-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L4XIZNIcYdKdJDfj4efuVvt2ImoSayzs320DGO5a2Q5cf7HnlBk2tTY1o/Go8u9z Vij1ZMGloxer/6iK4Wh+Ow== 0000950152-00-000550.txt : 20000204 0000950152-00-000550.hdr.sgml : 20000204 ACCESSION NUMBER: 0000950152-00-000550 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000202 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000203 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EATON CORP CENTRAL INDEX KEY: 0000031277 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 340196300 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-01396 FILM NUMBER: 522973 BUSINESS ADDRESS: STREET 1: EATON CTR STREET 2: 1111 SUPERIOR AVE CITY: CLEVELAND STATE: OH ZIP: 44114-2584 BUSINESS PHONE: 2165235000 MAIL ADDRESS: STREET 1: 1111 SUPERIOR AVENUE CITY: CLEVELAND STATE: OH ZIP: 44114 FORMER COMPANY: FORMER CONFORMED NAME: EATON YALE & TOWNE INC DATE OF NAME CHANGE: 19710822 8-K 1 EATON CORPORATION FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 2, 2000 EATON CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 1-1396 34-0196300 - ------------------- -------------- ------------------- (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation) Eaton Center Cleveland, Ohio 44114 - -------------------- ------------------- (Address of principal Zip Code executive offices) (216) 523-5000 ------------------ Registrant's telephone number, including area code 2 Item 5. Other Events. - ------- ------------- On February 2, 2000, Eaton Corporation (the "Company") entered into a Distribution Agreement(the "Distribution Agreement") with Goldman, Sachs & Co., Chase Securities Inc., J.P. Morgan Securities Inc. and Salomon Smith Barney Inc.(the "Agents"). Pursuant to the Distribution Agreement, the Company has appointed each Agent as an agent of the Company for the purpose of soliciting and receiving offers to purchase up to $800,000,000 of the Company's medium-term notes, subject to the terms and conditions set forth in the Distribution Agreement. In addition, under the Distribution Agreement, the Company has the right to sell medium-term notes directly on its own behalf, and the Company may determine to sell medium-term notes directly to an Agent as principal. The medium-term notes are registered pursuant to a Registration Statement on Form S-3 (File No. 333-74355), filed by the Company with the Securities and Exchange Commission ("Commission") on March 12, 1999, and made effective on May 26, 1999. Information concerning the medium-term notes and related matters is set forth in the Prospectus dated November 10, 1999 and the Prospectus Supplement dated February 2, 2000 filed with the Commission pursuant to Rule 424(b) under the Securities Act of 1933 on February 3, 2000. Reference is made to the Distribution Agreement filed as Exhibit 1(b) hereto, the Form of Medium-Term Note (Fixed Rate) filed as Exhibit 4(i) hereto, Form of Medium-Term Note (Floating Rate) filed as Exhibit 4(j) hereto, Form of Medium-Term Note (Single Indexed Note-Fixed Rate) filed as Exhibit 4(k) hereto, Form of Medium-Term Note (Single Indexed Note-Floating Rate) filed as Exhibit 4(l) hereto, the opinion of Shearman & Sterling filed as Exhibit 8 hereto and the Consent of Shearman & Sterling (Exhibit 23(d)contained in their opinion set forth in Exhibit 8 hereto). Item 7. Financial Statements and Exhibits. - ------- ---------------------------------- (c) Exhibits 1(b) Distribution Agreement 4(i) Form of Medium-Term Note (Fixed Rate) 4(j) Form of Medium-Term Note (Floating Rate) 4(k) Form of Medium-Term Note (Single Indexed Note-Fixed Rate) 4(l) Form of Medium-Term Note (Single Indexed Note-Floating Rate) 8 Opinion of Shearman & Sterling 23(d) Consent of Shearman & Sterling contained in their opinion filed as Exhibit 8 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EATON CORPORATION By /s/ J.R. Horst -------------------------- J.R. Horst Vice President and General Counsel DATE: February 3, 2000 2 3 Current Report on Form 8-K Eaton Corporation EXHIBIT INDEX ------------- Exhibit Description ------------------- Exhibit Number Description - ------- ----------- 1(b) Distribution Agreement 4(i) Form of Medium-Term Note (Fixed Rate) 4(j) Form of Medium-Term Note (Floating Rate) 4(k) Form of Medium-Term Note (Single Indexed Note-Fixed Rate) 4(l) Form of Medium-Term Note (Single Indexed Note-Floating Rate) 8 Opinion of Shearman & Sterling 23(d) Consent of Shearman & Sterling contained in their opinion filed as Exhibit 8 3 EX-1.B 2 EXHIBIT 1(B) 1 EXHIBIT 1(b) Eaton Corporation $800,000,000 Medium-Term Notes Distribution Agreement February 2, 2000 Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Chase Securities Inc. 270 Park Avenue New York, New York 10017 J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: Eaton Corporation, an Ohio corporation (the "Company"), proposes to issue and sell from time to time its Medium-Term Notes (the "Securities") in an aggregate amount up to the amount of debt securities registered under the Registration Statement (as defined in Section 1(a) hereof), together with such amount of the Company's debt securities subsequently registered under the Securities Act of 1933, as amended (the "Act"), as the Company shall, by notice to the Agents, make subject to this Agreement, but reduced by the aggregate amount of debt securities so registered to be or that have been sold otherwise than pursuant to this Agreement or any Terms Agreement and agrees with each of you (individually, an "Agent", and collectively, the "Agents") as set forth in this Agreement. Subject to the terms and conditions stated herein and to the reservation by the Company of the right to sell Securities 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 Securities from the Company pursuant to Section 2(a) hereof and (ii) agrees that, except as 2 otherwise contemplated herein, whenever it determines to sell Securities 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. This Distribution Agreement shall not be construed to create either an obligation on the part of the Company to sell any Securities or an obligation of any of the Agents to purchase Securities as principal. The Securities will be issued as senior securities under an indenture, dated as of April 1, 1994 (the "Indenture"), between the Company and The Chase Manhattan Bank, as Trustee (the "Trustee"). The Securities shall have the maturity ranges, interest rates, redemption provisions, if any, and other terms set forth in the Prospectus referred to below as it may be amended or supplemented from time to time. The Securities will be issued, and the terms and rights thereof established, from time to time by the Company in accordance with the Indenture. 1. The Company represents and warrants to, and agrees with, each Agent that: (a) A registration statement (No. 333-74355), including a prospectus, relating to debt securities, preferred shares, common shares and warrants of the Company has been filed with the Securities and Exchange Commission ("Commission") and has become effective. The various parts of such registration statement, including all exhibits thereto and the documents incorporated by reference in the prospectus contained in the registration statement at the time such part of the registration statement became effective, but excluding Form T-1, each as amended at the time such part of the registration statement became effective, are hereinafter collectively referred to as the "Registration Statement", and the prospectus included in such Registration Statement (including, if applicable, any prospectus supplement) relating to the Securities, including all documents incorporated therein by reference pursuant to the applicable form under the Act, as from time to time amended or supplemented by the filing of documents pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or as otherwise amended or supplemented pursuant to the Act or by any supplement that sets forth the terms of a particular issue of the Securities (a "pricing supplement") are herein referred to collectively as the "Prospectus", except that if any revised prospectus shall be provided to the Agents by the Company for use in connection with the offering of Securities which is not required to be filed by the Company pursuant to Rule 424(b) of the regulations of the Act, the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to the Agents for such use; the Registration Statement has been declared effective by the Commission and 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; (b) The documents incorporated by reference in the Registration Statement and the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Act or the 2 3 Exchange Act, as applicable, and the rules and regulations of the Commission thereunder; none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Prospectus, or any further amendment or supplement thereto, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (c) The Registration Statement and the Prospectus conform, and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the 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 as to the Registration Statement and any amendment thereto and as of the applicable filing date as to 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 reliance upon and in conformity with information furnished (i) to the Company by the Trustee in its Form T-1 (Statement of Eligibility of Trustee) filed with the Registration Statement or (ii) in writing to the Company by any Agent expressly for use in the Registration Statement or Prospectus to relate to a particular issuance of Securities; (d) Except as described in (or incorporated by reference in) the Registration Statement and the Prospectus, there has not been any material adverse change in, or any adverse development which materially affects, the business, properties, financial condition, results of operations or prospects of the Company and its subsidiaries (as defined in Rule 1.02(x) of Regulation S-X) (each a "Subsidiary" and, collectively, the "Subsidiaries") taken as a whole from the dates as of which information is given in the Registration Statement and the Prospectus; and, 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 of the Company or long-term debt of the Company and its Subsidiaries taken as a whole; (e) The Company and Aeroquip-Vickers, Inc., Eaton MDH Company, Inc., Eaton MDH Limited Partnership (the "Partnership"), Cutler Hammer, Inc. and Cutler Hammer de Puerto Rico Inc. (each a "Significant Subsidiary", which together, as of the date hereof, constitute all of the significant subsidiaries (as defined in Rule 1.02(w) of Regulation S-X) of the Company) have each (except the Partnership, which is covered in paragraph 1(f) hereof) been duly incorporated, are validly existing and in good standing 3 4 under the laws of their respective jurisdictions of incorporation, are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership of property or the conduct of their respective businesses requires such qualification (except where the failure to so qualify would not have a material adverse effect upon the Company and its Subsidiaries taken as a whole), and have power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged. All of the issued and outstanding stock of each Significant Subsidiary has been duly authorized and validly issued and is fully paid and nonassessable. The Company owns all of the issued and outstanding shares of each Significant Subsidiary, directly or through one or more Subsidiaries, except to the extent of shares owned of record by directors for the purpose of qualification as such, free and clear of any pledges, liens, encumbrances, claims or equities; (f) The Partnership, a Delaware limited partnership, has been duly formed and is validly existing under the Delaware Revised Uniform Limited Partnership Act, one or both of the partners of the Partnership is duly qualified to do business in all jurisdictions in which the Partnership's ownership of property or the conduct of the Partnership's business requires such qualification (except where the failure to so qualify would not have a material adverse effect upon the business, properties, financial condition, results of operations or prospects of the Company and its Subsidiaries taken as a whole), and the Partnership has all power and authority necessary to own its properties and conduct the business in which it is engaged; (g) The Company has authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been validly authorized and issued and are fully paid and non-assessable; (h) The Indenture, including any amendments and supplements thereto, pursuant to which the Securities will be issued, conforms with the requirements of the Trust Indenture Act; (i) The execution, delivery and performance by the Company of this Agreement and any Terms Agreement and compliance by the Company with the provisions contained herein, in the Securities and in the Indenture will not (i) conflict with, or result in the creation or imposition of any lien, charge or encumbrance upon any of the respective assets of the Company or any of its Subsidiaries pursuant to the terms of, or constitute a default under, any material agreement, indenture or instrument, or (ii) result in a violation of the articles or certificate of incorporation or regulations, as amended, of the Company or any of its Significant Subsidiaries or any law, order, rule or regulation of any court or governmental agency having jurisdiction over the Company, any of its Significant Subsidiaries or their respective properties; and, except as required by the Act, the Trust Indenture Act, the Exchange Act and applicable state securities laws or foreign laws, no consent, authorization or order of, or filing or registration with, any 4 5 court or governmental agency is required for the issuance and sale of the Securities or the execution, delivery and performance of this Agreement and the Indenture; (j) (i) The Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Trustee, constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting enforcement of creditors' rights generally, and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and except further as enforcement thereof may be limited by requirements that a claim with respect to any debt securities issued under the Indenture that are payable in a foreign or composite currency (or a foreign or composite currency judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or by governmental authority to limit, delay or prohibit the making of payments outside the United States; (ii) the Securities have been duly authorized and, when executed by the Company and completed and authenticated by the Trustee or the authentication agent in accordance with the Indenture, and delivered against payment thereof pursuant to this Agreement and any Terms Agreement, will be validly issued and outstanding, and will constitute legally binding obligations of the Company entitled to the benefits of the Indenture, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and except further as enforcement thereof may be limited by requirements that a claim with respect to any Securities payable in a foreign or composite currency (or a foreign or composite currency judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or by governmental authority to limit, delay or prohibit the making of payments outside the United States and (iii) the Securities and the Indenture will conform in all material respects to the descriptions thereof contained in the Prospectus; (k) Neither the Company nor any of its Subsidiaries is in violation of its articles or certificate of incorporation or regulations or bylaws or in default under any agreement, indenture or instrument, the effect of which violation or default would be material to the Company and its Subsidiaries taken as a whole; (l) The statements set forth in the Prospectus under the captions "Description of Debt Securities" and "Description of Notes", insofar as they purport to constitute a summary of the terms of the Securities, under the caption "United States Taxation", and 5 6 under the caption "Plan of Distribution", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate summaries of such provisions; (m) Except as described in (or incorporated by reference in) the Prospectus, there is no material litigation or governmental proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries which is reasonably expected by the Company to result in any material adverse change in the business, properties, financial condition, results of operations or prospects of the Company and its Subsidiaries taken as a whole or which is required to be disclosed in (or incorporated by reference in) the Registration Statement; (n) The Company is not, and immediately upon giving effect to each offering and sale of the Securities will not be, an "investment company", as such term is defined in the United States Investment Company act of 1940, as amended (the "Investment Company Act"); (o) Immediately after any sale of Securities by the Company hereunder or under any Terms Agreement, the aggregate amount of Securities which shall have been issued and sold by the Company hereunder or under any Terms Agreement and of any debt securities of the Company (other than such Securities) that shall have been issued and sold pursuant to the Registration Statement will not exceed the amount of debt securities registered under the Registration Statement; (p) Ernst & Young LLP, whose report appears in the Company's most recent Annual Report on Form 10-K or 10-K/A which is incorporated by reference in the Registration Statement and the Prospectus and who have examined certain financial statements of the Company and its Subsidiaries, are independent public accountants as required by the Act and the rules and regulations thereunder (the "Rules and Regulations"); (q) The Company has (i) initiated a review of its operations and those of its Subsidiaries and any third parties with which the Company or any of its subsidiaries has a material relationship to evaluate the extent to which the business or operations of the Company or any of its Subsidiaries will be affected by the Year 2000 Problem, (ii) developed a plan for addressing the Year 2000 Problem and (iii) is implementing that plan. As a result of those actions, nothing has come to the attention of the Company which would cause the Company to believe, and the Company does not believe, that the Year 2000 Problem will have a material adverse effect upon the business, properties, financial condition, results of operations or prospects of the Company and its Subsidiaries, taken as a whole. The "Year 2000 Problem" as used herein means any significant risk that computer hardware or software used in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data or in the operation of mechanical or electrical systems of any kind will not, in the case of 6 7 dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000. The disclosure contained in the Prospectus with respect to the Year 2000 Problem is accurate, complete and fair in all material respects; (r) The financial statements filed as part of, or incorporated by reference in, the Registration Statement or included in, or incorporated by reference in, any preliminary prospectus or the Prospectus present, or (in the case of any amendment or supplement to any such document, or any material incorporated by reference in any such document, filed with the Commission after the date as of which this representation is being made) will present, at all times during the period specified in Section 4(c) hereof, fairly, the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been and (in the case of any amendment or supplement to any such document, or any material incorporated by reference in any such document, filed with the Commission after the date as of which this representation is being made) will be, at all times during the period specified in Section 4(c) hereof, prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except as otherwise disclosed in such financial statements; (s) The unaudited pro forma financial information, if any, filed as a part of, or incorporated by reference in, the Registration Statement or included in, or incorporated by reference in, any preliminary prospectus or the Prospectus (i) present fairly, or (in the case of any amendment or supplement to any such document, or any material incorporated by reference in any such document, filed with the Commission after the date as of which this representation is made) will present fairly, at all times during the period specified in Section 4(c) hereof, on the basis set forth in any such document, the information set forth therein; (ii) has been prepared in accordance with the Rules and Regulations and the guidelines of the Commission with respect to pro forma financial information; and (iii) has been properly compiled on the pro forma bases set forth therein, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein; and (t) This Agreement has been duly authorized, executed and delivered by the Company. 2. (a) On the basis of the representations and warranties herein contained, and subject to the terms and conditions herein set forth, each of the Agents hereby severally and not jointly agrees, as agent of the Company, to use its reasonable best efforts to solicit and receive offers to purchase the Securities from the Company upon the terms and conditions set forth in the Prospectus as amended or supplemented from time to time. So long as this Agreement shall remain in effect with respect to any Agent, the Company shall not, without the 7 8 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 more than 9 months from the date of issue except pursuant to this Agreement, any Terms Agreement, or except an offering exempt from registration under the Act or except in connection with a firm commitment underwriting pursuant to an underwriting agreement that does not provide for a continuous offering of medium-term debt securities. However, the Company reserves the right to sell, and may solicit and accept offers to purchase, Securities directly on its own behalf in transactions with persons other than broker-dealers, and, in the case of any such sale not resulting from a solicitation made by any Agent, no commission will be payable with respect to such sale. These provisions shall not limit Section 4(f) hereof or any similar provision included in any Terms Agreement. For purposes of a particular sale of Securities, upon notifying the Agents, the Company may appoint other persons as agents for the purpose of soliciting purchases of such Securities from the Company by others; provided, however, that in the event that the Company so appoints one or more other persons, the Company and such person or persons shall execute a counterpart to this Agreement relating to such particular sale, whereupon from and after the date of such execution, the term "Agent" shall for purposes of such particular sale include such person or persons and such person or persons shall be subject to the terms and conditions stated herein. Procedural details relating to the issue and delivery of Securities, the solicitation of offers to purchase Securities and the payment in each case therefor shall be as set forth in the Administrative Procedure attached hereto as Annex II as it may be amended from time to time by written agreement between the Agents and the Company (the "Administrative Procedure"). The provisions of the Administrative Procedure shall apply to all transactions contemplated hereunder other than those made pursuant to a Terms Agreement. Each Agent and the Company agree to perform the respective duties and obligations specifically provided to be performed by each of them in the Administrative Procedure. The Company will furnish to the Trustee a copy of the Administrative Procedure as from time to time in effect. 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 Securities. As soon as practicable, but in any event not later than one business day in The City of New York, after receipt of notice from the Company, the Agents will suspend solicitation of offers to purchase Securities from the Company until such time as the Company has advised the Agents that such solicitation may be resumed. During such period, the Company shall not be required to comply with the provisions of Sections 4(a), 4(h), 4(i), 4(j) and 4(k). Upon advising the Agents that such solicitation may be resumed, however, if the Registration Statement or Prospectus has been amended or supplemented during the period of suspension (other than by an amendment or supplement providing solely for a change in the interest rates, redemption provisions, amortization schedules or maturities offered on the Securities or for a change the Agents deem to be immaterial), the Company shall simultaneously provide the documents required to be delivered by Sections 4(a), 4(h), 4(i), 4(j) and 4(k), and the Agents shall have no obligation to solicit offers to purchase the Securities until such documents have been received by the Agents. In addition, any failure by the Company to comply with its obligations hereunder, 8 9 including without limitation its obligations to deliver the documents required by Sections 4(h), 4(i), 4(j) and 4(k), shall automatically terminate the Agents' obligations hereunder, including without limitation its obligations to solicit offers to purchase the Securities hereunder as agent or to purchase Securities hereunder as principal. The Company agrees to pay each Agent a commission, at the time of settlement of any sale of a Security by the Company as a result of a solicitation made by such Agent, in an amount equal to the following applicable percentage of the principal amount of such Security sold (or such greater amount agreed upon by the parties to the subject transaction):
Commission (percentage of aggregate principal amount Range of Maturities of Securities sold) ------------------- ------------------- From 9 months to less than 1 year .125% From 1 year to less than 18 months .150% From 18 months to less than 2 years .200% From 2 years to less than 3 years .250% From 3 years to less than 4 years .350% From 4 years to less than 5 years .450% From 5 years to less than 6 years .500% From 6 years to less than 7 years .550% From 7 years to less than 10 years .600% From 10 years to less than 15 years .625% From 15 years to less than 20 years .700% From 20 years to 30 years .750%
