of such opinion (other than the financial
statements and related schedules therein, as to which such
14
<Page>
counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading;
and they do not know of any amendment to the Registration
Statement required to be filed or any contracts or other
documents of a character required to be filed as an exhibit
to the Registration Statement or required to be
incorporated by reference into the Prospectus as amended or
supplemented or required to be described in the
Registration Statement or the Prospectus as amended or
supplemented which are not filed or incorporated by
reference or described as required; and
(N) Such counsel does not know of any contract or other
document to which the Company is a party required to be
filed as an exhibit to the Registration Statement or
required to be incorporated by reference into the
Prospectus, as amended or supplemented, or required to be
described in the Prospectus, as amended or supplemented,
which has not been so filed, incorporated by reference or
described.
In rendering such opinion, such counsel may rely to the extent
such counsel deems appropriate upon certificates of officers or
other executives of the Company and its affiliates and of public
officials as to factual matters and upon opinions of other
counsel.
In rendering the opinion referred to in item (D) above, such
counsel need not express an opinion as to whether, with respect
to any Notes denominated in a currency other than United States
dollars, a court located in the United States of America would
grant a judgment relating to the Notes in other than United
States dollars, nor an opinion as to the date which any such
court would utilize for determining the rate of conversion into
United States dollars in granting such judgment.
(iii) Cadwalader, Wickersham & Taft, counsel to the
Agents, shall have furnished to such Agent (A) such opinion or
opinions, dated the Commencement Date, with respect to the
matters covered in paragraphs (A), (B), (C), (D), (E), (J) and
(M) of Subsection 6(c)(ii) above, as well as such other related
matters as such Agent may reasonably request, and (B) if and to
the extent requested by such Agent, with respect to each
applicable date referred to in Section 4(h) hereof that is on or
prior to such Solicitation Time or Time of Delivery, as the case
may be, an opinion or opinions, dated such applicable date, to
the effect that such Agent may rely on the opinion or opinions
which were last furnished to such Agent pursuant to this Section
6(c)(iii) to the same extent as though it or they were dated the
date of such letter authorizing reliance (except that the
statements in such last opinion or opinions shall be deemed to
relate to the Registration Statement and the Prospectus as
amended and supplemented to such date) or, in any case, in lieu
of such an opinion or opinions, an opinion or opinions of the
same tenor as the opinion or opinions referred to in clause (A)
of this Section 6(c)(iii) but modified to relate to the
Registration Statement and the Prospectus as amended and
supplemented to such date; and in each case such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(iv) On (A) the Commencement Date, (B) the date of
effectiveness of each amendment or the filing of each supplement
to the Registration Statement or the Prospectus setting forth or
incorporating by reference amended or supplemental financial
information, as the case may be (including the filing under the
Securities Act or the Exchange Act of documents which are
incorporated by reference in the Prospectus as amended or
supplemented but excluding amendments or supplements (i) relating
to an offering of securities other than the Notes, (ii)
constituting a Pricing Supplement, or (iii)
15
<Page>
relating solely to the incorporation by reference of the Company
proxy statement for its annual meeting of shareholders or of a
filing by the Company of a Current Report on Form 8-K under the
Exchange Act, unless in the case of clause (iii) above, in such
Agent's reasonable judgment, the information contained in such
documents is of such a character that certificates of officers
referred to below should be furnished, as the case may be), and
(C) each Time of Delivery, the independent certified public
accountants who have certified the financial statements of the
Company and its subsidiaries included or incorporated by
reference in the Registration Statement shall have furnished to
the Agents a letter or letters, dated such date in form and
substance satisfactory to the Agents, to the effect set forth in
Annex III hereto (modified in the case of amended or supplemented
financial information to reflect such amended and supplemental
financial information included or incorporated by reference in
the Registration Statement and the Prospectus, as amended or
supplemented to the date of such letter, provided that if the
Registration Statement or the Prospectus is amended or
supplemented solely to include or incorporate by reference
unaudited quarterly financial information, the scope of such
letter, which shall be satisfactory in form and substance to the
Agents, may be limited to relate to such unaudited financial
information unless any other accounting, financial or statistical
information included or incorporated by reference therein is of a
character that, in the reasonable judgment of the Agents, such
letter should address such other information);
(v) The Company shall have furnished or caused to be
furnished to such Agent certificates of officers of the Company
dated the Commencement Date and each applicable date referred to
in Section 4(h) hereof that is on or prior to such Solicitation
Time or Time of Delivery, as the case may be, in such form as
shall be satisfactory to such Agent, as to the accuracy of the
representations and warranties of the Company herein at and as of
the Commencement Date or such applicable date, as the case may
be, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to the
Commencement Date or such applicable date, as the case may be,
and as to the matters set forth in subsections (c)(i) and (c)(vi)
of this Section 6;
(vi) The Company shall not have sustained since the date of
the latest audited financial statements included or incorporated
by reference in the Prospectus as amended or supplemented prior
to the date of the Pricing Supplement relating to the Notes to be
delivered at the relevant Time of Delivery any change in the
capital stock or long-term debt of the Company or any change, or
any development involving a prospective change, in or affecting
the business, financial position, stockholders' equity or results
of operations of the Company, otherwise than as set forth or
contemplated in the Prospectus as amended or supplemented prior
to the date of the Pricing Supplement relating to the Notes to be
delivered at the relevant Time of Delivery, the effect of which
is in the judgment of such Agent so material and adverse as to
make it impracticable or inadvisable to proceed with the
solicitation by such Agent of offers to purchase Notes from the
Company or the purchase by such Agent of Notes from the Company
as principal, as the case may be, on the terms and in the manner
contemplated in the Prospectus as amended or supplemented prior
to the date of the Pricing Supplement relating to the Notes to be
delivered at the relevant Time of Delivery;
(vii) On or after the date of this Agreement or on the date
of any applicable Terms Agreement or other agreement by an Agent
to purchase Notes as principal, (A) no downgrading shall have
occurred in the rating accorded the Company's debt securities by
any "nationally recognized statistical rating organization", as
that term is defined by the Commission for purposes of Rule
436(g)(2) under the Act, and (B) no such organization shall have
publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the
Company's debt securities
16
<Page>
provided, however, that this Section 6(c)(vii) shall not apply to
any such rating agencies which shall have notified the Company of
the downgrading in the rating of its debt securities and of which
the Company shall have given the Agents written notice prior to
the execution of the Terms Agreement;
(viii) During the period in which the Agents are soliciting
offers to purchase Notes, including the period between the date
that any Agent agreed to purchase such Notes as principal and the
related Time of Delivery, there shall not have occurred: (A) a
suspension or material limitation in trading in securities
generally on the New York Stock Exchange (the "Exchange"); (B) a
suspension or material limitation in trading in the Company's
securities on the Exchange; (C) a general moratorium on
commercial banking activities declared in the United States by
Federal authorities, a general moratorium on commercial banking
activities declared in New York declared by either Federal
authorities or New York State authorities, or a general
moratorium on commercial banking activities in the District of
Columbia declared by either Federal or District of Columbia
authorities; or (D) the outbreak or escalation of hostilities
involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such
event specified in the clause (D) in the judgment of such Agent
makes it impracticable or inadvisable to proceed with the
solicitation of offers to purchase Notes or the purchase of the
Notes from the Company as principal pursuant to the applicable
Terms Agreement or otherwise, as the case may be, on the terms
and in the manner contemplated in the Prospectus; and
(ix) With respect to any Note denominated in a currency
other than the U.S. dollar, more than one currency or a composite
currency or any Note the principal or interest of which is
indexed to such currency, currencies or composite currency, there
shall not have occurred a suspension or material limitation in
foreign exchange trading in such currency, currencies or
composite currency by a major international bank, a general
moratorium on commercial banking activities in the country or
countries issuing such currency, currencies or composite
currency, the outbreak or escalation of hostilities involving,
the occurrence of any material adverse change in the existing
financial, political or economic conditions of, or the
declaration of war or a national emergency by, the country or
countries issuing such currency, currencies or composite currency
or the imposition or proposal of exchange controls by any
governmental authority in the country or countries issuing such
currency, currencies or composite currency.
7. (a) The Company will indemnify and hold harmless each Agent against
any losses, claims, damages or liabilities, joint or several, to which such
Agent may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the Prospectus, the Prospectus as amended or
supplemented, any other prospectus relating to the Notes, or any amendment or
supplement thereto furnished by the Company, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and will reimburse each Agent for any legal or other expenses
reasonably incurred by such Agent in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement, the
Prospectus, the Prospectus as amended or supplemented or any other prospectus
relating to the Notes or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by the
Agents expressly for use therein; and provided, further, that the Company
shall not be liable to any Agent under the indemnity agreement in this
subdivision (a) with
17
<Page>
respect to the Preliminary Prospectus, the Prospectus, the Prospectus as
amended or supplemented, any other prospectus relating to the Notes or any
amendment or supplement thereto, as the case may be, to the extent that any
such loss, claim, damage or liability of such Agent results solely from the
fact that such Agent sold Notes to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus (excluding documents incorporated by reference) or of the
Prospectus as then amended or supplemented (excluding documents incorporated
by reference), whichever is most recent, if the Company has previously
furnished copies thereof to such Agent.
(b) Each Agent, on a several and not joint basis, will indemnify and
hold harmless the Company against any losses, claims, damages or liabilities
to which the Company may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any Preliminary
Prospectus, the Registration Statement, the Prospectus, or the Prospectus as
amended or supplemented, any other prospectus relating to the Notes or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to
be stated therein necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement, the Prospectus, the
Prospectus as amended or supplemented, any other prospectus relating to the
Notes or such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Agent expressly for use
therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party
in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have
to any indemnified party otherwise than under such subsection. In case any
such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party (which consent shall not be unreasonably withheld, conditioned or
delayed), be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is
an actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability arising out of such action or claim and
(ii) does not include any statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.
The consent in this last sentence shall not be unreasonably withheld,
conditioned or delayed and the indemnifying party agrees that the indemnified
party shall in all cases be justified in withholding consent unless such
settlement, compromise or judgment (i) includes an unconditional release of
the indemnified party from all liability arising out of such action or claim
and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.
18
<Page>
(d) If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an indemnified party under
subdivision (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Company, on the one hand, and
each Agent, on the other, from the offering of the Notes to which such loss,
claim, damage or liability (or action in respect thereof) relates. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each indemnifying party
shall contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company, on the one hand, and each Agent,
on the other, in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and each Agent on
the other shall be deemed to be in the same proportion as the total net
proceeds from the sale of Notes (before deducting expenses) received by the
Company bear to the total commissions or discounts received by such Agent
with respect thereof. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, on the one hand or by any
Agent, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
With respect to any Agent, such relative fault shall also be determined by
reference to the extent (if any) to which such losses, claims, damages or
liabilities (or actions in respect thereof) with respect to any Preliminary
Prospectus result solely from the fact that such Agent sold Notes to a person
to whom there was not sent or given, at or prior to the written confirmation
of such sale, a copy of the Prospectus (excluding documents incorporated by
reference) or of the Prospectus as then amended or supplemented (excluding
documents incorporated by reference) if the Company has previously furnished
copies thereof to such Agent. The Company and each Agent agree that it would
not be just and equitable if contribution pursuant to this subdivision (d)
were determined by per capita allocation (even if all Agents were treated as
one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
subdivision (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subdivision (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), no Agent shall be
required to contribute any amount in excess of the amount by which the total
price at which the Notes purchased by or through such Agent were sold exceeds
the amount of any damages which such Agent has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of each of the Agents under this
subdivision (d) to contribute are several in proportion to the respective
purchases made by or through it to which such loss, claim, damage or
liability (or action in respect thereof) relates and are not joint.
(e) The obligations of the Company under this Section 7 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Agent within the meaning of the Securities Act; and each Agent's
obligations under this Section 7 shall be in addition to any liability which
such Agent may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person,
if any, who controls the Company within the meaning of the Securities Act.
8. In soliciting offers to purchase Notes from the Company and in
performing the other obligations of such Agent hereunder (other than in
respect of any purchase by an Agent as principal,
19
<Page>
pursuant to a Terms Agreement or otherwise), each Agent is acting solely as
agent for the Company and not as principal. Each Agent will make reasonable
efforts to assist the Company in obtaining performance by each purchaser
whose offer to purchase Notes from the Company was solicited by such Agent
and has been accepted by the Company, but such Agent shall not have any
liability to the Company in the event such purchase is not consummated for
any reason. If the Company shall default on its obligation to deliver Notes
to a purchaser whose offer it has accepted, the Company shall (i) hold each
Agent harmless against any loss, claim or damage arising from or as a result
of such default by the Company and (ii) notwithstanding such default, pay to
the Agent that solicited the offer any commission to which it would otherwise
be entitled in connection with such sale.
9. The respective indemnities, agreements, representations, warranties
and other statements by any Agent and the Company set forth in or made
pursuant to this Agreement shall remain in full force and effect regardless
of any investigation (or any statement as to the results thereof) made by or
on behalf of any Agent, the Company, or any officer or director or any
controlling person of the Company or any Agent, and shall survive each
delivery of and payment for any of the Notes.
10. The provisions of this Agreement relating to the solicitation of
offers to purchase Notes from the Company may be suspended or may be
terminated at any time by the Company as to any or all Agents or by any
Agent, insofar as this Agreement relates to such Agent, upon the giving of
written notice of such suspension or termination to such Agent or the
Company, as the case may be. Unless otherwise agreed by the respective
parties, any such suspension or termination shall be effective immediately
with respect to the party giving such notice and, in the case of the party
receiving such notice, at the close of business on the first business day
following the receipt of such notice. In the event of such suspension or
termination with respect to any Agent:
(x) this Agreement shall remain in full force and effect with
respect to any Agent as to which such suspension or termination has not
occurred;
(y) this Agreement shall remain in full force and effect with
respect to the rights and obligations of any party which had previously
accrued or which relate to Notes which are already issued, agreed to be
issued or the subject of a pending offer at the time of such suspension
or termination; and
(z) the Company shall not have any liability to such Agent and such
Agent shall not have any liability to the Company, except as provided in
any Terms Agreements, in the fifth paragraph of Section 2(a) and Sections
4(a)(vii), 4(b), 5, 7, 8 and 9 of this Agreement.
11. This Agreement or any Terms Agreement or other agreement by an Agent
to purchase Notes as principal may be terminated by any Agent upon written
notice to the Company if the Company makes an amendment or supplement to the
Registration Statement or the Prospectus related to the Notes after the date of
any Terms Agreement or other agreement by such Agent to purchase Notes as
principal and prior to the related Time of Delivery which shall be disapproved
by such Agent. In the event of such termination with respect to any Agent:
(x) this Agreement and any Terms Agreement or other agreement by
an Agent to purchase Notes as principal shall remain in full force and
effect with respect to any Agent as to which such termination has not
occurred;
(y) this Agreement and any Terms Agreement or other agreement by
an Agent to purchase Notes as principal shall remain in full force and
effect with respect to the rights and obligations of any party which had
previously accrued or which relate to Notes which are already issued,
agreed to be issued or the subject of a pending offer at the time of
such termination; and
(z) the Company shall not have any liability to such Agent and
such Agent shall not have any liability to the Company, except as
provided in the fifth paragraph of Section 2(a) and Sections 4(a)(vii),
4(b), 5, 7, 8 and 9 of this Agreement.