(b) Each sale of Securities 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 will provide for the sale of such Securities to, and the purchase thereof by, such Agent; a Terms Agreement may also specify certain provisions relating to the reoffering of such Securities by such Agent; the commitment of any Agent to purchase Securities as principal, whether pursuant to any Terms Agreement or otherwise, shall be deemed to have been made on the basis of the representations and warranties of the Company herein contained and shall be subject to the terms and conditions herein set forth; each Terms Agreement shall specify the principal amount of Securities to be purchased by any Agent pursuant thereto, the price to be paid to the Company for such Securities, any provisions relating to rights of, and default by, underwriters acting together with such Agent in the reoffering of the Securities and the time and date and place of delivery of and payment for such Securities; and such Terms Agreement shall also specify any requirements for opinions of counsel, accountants' letters and officers' certificates pursuant to Section 4 hereof. Each Agent proposes to offer Securities purchased by it as principal for sale at prevailing market prices or prices related thereto 9 10 at the time of sale, which may be equal to, greater than or less than the price at which such Securities are purchased by such Agent from the Company. For each sale of Securities to an Agent as principal that is not made pursuant to a Terms Agreement, the procedural details relating to the issue and delivery of such Securities and payment therefor shall be as set forth in the Administrative Procedure. For each such sale of Securities to an Agent as principal that is not made pursuant to a Terms Agreement, the Company agrees to pay such Agent a commission (or grant an equivalent discount) as provided in Section 2(a) hereof and in accordance with the schedule set forth therein. Each time and date of delivery of and payment for Securities to be purchased by an Agent as principal, whether set forth in a Terms Agreement or in accordance with the Administrative Procedure, is referred to herein as a "Time of Delivery". (c) Each Agent agrees, with respect to any Security denominated in a currency other than U.S. dollars, as agent, directly or indirectly, not to solicit offers to purchase, and as principal under any Terms Agreement or otherwise, directly or indirectly, not to offer, sell or deliver, such Security in, or to residents of, the country issuing such currency, except as permitted by applicable law; provided that for purposes of this Section 2(c), each of the members of the European Monetary Union is deemed to be a country issuing the euro. 3. The documents required to be delivered pursuant to Section 6 hereof on the Commencement Date (as defined below) shall be delivered to the Agents at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York, at 11:00 a.m., New York City time, on the date of this Agreement, which date and time of such delivery may be postponed by agreement between the Agents and the Company but in no event shall be later than the day prior to the date on which solicitation of offers to purchase Securities is commenced or on which any Terms Agreement is executed (such time and date being referred to herein as the "Commencement Date"). 4. The Company covenants and agrees with each Agent: (a) (i) Except as otherwise provided in this subsection or Section 2(a) of this Agreement, the Company will (A) give counsel for the Agents notice of its intention to file (I) any additional registration statement with respect to the registration of additional Securities to be distributed pursuant to this Agreement or (II) any amendment to the Registration Statement or any amendment or supplement to the Prospectus, whether by the filing of documents pursuant to the Act, the Exchange Act or otherwise; (ii) to furnish counsel for the Agents with copies of any document referred to in clause (i) above proposed to be filed a reasonable time in advance of filing; 10 11 (iii) to make available to the Agents copies of documents so filed promptly upon the filing thereof; (iv) 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 Securities; (v) to advise the Agents (A) of the institution by the Commission of any stop order proceedings in respect of the Registration Statement or of any part thereof, (B) when any post-effective amendment to the Registration Statement relating to or covering the Securities becomes effective, (C) of any request or proposed request by the Commission for (I) an amendment or supplement to the Registration Statement (insofar as the amendment or supplement relates to or covers the Securities), the Prospectus or any document incorporated by reference in any of the foregoing or (II) any additional information relating to the Registration Statement or the Prospectus and (D) of receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; and (vi) in the event of the issuance of any 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. Notwithstanding (i), (ii) and (iii) of this subsection, except as set forth below, the Company shall not be required to give any Agent (directly or through counsel) notice of its intention to file, to furnish any Agent (directly or through counsel) a copy of in advance of filing, or to make available to any Agent (directly or through counsel) upon filing (A) Quarterly Reports on Form 10-Q, any Current Report on Form 8-K relating solely to the inclusion of additional financial information (including a press release containing such information) or any filings pursuant to Section 14 of the Exchange Act, provided however, that the Company promptly notifies the Agents and counsel to the Agents of such filings with the Commission, and provided further that, if any such document is to be filed in order that the Prospectus does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in light of the circumstances then existing, then the Company shall give immediate notice (prior to the filing of any such document) to each Agent to cease solicitations of offers to purchase the Securities in its capacity as agent and to cease sales of any Securities an Agent may then own as principal pursuant to a Terms Agreement; (B) any pricing supplement to the Prospectus in connection with a sale of the Securities (except that a pricing supplement shall be provided to the Agent who solicits the sale or purchase of or who purchases as principal the Securities to which such pricing supplement relates); (C) any amendment or supplement to the Prospectus that relates 11 12 exclusively to an offering of debt securities other than the Securities; or (D) any Current Report on Form 8-K filed solely for the purpose of incorporating an exhibit by reference into a registration statement, except that the Company shall make available to each Agent any such Current Report on Form 8-K promptly after the filing thereof; (b) Promptly from time to time to take such action as such Agent may reasonably request to qualify the Securities for offering and sale under the securities laws of such jurisdictions as such Agent may reasonably 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 Securities; provided, however, that in connection therewith the Company shall not be required to qualify as a foreign corporation, become subject to taxes or file a general consent to service of process in any jurisdiction; (c) To make available to the Agents copies of the Registration Statement and each amendment thereto, with copies of the Prospectus as each time amended or supplemented, other than any pricing supplement (except as provided in the Administrative Procedure), in the form in which it is filed with the Commission pursuant to Rule 424 under the Act, and with copies of the documents incorporated by reference therein, all in such quantities as such Agent may reasonably request from time to time; and, if the delivery of a prospectus is required at any time in connection with the offering or sale of the Securities (including Securities purchased from the Company by such Agent as principal) and if at such time, in the judgment of the Company or in the reasonable opinion of counsel for the Agents, 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 Act, the Exchange Act or the Trust Indenture Act, to notify such Agent and request such Agent, in its capacity as agent of the Company, to suspend solicitation of offers to purchase Securities from the Company (and, if so notified, such Agent shall cease such solicitations as soon as practicable, but in any event not later than one business day later); and if the Company shall decide to amend or supplement the Registration Statement or the Prospectus, to so advise such Agent promptly by telephone (with confirmation in writing) and to prepare and cause to be filed promptly with the Commission an amendment or supplement to the Registration Statement or the Prospectus that will correct such statement or omission or effect such compliance; provided, however, that if during such same period such Agent continues to own Securities purchased from the Company by such Agent as principal or such Agent is otherwise required to deliver a prospectus in respect of transactions in the Securities, the 12 13 Company shall promptly prepare and file with the Commission such an amendment or supplement; (d) To make generally available to its security holders 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); (e) For two years after the last sale of Securities pursuant to this Agreement, to make available to the Agents (i) as soon as publicly available, a copy of each report or definitive proxy statement of the Company filed with the Commission under the Exchange Act, or mailed to stockholders and (ii) from time to time, such other publicly available information concerning the Company as the Agents may reasonably request; (f) That, from the date of any Terms Agreement with such Agent or other agreement by such Agent to purchase Securities as principal and continuing to and including the later of (i) the termination of the trading restrictions for the Securities purchased thereunder, as notified to the Company by such Agent and (ii) the related Time of Delivery, not to offer, sell, contract to sell or otherwise dispose of any debt securities of the Company which both mature more than 9 months after such Time of Delivery and are substantially similar to the Securities, without the prior written consent of such Agent; (g) That each acceptance by the Company of an offer to purchase Securities hereunder (including any purchase by such Agent as principal not pursuant to a Terms Agreement), and each execution and delivery by the Company of a Terms Agreement with such 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 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 settlement date for the Securities relating to such acceptance or as of the Time of Delivery relating to such sale, as the case may be, as though made at and as of such date (except that such representations and warranties shall be deemed to relate to the Registration Statement and the Prospectus relating to such Securities); (h) That reasonably in advance of (i) each time the Company sells Securities to an Agent as principal pursuant to a Terms Agreement and such Terms Agreement specifies the delivery of an opinion or opinions by Shearman & Sterling, counsel to the Agents, as a condition to the purchase of Securities pursuant to such Terms Agreement, (ii) each time that a Form 10-K is incorporated by reference into the Prospectus and (iii) each other time that the Registration Statement or Prospectus is amended or 13 14 supplemented and one or more Agents reasonably determines, the Company shall make available to such counsel such papers and information, other than those documents that the Company is exempt from providing to the Agents pursuant to Section 4(a) hereof, as they may reasonably request to enable them to furnish to such Agent the opinion or opinions referred to in Section 6(b) hereof; (i) That (i) each time the Registration Statement or the Prospectus shall be amended or supplemented other than (A) by a pricing supplement, (B) by an amendment or supplement relating solely to the interest rates, interest payment dates or maturity dates of the Securities or the sale of other securities or (C) by an amendment or supplement (other than by means of incorporation by reference) relating solely to the inclusion of additional financial information; (ii) each time a document filed under the Act or the Exchange Act is incorporated by reference into the Prospectus (other than on Form 8-K relating solely to the inclusion of additional financial information or on Form 10-Q or a proxy statement filed pursuant to Section 14 of the Exchange Act); and (iii) each time the Company sells Securities to such Agent as principal pursuant to a Terms Agreement and such Terms Agreement specifies the delivery of an opinion under this Section 4(i) as a condition to the purchase of Securities pursuant to such Terms Agreement, the Company shall furnish or cause to be furnished forthwith to such Agent a written opinion of the General Counsel of the Company, Deputy General Counsel of the Company, Associate General Counsel of the Company, Senior Counsel of the Company or other counsel for the Company satisfactory to such Agent, dated the date of such amendment, supplement, incorporation or Time of Delivery relating to such sale, as the case may be, in form satisfactory to such Agent, to the effect that such Agent may rely on the opinion of such counsel referred to in Section 6(c) hereof which was last furnished to such Agent 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) hereof but modified to relate to the Registration Statement and the Prospectus as amended and supplemented to such date. If counsel for Agents reasonably determines that the information included in a filing by the Company in a Quarterly Report filed on Form 10-Q or a Current Report filed on Form 8-K is of such importance that a legal opinion should be delivered to the Agents in conjunction therewith, such counsel for the Agents shall notify the Company promptly upon such determination; and the Company will thereupon deliver to the Agents an opinion of counsel for the Company complying with this section hereof and covering such matters referred to in Section 6(c) hereof as such Agent or Agents reasonably request. (j) That (i) each time the Registration Statement or the Prospectus shall be amended or supplemented other than (A) by a pricing supplement or (B) by an amendment or supplement relating solely to the interest rates, interest payment dates or maturity dates of the Securities; (ii) each time that a document filed under the Act or the 14 15 Exchange Act is incorporated by reference into the Prospectus, in either case (i) or (ii) to set forth, among other things, financial information included in or derived from the Company's consolidated financial statements or accounting records; and (iii) each time the Company sells Securities to such Agent as principal pursuant to a Terms Agreement and such Terms Agreement specifies the delivery of a letter under this Section 4(j) as a condition to the purchase of Securities pursuant to such Terms 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 forthwith to furnish counsel for such Agent a letter, dated the date of such amendment, supplement, incorporation or Time of Delivery relating to such sale, as the case may be, in form satisfactory to such Agent, of the same tenor as the letter referred to in Section 6(d) hereof but modified to relate to the Registration Statement and the Prospectus as amended or supplemented to the date of such letter, with such changes as may be necessary to reflect changes in the financial statements and other information derived from the accounting records of the Company, to the extent such financial statements and other information are available as of a date not more than five business days prior to the date of such letter; provided, however, that, with respect to any financial information or other matter, such letter may reconfirm as true and correct at such date as though made at and as of such date, rather than repeat, statements with respect to such financial information or other matter made in the letter referred to in Section 6(d) hereof which was last furnished to such Agent; and (k) That (i) each time the Registration Statement or the Prospectus shall be amended or supplemented other than (A) by a pricing supplement, (B) by an amendment or supplement relating solely to the interest rates, interest payment dates or maturity dates of the Securities or the sale of other securities or (C) by an amendment or supplement (other than by means of incorporation by reference) relating solely to the inclusion of additional financial information; (ii) each time a document filed under the Act or the Exchange Act is incorporated by reference into the Prospectus (other than on Form 8-K relating solely to the inclusion of additional financial information or a proxy statement filed pursuant to Section 14 of the Exchange Act); and (iii) each time the Company sells Securities to such Agent as principal and the applicable Terms Agreement specifies the delivery of a certificate under this Section 4(k) as a condition to the purchase of Securities pursuant to such Terms Agreement, the Company shall furnish or cause to be furnished forthwith to such Agent a certificate, dated the date of 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 reasonably satisfactory to such Agent, to the effect that the statements contained in the certificate referred to in Section 6(i) hereof which was last furnished to such Agent are true and correct at such date as though made at and as of such date (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such date) or, in lieu of such certificate, certificates of the same 15 16 tenor as the certificates referred to in said Section 6(i) but modified to relate to the Registration Statement and the Prospectus as amended and supplemented to such date. 5. The Company covenants and agrees with each Agent that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's counsel and accountants in connection with the registration of the Securities under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus, the Prospectus and any pricing supplements and all other amendments and supplements thereto and the mailing and delivering of copies thereof to such Agent; (ii) the reasonable fees, disbursements and expenses of counsel for the Agents in connection with the establishment of the program contemplated hereby, any opinions to be rendered by such counsel hereunder and under any Terms Agreement and the transactions contemplated hereunder and under any Terms Agreement; (iii) the cost of printing, producing or reproducing this Agreement, any Terms Agreement, any Indenture, any Blue Sky and legal investment survey, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (iv) all expenses in connection with the qualification of the Securities for offering and sale under state securities laws as provided in Section 4(b) hereof, including the fees and disbursements of counsel for the Agents in connection with such qualification and in connection with the Blue Sky and legal investment surveys; (v) any fees charged by securities rating services for rating the Securities; (vi) any filing fees incident to, and the fees and disbursements of counsel for the Agents in connection with, any required review by the National Association of Securities Dealers, Inc. of the terms and sale of the Securities; (vii) the cost of preparing the Securities; (viii) the fees and expenses of any Trustee and any agent 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 any Indenture and the Securities; (ix) any advertising expenses connected with the solicitation of offers to purchase and the sale of the Securities so long as such advertising expenses have been approved by the Company; and (x) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section 5. Except as provided in Sections 7 and 8 hereof, each Agent shall pay all other expenses it incurs. 6. The obligation of any Agent, as agent of the Company, at any time ("Solicitation Time") to solicit offers to purchase the Securities and the obligation of any Agent to purchase Securities as principal, pursuant to any Terms Agreement or otherwise, shall in each case be subject, in such Agent's discretion, to the condition that all representations and warranties and other statements of the Company herein (and, in the case of an obligation of an Agent under a Terms Agreement, in or incorporated by reference in such Terms Agreement) are true and correct at and as of the Commencement Date and any applicable date referred to in Section 4(k) hereof that is prior to such Solicitation Time or Time of Delivery, as the case may be, and, at and as of such Solicitation Time or Time of Delivery, as the case may be, the condition that, prior to such Solicitation Time or Time of Delivery, as the case may be, the Company shall have 16 17 performed all of its obligations hereunder theretofore to be performed, and the following additional conditions: (a) (i) With respect to any Securities sold at or prior to such Solicitation Time or Time of Delivery, as the case may be, the Prospectus with respect to such Securities 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; (ii) 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 (iii) all requests for additional information on the part of the Commission shall have been complied with to the reasonable satisfaction of such Agent; (b) Shearman & Sterling, counsel to the Agents, shall have furnished to such Agent (i) such opinion or opinions, dated the Commencement Date, with respect to the incorporation of the Company, the validity of the Securities, the Registration Statement, the Prospectus and the Indentures and other related matters as they are prepared to opine, and (ii) 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(b) 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 (i) but modified to relate to the Registration Statement and the Prospectus as amended and supplemented to such date; and in each case the Company shall have made available to such counsel such documents as they may reasonably request for the purpose of enabling them to pass upon such matters, and in rendering such opinion, Shearman & Sterling may rely as to the incorporation of the Company and all other matters governed by the law of the State of Ohio upon the opinion of the General Counsel of the Company, Deputy General Counsel of the Company, Associate General Counsel of the Company, Senior Counsel of the Company or other counsel for the Company satisfactory to the Agents referred to below; (c) The General Counsel of the Company, Deputy General Counsel of the Company, Associate General Counsel of the Company, Senior Counsel of the Company or other counsel for the Company satisfactory to such Agent, shall have furnished to such Agent a written opinion, dated the Commencement Date and each applicable date referred to in Section 4(i) hereof that is on or prior to such Solicitation Time or Time of Delivery, as the case may be, in form and substance satisfactory to such Agent, to the effect that: 17 18 (i) The Company and the Significant Subsidiaries (except the Partnership, which is covered in paragraph (ii) below) have been duly incorporated and are validly existing and in good standing under the laws of their respective jurisdictions of incorporation, are duly qualified to do business and in good standing as foreign corporations in all jurisdictions in which their respective ownership of property or the conduct of their respective businesses requires such qualification (except where the failure to so qualify would not have a material adverse effect upon the business, properties, financial condition, results of operations or prospects of the Company and its Subsidiaries taken as a whole), and have all power and authority necessary to own their respective properties and conduct the businesses in which they are engaged and, except as may be disclosed in the Registration Statement and the Prospectus and except to the extent of shares owned of record by directors for the purpose of qualifying as such, all outstanding shares of capital stock of the Significant Subsidiaries are owned by the Company directly, or indirectly through wholly owned Subsidiaries, free and clear of any lien, pledge and encumbrance or any claim of any third party; (ii) The Partnership has been duly formed and is validly existing under the Delaware Revised Uniform Limited Partnership Act, one or both of the partners of the Partnership is duly qualified to do business in all jurisdictions in which the Partnership's ownership of property or the conduct of the Partnership's business requires such qualification (except where the failure to so qualify would not have a material adverse effect upon the business, properties, financial condition, results of operations or prospects of the Company and its Subsidiaries taken as a whole), and the Partnership has all power and authority necessary to own its properties and conduct the business in which it is engaged; (iii) The Registration Statement is effective under the Act, and, to the best knowledge of such counsel, no stop order suspending its effectiveness has been issued, and no proceeding for that purpose is pending or, to the knowledge of such counsel, threatened by the Commission; (iv) No order directed to any document incorporated by reference in the Prospectus has been issued and, to the knowledge of such counsel, no challenge has been made to the accuracy or adequacy of any such document; (v) Each document incorporated by reference in the Registration Statement and the Prospectus (except for the financial statements, supporting schedules and other financial data included or incorporated therein, or omitted therefrom, as to which such counsel need express no opinion), as of the date it was filed with the Commission, appears on its face to have been appropriately responsive in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder; 18 19 (vi) The Registration Statement and the Prospectus (except for the financial statements, supporting schedules and other financial data included or incorporated therein, or omitted therefrom and the Statements of Eligibility of the Trustee on Form T-1, as to which such counsel need express no opinion), excluding the documents incorporated by reference therein, as of their respective effective or issue dates, appear on their face to have been appropriately responsive in all material respects to the requirements of the Act and the Rules and Regulations thereunder and the Trust Indenture Act; (vii) The statements made in the Prospectus under the captions "Description of Debt Securities", "Description of Notes", "Description of Debt Warrants " and "Plan of Distribution", insofar as they purport to summarize the provisions of documents or agreements specifically referred to therein, are accurate summaries of such provisions; (viii) Such counsel does not know of any litigation or any governmental proceeding pending or threatened against the Company or any of its Subsidiaries which is required to be disclosed in the Prospectus which is not disclosed and correctly summarized therein; (ix) Such counsel does not know of any contracts or other documents which are required to be filed as exhibits to the Registration Statement by the Act or by the Rules and Regulations, or which are required to be filed as exhibits to any document incorporated by reference in the Prospectus by the Exchange Act or the rules and regulations thereunder, which have not been filed as exhibits to the Registration Statement or to such document incorporated by reference in the Prospectus as permitted by the Rules and Regulations or the rules and regulations of the Commission under the Exchange Act; (x) To the best of such counsel's knowledge, neither the Company nor any Significant Subsidiary is in violation of its articles or certificate of incorporation or in default under any material agreement, indenture or instrument; (xi) The Company is not, and immediately upon giving effect to the offering and sale of the Securities will not be, an "investment company", as such term is defined in the Investment Company Act of 1940; (xii) The Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting 19 20 enforcement of creditors' rights generally and except further as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and except further as enforcement thereof may be limited by requirements that a claim with respect to any debt securities issued under the Indenture that are payable in a foreign or composite currency (or a foreign or composite currency judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or by governmental authority to limit, delay or prohibit the making of payments outside the United States; (xiii) [To be delivered on the Commencement Date only.] The Securities have been duly authorized by the Company and, when executed by the Company and completed and authenticated by the Trustee, or the authenticating agent, in accordance with the