20
<Page>
12. This Agreement may be amended or supplemented if, but only if, such
amendment or supplement is in writing and is signed by the Company and each
Agent. The foregoing notwithstanding, the Company may from time to time, on
two (2) business days prior written notice to the Agents but without the
consent of any Agent, add as a party hereto one or more additional firms
registered under the Exchange Act, pursuant to the execution of a counterpart
original of this Agreement by the Company and the additional firm, which when
taken together with all other counterpart originals executed by the Company
and the Agents shall constitute one document. Upon the execution of the
counterpart original of this Agreement by the additional firm, such firm
shall be a party to this Agreement and shall have all of the rights and
obligations of an Agent under this Agreement.
13. Except as otherwise specifically provided herein or in the
Procedures, all statements, requests, notices and advices hereunder shall be
in writing, or by telephone if promptly confirmed in writing, and if to an
Agent shall be sufficient in all respects when delivered or sent by facsimile
transmission or mail to such Agent at the address or facsimile transmission
number set forth in the Appointment and Acceptance of Agent relating to the
appointment of such Agent, and if to the Company shall be sufficient in all
respects when delivered or sent by facsimile transmission or mail to the
Company at 11600 Sallie Mae Drive, Reston, Virginia 20193, Attention: Vice
President, Finance , Facsimile Transmission No. (703) 810-7655 with a copy to
the Marianne M. Keler, General Counsel, Facsimile Transmission No. (703)
810-7695. Upon request of any party hereto, any statements, requests, notices
and advices transmitted by facsimile shall be promptly followed by delivery
of executed documents by mail.
14. This Agreement and any Terms Agreement shall be binding upon, and
inure solely to the benefit of, each Agent and the Company, and to the extent
provided in Section 7, Section 8 and Section 9 hereof, the officers and
directors of the Company and any person who controls any Agent or the
Company, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement or any Terms Agreement. No purchaser of a Note
through or from any Agent hereunder shall be deemed a successor or assign by
reason merely of such purchase.
15. Time shall be of the essence in this Agreement and any Terms
Agreement. As used herein, the term "business day" means a a Monday, Tuesday,
Wednesday, Thursday or Friday on which commercial banks in any of New York,
New York or Wilmington, Delaware and, (i) if the Notes are denominated in a
currency other than U.S. dollars, in the capital of the country of the
currency specified in the pricing supplement for those Notes, or (ii) if the
Notes are denominated in European Currency Units, in Brussels, are not
required or authorized to be closed.
16. This Agreement and each Terms Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York.
17. This Agreement (including such Appointments and Acceptances of
Agent as may be executed and delivered by the Company and accepted by one or
more Agents from time to time) and any Terms Agreement may be executed by any
one or more of the parties hereto and thereto in any number of counterparts,
each of which shall be an original, but all of such respective counterparts
shall together constitute one and the same instrument.
21
<Page>
18. Each agent designated below is hereby appointed as an Agent on the
terms and conditions set forth in the Distribution Agreement. Upon acceptance
of such appointment by signing and returning to us three counterparts hereof,
the Distribution Agreement shall constitute a binding agreement between the
Company and each such Agent in accordance with its terms.
Very truly yours,
USA EDUCATION, INC.
By: _____________________________
Name:_____________________________
Title: ___________________________
22
<Page>
APPOINTMENT AND ACCEPTANCE OF AGENT
Accepted in New York, New York, as of the date set forth on the first page of
the Distribution Agreement:
--------------------------------
By: _____________________________
Name:_____________________________
Title: ___________________________
Address:__________________________
__________________________
__________________________
Facsimile Transmission No.:
[Other terms of Agent's appointment, if any, including the duration of
appointment if limited other than pursuant to Section 12]
23
<Page>
APPOINTMENT AND ACCEPTANCE OF AGENT
Accepted in New York, New York, as of the date set forth on the first page of
the Distribution Agreement:
--------------------------------
By: _____________________________
Name:_____________________________
Title: ___________________________
Address:__________________________
__________________________
__________________________
Facsimile Transmission No.:
[Other terms of Agent's appointment, if any, including the duration of
appointment if limited other than pursuant to Section 12]
24
<Page>
ANNEX I
USA EDUCATION, INC.
$3,000,000,000 MEDIUM TERM NOTES, SERIES A
TERMS AGREEMENT
-----------------------
-----------------------
-----------------------
, 200__
Ladies and Gentlemen:
USA Education, Inc. (the "Company") proposes, subject to the terms and
conditions stated herein and in the Distribution Agreement, dated October __,
2001 (the "Distribution Agreement"), between the Company, on the one hand and
the Agents named therein, on the other, to issue and sell to you the
securities specified in the Schedule hereto (the "Purchased Notes"). Each of
the provisions of the Distribution Agreement not specifically related to the
solicitation by such firms, as agents of the Company, of offers to purchase
Notes is incorporated herein by reference in its entirety, and shall be
deemed to be part of this Agreement to the same extent as if such provisions
had been set forth in full herein, provided that for purposes of this
Agreement all references in the Distribution Agreement to the "Agents" shall
be deemed to refer to you alone. Nothing contained herein or in the
Distribution Agreement shall make any party hereto an agent of the Company or
make such party subject to the provisions in the Distribution Agreement
relating to the solicitation of offers to purchase securities from the
Company, solely by virtue of its execution of this Terms Agreement. Each of
the representations and warranties set forth therein shall be deemed to have
been made at and as of the date of this Terms Agreement, except that each
representation and warranty in Section 1 of the Distribution Agreement which
makes reference to the Prospectus shall be deemed to be a representation and
warranty as of the date of the Distribution Agreement in relation to the
Prospectus (as therein defined), and also a representation and warranty as of
the date of this Terms Agreement in relation to the Prospectus as amended and
supplemented to relate to the Purchased Notes. Unless otherwise defined
herein, terms defined in the Distribution Agreement are used herein as
therein defined.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Purchased Notes, in the form
heretofore delivered to you is now proposed to be filed with the Commission.
Subject to the terms and conditions set forth herein and in the
Distribution Agreement incorporated herein by reference, the Company agrees
to issue and sell to you and you agree to purchase from the Company the
Purchased Notes, at the time and place, in the principal amount and at the
purchase price set forth in the Schedule hereto.
<Page>
If the foregoing is in accordance with your understanding, please sign
and return to us three counterparts hereof, and upon acceptance hereof by
you, this letter and such acceptance hereof, including those provisions of
the Distribution Agreement incorporated herein by reference, shall constitute
a binding agreement between you and the Company.
USA EDUCATION, INC.
By: ____________________________
Name:___________________________
Title: ___________________________
Accepted:
[___________________________________]
By: ____________________________
Name:___________________________
Title: ___________________________
ii
<Page>
FORM OF PRICING SUPPLEMENT
SUBJECT TO COMPLETION DATED OCTOBER __, 2001
Pricing Supplement No. ___ dated: ____________ ____, 200__
to Prospectus dated August __, 2001
and Prospectus Supplement dated August __, 2001
$---------------------
<Table>
<Caption>
USA EDUCATION, INC.