Indenture and delivered against payment thereof pursuant to this Agreement and any Terms Agreement, the Securities, in the forms certified by authorized officers of the Company, will be valid and binding obligations of the Company, entitled to the benefits provided by the Indenture and enforceable in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting enforcement of creditors' rights generally and except further as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and except further as enforcement thereof may be limited by requirements that a claim with respect to any debt securities issued under the Indenture that are payable in a foreign or composite currency (or a foreign or composite currency judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or by governmental authority to limit, delay or prohibit the making of payments outside the United States; (xiv) [To be delivered at each Time of Delivery.] The Securities have been duly authorized, executed and delivered by the Company, and, assuming the due completion, authentication and delivery thereof by the Trustee or the authenticating agent, are valid and binding obligations of the Company, entitled to the benefits provided by the Indenture and enforceable in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and except further as enforcement thereof may be limited by requirements that a claim with respect to any debt securities issued under the Indenture that are payable in a foreign or composite currency (or a foreign or 20 21 composite currency judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or by governmental authority to limit, delay or prohibit the making of payments outside the United States; (xv) The Securities and the Indenture conform in all material respects to the statements concerning them in the Registration Statement and the Prospectus; and (xvi) This Agreement and any applicable Terms Agreement have been duly authorized, executed and delivered by the Company; the execution, delivery and performance of this Agreement and any applicable Terms Agreement and compliance by the Company with the provisions contained herein, in any applicable Terms Agreement and in the Securities and the Indenture will not, in any way that would have a material adverse effect upon the Company and its Subsidiaries taken as a whole (a) conflict with, or result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or any of its Subsidiaries pursuant to the terms of, or constitute a default under, any agreement, indenture or instrument known to such counsel, or (b) result in a violation of the articles or certificate of incorporation of the Company or any Significant Subsidiary or any law, order, rule or regulation of any court or governmental agency having jurisdiction over the Company and any of its Significant Subsidiaries or their property; and no consent, authorization or order of, or filing or registration with, any court or governmental agency is required for the execution, delivery and performance by the Company of this Agreement and any applicable Terms Agreement, except such as may be required by the Act, the Trust Indenture Act, the Exchange Act, state securities laws or foreign laws. Such counsel shall further state in that opinion that he, or attorneys over whom he exercises legal supervision, has participated in the preparation of the Registration Statement and the Prospectus, and no facts have come to his attention that lead him to believe that (i) the Registration Statement (except for the financial statements, supporting schedules or other financial data included or incorporated therein, or omitted therefrom, as to which he expresses no opinion, and except for the information furnished by the Trustee in its Form T-1, as to which he expresses no opinion), at the time the Registration Statement became effective, 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 (ii) the Prospectus as amended or supplemented, on the date of such opinion (except for the financial statements, supporting schedules or other financial data included or incorporated therein, or omitted therefrom, as to which he expresses no opinion, and except for the information furnished by the Trustee in its Form T-1, as to which he expresses no opinion), contained an untrue statement of a material fact or 21 22 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. Insofar as such opinion relates to or involves matters of law of any jurisdiction other than Ohio, the opinion may be given in reliance on an opinion of counsel of that jurisdiction, a copy of which opinion shall be furnished to each Agent, in which case the opinion shall state that he believes that each Agent and he are entitled to so rely; (d) Not later than 10:00 a.m., New York City time, on the Commencement Date and on each applicable date referred to in Section 4(j) hereof that is on or prior to such Solicitation Time or Time of Delivery, as the case may be, 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 such Agent a letter, dated the Commencement Date or such applicable date, as the case may be, in form and substance satisfactory to such Agent, to the effect set forth in Annex III hereto; (e) (i) Neither the Company nor any of its Subsidiaries shall have sustained since the date of the latest audited statements included in the Prospectus as amended or supplemented prior to the date of the pricing supplement relating to the Securities to be delivered at the Relevant Time of Delivery any 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, other than as set forth or contemplated in the Prospectus as amended or supplemented prior to the date of the pricing supplement relating to the Securities to be delivered at the Relevant Time of Delivery and (ii) since the respective dates as of which information is given in the Prospectus as amended or supplemented prior to the date of the pricing supplement relating to the Securities to be delivered at the Relevant Time of Delivery, there shall not have been any change in the capital stock or long-term debt of the Company or any of its Subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, shareholders' equity or results of operations of the Company and its Subsidiaries, taken as a whole, other than as set forth or contemplated in the Prospectus as amended or supplemented prior to the date of the pricing supplement relating to the Securities to be delivered at the Relevant Time of Delivery, the effect of which, in any such case described in clause (i) or (ii), is reasonably expected to have a material adverse effect upon the business, properties, financial condition, results of operations or prospects of the Company and its Subsidiaries, taken as a whole; (f) On the date hereof or during the period from the date of an acceptance of an offer to purchase Securities through the date of settlement of such sale or during the period from the date of any applicable Terms Agreement through the date of closing under such Terms Agreement (i) no downgrading shall have occurred in the rating 22 23 accorded the Company's debt securities or preferred stock by Fitch IBCA Investors Service L.P., Moody's Investors Service, Inc. or Standard & Poor's Ratings Group, and (ii) 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 or preferred stock; (g) On the date hereof or during the period from the date of an acceptance of an offer to purchase Securities through the date of settlement of such sale or during the period from the date of any applicable Terms Agreement through the date of closing under such Terms Agreement, there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange; (ii) a suspension or material limitation in trading in the Company's securities on the New York Stock Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities; or (iv) 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 this clause (iv) in the reasonable judgment of such Agent makes it impracticable or inadvisable to proceed with the solicitation of offers to purchase Securities or the purchase of the Securities 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; (h) On the date hereof or during the period from the date of an acceptance of an offer to purchase Securities through the date of settlement of such sale or during the period from the date of any applicable Terms Agreement through the date of closing under such Terms Agreement, with respect to any Security denominated in a currency other than the U.S. dollar, or more than one currency or a composite currency, or any Security 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; and (i) Such Agent shall have received a certificate, dated the Commencement Date and each applicable date referred to in Section 4(k) hereof that is on or prior to such Solicitation Time or Time of Delivery, as the case may be, of the President or any Vice-President and a principal financial or accounting officer of the Company in which 23 24 such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Company in this Agreement are true and correct, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Commencement Date or such applicable date, as the case may be, that no stop order suspending the effectiveness of the Registration Statement or of any part thereof has been issued and no proceedings for that purpose have been instituted or, to their knowledge, are contemplated by the Commission and certifying as to the matters in subsections (e) and (f) of this Section 6 and such other matters as the Agent may reasonably request. 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 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 the Registration Statement, the Prospectus or any other prospectus relating to the Securities, or any amendment or supplement thereto, or any related preliminary prospectus or preliminary prospectus supplement, 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 such Agent for any legal or other expenses reasonably incurred by such Agent in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will 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 in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by such Agent, if any, specifically for use therein. (b) Each Agent, severally and not jointly, will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the 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 the Registration Statement, the Prospectus or any other prospectus relating to the Securities, or any amendment or supplement thereto, or any related preliminary prospectus or preliminary prospectus supplement, 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 or 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 reliance upon and in conformity with written information furnished to the Company by such Agent, if any, specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred. 24 25 (c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party (absent material prejudice) of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may 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, 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 will not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action 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. (d) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and each Agent on the other from the offering of the Securities to which such loss, claim, damage or liability relates or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and each Agent on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and each Agent on the other shall be deemed to be in the same proportion as the total net proceeds from the sale of the Securities to which such loss, claim, damage or liability relates (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by such Agent in 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 or the Agents and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and each Agent agree that it would 25 26 not be just and equitable if contribution pursuant to this subsection (d) were determined by per capita allocation (even if all Agents were treated as one entity for such purpose) or by any other method which does not take account of the equitable contributions referred to above in this subsection (d). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Agent shall be required to contribute any amount in excess of the amount by which the total price at which the Securities, (to which such loss, claim, damage or liability relates), purchased by or through it were sold to the public 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 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 subsection (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 Act; and the obligations of each Agent 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 director of the Company, to each officer of the Company who has signed the Registration Statement and to each person, if any, who controls the Company within the meaning of the Act. 8. Each Agent, in soliciting offers to purchase Securities from the Company and in performing the other obligations of such Agent hereunder (other than in respect of any purchase by an Agent as principal, pursuant to a Terms Agreement or otherwise), is acting solely as agent for the Company and not as principal. Each Agent will make reasonable efforts to assist the Company in obtaining performance by each purchaser whose offer to purchase Securities from the Company was solicited by such Agent and has been accepted by the Company, but such Agent shall not have any liability to the Company in the event such purchase is not consummated for any reason. If the Company shall default on its obligation to deliver Securities to a purchaser whose offer it has accepted, 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 such offer any commission to which it would 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 26 27 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 or any controlling person of any Agent, or the Company, or any officer or director or any controlling person of the Company, and shall survive each delivery of and payment for any of the Securities. 10. The provisions of this Agreement relating to the solicitation of offers to purchase Securities from the Company may be suspended or terminated at any time by the Company as to any Agent or by any Agent as 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. In the event of such suspension or termination with respect to any Agent, (i) this Agreement shall remain in full force and effect with respect to any Agent as to which such suspension or termination has not occurred; (ii) this Agreement shall remain in full force and effect with respect to the rights and obligations of any party which have previously accrued or which relate to Securities which are already issued, agreed to be issued or the subject of a pending offer at the time of such suspension or termination; and (iii) in any event, this Agreement shall remain in full force and effect insofar as the fourth paragraph of Section 2(a), and Sections 4(c), 4(d), 4(e), 5, 7, 8 and 9 hereof are concerned. 11. Except as otherwise specifically provided herein or in the Administrative Procedure, all communications hereunder will be in writing and, if sent to the Agents, will be mailed, delivered or telegraphed and confirmed to them at their addresses furnished to the Company in writing for the purpose of communications hereunder or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at Eaton Center, 1111 Superior Avenue, Cleveland, Ohio 44114-2584, Attention: Secretary. 12. 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 Sections 7, 8 and 9 hereof, the officers and directors of the Company and any person who controls any Agent or the Company, and their respective personal representatives, 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 any of the Securities through or from any Agent hereunder shall be deemed a successor or assign by reason merely of such purchase. 13. The term "business day" shall mean any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in The City of New York. 14. THIS AGREEMENT AND ANY TERMS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 15. This Agreement 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 27 28 original, but all of such respective counterparts shall together constitute one and the same instrument. If the foregoing is in accordance with your understanding, please sign and return to us two counterparts hereof, whereupon this letter and the acceptance by you thereof shall constitute a binding agreement between the Company and you in accordance with its terms. 28 29 Very truly yours, EATON CORPORATION By: /s/ A.T. Dillon --------------------------------- Name: A.T. Dillon Title: Executive Vice President-- Chief Financial and Planning Officer By: /s/ R.E. Parmenter -------------------------------- Name: R.E. Parmenter Title: Vice President and Treasurer Accepted in New York, New York, as of the date hereof: By: GOLDMAN, SACHS & CO. By: /s/ Goldman, Sachs & Co. ------------------------------- (Goldman, Sachs & Co.) By: CHASE SECURITIES INC. By: /s/ Chase Securities Inc. ------------------------------- By: J.P. MORGAN SECURITIES INC. By: /s/ J.P. Morgan Securities Inc. ------------------------------- By: SALOMON SMITH BARNEY INC. By: /s/ Salomon Smith Barney Inc. ------------------------------- 29 30 ANNEX I EATON CORPORATION MEDIUM TERM NOTES TERMS AGREEMENT February , 2000 --- Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Chase Securities Inc. 270 Park Avenue New York, New York 10017 J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Eaton Corporation, an Ohio corporation (the "Company"), proposes, subject to the terms and conditions stated herein and in the Distribution Agreement, dated February ___, 2000 (the "Distribution Agreement"), between the Company on the one hand and Goldman, Sachs & Co., Chase Securities Inc., J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. (the "Agents") on the other, to issue and sell to the Agents the securities specified in the Schedule hereto (the "Purchased Securities"). Each of the provisions of the Distribution Agreement not specifically related to the solicitation by the Agents, as agents of the Company, of offers to purchase Securities is incorporated herein by reference in its entirety, and shall be deemed to be part of this Terms Agreement to the same extent as if such provisions had been set forth in full herein. 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 therein relating to the solicitation of offers to purchase Securities from the Company, solely by virtue of its execution I-1 31 of this Terms Agreement. Each of the representations and warranties set forth in the Distribution Agreement 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 to relate to the Purchased Securities. An amendment to the Registration Statement, or a supplement to the Prospectus, as the case may be, relating to the Purchased Securities, 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 the Agents and the Agents agree to purchase from the Company the Purchased Securities, at the time and place, in the principal amount and at the purchase price set forth in the Schedule hereto. If the foregoing is in accordance with your understanding, please sign and return to us two 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. I-2 32 EATON CORPORATION By: ------------------------------ Name: Title: By: ------------------------------ Name: Title: Accepted: By: GOLDMAN, SACHS & CO. By: ------------------------------ (Goldman, Sachs & Co.) By: CHASE SECURITIES INC. By: ------------------------------ By: J.P. MORGAN SECURITIES INC. By: ------------------------------ By: SALOMON SMITH BARNEY INC. By: ------------------------------ I-3 33 SCHEDULE TO ANNEX I Title of Purchased Securities: [ %] Medium-Term Notes Aggregate Principal Amount: [$.................... or units of other Specified Currency] [Price to Public:] Purchase Price by Goldman, Sachs & Co., Chase Securities Inc., J.P. Morgan Securities Inc. and Salomon Smith Barney Inc.: __% of the principal amount of the Purchased Securities[, plus accrued interest from ______ to ______] [and accrued amortization, if any, from ______ to ______] Method of and Specified Funds for Payment of Purchase Price: [By certified or official bank check or checks, payable to the order of the Company, in [[New York] Clearing House] [immediately available] funds] [By wire transfer to a bank account specified by the Company in [next day] [immediately available] funds] Indenture: [Indenture, dated as of April 1, 1994, between the Company and The Chase Manhattan Bank, as Trustee] [Indenture, dated as of ________, between the Company and ________, as Trustee] Time of Delivery: Closing Location for Delivery of Securities: Maturity: Interest Rate: [ %] Interest Payment Dates: S-1 34 [months and dates] Documents to be Delivered: The following documents referred to in the Distribution Agreement shall be delivered as a condition to the Closing: (1) The opinion or opinions of counsel to the Agents referred to in Section 4(h). (2) The opinion of counsel to the Company referred to in Section 4(i). (3) The accountants' letter referred to in Section 4(j). (4) The officers' certificate referred to in Section 4(k). Other Provisions: S-2 35 ANNEX II EATON CORPORATION MEDIUM TERM NOTES ADMINISTRATIVE PROCEDURE This Administrative Procedure relates to the Securities defined in the Distribution Agreement, dated February 2, 2000 (the "Distribution Agreement"), between Eaton Corporation, an Ohio corporation (the "Company"), and Goldman, Sachs & Co., Chase Securities Inc., J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. (the "Agents"), to which this Administrative Procedure is attached as Annex II. Defined terms used herein and not defined herein shall have the meanings given such terms in the Distribution Agreement, the Prospectus, or the Indenture. The procedures to be followed with respect to the settlement of sales of Securities directly by the Company to purchasers solicited by an Agent, as agent, are set forth below. The terms and settlement details related to a purchase of Securities by an Agent, as principal, from the Company will be set forth in a Terms Agreement pursuant to the Distribution Agreement, unless the Company and such Agent otherwise agree as provided in Section 2(b) of the Distribution Agreement, in which case the procedures to be followed in respect of the settlement of such sale will be as set forth below. An Agent, in relation to a purchase of a Security by a purchaser solicited by such Agent, is referred to herein as the "Selling Agent" and, in relation to a purchase of a Security by such Agent as principal other than pursuant to a Terms Agreement, as the "Purchasing Agent". The Company will advise each Agent in writing of those persons with whom such Agent is to communicate regarding offers to purchase Securities and the related settlement details. Each Security will be issued only in fully registered form and will be represented by either a global security (a "Global Security") delivered to the Trustee, as agent for The Depository Trust Company (the "Depositary") and recorded in the book-entry system maintained by the Depositary (a "Book-Entry Security") or a certificate issued in definitive form (a "Certificated Security") delivered to a person designated by an Agent, as set forth in the applicable pricing supplement. An owner of a Book-Entry Security will not be entitled to receive a certificate representing such a Security, except as provided in the Indenture. Book-Entry Securities will be issued in accordance with the Administrative Procedure set forth in Part I hereof, and Certificated Securities will be issued in accordance with the Administrative Procedure set forth in Part II hereof. II-1 36 PART I: ADMINISTRATIVE PROCEDURE FOR BOOK-ENTRY SECURITIES In connection with the qualification of the Book-Entry Securities for eligibility in the book-entry system maintained by the Depositary, the institution performing the functions of a Trustee (such institution, in its respective capacities as Trustee, Security Registrar, custodian for the Depositary and Depositary Participant, being herein called the "Bank") will perform the custodial, document control and administrative functions described below, in accordance with its respective obligations under a Letter of Representation from the Company and the Bank to the Depositary, dated the date hereof, and a Medium-Term Note Certificate Agreement between the Bank and the Depositary, dated as of December 2, 1988, (the "Certificate Agreement"), and its obligations as a participant in the Depositary, including the Depositary's Same-Day Funds Settlement System ("SDFS"). Posting Rates by the Company: The Company and the Agents will discuss from time to time the rates of interest per annum to be borne by and the maturity of Book-Entry Securities that may be sold as a result of the solicitation of offers by an Agent. The Company may establish a fixed set of interest rates and maturities for an offering period ("posting"). If the Company decides to change already posted rates, it will promptly advise the Agents to suspend solicitation of offers until the new posted rates have been established with the Agents. Acceptance of Offers by the Company: Each Agent will promptly advise the Company by telephone or other appropriate means of all reasonable offers to purchase Book-Entry Securities, 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 Book-Entry Securities as a Purchasing Agent. The Company will have the sole right to accept offers to purchase Book-Entry Securities and may reject any such offer in whole or in part. The Company will promptly notify the Agent or Purchasing Agent, as the case may be, of its acceptance or rejection of an offer to purchase Book-Entry Securities. If the Company accepts an offer to purchase Book-Entry Securities, it will confirm such acceptance in writing to the Selling Agent or Purchasing Agent, as the case may be, and the Bank. Communication of Sale Information to the Company by Agent and Settlement Procedures: A. After the acceptance of an offer by the Company, the Selling Agent or Purchasing Agent, as the case may be, will communicate promptly, but in no event later than the time set forth under "Settlement Procedure Timetable" below, the following details of the terms of such offer (the "Sale Information") to the Company by telephone (confirmed in writing) or by facsimile transmission or other acceptable written means: II-2 37 (1) Principal Amount of Book-Entry Securities to be purchased; (2) If a Fixed Rate Book-Entry Security, the interest rate and initial interest payment date; (3) Trade Date; (4) Settlement Date; (5) Maturity Date; (6) Specified Currency and, if the Specified Currency is other than U.S. dollars, the date or dates on which the Exchange Rate will be determined by the Exchange Rate Agent for such Specified Currency; (7) Indexed Currency, the Base Rate and the date on which the Exchange Rate is determined, if applicable; (8) Issue Price; (9) Selling Agent's commission or Purchasing Agent's discount, as the case may be; (10) Net Proceeds to the Company; (11) If a redeemable Book-Entry Security, such of the following as are applicable: (i) Initial Redemption Date, (ii) Redemption Percentage (% of par), and (iii) Amount (% of par) that the Redemption Percentage shall decline (but not below par) on each anniversary of the Initial Redemption Date; (12) If a Floating Rate Book-Entry Security, such of the following as are applicable: (i) Base Rate, (ii) Index Maturity, (iii) Spread or Spread Multiplier, (iv) Maximum Rate, (v) Minimum Rate, (vi) Initial Interest Rate, (vii) Interest Reset Date, (viii) Calculation Dates, (ix) Interest Determination Dates, (x) Interest Payment Dates, II-3 38 (xi) Regular Record Dates, and (xii) Calculation