MEDIUM-TERM NOTES, SERIES A
Principal Amount: Floating Rate Note: / / Fixed Rate Note: / /
Original Issue Date: Certificated Notes: / / Book Entry Notes: / /
Closing Date: Specified Currency: CUSIP Number:
Maturity Date: Option to Extend Maturity: No / / If Yes, Final Maturity Date:
Yes / /
Redeemable: No / / Redemption Price:
Yes / /
Optional Repayment Date(s): Optional Repayment Price(s):
Applicable to Fixed Rate Notes Only:
Interest Rate: Interest Payment Date(s):
Interest Accrual Method:
Applicable to Floating Rate Notes Only:
Floating Rate Index:
/ / CD Rate Index Maturity:
/ / Commercial Paper Rate
/ / CMT Rate Spread (plus or minus):
/ / Federal Funds Rate
/ / LIBOR Telerate Interest Rate Reset Date:
/ / LIBOR Reuters
/ / Prime Rate Interest Rate Reset Period:
/ / 91-Day Treasury Bill Rate
Initial Interest Rate: Interest Payment Date(s):
Interest Determination Date: Interest Payment Period:
Lock-in Period Start Date: Interest Accrual Method:
Maximum Interest Rate: Minimum Interest Rate:
ii
<Page>
Denominations:
Listing:
Clearance and Settlement:
UNDERWRITING AND OTHER INFORMATION:
Concession: ___ %
Reallowance: ___%
</Table>
iii
<Page>
ANNEX II
USA EDUCATION, INC.
ADMINISTRATIVE PROCEDURES
Medium-term notes (the "Notes") in the aggregate initial offering price
of up to $ are to offered from time to time by USA Education, Inc. (the
"Company") through agents of the Company (each an "Agent" and together, in
such capacity, the "Agents"). Each Agent has agreed to use its reasonable
efforts to solicit offers to purchase Notes directly from the Company (an
Agent, in relation to a purchase of a particular Note by a purchaser
solicited by such Agent, being herein referred to as the "Selling Agent") and
may also purchase Notes from the Company as principal (an Agent, in relation
to a purchase of a Note by such Agent as principal, being herein referred to
as the "Purchasing Agent"). The Notes are being sold pursuant to a
Distribution Agreement, dated October ___, 2001 (the "Distribution
Agreement"), between the Company and the Agents, to which these
Administrative Procedures are attached as Annex II.
The Notes will be issued pursuant to an Indenture, dated as of October
1, 2000, as amended or supplemented from time to time (the "Indenture"),
between the Company and The Chase Manhattan Bank, as Trustee (the "Trustee").
Unless otherwise defined herein, terms defined in the Indenture or the Notes
shall be used herein as therein defined.
In the case of purchases of Notes by any Agent as principal, the
relevant terms and settlement details related thereto, including the Time of
Delivery referred to in the first paragraph of Section 8, will (unless the
Company and such Agent otherwise agree) be set forth in a Terms Agreement
entered into between such Agent and the Company pursuant to the Distribution
Agreement.
The procedures to be followed during, and the specific terms of, the
solicitation of offers by the Agents and the sale as a result thereof by the
Company are explained below. The procedures are subject, and are qualified in
their entirety by reference, to all of the respective provisions of the
Distribution Agreement and the Indenture.
The Company will advise each Agent in writing of those persons handling
administrative responsibilities ("Designated Persons") with whom such Agent
is to communicate regarding offers to purchase Notes and the details of their
delivery.
I. General Procedures
<Table>
Registration: Notes will be issued only in fully registered form and will
be either (a) Book-Entry Notes represented by one or more
global notes (each a "Global Note") held by the Trustee, as
agent for The Depository Trust Company ("DTC") and recorded
in the book-entry system maintained by DTC or (b)
Certificated Notes delivered in certificated form to the
Selling Agent or Purchasing Agent. All Notes will be issued
as Book-Entry Notes except as otherwise approved in advance
by the Company and except that non-U.S. dollar denominated
Notes will be issued as Certificated Notes only unless
otherwise specified in a Prospectus Supplement or Pricing
Supplement.
iv
<Page>
Maturities: Each Note will mature on a date, selected by the Agents
and/or the purchaser, as the case may be, and agreed to by
the Company, which will be at least nine months, but not
more than thirty years, from the date of original issuance
by the Company of such Note (the "Settlement Date").
Price to Public: Each Note will be issued at the percentage of principal
amount specified in the Prospectus (as defined in Section
1(a) of the Distribution Agreement) relating to the Notes.
Currencies: Notes will be denominated in U.S. dollars or in such other
currency or currency unit as is specified in the Prospectus
(the "Specified Currency").
Denominations: The denomination of any Book-Entry, Global or Certificated
Note will be a minimum of U.S. $1,000 or any amount in
excess thereof in integral multiples of $1,000 or the
equivalent, as determined pursuant to the provisions of the
Indenture, of U.S. $1,000 (rounded down to an integral
multiple of 1,000 units of such Specified Currency) and any
amounts in excess thereof.
Interest Payments: As specified in the Indenture and the Form of Note.
Acceptance of Offers: Each Agent will promptly advise the Company by telephone or
other appropriate means of offers to purchase Notes received
by it other than those rejected by such Agent. Each Agent
may, in its discretion reasonably exercised, reject any
offer received by it in whole or in part. Each Agent also
may make offers to the Company to purchase Notes as a
Purchasing Agent in accordance with Section 3(b) of the
Distribution Agreement. The Company will have the sole
right to accept offers to purchase Notes and may reject any
such offer.
If the Company accepts an offer to purchase Notes, it will
confirm such acceptance in writing to the Selling Agent or
Purchasing Agent, as the case may be. If the Company
rejects an offer, it will promptly notify the Agent involved.
Filing and Delivery of If the Company accepts an offer to purchase a Note, the
Prospectus: Company will prepare a Pricing Supplement reflecting the
terms of such Note and will arrange to have a Pricing
Supplement filed with the Securities and Exchange Commission
(the "Commission") as soon as practicable after the
preparation thereof and will supply at least one such
Pricing Supplement to the Selling Agent or the Purchasing
Agent, as the case may be, not later than 5:00 p.m., New
York City time, on the Business Day following the date of
acceptance of such offer.
With respect to each Note sold pursuant to the Distribution
Agreement, the Selling Agent shall send a copy of the
Prospectus as most recently amended or supplemented
(together with the Pricing Supplement relating to such Note)
to the purchaser or its agent prior to or together with the
delivery of (a) the written confirmation of sale
v
<Page>
(including, in the case of a book-entry security, the
confirmation through DTC's Institutional Delivery System)
or (b) the delivery of such Note, whichever is earlier.
Confirmation: For each offer accepted by the Company, the Selling Agent
will issue a written confirmation to each purchaser
containing the Sale Information (as defined below), plus
delivery and payment instructions.
Currency Swaps: Unless otherwise requested by the Company, each time an
Agent advises the Company of an offer to purchase Notes
denominated in a currency or currency unit other than U.S.
dollars, such Agent will provide the Company information
with respect to currency swap or forward arrangements that,
as of the time the offer is communicated to the Company,
such Agent is prepared to enter into or arrange with a third
party to enter into in order to exchange amounts to be
received from the purchaser of such Note at the Settlement
Date and to exchange amounts to be paid by the Company on
the interest payment dates and at maturity.
Settlement --Sales as In the event of a purchase of Notes by an Agent or Agents,
Principal: as principal or underwriter (other than as Purchasing
Agent), appropriate settlement details will be set forth in
the applicable Terms Agreement to be entered into between
such Agent or Agents and the Company pursuant to the
Distribution Agreement.
Settlement -- All offers solicited by the Agents and accepted by the
Sales as Agent: Company will be settled on the third Business Day after the
date of acceptance unless otherwise agreed by the purchaser
and the Company and the Settlement Date shall be specified
upon acceptance of such offer.