Agent; (13) Denomination of certificates to be delivered at settlement; (14) Selling Agent or Purchasing Agent; and (15) Any other information necessary to complete the form of Security. B. After receiving the Sale Information from the Selling Agent or Purchasing Agent, as the case may be, the Company will assign a CUSIP number to the Global Security representing such Book-Entry Security from a list of CUSIP numbers previously obtained by the Company and delivered to the Bank by the Company and will then communicate such Sale Information and CUSIP number to the Bank by fascimile transmission or other acceptable means. The Company will also advise the Selling Agent and the Purchasing Agent, as the case may be, of such CUSIP number. C. The Bank will enter a pending deposit message through the Depositary's Participant Terminal System, providing the following settlement information to the Depositary, and the Depositary shall forward such information to such Agent and Standard & Poor's Corporation: (1) The applicable Sale Information; (2) CUSIP number of the Global Security representing such Book-Entry Security; (3) Whether such Global Security will represent any other Book-Entry Security (to the extent known at such time); (4) Number of the participant account maintained by the Depositary on behalf of the Selling Agent or Purchasing Agent, as the case may be; (5) The interest payment period; and (6) Initial Interest Payment Date for such Book-Entry Security, number of days by which such date succeeds the record date for the Depositary's purposes and, if calculable at that time, the amount of interest payable on such Interest Payment Date. D. The Bank will complete and authenticate the Global Security previously delivered by the Company representing such Book-Entry Security. E. The Depositary will credit such Book-Entry Security to the Bank's participant account at the Depositary. F. The Bank will enter an SDFS deliver order through the Depositary's Participant Terminal System instructing the Depositary to (i) debit such Book-Entry Security to the Bank's participant account and credit such Book-Entry Security to such Agent's participant account and II-4 39 (ii) debit such Agent's settlement account and credit the Bank's settlement account for an amount equal to the price of such Book-Entry Security less such Agent's commission. The entry of such a deliver order shall constitute a representation and warranty by the Bank to the Depositary that (a) the Global Security representing such Book-Entry Security has been issued and authenticated and (b) the Bank is holding such Global Security pursuant to the Certificate Agreement. G. Such Agent will enter an SDFS deliver order through the Depositary's Participant Terminal System instructing the Depositary (i) to debit such Book-Entry Security to such Agent's participant account and credit such Book-Entry Security to the participant accounts of the Participants with respect to such Book-Entry Security and (ii) to debit the settlement accounts of such Participants and credit the settlement account of such Agent for an amount equal to the price of such Book-Entry Security. H. Transfers of funds in accordance with SDFS deliver orders described in Settlement Procedures "F" and "G" herein will be settled in accordance with SDFS operating procedures in effect on the settlement date. I. Upon confirmation of receipt of funds, the Bank will transfer to the account of the Company maintained at The Chase Manhattan Bank, New York, New York, account no. 910-1-419894 or such other account as the Company may have previously specified to the Bank, in funds available for immediate use in the amount transferred to the Bank in accordance with Settlement Procedure "F" herein. J. Upon request, the Bank will send to the Company a statement setting forth the principal amount of Book-Entry Securities outstanding as of that date under the Indenture. K. Such Agent will confirm the purchase of such Book-Entry Security to the purchaser either by transmitting to the Participants with respect to such Book-Entry Security a confirmation order or orders through the Depositary's institutional delivery system or by mailing a written confirmation to such purchaser. L. The Depositary will, at any time, upon request of the Company or the Bank, promptly furnish to the Company or the Bank a list of the names and addresses of the Participants for whom the Depositary has credited Book-Entry Securities. Preparation of Pricing Supplement: If the Company accepts an offer to purchase a Book-Entry Security, it will prepare a pricing supplement reflecting the terms of such Book-Entry Security and arrange to have delivered to the Selling Agent or Purchasing Agent, as the case may be, at least ten copies of such pricing supplement, not later than 5:00 p.m., New York City time, on the Business Day following the Trade Date (as defined below), or, if the Company and the purchaser agree to settlement on the Business Day following the date of acceptance of such offer, not later than II-5 40 noon, New York City time, on such date. The Company will arrange to have the pricing supplement filed with the Commission not later than the close of business of the Commission on the fifth Business Day following the date on which such pricing supplement is first used. As used herein, the term "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in The City of New York. Delivery of Confirmation and Prospectus to Purchaser by Selling Agent: The Selling Agent will deliver to the purchaser of a Book-Entry Security a written confirmation of the sale and delivery and payment instructions. In addition, the Selling Agent will deliver to such purchaser or its agent the Prospectus (including the pricing supplement) in relation to such Book-Entry Security prior to or together with the earlier of the delivery to such purchaser or its agent of (a) the confirmation of sale or (b) the Book-Entry Security. Date of Settlement: The receipt by the Company of immediately available funds in payment for a Book-Entry Security and the authentication and issuance of the Global Security representing such Book-Entry Security shall constitute "settlement" with respect to such Book-Entry Security. All orders of Book-Entry Securities solicited by a Selling Agent or made by a Purchasing Agent and accepted by the Company on a particular date (the "Trade Date") will be settled on a date (the "Settlement Date") which is the third Business Day after the Trade Date pursuant to the "Settlement Procedure Timetable" set forth below, unless the Company and the purchaser agree to settlement on another Business Day, which shall be no earlier than the next Business Day after the Trade Date. Settlement Procedure Timetable: For orders of Book-Entry Securities solicited by a Selling Agent and accepted by the Company for settlement on the third Business Day after the Trade Date, Settlement Procedures "A" through "I" set forth above shall be completed as soon as possible but not later than the respective times (New York City time) set forth below: II-6 41
SETTLEMENT PROCEDURE Time - --------- ---- A 5:00 p.m. on the Business Day following the Trade Date or 10:00 a.m. on the second Business Day immediately preceding the Settlement Date, whichever is earlier B 12:00 noon on the second Business Day immediately preceding the Settlement Date C 2:00 p.m. on the second Business Day immediately preceding the Settlement Date D 9:00 a.m. on the Settlement Date E 10:00 a.m. on the Settlement Date F-G 2:00 p.m. on the Settlement Date H 4:45 p.m. on the Settlement Date I 5:00 p.m. on the Settlement Date
If the initial interest rate for a Floating Rate Book-Entry Security has not been determined at the time that Settlement Procedure "A" is completed, Settlement Procedures "B" and "C" shall be completed as soon as such rate has been determined but no later than 2:00 p.m. on the second Business Day immediately preceding 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 Security is rescheduled or canceled, the Bank, upon obtaining knowledge thereof, will deliver to the Depositary, through the Depositary's Participation Terminal System, a cancellation message to such effect by no later than 2:00 p.m. on the Business Day immediately preceding the scheduled Settlement Date. Failure to Settle: If the Bank fails to enter an SDFS deliver order with respect to a Book-Entry Security pursuant to Settlement Procedure "F", the Bank may deliver to the Depositary, through the Depositary's Participant Terminal System, as soon as practicable a withdrawal message instructing the Depositary to debit such Book-Entry Security to the Bank's participant account, provided that the Bank's participant account contains a principal amount of the Global Security representing such Book-Entry Security that is at least equal to the principal amount to be debited. If a withdrawal message is processed with respect to all the Book-Entry Securities represented by a Global Security, the Bank will mark such Global Security "canceled", make appropriate entries in the Bank's records and send such canceled Global Security to the Company. The CUSIP number assigned to such Global Security shall, in accordance with CUSIP Service Bureau procedures, be canceled and not immediately reassigned. If a withdrawal message is processed with respect to one or more, but not all, of the Book-Entry Securities represented by a Global Security, the Bank will exchange such Global Security for two Global Securities, one of which II-7 42 shall represent such Book-Entry Security or Securities and shall be canceled immediately after issuance and the other of which shall represent the remaining Book-Entry Securities previously represented by the surrendered Global Security and shall bear the CUSIP number of the surrendered Global Security. If the purchase price for any Book-Entry Security is not timely paid to the participants with respect to such Book-Entry Security by the beneficial purchaser thereof (or a person, including an indirect participant in the Depositary, acting on behalf of such purchaser), such participants and, in turn, the Agent for such Book-Entry Security may enter delivery orders through the Depositary's Participant Terminal System debiting such Book-Entry Security to such participant's account and crediting such Book-Entry Security to such Agent's account and then debiting such Book-Entry Security to such Agent's participant account and crediting such Book-Entry Security to the Bank's participant account and shall notify the Company and the Bank thereof. Thereafter, the Bank will (i) immediately notify the Company of such order and the Company shall transfer to such Agent funds available for immediate use in an amount equal to the price of such Book-Entry Security which was credited to the account of the Company maintained at the Bank in accordance with Settlement Procedure I, and (ii) deliver the withdrawal message and take the related actions described in the preceding paragraph. If such failure shall have occurred for any reason other than default by the applicable Agent to perform its obligations hereunder or under the Distribution Agreement, the Company and such Agent will mutually agree upon an amount of compensation to reimburse such Agent for the loss of its use of funds during the period when the funds were credited to the account of the Company; provided however, it is understood that the parties will, during the course of reaching such mutual agreement, take into consideration, among other things, any adverse effect (including the magnitude thereof) on each of the parties as a result of such failure. Notwithstanding the foregoing, upon any failure to settle with respect to a Book-Entry Security, the Depositary may take any actions in accordance with its SDFS operating procedures then in effect. In the event of a failure to settle with respect to one or more, but not all, of the Book-Entry Securities to have been represented by a Global Security, the Bank will provide, in accordance with Settlement Procedure "D", for the authentication and issuance of a Global Security representing the other Book-Entry Securities to have been represented by such Global Security and will make appropriate entries in its records. The Company will, from time to time, furnish the Bank with a sufficient quantity of Securities. PART II: ADMINISTRATIVE PROCEDURE FOR CERTIFICATED SECURITIES Posting Rates by Company: The Company and the Agents will discuss from time to time the rates of interest per annum to be borne by and the maturity of Certificated Securities that may be sold as a result of the solicitation of offers by an Agent. The Company may establish a fixed set of interest rates and maturities for an offering period ("posting"). If the Company decides to change already II-8 43 posted rates, it will promptly advise the Agents to suspend solicitation of offers until the new posted rates have been established with the Agents. Acceptance of Offers by Company: Each Agent will promptly advise the Company by telephone or other appropriate means of all reasonable offers to purchase Certificated Securities, 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 Certificated Securities as a Purchasing Agent. The Company will have the sole right to accept offers to purchase Certificated Securities and may reject any such offer in whole or in part. The Company will promptly notify the Selling Agent or Purchasing Agent, as the case may be, of its acceptance or rejection of an offer to purchase Certificated Securities. If the Company accepts an offer to purchase Certificated Securities, it will confirm such acceptance in writing to the Selling Agent or Purchasing Agent, as the case may be, and the Bank. Communication of Sale Information to Company by Agent: After the acceptance of an offer by the Company, the Selling Agent or Purchasing Agent, as the case may be, will communicate the following details of the terms of such offer (the "Sale Information") to the Company by telephone (confirmed in writing) or by facsimile transmission or other acceptable written means: (1) Principal Amount of Certificated Securities to be purchased; (2) If a Fixed Rate Certificated Security, the interest rate and initial interest payment date; (3) Trade Date; (4) Settlement Date; (5) Maturity Date; (6) Specified Currency and, if the Specified Currency is other than U.S. dollars, the applicable Exchange Rate for such Specified Currency; (7) Indexed Currency, the Base Rate and the date on which the applicable Exchange is determined, if applicable; (8) Issue Price; (9) Selling Agent's commission or Purchasing Agent' discount, as the case may be; (10) Net Proceeds to the Company; (11) If a redeemable Certificated Security, such of the following as are applicable: (i) Initial Redemption Date, (ii) Redemption Percentage (% of par), and (iii) Amount (% of par) that the Redemption Percentage shall decline (but not below par) on each anniversary of the Initial Redemption Date; II-9 44 (12) If a Floating Rate Certificated Security, such of the following as are applicable: (i) Base Rate (ii) Index Maturity (iii) Spread or Spread Multiplier (iv) Maximum Rate (v) Minimum Rate (vi) Initial Interest Rate (vii) Interest Reset Dates (viii) Calculation Dates (ix) Interest Determination Dates (x) Interest Payment Dates (xi) Regular Record Dates (xii) Calculation Agent (13) Name, address and taxpayer identification numbe of the registered owner(s); (14) Denomination of certificates to be delivered at settlement; (15) Selling Agent or Purchasing Agent. (16) Any other information necessary to complete the form of Security. Preparation of Pricing Supplement by Company: If the Company accepts an offer to purchase a Certificated Security, it will prepare a pricing supplement reflecting the terms of such Certificated Security and arrange to have delivered to the Selling Agent or Purchasing Agent, as the case may be, at least ten copies of such pricing supplement, not later than 5:00 p.m., New York City time, on the Business Day following the Trade Date, or, if the Company and the purchaser agree to settlement on the date of acceptance of such offer, not later than noon, New York City time, on such date. The Company will arrange to file the pricing supplement with the Commission not later than the close of business of the Commission on the fifth Business Day following the date on which such pricing supplement is first used. Delivery of Confirmation and Prospectus to Purchaser by Selling Agent: The Selling Agent will deliver to the purchaser of a Certificated Security a written confirmation of the sale and delivery and payment instructions. In addition, the Selling Agent will deliver to such purchaser or its agent the Prospectus (including the pricing supplement) in relation to such Certificated Security prior to or together with the earlier of the delivery to such purchaser or its agent of (a) the confirmation of sale or (b) the Certificated Security. II-10 45 Date of Settlement: All offers of Certificated Securities solicited by a Selling Agent or made by a Purchasing Agent and accepted by the Company will be settled on a date (the "Settlement Date") which is the third Business Day after the date of acceptance of such offer, unless the Company and the purchaser agree to settlement (a) on another Business Day after the acceptance of such offer or (b) with respect to an offer accepted by the Company prior to 10:00 a.m., New York City time, on the date of such acceptance. Instruction from Company to Trustee for Preparation of Certificated Securities: After receiving the Sale Information from the Selling Agent or Purchasing Agent, as the case may be, the Company will communicate such Sale Information to the Bank by facsimile transmission or other acceptable written means. The Company will instruct the Bank by facsimile transmission or other acceptable written means to authenticate and deliver the Certificated Securities no later than 2:15 p.m., New York City time, on the Settlement Date. Such instruction will be given by the Company prior to 3:00 p.m., New York City time, on the Business Day immediately preceding the Settlement Date unless the Settlement Date is the date of acceptance by the Company of the offer to purchase Certificated Securities, in which case such instruction will be given by the Company by 11:00 a.m., New York City time. Preparation and Delivery of Certificated Securities by Trustee and Receipt of Payment Therefor: The Bank will complete each Certificated Security and appropriate receipts that will serve as the documentary control of the transaction. In the case of a sale of Certificated Securities to a purchaser solicited by a Selling Agent, the Bank will, by 2:15 p.m., New York City time, on the Settlement Date, deliver the Certificated Securities to the Selling Agent for the benefit of the purchaser of such Certificated Securities against delivery by the Selling Agent of a receipt therefor. On the Settlement Date, the Selling Agent will deliver payment for such Certificated Securities in immediately available funds to the Company in an amount equal to the issue price of the Certificated Securities less the Selling Agent's commission; provided that the Selling Agent reserves the right to withhold payment for which it has not received funds from the purchaser. The Company shall not use any proceeds advanced by a Selling Agent to acquire securities. In the case of a sale of Certificated Securities to a Purchasing Agent, the Bank will, by 2:15 p.m., New York City time, on the Settlement Date, deliver the Certificated Securities to the Purchasing Agent against receipt therefor. On the Settlement Date the Purchasing Agent will deliver payment for such Certificated Securities in immediately available funds to the Company II-11 46 in an amount equal to the issue price of the Certificated Securities less the Purchasing Agent's discount. Failure of Purchaser to Pay Selling Agent: If a purchaser (other than a Purchasing Agent) fails to make payment to the Selling Agent for a Certificated Security, the Selling Agent will promptly notify the Bank and the Company thereof by telephone (confirmed in writing) or by facsimile transmission or other acceptable written means. The Selling Agent will immediately return the Certificated Security to the Bank. Immediately upon receipt of such Certificated Security by the Bank, the Company will return to the Selling Agent an amount equal to the amount previously paid to the Company in respect of such Certificated Security. The Company and the Selling Agent will mutually agree upon an amount of compensation to reimburse the Selling Agent for the loss of its use of funds during the period when they were credited to the account of the Company; provided, however, it is understood that the parties will, during the course of reaching such mutual agreement, take into consideration, among other things, any adverse effect (including the magnitude thereof) on each of the parties as a result of such failure. The Bank will cancel the Certificated Security in respect of which the failure occurred, make appropriate entries in its records and, unless otherwise instructed by the Company, dispose of the Certificated Security in accordance with its customary procedures. PART III: BANK NOT TO RISK FUNDS Nothing herein shall be deemed to require the Bank to risk or expend its own funds in connection with any payment to the Company or the Agents or any purchaser, it being understood by all parties that payments made by the Bank to either the Company or the Agents or any purchaser shall be made only to the extent that funds are provided to the Bank for such purpose. II-12 47 ANNEX III ACCOUNTANTS' LETTER Pursuant to Sections 4(j) and 6(d), as the case may be, 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 Subsidiaries within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) in their opinion, the financial statements and schedules examined by them and included in the prospectus or prospectuses contained in the Registration Statement relating to the Securities, as amended at the date of such letter, comply in form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; (iii) they have, as indicated in their report or reports attached to such letter, made a review of any unaudited financial statements included in such prospectus in accordance with standards established by the American Institute of Certified Public Accountants; (iv) on the basis of the review referred to in (iii) above, a reading of the latest available interim financial statements of the Company, and inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that the unaudited financial statements, if any, included in such Prospectus or prospectuses do not comply in form in all material respects with the applicable accounting requirements of the Act, the Exchange Act and the related published Rules and Regulations, or are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in such Prospectus; (v) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in such prospectus or prospectuses (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its Subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter; III-1 48 (vi) from the date of the latest balance sheet of the Company and its Subsidiaries included or incorporated by reference in the Prospectus to a specified date not more than five days from the date of such letter, there was not any change in the capital stock of the Company (other than by reason of shares issued pursuant to the Company's employee or director stock option plans, or stock ownership plans, stock bonus plans, stock compensation plans or dividend reinvestment plans or upon conversion of convertible securities or in connection with acquisitions or distributions previously disclosed to the Agents), any increase in the long-term debt or short-term debt of the Company and its consolidated Subsidiaries or any decrease in consolidated net assets of the Company and its consolidated Subsidiaries, in each case as compared with amounts shown in such latest balance sheet, or any decrease in consolidated net sales or the total or per share amounts of consolidated net income, in each case as compared with the comparable period in the preceding year, 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 or letters; and (vii) they have read the unaudited pro forma financial information, if any, contained in the Prospectus, and nothing came to their attention that caused them to believe that the unaudited pro forma financial information does not comply in all material respects with the applicable requirements of Rule 11.02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of the unaudited pro forma financial information. All financial statements and schedules included in material incorporated by reference into such Prospectus shall be deemed included in such Prospectus. All references in this Annex III to the Prospectus shall be deemed to refer to the Prospectus (including the documents incorporated by reference therein) as defined in the Distribution Agreement as of the Commencement Date referred to in Section 6(d) thereof and 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 requiring the delivery of such letter under 4(j) thereof. III-2 EX-4.I 3 EXHIBIT 4(I) 1 Exhibit 4(i) [FACE OF NOTE] CUSIP NO. REGISTERED PRINCIPAL AMOUNT No. FX - EATON CORPORATION MEDIUM-TERM NOTE (FIXED RATE) If the registered owner of this Security (as indicated below) is The Depository Trust Company (the "Depository") or a nominee of the Depository, this Security is a Global Security and the following two legends apply: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR OF THE DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR. IF APPLICABLE, THE "TOTAL AMOUNT OF OID", "YIELD TO MATURITY" AND "INITIAL ACCRUAL PERIOD OID" (COMPUTED UNDER THE APPROXIMATE METHOD) BELOW WILL BE COMPLETED SOLELY FOR THE PURPOSES OF APPLYING THE FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES. 2 2 ISSUE PRICE: OPTION TO ELECT REPAYMENT: [ ] YES [ ] NO ORIGINAL ISSUE DATE: OPTIONAL REPAYMENT DATE[S]: STATED MATURITY DATE: MINIMUM DENOMINATION: [ ] $1,000 [ ] Other: SPECIFIED CURRENCY: ADDITIONAL AMOUNTS: United States Dollars: [ ] YES [ ] NO DEFEASANCE: [ ] YES [ ] NO Foreign Currency: COVENANT DEFEASANCE: [ ] YES [ ] NO EXCHANGE RATE AGENT: TOTAL AMOUNT OF OID: OPTION TO RECEIVE PAYMENTS IN YIELD TO MATURITY: SPECIFIED CURRENCY OTHER THAN U.S. DOLLARS: [ ] YES [ ] NO INITIAL ACCRUAL PERIOD OID: INTEREST RATE: SINKING FUND: PRINCIPAL FINANCIAL CENTER: INTEREST PAYMENT DATES IF OTHER THAN APRIL 15 AND OCTOBER 15: REGULAR RECORD DATES IF OTHER THAN APRIL 1 AND OCTOBER 1: OPTIONAL REDEMPTION: [ ] YES [ ] NO INITIAL REDEMPTION DATE: INITIAL REDEMPTION PERCENTAGE: ANNUAL REDEMPTION PERCENTAGE REDUCTION: OTHER/DIFFERENT PROVISIONS: 3 3 EATON CORPORATION, an Ohio corporation (herein referred to as the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ___________________________________, or registered assigns, the principal sum of ___________________________ on the Stated Maturity Date shown above (except to the extent redeemed or repaid prior to the Stated Maturity Date) and to pay interest, if any, thereon at the Interest Rate shown above from the Original Issue Date shown above or from the most recent Interest Payment Date to which interest, if any, has been paid or duly provided for, semiannually on April 15 and October 15 of each year (unless other Interest Payment Dates are shown on the face hereof) (each, an "Interest Payment Date") until the principal hereof is paid or made available for payment and on the Stated Maturity Date, any Redemption Date or Repayment Date (such terms are together hereinafter referred to as the "Maturity Date" with respect to the principal repayable on such date); provided, however, that any payment of principal (or premium, if any) or interest, if any, to