Communication of Sale For each offer accepted by the Company, the Selling Agent or
Information to the Company by Purchasing Agent, as the case may be, will provide (unless
Selling Agent: provided by the purchaser directly to the Company) to a
Designated Person by facsimile transmission or other
acceptable means the following information (the "Sale
Information"):
(1) If a Certificated Note, exact name of the registered
owner,
(2) If a Certificated Note, exact address of the registered
owner,
(3) If a Certificated Note, taxpayer identification number
of the registered owner (if available),
(4) If a Book-Entry Note, the DTC Participant Number of the
institution through which the customer will hold the
beneficial interest in the Global Note,
(5) Principal amount of the Note,
(6) Date of Note,
vi
<Page>
(7) If a Fixed Rate Note, the interest rate,
(8) Settlement Date,
(9) Maturity date,
(10) Currency or currency unit in which the Note is to be
denominated and, if other than U.S. dollars, the applicable
Exchange Rate for such currency or currency unit,
(11) Indexed Currency, the Base Rate and the Exchange Rate
Determination Date, if applicable,
(12) Issue Price,
(13) Selling Agent's commission or Purchasing Agent's
discount, as the case may be (to be paid upon settlement as
a discount from gross proceeds of sale except as provided
below under "Delivery of Notes and Cash Payment"),
(14) Net proceeds to the Company,
(15) If a redeemable or repayable Note with a Redemption
Date or Redemption Dates, such of the following as are
applicable:
(i) the Redemption Date or Redemption Dates,
(ii) whether the Note is redeemable or repayable at
the option of the Company or the Holder or both,
(iii) the Redemption Price (% of par) on each
Redemption Date,
(iv) the notice period during which the option to
redeem may be exercised, and
(v) the method by which notice of redemption is to
be given,
(16) If a Floating Rate Note, such of the following as are
applicable:
(i) Interest Rate Basis,
(ii) Index Maturity,
(iii) Spread,
(iv) Spread Multiplier,
(v) Maximum Rate,
(vi) Minimum Rate,
(vii) Initial Interest Determination Date,
(viii) Interest Reset Dates,
(ix) Calculation Dates,
(x) Interest Determination Dates, and
(xi) Calculation Agent,
(17) Interest Payment Dates,
(18) Regular Record Dates,
(19) Denomination of certificates to be delivered at
settlement,
(20) That the Note is a Certificated Note (if applicable),
vii
<Page>
(21) To the extent known to the Agent, any information not
otherwise expressly set forth in the Prospectus Supplement
which is required pursuant to Item 501(c)(7)or 508 of
Regulation S-K promulgated by the Commission, including, but
not limited to, the initial public offering price of the
Notes, if other than 100% of the principal amount, and
(22) If an Agent purchases Notes as a principal, the extent,
if any, to which the items specified in Sections 8(c), 8(d)
and 8(h) of the Distribution Agreement are required to be
furnished as of the Time of Delivery.
In addition, the Selling Agent will use its reasonable efforts to provide in
writing the following information to the Company and the Trustee:
One of the following:
a. In the case of a foreign registered owner
(other than a Financial Institution (as defined
below)), an IRS Form W-8 that has been duly and
properly signed by the registered owner.
b. In the case of a registered owner which is a
Financial Institution, a statement from the
Financial Institution signed under penalties of
perjury stating that the Financial Institution has
received from the beneficial owner an IRS Form W-8
that has been duly and properly signed by the
registered owner together with a copy of such Form
W-8.
c. In the case of a registered owner who is a
United States person, an IRS Form W-9 that has been
duly and properly signed by the registered owner.
A "Financial Institution" is a securities clearing organization,
a bank, or another financial institution that holds customers'
securities in the ordinary course of its trade or business which
holds a Note for a beneficial owner who is a foreign person.
After receiving the Sale Information, the Company will, after recording the Sale
Information and any necessary calculations, provide appropriate documentation to
the Trustee necessary for the preparation, authentication and delivery of such
Note.
Change in Interest Rate, The Company and the Agents will discuss from time to time
Maturity or Currency the rates of interest per annum to be borne by, and the
Denomination: maturity and currency denomination of, Notes that may be
sold as a result of the solicitation of offers by the Agents.
Suspension of Solicitation; The Company may instruct the Agents to suspend solicitation
Amendment or Supplement: of offers to purchase Notes at any time, whereupon the
Agents will as promptly as possible (but in any event not later
than one business day after receipt of such instruction) suspend
solicitation until such time as the Company has advised the
Agents that solicitation of
viii
<Page>
offers to purchase Notes may be resumed. If the Company proposes
to amend or supplement the Registration Statement or the
Prospectus relating to the Notes (except in the case of a Pricing
Supplement), it will promptly advise the Agents and will furnish to the
Agents such proposed amendment or supplement and, after the Agents
have been afforded a reasonable opportunity to review such
amendment or supplement, will cause such amendment or
supplement to be filed with the Commission. The Company
will promptly provide the Agents with copies of any such
amendment or supplement and confirm to the Agents that such
amendment or supplement has been filed with the Commission.
In the event that at the time the Agents suspend
solicitation of offers to purchase Notes there shall be any
outstanding offers to purchase Notes that have been accepted
by the Company but for which settlement has not occurred,
the Company, consistent with its obligations under the
Distribution Agreement, promptly will advise the Agents
whether such sales may be settled and whether copies of the
Prospectus as supplemented at the time of the suspension may
be delivered in connection with the settlement of such
sales. The Company will have the sole responsibility for
such decision and for any arrangements which may be made in
the event that the Company determines that such sales may
not be settled or that copies of such Prospectus may not be
so delivered
Authenticity of Signatures: The Trustee will furnish the Agents from time to time with
the specimen signatures of each of the Trustee's officers,
employees or agents who have been authorized by the Trustee
to authenticate Notes, but the Agents will have no
obligation or liability to the Company or the Trustee in
respect of the authenticity of the signature of any officer,
employee or agent of the Company or the Trustee on any Note.
Advertising Cost: The Company will determine with the Agents the amount of
advertising that may be appropriate in the solicitation of
offers to purchase the Notes. Advertising expenses will be
paid by the Agents.
II. Book-Entry Procedures
In connection with the qualification of Book-Entry Notes for eligibility in the
book-entry system maintained by DTC, the Trustee will perform the custodial,
document control and administrative functions described below, in accordance
with its obligations under a Letter of Representations from the Company and the
Trustee to DTC, dated as of October ___, 2001, and a Medium-Term Note
Certificate Agreement, dated as of October ___, 2001 between the Trustee and DTC
(the "Certificate Agreement"), and the Trustee's obligations as a participant in
DTC including DTC's Same-Day Funds Settlement System ("SDFS").
Issuance: All Fixed Rate Notes which have the same original issue
date, redemption or repayment provisions, Interest Payment
Dates, Regular Record Dates, interest rate, Specified
Currency and maturity date (collectively, the "Fixed Rate
Terms") will be represented
ix
<Page>
initially by a single Global Note in fully registered form
without coupons.
All Floating Rate Notes which have the same original issue
date, redemption or repayment provisions, Interest Payment
Dates, Regular Record Dates, Interest Rate Basis, Interest
Determination Dates, Interest Reset Dates, Calculation
Dates, Index Maturity, Spread or Spread Multiplier, if any,
Minimum Rate, if any, Maximum Rate, if any, Specified
Currency and maturity date (collectively, the "Floating
Rate Terms") will be represented initially be a single Global
Note in fully registered form without coupons.
Identification: The Company has received from the CUSIP Service Bureau of
Standard & Poor's Corporation (the "CUSIP Service Bureau") a
series of approximately ____ CUSIP numbers for future
assignment to Global Notes, and the Company has delivered to
the Trustee and DTC such list of such CUSIP numbers. The
Trustee will assign CUSIP numbers to Global Notes as
described below. DTC will notify the CUSIP Service Bureau
periodically of the CUSIP numbers that have been assigned to
Global Notes. The Trustee will notify the Company at any
time when fewer than 10 of the reserved CUSIP numbers remain
unassigned to Global Notes, and, if it deems necessary, the
Company will reserve additional CUSIP numbers for assignment
to Global Notes. Upon obtaining such additional CUSIP
numbers, the Company will deliver a list of such additional
numbers to the Trustee and DTC.