be made on any Interest Payment Date or on the Maturity Date that is not a Business Day (as defined below) shall be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date or the Maturity Date, as the case may be, and no additional interest, if any, shall accrue on the amount so payable as a result of such delayed payment. For purposes of this Security, unless otherwise specified on the face hereof, "Business Day" means any day that is not a Saturday or Sunday and that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York; provided, however, that, if the Specified Currency shown above is a foreign currency, such day is also not a day on which commercial banks are authorized or required by law, regulation or executive order to close in the Principal Financial Center (as defined below) of the country issuing the Specified Currency (or, if the Specified Currency is the euro, such day is also a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open). "Principal Financial Center" means the capital city of the country issuing the Specified Currency except that with respect to United States dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders, South African rand and Swiss francs, the "Principal Financial Center" shall be The City of New York, Sydney and (solely in the case of the Specified Currency) Melbourne, Toronto, Frankfurt, Amsterdam, Johannesburg and Zurich, respectively. Any interest hereon will accrue from, and including, the immediately preceding Interest Payment Date in respect of which interest, if any, has been paid or duly provided for (or from, and including, the Original Issue Date if no interest has been paid or duly provided for) to, but excluding, the succeeding Interest Payment Date or the Maturity Date, as the case may be. The interest, if any, so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture and subject to certain exceptions described herein (referred to on the reverse hereof), be paid to the person (the "Holder") in whose name this 4 4 Security (or one or more Predecessor Securities) is registered at the close of business on the April 1 or October 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date (unless other Regular Record Dates are specified on the face hereof) (each, a "Regular Record Date"); provided, however, that, if this Security was issued between a Regular Record Date and the initial Interest Payment Date relating to such Regular Record Date, interest, if any, for the period beginning on the Original Issue Date and ending on such initial Interest Payment Date shall be paid on the Interest Payment Date following the next succeeding Regular Record Date to the Holder hereof on such next succeeding Regular Record Date; and provided further that interest, if any, payable on the Maturity Date will be payable to the person to whom the principal hereof shall be payable. Any such interest not so punctually paid or duly provided for on any Interest Payment Date other than the Maturity Date ("Defaulted Interest") will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee (referred to on the reverse hereof), notice whereof shall be given to the Holder of this Security not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more fully provided in the Indenture. Unless otherwise specified above, all payments in respect of this Security will be made in U.S. dollars regardless of the Specified Currency shown above unless the Holder hereof makes the election described below. If the Specified Currency shown above is other than U.S. dollars, the Exchange Rate Agent (referred to on the reverse hereof) will arrange to convert any such amounts so payable in respect hereof into U.S. dollars in the manner described on the reverse hereof; provided, however, that the Holder hereof may, if so indicated above, elect to receive all or any specified portion of any payment of principal, premium, if any, and/or interest, if any, in respect of this Security in such Specified Currency by delivery of a written request to the corporate trust office of the Trustee in The City of New York, on or prior to the applicable Regular Record Date or at least fifteen days prior to the Maturity Date, as the case may be. Such request may be in writing (mailed or hand delivered) or by cable, telex or other form of facsimile transmission. The Holder hereof may elect to receive payment in such Specified Currency for all principal, premium, if any, and interest payments, if any, and need not file a separate election for each payment. Such election will remain in effect until revoked by written notice to the Trustee, but written notice of any such revocation must be received by the Trustee on or prior to the applicable Regular Record Date or at least fifteen days prior to the Maturity Date, as the case may be. Notwithstanding the foregoing, if the Company determines that the Specified Currency is not available for making payments in respect hereof due to the imposition of exchange controls or other circumstances beyond the Company's control, or is no longer used by the government of the country issuing such currency or for the settlement of transactions by public institutions of or within the international banking community, then the Holder hereof may 5 5 not so elect to receive payments in the Specified Currency and any such outstanding election shall be automatically suspended, until the Company determines that the Specified Currency is again available for making such payments. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency will not constitute a default under the Indenture. In the event of an official redenomination of the Specified Currency, the obligations of the Company with respect to payments on this Security, in all cases, shall be deemed immediately following such redenomination to provide for payment of that amount of redenominated currency representing the amount of such obligations immediately before such redenomination. In no event shall any adjustment be made to any amount payable hereunder as a result of any change in the value of the Specified Currency shown above relative to any other currency due solely to fluctuations in exchange rates. Until this Security is paid in full or payment therefor in full is duly provided for, the Company will at all times maintain a Paying Agent (which Paying Agent may be the Trustee) in The City of New York (which, unless otherwise specified above, shall be the "Place of Payment"). The Company has initially appointed The Chase Manhattan Bank, at its office in The City of New York as Paying Agent. Unless otherwise shown above, payment of interest on this Security (other than on the Maturity Date) will be made by check mailed to the registered address of the Holder hereof as of the Regular Record Date; provided, however, that, if (i) the Specified Currency is U.S. dollars and this is a Global Security (as defined on the reverse hereof) or (ii) the Specified Currency is a Foreign Currency, and the Holder has elected to receive payments in such Specified Currency as provided for above, such interest payments will be made by transfer of immediately available funds, but only if appropriate wire transfer instructions have been received in writing by the Trustee on or prior to the applicable Regular Record Date. Simultaneously with any election by the Holder hereof to receive payments in respect hereof in the Specified Currency (if other than U.S. dollars), such Holder may provide appropriate wire transfer instructions to the Trustee, and all such payments will be made in immediately available funds to an account maintained by the payee with a bank, but only if such bank has appropriate facilities therefor. Unless otherwise specified above, the principal hereof (and premium, if any) and interest, if any, hereon payable on the Maturity Date will be paid in immediately available funds upon surrender of this Security at the office of the Trustee maintained for that purpose in the Borough of Manhattan, The City of New York (or at such other location as may be specified above). The Company will pay any administrative costs imposed by banks in making payments in immediately available funds but, except as otherwise provided under Additional Amounts above, any tax, assessment or governmental charge imposed upon payments will be borne by the Holders of the Securities in respect of which such payments are made. 6 6 Interest on this Security, if any, will be computed on the basis of a 360-day year of twelve 30-day months. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its facsimile corporate seal. EATON CORPORATION By:_________________________________ Name: Title: By:_________________________________ Name: Title: [CORPORATE SEAL] Attest:______________________________ Name: Title: Secretary Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture THE CHASE MANHATTAN BANK, as Trustee By:________________________________ Authorized Officer 7 [REVERSE OF NOTE] EATON CORPORATION MEDIUM-TERM NOTE Section 1. General. This Security is one of a duly authorized issue of securities (herein called the "Securities") of the Company, issued and to be issued in one or more series under an Indenture, dated as of April 1, 1994, as it may be supplemented from time to time (herein called the "Indenture"), between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture with respect to a series of which this Security is a part), to which Indenture and all indentures supplemental thereto, reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to U.S.$800,000,000 (or the equivalent thereof in one or more foreign currencies) or such other principal amount as shall be provided pursuant to the Indenture. Section 2. Payments. If the Specified Currency is other than U.S. dollars and the Holder hereof fails to elect payment in such Specified Currency in accordance with the procedures set forth on the face hereof, the amount of U.S. dollar payments to be made in respect hereof will be determined by the Exchange Rate Agent specified on the face hereof or a successor thereto (the "Exchange Rate Agent") based on the highest bid quotation in The City of New York at approximately 11:00 A.M., New York City time, on the second Business Day preceding the applicable payment date received by the Exchange Rate Agent from three recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the Company for the purchase by the quoting dealer of the Specified Currency for U.S. dollars for settlement on such payment date in the aggregate amount of the Specified Currency payable to all holders of Securities scheduled to receive U.S. dollar payments and at which the applicable dealer commits to execute a contract. If three such bid quotations are not available, payments will be made in the Specified Currency. If the Specified Currency is other than U.S. dollars and the Holder hereof has elected payment in such Specified Currency in accordance with the procedures set forth on the face hereof and the Specified Currency is not available due to the imposition of exchange controls or to other circumstances beyond the Company's control, the Company will be entitled to satisfy its obligations to the Holder of this Security by making such payment in U.S. dollars on the basis of the noon buying rate in The City of New York for cable transfers of such Specified Currency as certified for customs purposes (or, if not so certified, as otherwise determined) by the Federal Reserve Bank of New York (the "Market Exchange Rate") as computed by the 8 2 Exchange Rate Agent on the second Business Day prior to the applicable payment date or, if the Market Exchange Rate is then not available, on the basis of the most recently available Market Exchange Rate or as otherwise indicated above. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency will not constitute a default under the Indenture. All determinations referred to above made by the Exchange Rate Agent shall be at its sole discretion (except to the extent expressly provided that any determination is subject to approval by the Company) and, in the absence of manifest error, shall be conclusive for all purposes and binding on the Holder of this Security, and the Exchange Rate Agent shall have no liability therefor. All currency exchange costs will be borne by the Company. References herein to "U.S. dollars" or "U.S. $" or "$" are to the currency of the United States of America. Section 3. Redemption. If so specified on the face hereof, the Company may at its option redeem this Security in whole or from time to time in part in increments of $1,000 (provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination specified on the face hereof) on or after the date designated as the Initial Redemption Date on the face hereof at 100% of the unpaid principal amount hereof or the portion thereof redeemed (or, if this Security is a Discount Security, such lesser amount as is provided for below) multiplied by the Initial Redemption Percentage specified on the face hereof, together with accrued interest, if any, to the Redemption Date. Such Initial Redemption Percentage shall decline at each anniversary of the Initial Redemption Date by an amount equal to the Annual Redemption Percentage Reduction, if any, specified on the face hereof until the Redemption Price is 100% of the unpaid principal amount hereof. The Company may exercise such option by causing the Trustee to mail a notice of such redemption at least 30 but not more than 60 days prior to the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If less than all of the Securities with like tenor and terms to this Security are to be redeemed, the Securities to be redeemed shall be selected by the Trustee by such method as the Trustee shall deem fair and appropriate. However, if less than all the Securities of the series with differing tenor and terms to this Security are to be redeemed, then the Company in its sole discretion shall select the particular Securities to be redeemed and shall notify the Trustee in writing thereof at least 45 days prior to the relevant Redemption Date. Section 4. Repayment. If so specified on the face hereof, this Security shall be repayable prior to the Stated Maturity Date at the option of the Holder on each applicable Optional Repayment Date shown on the face hereof at a repayment price equal to 100% of the principal amount to be repaid, together with accrued interest, if any, to the Repayment Date. In 9 3 order for this Security to be repaid, the Trustee must receive at least 30 but not more than 45 days prior to an Optional Repayment Date, this Security with the form attached hereto entitled "Option to Elect Repayment" duly completed. Any tender of this Security for repayment shall be irrevocable. The repayment option may be exercised by the Holder of this Security in whole or in part in increments of $1,000 (provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination specified on the face hereof). Upon any partial repayment, this Security shall be canceled and a new Security or Securities for the remaining principal amount hereof shall be issued in the name of the Holder of this Security. Section 5. Discount Securities. If this Security (such a Security being referred to as a "Discount Security") (a) has been issued at an Issue Price lower, by more than a de minimis amount (as determined under United States federal income tax rules applicable to original issue discount instruments), than the stated redemption price at maturity (as defined below) hereof and (b) would be considered an original issue discount security for United States federal income tax purposes, then the amount payable on this Security in the event of redemption by the Company, repayment at the option of the Holder or acceleration of the maturity hereof, in lieu of the principal amount due at the Stated Maturity Date hereof, shall be the Amortized Face Amount (as defined below) of this Security as of the date of such redemption, repayment or acceleration. The "Amortized Face Amount" of this Security shall be the amount equal to the sum of (a) the Issue Price (as set forth on the face hereof) plus (b) the aggregate of the portions of the original issue discount (the excess of the amounts considered as part of the "stated redemption price at maturity" of this Security within the meaning of Section 1273(a)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), whether denominated as principal or interest, over the Issue Price of this Security) which shall theretofore have accrued pursuant to Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code) from the date of issue of this Security to the date of determination, minus (c) any amount considered as part of the "stated redemption price at maturity" of this Security which has been paid on this Security from the date of issue to the date of determination. Section 6. Modification and Waivers; Obligation of the Company Absolute. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series. Such amendment may be effected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of Outstanding Securities of each series affected thereby. The Indenture also contains provisions permitting the Holders of not less than a majority in principal amount of the Outstanding Securities of any series, on behalf of the Holders of all Outstanding Securities of such series, to waive compliance by the Company with certain provisions of the Indenture. Provisions in the Indenture also permit the Holders of not less than a majority in principal amount of all Outstanding Securities of any series to waive on behalf of all of the Holders of Securities of such series certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Security and 10 4 upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. The Securities are unsecured and rank pari passu with all other unsecured and unsubordinated indebtedness of the Company. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the Specified Currency herein prescribed, except as set forth in Section 2 on the reverse hereof. Section 7. Defeasance and Covenant Defeasance. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security, unless otherwise specified on the face hereof. Section 8. Minimum Denomination. Authorized Denominations. Unless otherwise provided on the face hereof, this Security is issuable only in registered form without coupons in denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000. If this Security is denominated in a Specified Currency other than U.S. dollars or is a Discount Security, this Security shall be issuable in the denominations set forth on the face hereof. Section 9. Registration of Transfer. As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Security is registrable in the Security Register upon surrender of this Security for registration of transfer at a Place of Payment for the series of Securities of which this Security forms a part, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of like authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. If the registered owner of this Security is the Depository (such a Security being referred to as a "Global Security"), and (i) the Depository is at any time unwilling or unable to continue as depository and a successor depository is not appointed by the Company within 90 days following notice to the Company or (ii) an Event of Default occurs, the Company will issue Securities in certificated form in exchange for this Global Security. In addition, the Company may at any time, and in its sole discretion, determine not to have Securities represented by a Global Security and, in such event, will issue Securities in certificated form in exchange in 11 5 whole for this Global Security. In any exchange pursuant to this paragraph, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Securities of this series in exchange for this Global Security, will authenticate and deliver individual Securities of this series in certificated form in an aggregate principal amount equal to the principal amount of this Global Security in exchange herefor. Securities issued in exchange for this Global Security pursuant to this paragraph shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in this Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. For purposes of the Indenture, this Global Security constitutes a Security issued in permanent global form. Securities so issued in certificated form will be issued in denominations of $1,000 (or such other denomination as shall be specified on the face hereof) or any amount in excess thereof which is an integral multiple of $1,000 and will be issued in registered form only, without coupons. As provided in the Indenture and subject to certain limitations therein and herein set forth, this Security is exchangeable for a like aggregate principal amount of Securities of this series of different authorized denominations but otherwise having the same terms and conditions, as requested by the Holder hereof surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder as the owner hereof for all purposes, whether or not this Security be overdue, and none of the Company, the Trustee nor any such agent shall be affected by notice to the contrary. Section 10. Events of Default. If an Event of Default with respect to the Securities of the series of which this Security forms a part shall have occurred and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect provided in the Indenture. Section 11. Defined Terms. All terms used in this Security which are defined in the Indenture and are not otherwise defined herein shall have the meanings assigned to them in the Indenture. 12 6 Section 12. Governing Law. Unless otherwise specified on the face hereof, this Security shall be governed by and construed in accordance with the law of the State of New York. 13 OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably requests and instructs the Company to repay this Security (or the portion thereof specified below), pursuant to its terms, on the "Optional Repayment Date" first occurring after the date of receipt of this Security as specified below (the "Repayment Date"), at a Repayment Price equal to 100% of the principal amount thereof, together with interest thereon accrued to the Repayment Date, to the undersigned at: ___________________________________ ___________________________________ (Please Print or Type Name and Address of the Undersigned.) For this Option to Elect Repayment to be effective, this Security with the Option to Elect Repayment duly completed must be received at least 30 but not more than 45 days prior to the Optional Repayment Date (or, if such Repayment Date is not a Business Day, the next succeeding Business Day) by the Company at its office or agency in The City of New York, which will be located initially at the office of the Trustee at 450 West 33rd Street, New York, New York 10001-2697. If less than the entire principal amount of this Security is to be repaid, specify the portion thereof (which shall be $1,000 or an integral multiple thereof) which is to be repaid: $___________. If less than the entire principal amount of the within Security is to be repaid, specify the denomination(s) of the Security(ies) to be issued for the unpaid amount ($1,000 or any integral multiple of $1,000; provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination): $____. Dated:_________ _______________ Note: The signature to this Option to Elect Repayment must correspond with the name as written upon the face of this Security in every particular without alteration or enlargement or any change whatsoever. 14 _____________ ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - ............Custodian............ (Cust.) (Minor) Under Uniform Gifts to Minors Act ................................. (State) Additional abbreviations may also be used though not in the above list. _____________ FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________________ | | | | _______________________________________________________________ Please print or type name and address, including zip code of assignee _______________________________________________________________ the within Security of EATON CORPORATION and all rights thereunder and does hereby irrevocably constitute and appoint Attorney ________________________________________________________________________ to transfer the said Security on the books of the within-named Company, with full power of substitution in the premises. Dated __________________ SIGNATURE GUARANTEED: _____________________________________ ________________________ _________________________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the Security in every particular, without alteration or enlargement or any change whatsoever. EX-4.J 4 EXHIBIT 4(J) 1 Exhibit 4(j) [FACE OF NOTE] CUSIP NO. REGISTERED PRINCIPAL AMOUNT No. FL - EATON CORPORATION MEDIUM-TERM NOTE (FLOATING RATE) If the registered owner of this Security (as indicated below) is The Depository Trust Company (the "Depository") or a nominee of the Depository, this Security is a Global Security and the following two legends apply: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR OF THE DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR. IF APPLICABLE, THE "TOTAL AMOUNT OF OID", "YIELD TO MATURITY" AND "INITIAL ACCRUAL PERIOD OID" (COMPUTED UNDER THE APPROXIMATE METHOD) BELOW WILL BE COMPLETED SOLELY FOR THE PURPOSES OF APPLYING THE FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES. 2 2 ISSUE PRICE: OPTION TO ELECT REPAYMENT: [ ] YES [ ] NO ORIGINAL ISSUE DATE: OPTIONAL REPAYMENT DATE[S]: STATED MATURITY DATE: OPTIONAL REDEMPTION: [ ] YES [ ] NO BASE RATE: INITIAL REDEMPTION DATE: If LIBOR: [ ] LIBOR Telerate [ ] LIBOR Reuters [ ] Other INITIAL REDEMPTION PERCENTAGE: Designated LIBOR Page: Designated LIBOR Currency: If CMT Rate, Designated CMT Telerate Page: Designated CMT Maturity Index: INITIAL INTEREST RATE: ANNUAL REDEMPTION PERCENTAGE REDUCTION: INDEX MATURITY: MINIMUM DENOMINATION: [ ] $1,000 [ ] Other: SPREAD (PLUS OR MINUS): SPECIFIED CURRENCY: United States Dollars: [ ] YES [ ] NO SPREAD MULTIPLIER: Foreign Currency: CALCULATION AGENT: OPTION TO RECEIVE PAYMENTS IN SPECIFIED CURRENCY OTHER THAN U.S. DOLLARS: [ ] YES [ ] NO CALCULATION DATE: EXCHANGE RATE AGENT; SINKING FUND: ADDITIONAL AMOUNTS: MAXIMUM INTEREST RATE: DEFEASANCE: [ ] YES [ ] NO MINIMUM INTEREST RATE: COVENANT DEFEASANCE: [ ] YES [ ] NO INTEREST DETERMINATION DATE: OTHER/DIFFERENT PROVISIONS: INTEREST RESET PERIOD: INTEREST RESET DATES: INTEREST PAYMENT PERIOD: REGULAR RECORD DATES: INTEREST PAYMENT DATES: TOTAL AMOUNT OF OID: INITIAL ACCRUAL PERIOD OID: YIELD TO MATURITY: OPTIONAL INTEREST RATE RESET: [ ] YES [ ] NO OPTIONAL INTEREST RATE RESET DATES:
3 3 EATON CORPORATION, an Ohio corporation (herein referred to as the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ______________, or registered assigns, the principal sum of ___________on the Stated Maturity Date shown above (except to the extent redeemed or repaid prior to the Stated Maturity Date) and to pay interest thereon at the Initial Interest Rate shown above from the Original Issue Date shown above until the first Interest Reset Date shown above following the Original Issue Date (if the first Interest Reset Date is later than the Original Issue Date) and thereafter at the interest rate determined by reference to the Base Rate shown above, plus or minus the Spread, if any, or multiplied by the Spread Multiplier, if any, shown above, or adjusted by such other formula, if any, set forth on the face hereof, until the principal hereof is paid or duly made available for payment. The Company will pay interest on each Interest Payment Date, if any, specified above, commencing with the first Interest Payment Date next succeeding the Original Issue Date, and on the Stated Maturity Date, any Redemption Date or Repayment Date (each such date being hereinafter referred to as the "Maturity Date" with respect to the principal repayable on such date); provided, however, that any payment of principal (or premium, if any) or interest, if any, to be made on any Interest Payment Date or on the Maturity Date that is not a Business Day (as defined below) shall be made on the next succeeding Business Day (except that if the Base Rate specified above is LIBOR, and such day falls in the next succeeding calendar month, such payment will be made on the next preceding Business Day) as described on the reverse hereof. For purposes of this Security, unless otherwise specified on the face hereof, "Business Day" means any day that is not a Saturday or Sunday and that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York; provided, however, that, if the Specified Currency shown above is a Foreign Currency, such day is also not a day on which commercial banks are authorized or required by law, regulation or executive order to close in the Principal Financial Center (as defined below) of the country issuing the Specified Currency (or, if the Specified Currency is the euro, such day is also a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open); provided further that, with respect to Securities as to which LIBOR is an applicable Base Rate, such day is also a London Business Day. "London Business Day" means a day on which commercial banks are open for business (including dealings in the LIBOR Currency (as defined below)) in London. "Principal Financial Center" means (i) the capital city of the country issuing the Specified Currency or (ii) the capital city of the country to which the LIBOR Currency relates, as applicable, except, in the case of (i) or (ii) above, that with respect to United States dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos, South African rand and Swiss francs, the "Principal Financial Center" shall be The City of New York, Sydney and (solely in the case of the Specified Currency) Melbourne, Toronto, Frankfurt, Amsterdam, London (solely in the case of the LIBOR Currency), Johannesburg and Zurich, respectively. 4 4 Interest on this Security will accrue from, and including, the immediately preceding Interest Payment Date to which interest has been paid or duly provided for (or from, and including, the Original Issue Date if no interest has been paid or duly provided for) to, but excluding, the applicable Interest Payment Date or the Maturity Date, as the case may be (each an "Interest Period"). The interest, if any, so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture and subject to certain exceptions described herein (referred to on the reverse hereof), be paid to the person (the "Holder") in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the fifteenth day (whether or not a Business Day) next preceding such Interest Payment Date (a "Regular Record Date"); provided, however, that, if this Security was issued between a Regular Record Date and the initial Interest Payment Date relating to such Regular Record Date, interest, if any, for the period beginning on the Original Issue Date and ending on such initial Interest Payment Date shall be paid on the Interest Payment Date following the next succeeding Regular Record Date to the Holder hereof on such Regular Record Date; and provided further that interest, if any, payable on the Maturity Date will be payable to the person to whom the principal hereof shall be payable. Any such interest not so punctually paid or duly provided for on any Interest Payment Date other than the Maturity Date ("Defaulted Interest") will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee (referred to on the reverse hereof), notice whereof shall be given to the Holder of this Security not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more fully provided in the Indenture. Unless otherwise specified above, all payments in respect of this Security will be made in U.S. dollars regardless of the Specified Currency shown above unless the Holder hereof makes the election described below. If the Specified Currency shown above is other than U.S. dollars, the Exchange Rate Agent (referred to on the reverse hereof) will arrange to convert any such amounts so payable in respect hereof into U.S. dollars in the manner described on the reverse hereof; provided, however, that the Holder hereof may, if so indicated above, elect to receive all or a specified portion of any payment of principal, premium, if any, and/or interest , if any, in respect of this Security in such Specified Currency by delivery of a written request to the corporate trust office of the Trustee in The City of New York, on or prior to the applicable Regular Record Date or at least fifteen days prior to the Maturity Date, as the case may be. Such request may be in writing (mailed or hand delivered) or by cable, telex or other form of facsimile transmission. The Holder hereof may elect to receive payment in such Specified Currency for all principal, any premium, if any, and interest payments, if any, and need not file a separate election for each payment. Such election will remain in effect until revoked by written notice to the Trustee, but written notice of any such revocation must be received by the Trustee on or prior to the Regular Record Date or at least fifteen days prior to the Maturity Date, as the case may be. 5 5 Notwithstanding the foregoing, if the Company determines that the Specified Currency is not available for making payments in respect hereof due to the imposition of exchange controls or other circumstances beyond the Company's control, or is no longer used by the government of the country issuing such currency or for the settlement of transactions by public institutions of or within the international banking community, then the Holder hereof may not so elect to receive payments in the Specified Currency and any such outstanding election shall be automatically suspended, until the Company determines that the Specified Currency is again available for making such payments. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency will not constitute a default under the Indenture. In the event of an official redenomination of the Specified Currency, the obligations of the Company with respect to payments on this Security shall, in all cases, be deemed immediately following such redenomination to provide for payment of that amount of redenominated currency representing the amount of such obligations immediately before such redenomination. In no event shall any adjustment be made to any amount payable hereunder as a result of any change in the value of the Specified Currency shown above relative to any other currency due solely to fluctuations in exchange rates. Until this Security is paid in full or payment therefor in full is duly provided for, the Company will at all times maintain a Paying Agent (which Paying Agent may be the Trustee) in The City of New York (which, unless otherwise specified above, shall be the "Place of Payment"). The Company has initially appointed The Chase Manhattan Bank, at its office in The City of New York as Paying Agent. Unless otherwise shown above, payment of interest on this Security (other than on the Maturity Date) will be made by check mailed to the registered address of the Holder hereof as of the Regular Record Date; provided, however, that, if (i) the Specified Currency is U.S. dollars and this is a Global Security (as defined on the reverse hereof) or (ii) the Specified Currency is a Foreign Currency and the Holder has elected to receive payments in such Specified Currency as provided for above, such interest payments will be made by transfer of immediately available funds, but only if appropriate wire transfer instructions have been received in writing by the Trustee on or prior to the applicable Regular Record Date. Simultaneously with any election by the Holder hereof to receive payments in respect hereof in the Specified Currency (if other than U.S. dollars), such Holder may provide appropriate wire transfer instructions to the Trustee, and all such payments will be made in immediately available funds to an account maintained by the payee with a bank, but only if such bank has appropriate facilities therefor. Unless otherwise specified above, the principal hereof (and premium, if any) and interest hereon payable on the Maturity Date will be paid in immediately available funds upon surrender of this Security at the office of the Trustee maintained for that purpose in the Borough of Manhattan, The City of New York (or at such other location as may be specified above). The Company will pay any administrative costs imposed by banks in making payments in immediately available funds but, 6 6 except as otherwise provided under Additional Amounts above, any tax, assessment or governmental charge imposed upon payments will be borne by the Holders of the Securities in respect of which such payments are made. 7 REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its facsimile corporate seal. EATON CORPORATION By:__________________________________ Name: Title: By:__________________________________ Name: Title: [CORPORATE SEAL] Attest:________________________________ Name: Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture THE CHASE MANHATTAN BANK, as Trustee By:___________________________________ Authorized Officer 8 [REVERSE OF NOTE] EATON CORPORATION MEDIUM-TERM NOTE Section 1. General. This Security is one of a duly authorized issue of securities (herein called the "Securities") of the Company, issued and to be issued in one or more series under an indenture, dated as of April 1, 1994, as it may be supplemented from time to time (herein called the "Indenture"), between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture with respect to a series of which this Security is a part), to which Indenture and all indentures supplemental thereto, reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to U.S.$800,000,000 (or the equivalent thereof in one or more foreign currencies) or such other principal amount as shall be provided pursuant to the Indenture. Section 2. Payments. If the Specified Currency is other than U.S. dollars and the Holder hereof fails to elect payment in such Specified Currency in accordance with the procedures set forth on the face hereof, the amount of U.S. dollar payments to be made in respect hereof will be determined by the Exchange Rate Agent specified on the face hereof or a successor thereto (the "Exchange Rate Agent") based on the highest bid quotation in The City of New York at approximately 11:00 A.M., New York City time, on the second Business Day preceding the applicable payment date received by the Exchange Rate Agent from three recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the Company for the purchase by the quoting dealer of the Specified Currency for U.S. dollars for settlement on such payment date in the aggregate amount of the Specified Currency payable to all Holders of Securities scheduled to receive U.S. dollar payments and at which the applicable dealer commits to execute a contract. If three such bid quotations are not available, payments will be made in the Specified Currency. If the Specified Currency is other than U.S. dollars and the Holder hereof has elected payment in such Specified Currency in accordance with the procedures set forth on the face hereof and the Specified Currency is not available due to the imposition of exchange controls or to other circumstances beyond the Company's control, the Company will be entitled to satisfy its obligations to the Holder of this Security by making such payment in U.S. dollars on the basis of the noon buying rate in The City of New York for cable transfers of such Specified Currency as certified for customs purposes (or, if not so certified as otherwise determined) by the Federal Reserve Bank of New York (the "Market Exchange Rate") as computed by the Exchange 9 2 Rate Agent on the second Business Day prior to the applicable payment date or, if the Market Exchange Rate is then not available, on the basis of the most recently available Market Exchange Rate or as otherwise indicated above. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency will not constitute a default under the Indenture. All determinations referred to above made by the Exchange Rate Agent shall be at its sole discretion (except to the extent expressly provided that any determination is subject to approval by the Company) and, in the absence of manifest error, shall be conclusive for all purposes and binding on the Holder of this Security and the Exchange Rate Agent shall have no liability therefor. All currency exchange costs will be borne by the Company. Section 3. Interest Rate Calculations. Unless otherwise set forth on the face hereof, the following provisions of this Section 3 shall apply to the calculation of interest on this Security. If the first Interest Reset Date is later than the Original Issue Date, this Security will bear interest from its Original Issue Date to the first Interest Reset Date at the Initial Interest Rate set forth on the face hereof. Thereafter, the interest rate hereon for each Interest Reset Period (as defined below) will be determined by reference to the Base Rate set forth on the face hereof, as adjusted by the Spread, the Spread Multiplier or other formula, if any, set forth on the face hereof. As set forth on the face hereof, this Security may also have either or both of the following: (i) a maximum limitation, or ceiling, on the rate at which interest may accrue during any Interest Period (as defined below) ("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the rate at which interest may accrue during any Interest Period ("Minimum Interest Rate"). In addition to any Maximum Interest Rate that may be set forth on the face hereof, the interest rate on this Security will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. The rate of interest hereon will be reset daily, weekly, monthly, quarterly, semiannually or annually or at another interval (each, an "Interest Reset Period"), as set forth on the face hereof. The date or dates on which interest will be reset (each, an "Interest Reset Date") will be, if this Security resets (i) daily, each Business Day; (ii) weekly, the Wednesday of each week (unless the Base Rate set forth on the face hereof is the Treasury Rate, in which case the Tuesday of each week (except as provided below)); (iii) monthly, the third Wednesday of each month; (iv) quarterly, the third Wednesday of each of the four months set forth on the face hereof; (v) semiannually, the third Wednesday of each of the two months set forth on the face hereof; and (vi) annually, the third Wednesday of the month of each year set forth on the face hereof; provided, however, that (a) if the first Interest Reset Date is later than the Original Issue Date, the interest rate in effect from the Original Issue Date to the first Interest Reset Date will be 10 3 the Initial Interest Rate as set forth on the face hereof and (b) the interest rate in effect for the ten days immediately prior to the Maturity Date will be that in effect on the tenth day preceding the Maturity Date. If the Base Rate set forth on the face hereof is the Treasury Rate and a Treasury auction shall fall on the Interest Reset Date for this Security, then such Interest Reset Date shall instead be the first Business Day immediately following such Treasury auction. If any Interest Reset Date would otherwise be a day that is not a Business Day, such Interest Reset Date shall be postponed to the next succeeding Business Day, except that, if the Base Rate set forth on the face hereof is LIBOR, if such Business Day is in the next succeeding calendar month, such Interest Reset Date shall be the immediately preceding Business Day. The interest payable hereon on each Interest Payment Date and on the Maturity Date shall be the amount of interest accrued from, and including, the Original Issue Date or the next preceding Interest Payment Date in respect of which interest, if any, has been paid or duly provided for, as the case may be, to, but excluding, the next succeeding Interest Payment Date or the Maturity Date, as the case may be (each such period, an "Interest Period"). If the Maturity Date falls on a day which is not a Business Day, the payment of principal, premium, if any, and interest, if any, with respect to the Maturity Date will be paid on the next succeeding Business Day with the same force and effect as if made on the Maturity Date, and no interest shall accrue on the amount so payable as a result of such delayed payment. If an Interest Payment Date other than the Maturity Date falls on a day that is not a Business Day, such Interest Payment Date will be postponed to the next day that is a Business Day and interest will accrue for the period of such postponement (except if the Base Rate specified above is LIBOR, and such day falls in the next succeeding calendar month, such Interest Payment Date will be advanced to the immediately preceding Business Day), it being understood that, to the extent this sentence is inconsistent with Section 112 of the Indenture, the provisions of this sentence shall apply in lieu of such Section. Accrued interest will be calculated by multiplying the principal amount hereof by an accrued interest factor. Such accrued interest factor will be computed by adding the interest factor calculated for each day in the Interest Period or from the last date from which accrued interest is being calculated. The interest factor for each such day is computed by dividing the interest rate applicable on such day by 360, if the Base Rate set forth on the face hereof is the CD Rate, Commercial Paper Rate, Federal Funds Rate, Prime Rate or LIBOR (each as described below), or by the actual number of days in the year, if the Base Rate set forth on the face hereof is the Treasury Rate or the CMT Rate (each as described below). The interest rate applicable to any day that is an Interest Reset Date is the interest rate as determined, in accordance with the procedures hereinafter set forth, with respect to the Interest Determination Date (as defined below) pertaining to such Interest Reset Date. The interest rate applicable to any other day is the interest rate for the immediately preceding Interest Reset Date (or, if none, the Initial Interest Rate, as set forth on the face hereof). All percentages resulting from any calculation with respect hereto will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths 11 4 of a percentage point rounded upward (e.g., 7.123455% (or 0.07123455) being rounded to 7.12346% (or 0.0712346) and 7.123454% (or 0.07123454) being rounded to 7.12345% (or 0.0712345)), and all currency amounts used in or resulting from such calculation will be rounded to the nearest one-hundredth of a unit (with five one-thousandths of a unit being rounded upwards). Interest will be payable on, if this Security resets (i) daily, weekly or monthly, the third Wednesday of each month; (ii) quarterly, the third Wednesday of the four months set forth on the face hereof; (iii) semiannually, the third Wednesday of the two months set forth on the face hereof; and (iv) annually, the third Wednesday of the month set forth on the face hereof (each, an "Interest Payment Date"), and in each case, on the Maturity Date. If the Base Rate set forth on the face hereof is the CD Rate, the CMT Rate, the Commercial Paper Rate, the Federal Funds Rate or the Prime Rate, the "Interest Determination Date" pertaining to an Interest Reset Date for this Security will be the second Business Day immediately preceding such Interest Reset Date; if the Base Rate set forth on the face hereof is LIBOR, the "Interest Determination Date" pertaining to an Interest Reset Date for this Security will be the second London Business Day immediately preceding such Interest Reset Date unless the Designated LIBOR Currency is British pounds sterling, in which case the "Interest Determination Date" will be such Interest Reset Date; and if the Base Rate set forth on the face hereof is the Treasury Rate, the "Interest Determination Date" pertaining to an Interest Reset Date for this Security will be the day of the week in which such Interest Reset Date falls on which Treasury bills (as defined below) would normally be auctioned. Treasury bills are usually sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday, except that sometimes such auction may be held on the preceding Friday. If, as the result of a legal holiday, an auction is so held on the preceding Friday, such Friday will be the Interest Determination Date pertaining to the Interest Reset Date occurring in the next succeeding week. Unless otherwise set forth on the face hereof, the "Calculation Date", where applicable, pertaining to an Interest Determination Date is the earlier of (i) the tenth calendar day after such Interest Determination Date or, if any such day is not a Business Day, the next succeeding Business Day and (ii) the Business Day immediately preceding the applicable Interest Payment Date or the Maturity Date, as the case may be. The Company will appoint and enter into an agreement with an agent (a "Calculation Agent") to calculate the rate of interest on the Securities of this series which bear interest at a floating rate. Unless otherwise set forth on the face hereof, The Chase Manhattan Bank will be the Calculation Agent. At the request of the Holder hereof, the Calculation Agent will provide the interest rate then in effect and, if determined, the interest rate that will become effective on the next Interest Reset Date. 12 5 Subject to applicable provisions of law and except as specified herein, with respect to each Interest Determination Date, the rate of interest shall be the rate determined by the Calculation Agent in accordance with the provisions of the applicable heading below. Determination of CD Rate. If the Base Rate set forth on the face hereof is the CD Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the CD Rate and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "CD Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate on such date for negotiable certificates of deposit having the Index Maturity set forth on the face hereof as published in H.15(519) (as defined below), under the heading "CDs (secondary market)" or, if not yet published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the CD Rate will be the rate on such Interest Determination Date for negotiable certificates of deposit having the Index Maturity set forth on the face hereof as published in H.15 Daily Update (as defined below) or such other recognized electronic source used for the purpose of displaying such rate, under the caption "CDs (secondary market)". If by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date such rate is not yet published in H.15(519), H.15 Daily Update or such other recognized electronic source, the CD Rate on such Interest Determination Date will be calculated by the Calculation Agent and will be the average of the secondary market offered rates as of 10:00 A.M., New York City time, on such Interest Determination Date, of three leading non-bank dealers in negotiable U.S. dollar certificates of deposit in The City of New York selected by the Calculation Agent (after consultation with the Company) for negotiable certificates of deposit of major United States money market banks of the highest credit standing (in the market for negotiable certificates of deposit) having a remaining maturity closest to the Index Maturity set forth on the face hereof in a denomination of U.S. $5,000,000; provided, however, that, if fewer than three dealers are quoting as mentioned in this sentence, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. "H.15 Daily Update" means the daily update of H.15(519), available through the world-wide web site of the Board of Governors of the Federal Reserve System at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or publication. Determination of Commercial Paper Rate. If the Base Rate set forth on the face hereof is the Commercial Paper Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the Commercial Paper Rate and the Spread, Spread Multiplier or other formula , if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "Commercial Paper Rate" means, with respect to any Interest Determination Date pertaining thereto, the Money Market Yield (calculated as described below) of the rate on such date for commercial paper having the Index Maturity set forth on the face 13 6 hereof, as such rate shall be published in H.15(519) under the caption "Commercial Paper -- Nonfinancial" or, if not yet published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the Commercial Paper Rate shall be the Money Market Yield of the rate on such Interest Determination Date for commercial paper having the Index Maturity set forth on the face hereof as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying such rate, under the caption "Commercial Paper -- Nonfinancial". If by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date such rate is not yet published in H.15(519), H.15 Daily Update or such other recognized electronic source, the Commercial Paper Rate on such Interest Determination Date shall be calculated by the Calculation Agent and shall be the Money Market Yield of the average of the offered rates as of 11:00 A.M., New York City time, on such Interest Determination Date of three leading dealers in U.S. dollar commercial paper in The City of New York selected by the Calculation Agent (after consultation with the Company) for commercial paper having the Index Maturity set forth on the face hereof placed for an industrial issuer whose bond rating is "Aa", or the equivalent, from a nationally recognized securities rating agency; provided, however, that, if fewer than three dealers are quoting as mentioned in this sentence, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. "Money Market Yield" shall be a yield (expressed as a percentage) calculated in accordance with the following formula: MONEY MARKET YIELD = D x 360 x 100 ------------- 360 - (D x M) where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal; and "M" refers to the actual number of days in the Interest Period for which interest is being calculated. Determination of Federal Funds Rate. If the Base Rate set forth on the face hereof is the Federal Funds Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the Federal Funds Rate and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "Federal Funds Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate on such date for federal funds as published in H.15(519) under the caption "Federal Funds (Effective)" as such rate is displayed on Telerate on page 120 (or any other page as may replace such page on such service) ("Telerate Page 120"). If such rate does not appear on Telerate Page 120 or is not yet published in H.15(519) by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the Federal Funds Rate will be the rate on such Interest Determination Date as published in H.15 Daily Update, or 14 7 such other recognized electronic source used for the purpose of displaying such rate, under the caption "Federal Funds (Effective)". If by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date such rate does not appear on Telerate Page 120 or is not yet published in H.15(519), H.15 Daily Update or such other recognized electronic source, the Federal Funds Rate for such Interest Determination Date will be calculated by the Calculation Agent and will be the average of the rates for the last transaction in overnight Federal Funds arranged by three leading dealers of Federal Funds transactions in The City of New York, which dealers have been selected by the Calculation Agent (after consultation with the Company), as of 9:00 A.M., New York City time, on such Interest Determination Date; provided, however, that, if