Registration: Each Global Note will be registered in the name of Cede &
Co., as nominee for DTC, on the Security Register maintained
under the Indenture. The beneficial owner of a Book-Entry
Note (or one or more indirect participants in DTC designated
by such owner) will designate one or more participants in DTC (the
"Participants") to act as agent or agents for such owner in
connection with the book-entry system maintained by DTC, and
DTC will record in book-entry form, in accordance with
instructions provided by such Participants, a credit balance
with respect to such Book-Entry Note in the account of such
Participants. The ownership interest of such beneficial
owner in such Book-Entry Note will be recorded through the
records of such Participants or through the separate records
of such Participants and one or more indirect participants
in DTC.
Transfers: Transfers of a Book-Entry Note will be accomplished by book
entries made by DTC and, in turn, by Participants (and in
certain cases, one or more indirect participants in DTC) acting on
behalf of beneficial transferors and transferees of such Book-Entry
Note.
Exchanges: The Trustee, at the Company's request, may deliver to DTC
and the CUSIP Service Bureau at any time a written notice of
consolidation specifying (a) the CUSIP numbers of two or
more outstanding Global Notes having the same Fixed Rate
Terms or Floating Rate Terms, as the case may be (except
that original issue dates need not be the same), and for
which interest has been paid to the same date; (b) a date,
occurring at least 30 days after such written notice is
x
<Page>
delivered and at least 30 days before the next Interest
Payment Date for the related Book-Entry Notes, on which such
Global Notes shall be exchanged for a single replacement
Global Note; and (c) a new CUSIP number to be assigned to
such replacement Global Note. Upon receipt of such a
notice, DTC will send to its participants (including the
Trustee) a written reorganization notice to the effect that
such exchange will occur on such date.
Prior to the specified exchange date, the Trustee will
deliver to the CUSIP Service Bureau written notice setting
forth such exchange date and the new CUSIP number and
stating that, as of such exchange date, the CUSIP numbers of
the Global Notes to be exchanged will no longer be valid.
On the specified exchange date, the Trustee will exchange
such Global Notes for a single Global Note bearing the new
CUSIP number. The CUSIP numbers of the exchanged Global Notes
will, in accordance with CUSIP Service Bureau procedures, be
cancelled and not immediately reassigned.
Notwithstanding the foregoing, if the Global Notes to be
exchanged exceed $400,000,000 in aggregate principal amount,
one replacement Global Note will be authenticated and issued
to represent each $400,000,000 of principal amount of the
exchanged Global Notes and an additional Global Note will be
authenticated and issued to represent any remaining principal
amount of such Global Notes, subject to the minimum denomination
restrictions described in General Procedures - Denominations (see
"Denominations" below).
Denominations: Global Notes representing Book-Entry Notes will be denominated
in principal amounts not in excess of $400,000,000. If one
or more Book-Entry Notes having an aggregate principal amount in
excess of $400,000,000 would, but for the preceding sentence, be
represented by a single Global Note, then one Global Note will be
issued to represent each $400,000,000 principal amount of such
Book-Entry Note or Book-Entry Notes and an additional Global Note will
be issued to represent any remaining principal amount of such
Book-Entry Note or Book-Entry Notes, subject to the minimum
denomination restrictions described in General Procedures -
Denominations. In such a case, each of the Global Notes
representing such Book-Entry Note or Notes shall be assigned
the same CUSIP number.
Interest: DTC will arrange for each pending deposit message described
under Settlement Procedure B below to be transmitted to
Standard & Poor's Corporation, which will use the message to
include certain terms of the related Global Note in the
appropriate daily bond report published by Standard & Poor's
Corporation.
Payments of Principal:
Premium, if any, and Interest Promptly after each Regular Record Date (or as soon
Payments of Interest Only: thereafter as such information is determined), the Trustee
will deliver to the
xi
<Page>
Company and DTC a written notice specifying by CUSIP
number the amount of interest to be paid on each
Global Note on the following Interest Payment Date
(other than an Interest Payment Date coinciding with the
Maturity) and the total of such amounts. DTC will confirm
the amount payable on each Global Note on such Interest
Payment Date by reference to the daily bond reports
published by Standard & Poor's Corporation. On such
Interest Payment Date, the Company will pay to the Trustee,
and the Trustee in turn will pay to DTC, such total amount
of interest due (other than at Maturity), at the times and
in the manner set forth below under "Manner of Payment."
Payments at Maturity: On or about the first Business Day of each month (or as soon
thereafter as such information is determined), the Trustee
will deliver to the Company and DTC a written list of
principal, premium, if any, and interest to be paid on each
Global Note maturing or subject to redemption or repayment
in the following month. The Trustee, the Company and DTC
will confirm the amounts of such principal, premium (if any)
and interest payments with respect to each such Global Note
on or about the fifth Business Day preceding the maturity
date of such Global Note. At such maturity date, the
Company will pay to the Trustee, and the Trustee in turn
will pay to DTC, the principal of and premium, if any, on
such Global Note, together with interest due at such
maturity date, at the times and in the manner set forth
below under "Manner of Payment." Promptly after payment to
DTC of the principal, premium, if any, and interest due at
maturity of all Book-Entry Notes represented by a particular
Global Note, the Trustee will cancel such Global Note, make
appropriate entries in its records and dispose of such
Global Note as provided in the Indenture.
Manner of Payment: The total amount of any principal, premium and interest due
on Global Notes on any Interest Payment Date or at maturity
shall be paid by the Company to the Trustee in funds
immediately available for use by the Trustee as of noon, New
York City time, on such date. The Company will make such
payment on such Global Notes by wire transfer to the Trustee
or by instructing the Trustee to withdraw funds from an
account maintained by the Company at the Trustee. The
Company will confirm any such instructions in writing to the
Trustee. For maturity, redemption and other principal
payments, prior to 1:00 p.m., New York City time, on each
such date or as soon as possible thereafter following
receipt of such funds from the Company, the Trustee will pay
by separate wire transfer (using Fedwire message entry
instructions in a form previously specified by DTC) to an
account at the Federal Reserve Bank of New York previously
specified by DTC, in funds available for immediate use by
DTC, each payment of interest, principal and premium, if
any, due on Global Notes on such date; and for interest
payments, the Trustee will pay DTC in same day funds on the
Interest Payment Date in accordance with existing
arrangements between the Trustee and DTC. Thereafter on
each such date, DTC will pay, in accordance with its SDFS
operating procedures then in effect, such amounts in funds
available for immediate use to the respective
xii
<Page>
Participants with payments in amounts proportionate to
their respective holdings in principal amount of beneficial
interest in such Global Note as are recorded in the book-entry
system maintained by DTC. Once payment has been made to DTC,
neither the Company nor the Trustee shall have any
responsibility or liability for the payment by DTC of the
principal of, or premium, if any, or interest on, the
Book-Entry Notes to such Participants.
Withholding Taxes: The amount of any taxes required under applicable law to be
withheld from any interest payment on a Book-Entry Note will
be determined and withheld by the Participant, indirect
participant in DTC or other Person responsible for
forwarding payments and materials directly to the beneficial
owner of such Book-Entry Note, or as applicable law may
otherwise require.
SETTLEMENT PROCEDURES
Settlement Procedures with regard to each Book-Entry Note sold by each Agent
will be as follows:
A. Upon receiving the Sale Information, the Company will, as soon as
practicable, advise the Trustee by facsimile transmission of the Sale
Information and the name of such Agent.
B. The Trustee will assign a CUSIP number to the Global Note representing such
Book-Entry Note and will communicate to DTC and the Agent through DTC's
Participant Terminal System, a pending deposit message specifying such of the
following Settlement information as applicable:
1. The following information:
(a) Principal amount of the purchase.