fewer than three dealers are quoting as mentioned in this sentence, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. Determination of LIBOR. If the Base Rate set forth on the face hereof is LIBOR, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to LIBOR and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, "LIBOR" means the rate determined by the Calculation Agent in accordance with the following provisions: (i) If "LIBOR Reuters" is specified on the face hereof, LIBOR will be the average of the offered rates for deposits in the LIBOR Currency having the Index Maturity set forth on the face hereof on the applicable Interest Reset Date, as such rates appear on the Designated LIBOR Page as of 11:00 A.M., London time, on that Interest Determination Date, if at least two such offered rates appear on the Designated LIBOR Page. (ii) If "LIBOR Telerate" is specified on the face hereof, LIBOR will be the rate for deposits in the LIBOR Currency having the Index Maturity set forth on the face hereof on the applicable Interest Reset Date, as such rate appears on the Designated LIBOR Page as of 11:00 A.M., London time, on that Interest Determination Date. If such rate does not appear, LIBOR for such Interest Determination Date will be determined as described in (iii) below. (iii) If the Designated LIBOR Page by its terms provides only for a single rate, that single rate will be used regardless of whether the foregoing provisions require more than one rate. With respect to an Interest Determination Date, if LIBOR Reuters is the applicable method for determining LIBOR and fewer than two offered rates (or no rate, if applicable) appear on the Designated LIBOR Page as specified in (i) above or if LIBOR Telerate is the applicable method for determining LIBOR and no rate appears on the Designated LIBOR Page as specified in (ii) above, then LIBOR will be determined on the basis of the offered rates at which deposits in the LIBOR Currency for the period of the Index Maturity set forth on the face hereof on the Interest Determination Date and in a 15 8 principal amount that is representative of a single transaction in that market at that time are offered by four major banks in the London interbank market at approximately 11:00 AM., London time, for the period commencing on the Interest Reset Date to prime banks in the London interbank market. The Calculation Agent will select the four banks and request the principal London office of each of those banks to provide a quotation of its rate for deposits in the LIBOR Currency. If at least two quotations are provided, LIBOR for that Interest Determination Date will be the average of those quotations. If fewer than two quotations are provided as mentioned above, LIBOR will be the average of the rates quoted by three major banks in the Principal Financial Center selected by the Calculation Agent at approximately 11:00 A.M. in the Principal Financial Center, on the Interest Determination Date for loans to leading European banks in the LIBOR Currency having the Index Maturity set forth on the face hereof, for the period commencing on the Interest Reset Date and in a principal amount that is representative for a single transaction in the LIBOR Currency in that market at that time. The Calculation Agent will select the three banks referred to above. If fewer than three banks selected by the Calculation Agent are quoting as mentioned above, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. "LIBOR Currency" means the Designated LIBOR Currency specified on the face hereof as to which LIBOR shall be calculated or, if no such currency is specified on the face hereof, United States dollars. "Designated LIBOR Page" means, if "LIBOR Reuters" is specified on the face hereof, the display on the Reuters Monitor Money Rates Service (or any successor service) on the page specified on the face hereof (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency; or if "LIBOR Telerate" is specified on the face hereof or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified on the face hereof as the method of calculating LIBOR, the display on Bridge Telerate, Inc. (or any successor service, "Telerate") on the page specified on the face hereof (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency. Determination of Prime Rate. If the Base Rate set forth on the face hereof is the Prime Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the Prime Rate and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "Prime Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate on such date as published in H.15(519) under the caption "Bank Prime Loan" or, if not yet published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the rate on such Interest Determination Date as published in H.15 Daily Update, or such 16 9 other recognized electronic source used for the purpose of displaying such rate, under the caption "Bank Prime Loan." If the rate is not published in H.15 (519), H.15 Daily Update or another recognized electronic source by 3:00 P.M., New York City time, on the Calculation Date, then the Calculation Agent will determine the Prime Rate to be the average of the rates of interest publicly announced by each bank that appears on the Reuters Screen US PRIME1 Page as that bank's prime rate or base lending rate as in effect for that Interest Determination Date. If at least one rate but fewer than four rates appear on the Reuters Screen US PRIME1 Page on the Interest Determination Date, then the Prime Rate will be the average of the prime rates or base lending rates quoted (on the basis of the actual number of days in the year divided by a 360-day year) as of the close of business on the Interest Determination Date by three major money center banks in the City of New York selected by the Calculation Agent. If the banks selected by the Calculation Agent are not quoting as mentioned above, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. "Reuters Screen US PRIME1 Page" means the display designated as Page "USPRIME1" on the Reuters Monitor Money Rates Service (or any successor service, or such other page as may replace the USPRIME1 Page on that service) for the purpose of displaying prime rates or base lending rates of major United States banks. Determination of Treasury Rate. If the Base Rate set forth on the face hereof is the Treasury Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the Treasury Rate and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "Treasury Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate for the auction of direct obligations of the United States ("Treasury bills") held on such Interest Determination Date having the Index Maturity set forth on the face hereof under the caption "INVESTMENT RATE" on the display on Telerate on page 56 (or any other page as may replace such page on such service) ("Telerate Page 56") or page 57 (or any other page as may replace such page on such service) ("Telerate Page 57") by 3:00 P.M., New York City time, on the Calculation date for that Interest Determination Date. The following procedures will be followed if the Treasury Rate cannot be determined as described above: If the rate is not published by 3:00 P.M., New York City time, on the Calculation Date, the Treasury Rate will be the Bond Equivalent Yield of the auction rate of such Treasury bills as published in H.15 Daily Update or such recognized electronic source used for the purpose of displaying such rate under the caption "U.S. Government securities/Treasury bills/Auction high." 17 10 If the rate is not published by 3:00 P.M., New York City time, on the Calculation Date and cannot be determined as described in the immediately preceding paragraph, the Treasury Rate will be the Bond Equivalent Yield of the auction rate of such Treasury bills as otherwise announced by the United States Department of Treasury. If the results of the most recent auction of Treasury bills having the Index Maturity set forth on the face hereof are not published or announced as described above by 3:00 P.M., New York City time, on the Calculation Date, or if no auction is held on the Interest Determination Date, then the Treasury Rate will be the Bond Equivalent Yield on such Interest Determination Date of Treasury bills having the Index Maturity set forth on the face hereof as published in H.15(519) under the caption "U.S. Government securities/Treasury bills/Secondary market" or, if not yet published by 3:00 p.m., New York City time, on the related Calculation Date, the rate on such Interest Determination Date of such Treasury Bills as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying such rate, under the caption "U.S. Government securities/Treasury bills/Secondary market." If such rate is not published in H.15 (519), H.15 Daily Update or another recognized electronic source, then the Calculation Agent will determine the Treasury Rate to be the Bond Equivalent Yield of the average of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on the Interest Determination Date of three leading primary United States government securities dealers for the issue of Treasury bills with a remaining maturity closest to the Index Maturity set forth on the face hereof. The Calculation Agent will select the three dealers referred to above. If fewer than three dealers are quoting as described above, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. "Bond Equivalent Yield" means a yield (expressed as a percentage) calculated in accordance with the following formula: D x N X 100 Bond Equivalent Yield = --------------- 360 - (D x M) where "D" refers to the applicable per annum rate for Treasury bills quoted on a bank discount basis, "N" refers to 365 or 366, as the case may be, and "M" refers to the actual number of days in the applicable Interest Reset Period. Determination of CMT Rate. If the Base Rate set forth on the face hereof is the CMT Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the CMT Rate and the Spread, Spread Multiplier, or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "CMT Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate displayed on 18 11 the Designated CMT Telerate Page (as defined below) under the caption ". . . Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately 3:45 P.M.", under the column for the Designated CMT Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page is 7051 or any successor page, the rate on such Interest Determination Date and (ii) if the Designated CMT Telerate Page is 7052 or any successor page, the rate for the weekly or the monthly average, as applicable, ended immediately preceding the week or month in which the related Interest Determination Date occurs. If such rate is no longer displayed on the relevant page, or if not displayed by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, then the interest rate for such Interest Determination Date shall be the rate for the Designated CMT Maturity Index as published in H.15(519). If such rate is no longer published, or if not published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, then the interest rate for such Interest Determination Date shall be the rate for the Designated CMT Maturity Index (or other United States Treasury rate for the Designated CMT Maturity Index) as may then be published by either the Board of Governors of the Federal Reserve System or the United States Department of the Treasury that the Calculation Agent determines (with the concurrence of the Company) to be comparable to the rate formerly displayed on the Designated CMT Telerate Page and published in H.15(519). If such information is not provided by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, then the interest rate for such Interest Determination Date shall be calculated by the Calculation Agent and shall be a yield to maturity, based on the arithmetic average of the secondary market closing offer side prices as of approximately 3:30 P.M., New York City time, on such Interest Determination Date, reported by three leading primary United States government securities dealers (each, a "Reference Dealer") in The City of New York, for the most recently issued direct noncallable fixed rate obligations of the United States ("U.S. Treasury Notes") with an original maturity of approximately the Designated CMT Maturity Index and a remaining term to maturity of not less than such Designated CMT Maturity Index minus one year. The three Reference Dealers shall be determined by (i) the selection of five Reference Dealers by the Calculation Agent (after consultation with the Company) and (ii) the elimination of the Reference Dealers providing the highest (or, in the event of equality, one of the highest) and the lowest (or, in the event of equality, one of the lowest) quotations for such Interest Determination Date. If the Calculation Agent cannot obtain three such U.S. Treasury Note quotations, the interest rate for such Interest Determination Date shall be calculated by the Calculation Agent and shall be a yield to maturity based on the arithmetic average of the secondary market offer side prices as of approximately 3:30 P.M., New York City time, on the Interest Determination Date reported, according to their written records, by three Reference Dealers in The City of New York, selected in the manner described above, for U.S. Treasury Notes with an original maturity of the number of years that is the next highest to the Designated CMT Maturity Index and a remaining term to maturity closest to the Designated CMT Maturity Index, which has an outstanding balance of at least $100 million. If only three or four of such Reference Dealers are quoting as described above, then the interest rate shall be based on the arithmetic average of the offer side prices so obtained from all such Reference Dealers, without eliminating the Reference 19 12 Dealers providing the highest and the lowest of such quotes. If fewer than three such Reference Dealers are quoting as described above, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. If two such U.S. Treasury Notes have remaining terms to maturity equally close to the Designated CMT Maturity Index, the quotes for the U.S. Treasury Note with the shorter remaining term to maturity shall be used. "Designated CMT Telerate Page" means the display on Telerate on the page set forth on the face hereof (or any other page as may replace such page on that service for the purpose of displaying treasury constant maturities as reported in H.15(519)). If no such page is so specified, the Designated CMT Telerate Page shall be 7052. "Designated CMT Maturity Index" means the original period to maturity of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified on the face hereof with respect to which the CMT Rate will be calculated. If no such maturity is so specified, the Designated CMT Maturity Index shall be two years. References herein to "U.S. dollars" or "U.S. $" or "$" are to the currency of the United States of America. Section 4. Redemption. If so specified on the face hereof, the Company may at its option redeem this Security in whole or from time to time in part in increments of $1,000 (provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination specified on the face hereof) on or after the date designated as the Initial Redemption Date on the face hereof at 100% of the unpaid principal amount hereof or the portion thereof redeemed (or, if this Security is a Discount Security, such lesser amount as is provided for below) multiplied by the Initial Redemption Percentage specified on the face hereof, together with accrued interest to the Redemption Date. Such Initial Redemption Percentage shall decline at each anniversary of the Initial Redemption Date by an amount equal to the Annual Redemption Percentage Reduction, if any, specified on the face hereof until the Redemption Price is 100% of the unpaid principal amount hereof. The Company may exercise such option by causing the Trustee to mail a notice of such redemption at least 30 but not more than 60 days prior to the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If less than all of the Securities with like tenor and terms to this Security are to be redeemed, the Securities to be redeemed shall be selected by the Trustee by such method as the Trustee shall deem fair and appropriate. However, if less than all the Securities of the series with differing tenor and terms to this Security are to be redeemed, then the Company in its sole discretion shall select the particular Securities to be redeemed and shall notify the Trustee in writing thereof at least 45 days prior to the relevant Redemption Date. 20 13 Section 5. Repayment. If so specified on the face hereof, this Security shall be repayable prior to the Stated Maturity Date at the option of the Holder on each applicable Optional Repayment Date shown on the face hereof at a repayment price equal to 100% of the principal amount to be repaid, together with accrued interest to the Repayment Date. In order for this Security to be repaid, the Trustee must receive at least 30 but not more than 45 days prior to an Optional Repayment Date, this Security with the form attached hereto entitled "Option to Elect Repayment" duly completed. Any tender of this Security for repayment shall be irrevocable. The repayment option may be exercised by the Holder of this Security in whole or in part in increments of $1,000 (provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination specified on the face hereof). Upon any partial repayment, this Security shall be canceled and a new Security or Securities for the remaining principal amount hereof shall be issued in the name of the Holder of this Security. Section 6. Discount Securities. If this Security (such Security being referred to as a "Discount Security") (a) has been issued at an Issue Price lower, by more than a de minimis amount (as determined under United States federal income tax rules applicable to original issue discount instruments), than the stated redemption price at maturity (as defined below) hereof and (b) would be considered an original issue discount security for United States federal income tax purposes, then the amount payable on this Security in the event of redemption by the Company, repayment at the option of the Holder or acceleration of the maturity hereof, in lieu of the principal amount due at the Stated Maturity Date hereof, shall be the Amortized Face Amount (as defined below) of this Security as of the date of such redemption, repayment or acceleration. The "Amortized Face Amount" of this Security shall be the amount equal to the sum of (a) the Issue Price (as set forth on the face hereof) plus (b) the aggregate of the portions of the original issue discount (the excess of the amounts considered as part of the "stated redemption price at maturity" of this Security within the meaning of Section 1273(a)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), whether denominated as principal or interest, over the Issue Price of this Security) which shall theretofore have accrued pursuant to Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code) from the date of issue of this Security to the date of determination, minus (c) any amount considered as part of the "stated redemption price at maturity" of this Security which has been paid on this Security from the date of issue to the date of determination. Section 7. Modification and Waivers; Obligation of the Company Absolute. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series. Such amendment may be effected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of all Outstanding Securities of each series affected thereby. The Indenture also contains provisions permitting the Holders of not less than a majority in principal amount of the Outstanding Securities of any series at the time, on behalf of the Holders of all Outstanding Securities of such series, to waive compliance by the Company with certain provisions of the Indenture. Provisions in the 21 14 Indenture also permit the Holders of not less than a majority in principal amount of all Outstanding Securities of any series to waive on behalf of all of the Holders of Securities of such series certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Security and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. The Securities are unsecured and rank pari passu with all other unsecured and unsubordinated indebtedness of the Company. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the Specified Currency herein prescribed, except as set forth in Section 2 on the reverse hereof. Section 8. Defeasance and Covenant Defeasance. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security, unless otherwise specified on the face hereof. Section 9. Minimum Denomination. Unless otherwise provided on the face hereof, this Security is issuable only in registered form without coupons in denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000. If this Security is denominated in a Specified Currency other than U.S. dollars or is a Discount Security, this Security shall be issuable in the denominations set forth on the face hereof. Section 10. Registration of Transfer. As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Security is registrable in the Security Register upon surrender of this Security for registration of transfer at a Place of Payment for the series of Securities of which this Security is a part, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of like authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. If the registered owner of this Security is the Depository (such a Security being referred to as a "Global Security") and (i) the Depository is at any time unwilling or unable to continue as depository and a successor depository is not appointed by the Company within 90 days following notice to the Company or (ii) an Event of Default occurs, the Company will 22 15 issue Securities in certificated form in exchange for this Global Security. In addition, the Company may at any time, and in its sole discretion, determine not to have Securities represented by a Global Security and, in such event, will issue Securities in certificated form in exchange in whole for this Global Security representing such Security. In any exchange pursuant to this paragraph, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Securities of this series in exchange for this Global Security, will authenticate and deliver individual Securities of this series in certificated form in an aggregate principal amount equal to the principal amount of this Global Security in exchange herefor. Securities issued in exchange for this Global Security pursuant to this paragraph shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in this Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. For purposes of the Indenture, this Global Security constitutes a Security issued in permanent global form. Securities so issued in certificated form will be issued in denominations of $1,000 (or such other Minimum Denomination specified on the face hereof) or any amount in excess thereof which is an integral multiple of $1,000 (or such Minimum Denomination) and will be issued in registered form only, without coupons. As provided in the Indenture and subject to certain limitations therein and herein set forth, this Security is exchangeable for a like aggregate principal amount of Securities of this series of different authorized denominations but otherwise having the same terms and conditions, as requested by the Holder hereof surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder as the owner hereof for all purposes, whether or not this Security be overdue, and none of the Company, the Trustee nor any such agent shall be affected by notice to the contrary. Section 11. Events of Default. If an Event of Default with respect to the Securities of the series of which this Security forms a part shall have occurred and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect provided in the Indenture. 23 16 Section 12. Defined Terms. All terms used in this Security which are defined in the Indenture and are not otherwise defined herein shall have the meanings assigned to them in the Indenture. Section 13. Governing Law. Unless otherwise specified on the face hereof, this Security shall be governed by and construed in accordance with the law of the State of New York. 24 OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably requests and instructs the Company to repay this Security (or the portion thereof specified below), pursuant to its terms, on the "Optional Repayment Date" first occurring after the date of receipt of this Security as specified below (the "Repayment Date"), at a Repayment Price equal to 100% of the principal amount thereof, together with interest thereon accrued to the Repayment Date, to the undersigned at: ___________________________________ ____________________________________ (Please Print or Type Name and Address of the Undersigned.) For this Option to Elect Repayment to be effective, this Security with the Option to Elect Repayment duly completed must be received at least 30 but not more than 45 days prior to the Optional Repayment Date (or, if such Repayment Date is not a Business Day, the next succeeding Business Day) by the Company at its office or agency in The City of New York, which will be located initially at the office of the Trustee at 450 West 33rd Street, New York, New York 10001-2697. If less than the entire principal amount of this Security is to be repaid, specify the portion thereof (which shall be $1,000 or an integral multiple thereof) which is to be repaid: $ . If less than the entire principal amount of this Security is to be repaid, specify the denomination(s) of the Security(ies) to be issued for the unpaid amount ($1,000 or any integral multiple of $1,000; provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination): $ . Dated: __________________ ____________________________________________________ Note: The signature to this Option to Elect Repayment must correspond with the name as written upon the face of this Security in every particular without alteration or enlargement or any change whatsoever. 