(b) In the case of a Fixed Rate Note, the interest
rate, or, in the case of a Floating Rate Note, the
initial interest rate, the Interest Reset Dates, the
Interest Payment Dates, the Interest Rate Basis,
Index Maturity, Spread or Spread Multiplier, if any,
and the Minimum Rate and Maximum Rate, if any.
(c) Settlement date.
(d) Maturity date.
(e) Price.
(f) DTC Participant Number of the institution
through which the customer will hold the beneficial
interest in the Global Note.
2. The numbers of the participant accounts maintained by
DTC on behalf of the Trustee and the Agent.
3. Identification as a Fixed Rate Note or a Floating Rate
Note.
4. The initial Interest Payment Date for such Note, number
of days by which such date succeeds the related DTC record
date (which term means the Regular Record Date, or in the
case of Floating Rate Notes which reset weekly, the date
five calendar days immediately preceding the applicable
Interest Payment Date) and, for Fixed Rate Notes, the amount
of interest payable on such Interest Payment Date
xiii
<Page>
per $1,000 principal amount of Note.
5. The frequency of interest payments.
6. The frequency of interest rate resets.
7. The CUSIP number of the Global Note representing such
Book-Entry Notes.
8. Whether such Global Note represents any other
Book-Entry Notes issued or to be issued.
The Trustee will also orally notify the Agent of the CUSIP
number assigned to the Global Note.
</Table>
C. The Trustee will prepare a Global Note representing such Book-Entry Note
in a form that has been approved by the Company.
D. The Trustee will authenticate the Global Note representing such Book-Entry
Note and maintain possession of such Global Note.
E. DTC will credit such Book-Entry Note to the participant account of the
Trustee maintained by DTC.
F. The Trustee will enter an SDFS deliver order through DTC's Participant
Terminal System instructing DTC to (i) debit such Book-Entry Note to the
Trustee's participant account and credit such Book-Entry Note to the
participant account of the Agent maintained by DTC and (ii) debit the
settlement account of the Agent and credit the settlement account of the
Trustee maintained by DTC, in an amount equal to the price of such Book-Entry
Note less the Agent's commission. The entry of such a deliver order shall be
deemed to constitute a representation and warranty by the Trustee to DTC that
(a) the Global Note representing such Book-Entry Note has been issued and
authenticated and (b) the Trustee is holding such Global Note pursuant to the
Certificate Agreement.
G. The Agent will enter an SDFS deliver order through DTC's Participant
Terminal System instructing DTC to (i) debit such Book-Entry Note to the
Agent's participant account and credit such Book-Entry Note to the
participant accounts of the Participants to whom such Book-Entry Note is to
be credited maintained by DTC and (ii) debit the settlement accounts of such
Participants and credit the settlement account of the Agent maintained by
DTC, in an amount equal to the initial public offering price of the
Book-Entry Note so credited to their accounts.
H. Transfers of funds in accordance with SDFS deliver orders described in
Settlement Procedures F and G will be settled in accordance with SDFS
operating procedures in effect on the Settlement Date.
I. The Trustee will credit to an account of the Company maintained at funds
available for immediate use in an amount equal to the amount credited to the
Trustee's DTC settlement account in accordance with Settlement Procedure F.
J. The Agent will confirm the purchase of each Book-Entry Note to the
purchaser thereof either by transmitting to the Participant to whose account
such Note has been credited a confirmation order through DTC's Participant
Terminal System or by mailing a written confirmation to such purchaser. In
all cases the Prospectus as most recently amended or supplemented (including
the applicable Pricing Supplement) must accompany or precede such
confirmation.
xiv
<Page>
<Table>
Timetable: For offers accepted by the Company, Settlement Procedures A
through J shall occur no later than the respective times (New
York City time) listed below:
Settlement Procedure Time
A 11:00 a.m. on the Business Day following the date of
acceptance.
B 2:00 p.m. on the Business Day following the date of
acceptance.
C 5:00 p.m. on the Business Day before the Settlement Date.
D 9:00 a.m. on the Settlement Date.
E 10:00 a.m. on the Settlement Date.
F 2:00 p.m. on the Settlement Date.
G 4:45 p.m. on the Settlement Date.
H 5:00 p.m. on the Settlement Date.
Settlement Procedure H is subject to extension in accordance with any extension
of Fedwire closing deadlines and in the other events specified in the SDFS
operating procedures in effect on the Settlement Date.
If Settlement of a Book-Entry Note is rescheduled or cancelled, the Trustee will
deliver to DTC, through DTC's Participant Terminal System, a cancellation
message to such effect by no later than 2:00 p.m., New York City time, on the
Business Day immediately preceding the scheduled Settlement Date.
Failures: If the Trustee has not entered an SDFS deliver order with
respect to a Book-Entry Note pursuant to Settlement Procedure
F (which may be evidenced by facsimile transmission), the
Trustee, at the Company's direction, shall deliver to DTC,
through DTC's Participant Terminal System, as soon as
practicable, but no later than 2:00 p.m. on any business day,
a withdrawal message instructing DTC to debit such Book-Entry
Note to the participant account of the Trustee maintained at
DTC. DTC will process the withdrawal message, provided that
such participant account contains a principal amount of the
Global Note representing such Book-Entry Note that is at
least equal to the principal amount of such Book-Entry Note
to be debited. If withdrawal messages are processed with
respect to all the Book-Entry Notes issued or to be issued
represented by a Global Note, the Trustee will void such
Global Note, make appropriate entries in its records and,
unless otherwise directed by the Company, destroy the
Certificate. The CUSIP number assigned to such Global Note
shall, in accordance with CUSIP Service Bureau procedures, be
cancelled and not immediately reassigned. If withdrawal
messages are processed with respect to a portion of the
Book-Entry Notes represented by a Global Note, the Trustee
will exchange such Global Note for two Global Notes, one of
which shall represent such Book-Entry Notes (which shall be
cancelled immediately after issuance), and the other of which
shall represent the remaining Book-Entry Notes previously
represented by the surrendered Global Note and shall bear the
CUSIP number of the surrendered Global Note. If the purchase
price for any Book-Entry Note is not timely paid to the
Participants with respect to such Note by the beneficial
purchaser (other than a Purchasing Agent) thereof (or a
person, including an indirect participant in DTC, acting on
behalf of such purchaser), such Participants and, in turn,
the related Agent may enter SDFS deliver orders through DTC's
Participant Terminal System debiting such
xv
<Page>
Note free to such Agent's Participant Account and crediting
such Note free to the Participant Account of the Trustee and
shall notify the Trustee and the Company thereof. Thereafter,
the Trustee, (i) will immediately notify the Company, once the
Trustee has confirmed that such Note has been credited to its
Participant Account, and the Company shall transfer by Fedwire
(immediately available funds) to such Agent an amount equal
to the price of such Note which was previously sent by wire
transfer to the account of the Company maintained at [The
Chase Manhattan Bank] in accordance with settlement procedure
I, and (ii) the Trustee will deliver the withdrawal message
and take the related actions described in the preceding
sentences of this paragraph. Such debits and credits will be
made on the Settlement Date, if possible, and in any event
not later than 5:00 p.m. on the following Business Day. If
such failure shall have occurred for any reason other than
default by the Agent in the performance of its obligations
hereunder or under the Distribution Agreement, the Company
will reimburse the Agent on an equitable basis for its loss
of the use of funds during the period when they were credited
to the account of the Company. In addition, if such failure
shall have occurred by reason of a default by the Company in
the performance of its obligations under the Distribution
Agreement, the Company will pay the Selling Agent any commission to
which it would have been entitled in connection with such
sale.
Notwithstanding the foregoing, upon any failure to settle
with respect to a Book-Entry Note, DTC may take any actions
in accordance with its SDFS operating procedures then in
effect. In the event of a failure to settle with respect to
a Book-Entry Note that was to have been represented by a
Global Note also representing other Book-Entry Notes, the
Trustee will provide, in accordance with Settlement
Procedures C and D, for the authentication and issuance of a
Global Note representing such other Book-Entry Notes and will
make appropriate entries in its records.
Trustee Not to Risk Funds: Nothing herein shall be deemed to require the Trustee to risk
or expend its own funds in connection with any payment to the
Company, or the Agents or DTC, it being understood by all
parties that payments made by the Trustee to either the
Company, DTC or the Agents shall be made only to the extent
that funds are provided to the Trustee for such purpose.
Settlement Procedures with regard to each Certificated Note sold by each Agent
will be as follows:
Payment at Maturity: As specified in the Indenture and the Form of Note.
Settlement: Prior to 3:00 p.m., New York City time, on the Business Day
prior to the Settlement Date, the Company will instruct the
Trustee or its agent by facsimile transmission or other
acceptable written means to authenticate and deliver the
Certificated Notes no later than 2:15 p.m., New York City
time, on the Settlement Date.
xvi
<Page>
If the Settlement Date is the same day as the date of
acceptance, then prior to 11:00 a.m., New York City time, on
the Settlement Date the Company will instruct the Trustee or
its agent by facsimile transmission or other acceptable
written means to authenticate and deliver the Certificated
Notes no later than 2:15 p.m., New York time, on the
Settlement Date. Certificated Notes denominated in a currency
or currency unit other than U.S. dollars shall have a
Settlement Date not less than two Business Days after the
acceptance of the offer by the Company.
Delivery of Notes and Cash Upon receipt of appropriate documentation and instructions,
Payment: the Company will cause the Trustee to prepare and
authenticate each Note and appropriate receipts.
Each Certificated Note shall be authenticated and dated on
the Settlement Date therefor. The Trustee will deliver each
authenticated Certificated Note to the Selling Agent for the
benefit of the purchaser in accordance with written
instructions (or oral instructions confirmed in writing
(which may be given by telex or telecopy) on the next
business day) from the Company.
Delivery by the Trustee of Upon verification by the Selling Agent that a Certificated
each Certificated Note will Note has been prepared and properly authenticated and
be made against a receipt delivered by the Trustee and registered in the name of the
therefor: purchaser in the proper principal amount and other terms in
accordance with the Sale Information, payment will be made to
the Company's account at [The Chase Manhattan Bank], on behalf
of the Company by the Selling Agent on behalf of the purchaser the
same day as the Selling Agent's receipt of such Certificated
Note in immediately available funds.
If either (i) the Certificated Note is denominated in U.S.
dollars or (ii) the Certificated Note is denominated in a
currency or currency unit other than U.S. dollars and, at or
prior to the Settlement Date, the Company and the Selling
Agent have entered into, or the Selling Agent has arranged
for the Company to enter into, a contract with respect to the
sale of the Specified Currency, the amount payable by the
Selling Agent pursuant to the preceding sentence shall be the
issue price of the Certificated Note (or the U.S. dollar
equivalent pursuant to such contract) less the Selling
Agent's commission determined in accordance with Section 3(a)
of the Distribution Agreement. In all other cases, the
Selling Agent's commission shall not be discounted from the
gross proceeds but shall be paid separately by the Company in
U.S. dollars in immediately available funds on the Settlement
Date. The payment by the Selling Agent shall be made only
upon prior receipt by such Agent of immediately available
funds from or on behalf of the purchaser in the Specified
Currency unless such Agent decides, at its option, to advance
its own funds for such payment against subsequent receipt of
funds from the purchaser.
Upon delivery of a Certificated Note to the Selling Agent and
the verification provided in the preceding paragraph, the
Selling Agent shall promptly deliver such Certificated Note
to the purchaser or its agent.
xvii
<Page>
Failures: In the event that a purchaser (other than a Purchasing Agent)
shall fail to accept delivery of and make payment for any
Certificated Note, the Selling Agent will forthwith notify
the Trustee and the Company's Executive Vice President and
Chief Financial Officer by telephone or by facsimile
transmission. If the Certificated Note has been delivered to
the Selling Agent on behalf of the purchaser, the Selling
Agent will immediately return the Certificated Note to the
Trustee. If funds have been advanced by the Selling Agent
for the purchase of such Note, the Trustee will, upon
instruction by the Company and upon receipt of the
Certificated Note, debit the account of the Company in an
amount equal to the amount previously credited thereto in
respect of the Note and will either credit the account of or
return such funds to the Selling Agent. Such debits and
credits or returns will be made on the Settlement Date if
possible and, in any event, not later than the business day
following the Settlement Date. If such failure shall have
occurred for any reason other than default by the Selling
Agent in the performance of its obligations under the
Distribution Agreement, the Company will reimburse the
Selling Agent on an equitable basis for its loss of the use
of the funds during the period when they were credited to the
account of the Company. In addition, if such failure shall
have occurred by reason of a default by the Company in the
performance of its obligations under the Distribution
Agreement, the Company will pay the Selling Agent any
commission to which it would have been entitled in connection
with such sale.
Immediately upon receipt of the certificate representing the
Note in respect of which the failure occurred, the Trustee
will void such Certificated Note, make appropriate entries in
its records and, unless otherwise instructed by the Company,
destroy the certificate.
</Table>
xviii
<Page>
ANNEX III
Pursuant to Section 8(d) of the Distribution Agreement, the Company's
independent certified public accountants shall furnish letters to the effect
that:
(i) They are independent certified public accountants with
respect to the Company and its consolidated subsidiaries within the
meaning of the Securities Act and the applicable published rules and
regulations of the Commission thereunder and the answer to Item 10 of the
Registration Statement is correct insofar as it relates to them;
(ii) In their opinion, the financial statements and schedules
and the additional financial information examined by them and included or
incorporated by reference in the Registration Statement or the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act or the Exchange Act, as applicable, and
the published rules and regulations thereunder;
(iii) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
including a reading of the unaudited financial statements and schedules
and other information referred to below, a reading of the latest available
interim financial statements of the Company and certain of its
subsidiaries, inspection of the minute books of the Company and certain of
its subsidiaries since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) the unaudited consolidated statements of income, consolidated
statements of financial position and consolidated statements of
changes in financial position of the Company and its consolidated
subsidiaries included or incorporated by reference in the Prospectus
do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act and the
published rules and regulations thereunder; or
(B) as of a specified date not more than five business days prior
to the date of delivery of such letter, there have been any changes
in the capital stock accounts, long-term debt, short- term debt, or
any decreases in net assets or other items specified by the Agents,
in each case as compared with amounts shown or included in the
latest statement of financial position of the Company included or
incorporated by reference in the Prospectus, except in each case for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(iv) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and the
limited procedures, inspection of minute books, inquiries and other
procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information specified by the
Agents which are derived from the general accounting records of the
Company and its subsidiaries, which appear in the Prospectus (excluding
documents incorporated by reference), or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Agents or in
documents incorporated by reference in the Prospectus specified by the
Agents, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
xix
<Page>
All references in this Annex III to the Prospectus shall be deemed
to refer to the Prospectus as amended or supplemented (including the
documents incorporated by reference therein) as of the Commencement Date
referred to in Section 6(c) thereof and to the Prospectus as amended or
supplemented (including the documents incorporated by reference therein) as
of the date of the amendment, supplement, incorporation or the Time of
Delivery relating to the Terms Agreement or other agreement by an Agent to
purchase Notes as principal requiring the delivery of such letter under
Section 8(d) thereof.
xx