25 _____________ ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - Custodian ---------------------------------------------- (Cust.) (Minor) Under Uniform Gifts to Minors Act ................................. (State) Additional abbreviations may also be used though not in the above list. ________________ FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________________ | | | | |_____________________________________|________________________________________ Please print or type name and address, including zip code of assignee _______________________________________________________________________________ the within Security of EATON CORPORATION and all rights thereunder and does hereby irrevocably constitute and appoint ______________________________________________________________________Attorney to transfer the said Security on the books of the within-named Company, with full power of substitution in the premises. Dated _________________ SIGNATURE GUARANTEED: _______________________________________ _________________________________________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the Security in every particular, without alteration or enlargement or any change whatsoever. EX-4.K 5 EXHIBIT 4(K) 1 Exhibit 4(k) [FACE OF NOTE] CUSIP NO. REGISTERED FACE AMOUNT PRINCIPAL AMOUNT No. FX - EATON CORPORATION MEDIUM-TERM NOTE (SINGLE INDEXED NOTE) (FIXED RATE) If the registered owner of this Security (as indicated below) is The Depository Trust Company (the "Depository") or a nominee of the Depository, this Security is a Global Security and the following two legends apply: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR OF THE DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR. IF APPLICABLE, THE "TOTAL AMOUNT OF OID", "YIELD TO MATURITY" AND "INITIAL ACCRUAL PERIOD OID" (COMPUTED UNDER THE APPROXIMATE METHOD) BELOW WILL BE COMPLETED SOLELY FOR THE PURPOSES OF APPLYING THE FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES. 2 2 ISSUE PRICE: SINKING FUND: ORIGINAL ISSUE DATE: OPTION TO ELECT REPAYMENT: [ ] YES [ ] NO STATED MATURITY DATE: SPECIFIED CURRENCY: United States Dollars: OPTIONAL REPAYMENT DATE[S]: [ ] YES [ ] NO Foreign Currency: MINIMUM DENOMINATIONS: [ ] $1,000 EXCHANGE RATE AGENT: [ ] Other: OPTION TO RECEIVE PAYMENTS IN SPECIFIED CURRENCY OTHER THAN U.S. DOLLARS: [ ] YES [ ] NO ADDITIONAL AMOUNTS: INTEREST RATE: DEFEASANCE: [ ] YES [ ] NO INDEXED CURRENCY: United States Dollars: [ ] YES [ ] NO COVENANT DEFEASANCE: [ ] YES [ ] NO Foreign Currency: TOTAL AMOUNT OF OID: PRINCIPAL FINANCIAL CENTER: BASE EXCHANGE RATE: YIELD TO MATURITY: DETERMINATION AGENT: INITIAL ACCRUAL PERIOD OID: REFERENCE DEALERS: 1. ___ 2. ___ 3. ___ INTEREST PAYMENT DATES IF OTHER THAN APRIL 15 AND OCTOBER 15: REGULAR RECORD DATES IF OTHER THAN APRIL 1 AND OCTOBER 1: OPTIONAL REDEMPTION: [ ] YES [ ] NO INITIAL REDEMPTION DATE: INITIAL REDEMPTION PERCENTAGE: ANNUAL REDEMPTION PERCENTAGE REDUCTION: OTHER/DIFFERENT PROVISIONS: 3 EATON CORPORATION, an Ohio corporation (herein referred to as the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________, or registered assigns, in the Specified Currency on the Stated Maturity Date shown above (except to the extent redeemed or repaid prior to the Stated Maturity Date), the principal sum of _______ (the "Face Amount"), plus or minus an amount determined by the Determination Agent specified above in accordance with the formula set forth below, and to pay interest on the Face Amount as described below and on the reverse hereof. If the Spot Rate exceeds or equals the Base Exchange Rate, the principal amount of this Security payable on the Maturity Date (as defined below) shall equal: Face Amount + (Face Amount x Spot Rate - Base Exchange Rate) ------------------------------ Base Exchange Rate If the Base Exchange Rate exceeds the Spot Rate, the principal amount of this Security payable on the Maturity Date shall equal: Face Amount - (Face Amount x Base Exchange Rate - Spot Rate) ------------------------------ Base Exchange Rate ; provided, however, that in no event shall such principal amount be less than zero. In making the above calculations, the (i) "Base Exchange Rate" is the exchange rate specified as such above and (ii) "Spot Rate" is the rate at which the Specified Currency can be exchanged for the Indexed Currency specified above (such rate stated as units of Indexed Currency per unit of the Specified Currency) as determined on the second Exchange Rate Day, as defined below, prior to the Maturity Date (the "Determination Date") by the Determination Agent based upon the arithmetic mean of the open market spot offer quotations for such Indexed Currency (spot bid quotations for the Specified Currency) obtained by the Determination Agent from the Reference Dealers specified above in The City of New York at 11:00 A.M., New York City time, on the Determination Date, for an amount of Indexed Currency equal to the Face Amount of this Security multiplied by the Base Exchange Rate, in terms of the Specified 4 2 Currency for settlement on the Maturity Date. If such quotations from the Reference Dealers are not available on the Determination Date due to circumstances beyond the control of the Company or the Determination Agent, the Spot Rate will be determined on the basis of the most recently available quotations from the Reference Dealers. If any of the Reference Dealers shall be unwilling or unable to provide the requested quotations, the Company may select other major money center bank or banks in The City of New York, in consultation with the Determination Agent, to act as Reference Dealer or Dealers in replacement therefor. In the absence of manifest error, the determination by the Determination Agent of the Spot Rate and the principal amount of this Security payable on the Maturity Date shall be final and binding on the Company, the Trustee (referred to on the reverse hereof) and the Holder (as defined below) of this Security. "Exchange Rate Day" means any day which is a Business Day in The City of New York and, if the Specified Currency or Indexed Currency is any currency or currency unit other than U.S. dollars, in Principal Financial Center of the country of such Specified Currency or Indexed Currency. The Company shall pay interest on the Face Amount hereof at the Interest Rate shown above from the Original Issue Date shown above or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually on April 15 and October 15 of each year (unless other Interest Payment Dates are shown on the face hereof) (each, an "Interest Payment Date") until the principal hereof is paid or made available for payment and on the Stated Maturity Date, any Redemption Date or Repayment Date (such terms are together hereinafter referred to as the "Maturity Date" with respect to the principal repayable on such date); provided, however, that any payment of principal (or premium, if any) or interest, if any, to be made on any Interest Payment Date or on the Maturity Date that is not a Business Day (as defined below) shall be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date or the Maturity Date, as the case may be, and no additional interest shall accrue on the amount so payable as a result of such delayed payment. For purposes of this Security, unless otherwise specified on the face hereof, "Business Day" means any day that is not a Saturday or Sunday and that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York; provided, however, that, if the Specified Currency shown above is a foreign currency, such day is also not a day on which commercial banks are authorized or required by law, regulation or executive order to close in the Principal Financial Center (as defined below) of the country issuing the Specified Currency (or, if the Specified Currency is the euro, such day is also a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open). "Principal Financial Center" means the capital city of the country issuing the Specified Currency or the Indexed Currency, as the case may be, except that with respect to United States dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders, South African rand and Swiss francs, the "Principal Financial 5 3 Center" shall be The City of New York, Sydney and (solely in the case of the Specified Currency) Melbourne, Toronto, Frankfurt, Amsterdam, Johannesburg and Zurich, respectively. Any interest hereon will accrue from, and including, the immediately preceding Interest Payment Date in respect of which interest, if any, has been paid or duly provided for (or from, and including, the Original Issue Date if no interest has been paid or duly provided for) to, but excluding, the succeeding Interest Payment Date or the Maturity Date, as the case may be. The interest, if any, so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture and subject to certain exceptions described herein (referred to on the reverse hereof), be paid to the person (the "Holder") in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the April 1 or October 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date (unless other Regular Record Dates are specified on the face hereof) (each, a "Regular Record Date"); provided, however, that, if this Security was issued between a Regular Record Date and the initial Interest Payment Date relating to such Regular Record Date, interest, if any, for the period beginning on the Original Issue Date and ending on such initial Interest Payment Date shall be paid on the Interest Payment Date following the next succeeding Regular Record Date to the Holder hereof on such next succeeding Regular Record Date; and provided further that interest, if any, payable on the Maturity Date will be payable to the person to whom the principal hereof shall be payable. Any such interest not so punctually paid or duly provided for on any Interest Payment Date other than the Maturity Date ("Defaulted Interest") will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee (referred to on the reverse hereof), notice whereof shall be given to the Holder of this Security not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more fully provided in the Indenture. Unless otherwise specified above, all payments in respect of this Security will be made in U.S. dollars regardless of the Specified Currency shown above unless the Holder hereof makes the election described below. If the Specified Currency shown above is other than U.S. dollars, the Exchange Rate Agent (referred to on the reverse hereof) will arrange to convert any such amounts so payable in respect hereof into U.S. dollars in the manner described on the reverse hereof; provided, however, that the Holder hereof may, if so indicated above, elect to receive all or a specified portion of any payment of principal, premium, if any, and/or interest, if any, in respect of this Security in such Specified Currency by delivery of a written request to the corporate trust office of the Trustee in The City of New York, on or prior to the applicable Regular Record Date or at least fifteen days prior to the Maturity Date, as the case may be. Such request may be in writing (mailed or hand delivered) or by cable, telex or other form of facsimile transmission. The Holder hereof may elect to receive payment in such Specified Currency for all 6 4 principal, premium, if any, and interest payments, if any, and need not file a separate election for each payment. Such election will remain in effect until revoked by written notice to the Trustee, but written notice of any such revocation must be received by the Trustee on or prior to the applicable Regular Record Date or at least fifteen days prior to the Maturity Date, as the case may be. Notwithstanding the foregoing, if the Company determines that the Specified Currency is not available for making payments in respect hereof due to the imposition of exchange controls or other circumstances beyond the Company's control, or is no longer used by the government of the country issuing such currency or for the settlement of transactions by public institutions of or within the international banking community, then the Holder hereof may not so elect to receive payments in the Specified Currency and any such outstanding election shall be automatically suspended, until the Company determines that the Specified Currency is again available for making such payments. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency will not constitute a default under the Indenture. In the event of an official redenomination of the Specified Currency, the obligations of the Company with respect to payments on this Security shall be deemed, immediately following such redenomination, to provide for payment of that amount of redenominated currency representing the amount of such obligations immediately before such redenomination. Except as set forth above, in no event shall any adjustment be made to any amount payable hereunder as a result of any change in the value of the Specified Currency shown above relative to any other currency due solely to fluctuations in exchange rates. Until this Security is paid in full or payment therefor in full is duly provided for, the Company will at all times maintain a Paying Agent (which Paying Agent may be the Trustee) in The City of New York (which, unless otherwise specified above, shall be the "Place of Payment"). The Company has initially appointed The Chase Manhattan Bank, at its office in The City of New York as Paying Agent. Unless otherwise shown above, payment of interest on this Security (other than on the Maturity Date) will be made by check mailed to the registered address of the Holder hereof as of the Regular Record Date; provided, however, that, if (i) the Specified Currency is U.S. dollars and this is a Global Security (as defined on the reverse hereof) or (ii) the Specified Currency is a Foreign Currency, and the Holder has elected to receive payments in such Specified Currency as provided for above, such interest payments will be made by transfer of immediately available funds, but only if appropriate wire transfer instructions have been received in writing by the Trustee on or prior to the applicable Regular Record Date. Simultaneously with any election by the Holder hereof to receive payments in respect hereof in the Specified Currency (if other than U.S. dollars), such Holder may provide appropriate wire transfer instructions to the Trustee, and 7 5 all such payments will be made in immediately available funds to an account maintained by the payee with a bank, but only if such bank has appropriate facilities therefor. Unless otherwise specified above, the principal hereof (and premium, if any) and interest, if any, hereon payable on the Maturity Date will be paid in immediately available funds upon surrender of this Security at the office of the Trustee maintained for that purpose in the Borough of Manhattan, The City of New York (or at such other location as may be specified above). The Company will pay any administrative costs imposed by banks in making payments in immediately available funds but, except as otherwise provided under Additional Amounts above, any tax, assessment or governmental charge imposed upon payments will be borne by the Holders of the Securities in respect of which such payments are made. Interest on this Security, if any, will be computed on the basis of a 360-day year of twelve 30-day months. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. 8 6 Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its facsimile corporate seal. EATON CORPORATION By: --------------------------------- Name: Title: By: --------------------------------- Name: Title: [CORPORATE SEAL] Attest: --------------------------------- Name: Title: Secretary TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture Dated: THE CHASE MANHATTAN BANK, as Trustee By: --------------------------------- Authorized Officer 9 [REVERSE OF NOTE] EATON CORPORATION MEDIUM-TERM NOTE Section 1. General. This Security is one of a duly authorized issue of securities (herein called the "Securities") of the Company, issued and to be issued in one or more series under an indenture, dated as of April 1, 1994, as it may be supplemented from time to time (herein called the "Indenture"), between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture with respect to a series of which this Security is a part), to which Indenture and all indentures supplemental thereto, reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to U.S.$800,000,000 (or the equivalent thereof in one or more foreign currencies) or such other principal amount as shall be provided pursuant to the Indenture. Section 2. Payments. If the Specified Currency is other than U.S. dollars and the Holder hereof fails to elect payment in such Specified Currency in accordance with the procedures set forth on the face hereof, the amount of U.S. dollar payments to be made in respect hereof will be determined by the Exchange Rate Agent specified on the face hereof or a successor thereto (the "Exchange Rate Agent") based on the highest bid quotation in The City of New York at approximately 11:00 A.M., New York City time, on the second Business Day preceding the applicable payment date received by the Exchange Rate Agent from three recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the Company for the purchase by the quoting dealer of the Specified Currency for U.S. dollars for settlement on such payment date in the aggregate amount of the Specified Currency payable to all holders of Securities scheduled to receive U.S. dollar payments and at which the applicable dealer commits to execute a contract. If three such bid quotations are not available, payments will be made in the Specified Currency. If the Specified Currency is other than U.S. dollars and the Holder hereof has elected payment in such Specified Currency in accordance with the procedures set forth on the face hereof and the Specified Currency is not available due to the imposition of exchange controls or to other circumstances beyond the Company's control, the Company will be entitled to satisfy its obligations to the Holder of this Security by making such payment in U.S. dollars on the basis of the noon buying rate in The City of New York for cable transfers of such Specified Currency as certified for customs purposes (or, if not so certified, as otherwise determined) by 10 2 the Federal Reserve Bank of New York (the "Market Exchange Rate")as computed by the Exchange Rate Agent on the second Business Day prior to the applicable payment date or, if the Market Exchange Rate is then not available, on the basis of the most recently available Market Exchange Rate or as otherwise indicated above. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency will not constitute a default under the Indenture. All determinations referred to above made by the Exchange Rate Agent shall be at its sole discretion (except to the extent expressly provided that any determination is subject to approval by the Company) and, in the absence of manifest error, shall be conclusive for all purposes and binding on the Holder of this Security, and the Exchange Rate Agent shall have no liability therefor. All currency exchange costs will be borne by the Company. References herein to "U.S. dollars" or "U.S. $" or "$" are to the currency of the United States of America. Section 3. Redemption. If so specified on the face hereof, the Company may at its option redeem this Security in whole or from time to time in part in increments of $1,000 (provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination specified on the face hereof) on or after the date designated as the Initial Redemption Date on the face hereof at 100% of the unpaid principal amount hereof or the portion thereof redeemed (or, if this Security is a Discount Security, such lesser amount as is provided for below) multiplied by the Initial Redemption Percentage specified on the face hereof, together with accrued interest, if any, to the Redemption Date. Such Initial Redemption Percentage shall decline at each anniversary of the Initial Redemption Date by an amount equal to the Annual Redemption Percentage Reduction, if any, specified on the face hereof until the Redemption Price is 100% of the unpaid principal amount hereof. The Company may exercise such option by causing the Trustee to mail a notice of such redemption at least 30 but not more than 60 days prior to the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If less than all of the Securities with like tenor and terms to this Security are to be redeemed, the Securities to be redeemed shall be selected by the Trustee by such method as the Trustee shall deem fair and appropriate. However, if less than all the Securities of the series with differing tenor and terms to this Security are to be redeemed, then the Company in its sole discretion shall select the particular Securities to be redeemed and shall notify the Trustee in writing thereof at least 45 days prior to the relevant Redemption Date. Section 4. Repayment. If so specified on the face hereof, this Security shall be repayable prior to the Stated Maturity Date at the option of the Holder on each applicable 11 3 Optional Repayment Date shown on the face hereof at a repayment price equal to 100% of the principal amount to be repaid, together with accrued interest, if any, to the Repayment Date. In order for this Security to be repaid, the Trustee must receive at least 30 but not more than 45 days prior to an Optional Repayment Date, this Security with the form attached hereto entitled "Option to Elect Repayment" duly completed. Any tender of this Security for repayment shall be irrevocable. The repayment option may be exercised by the Holder of this Security in whole or in part in increments of $1,000 (provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination specified on the face hereof). Upon any partial repayment, this Security shall be canceled and a new Security or Securities for the remaining principal amount hereof shall be issued in the name of the Holder of this Security. Section 5. Discount Securities. If this Security (such a Security being referred to as a "Discount Security") (a) has been issued at an Issue Price lower, by more than a de minimis amount (as determined under United States federal income tax rules applicable to original issue discount instruments), than the stated redemption price at maturity (as defined below) hereof and (b) would be considered an original issue discount security for United States federal income tax purposes, then the amount payable on this Security in the event of redemption by the Company, repayment at the option of the Holder or acceleration of the maturity hereof, in lieu of the principal amount due at the Stated Maturity Date hereof, shall be the Amortized Face Amount (as defined below) of this Security as of the date of such redemption, repayment or acceleration. The "Amortized Face Amount" of this Security shall be the amount equal to the sum of (a) the Issue Price (as set forth on the face hereof) plus (b) the aggregate of the portions of the original issue discount (the excess of the amounts considered as part of the "stated redemption price at maturity" of this Security within the meaning of Section 1273(a)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), whether denominated as principal or interest, over the Issue Price of this Security) which shall theretofore have accrued pursuant to Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code) from the date of issue of this Security to the date of determination, minus (c) any amount considered as part of the "stated redemption price at maturity" of this Security which has been paid on this Security from the date of issue to the date of determination. Section 6. Modification and Waivers; Obligation of the Company Absolute. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series. Such amendment may be effected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal 12 4 amount of Outstanding Securities of each series affected thereby. The Indenture also contains provisions permitting the Holders of not less than a majority in principal amount of the Outstanding Securities of any series, on behalf of the Holders of all Outstanding Securities of such series, to waive compliance by the Company with certain provisions of the Indenture. Provisions in the Indenture also permit the Holders of not less than a majority in principal amount of all Outstanding Securities of any series to waive on behalf of all of the Holders of Securities of such series certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Security and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. The Securities are unsecured and rank pari passu with all other unsecured and unsubordinated indebtedness of the Company. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Security at the times, place and rate, and in the Specified Currency herein prescribed, except as set forth in Section 2 on the reverse hereof. Section 7. Defeasance and Covenant Defeasance. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security, unless otherwise specified on the face hereof. Section 8. Minimum Denomination. Authorized Denominations. Unless otherwise provided on the face hereof, this Security is issuable only in registered form without coupons in denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000. If this Security is denominated in a Specified Currency other than U.S. dollars or is a Discount Security, this Security shall be issuable in the denominations set forth on the face hereof. Section 9. Registration of Transfer. As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Security is registrable in the Security Register upon surrender of this Security for registration of transfer at a Place of Payment for the series of Securities of which this Security forms a part, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of like authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. If the registered owner of this Security is the Depository (such a Security being referred to as a "Global Security"), and (i) the Depository is at any time unwilling or unable to continue as depository and a successor depository is not appointed by the Company within 13 5 90 days following notice to the Company, or (ii) an Event of Default occurs, the Company will issue Securities in certificated form in exchange for this Global Security. In addition, the Company may at any time, and in its sole discretion, determine not to have Securities represented by a Global Security and, in such event, will issue Securities in certificated form in exchange in whole for this Global Security. In any exchange pursuant to this paragraph, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Securities of this series in exchange for this Global Security, will authenticate and deliver individual Securities of this series in certificated form in an aggregate principal amount equal to the principal amount of this Global Security in exchange herefor. Securities issued in exchange for this Global Security pursuant to this paragraph shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in this Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. For purposes of the Indenture, this Global Security constitutes a Security issued in permanent global form. Securities so issued in certificated form will be issued in denominations of $1,000 (or such other denomination as shall be specified on the face hereof) or any amount in excess thereof which is an integral multiple of $1,000 and will be issued in registered form only, without coupons. As provided in the Indenture and subject to certain limitations therein and herein set forth, this Security is exchangeable for a like aggregate principal amount of Securities of this series of different authorized denominations but otherwise having the same terms and conditions, as requested by the Holder hereof surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder as the owner hereof for all purposes, whether or not this Security be overdue, and none of the Company, the Trustee nor any such agent shall be affected by notice to the contrary. Section 10. Events of Default. If an Event of Default with respect to the Securities of the series of which this Security forms a part shall have occurred and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect provided in the Indenture. 14 6 Section 11. Defined Terms. All terms used in this Security which are defined in the Indenture and are not otherwise defined herein shall have the meanings assigned to them in the Indenture. Section 12. Governing Law. Unless otherwise specified on the face hereof, this Security shall be governed by and construed in accordance with the law of the State of New York. 15 OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably requests and instructs the Company to repay this Security (or the portion thereof specified below), pursuant to its terms, on the "Optional Repayment Date" first occurring after the date of receipt of the within Security as specified below (the "Repayment Date"), at a Repayment Price equal to 100% of the principal amount thereof, together with interest thereon accrued to the Repayment Date, to the undersigned at: ____________________________________ ____________________________________ (Please Print or Type Name and Address of the Undersigned.) For this Option to Elect Repayment to be effective, this Security with the Option to Elect Repayment duly completed must be received at least 30 but not more than 45 days prior to the Optional Repayment Date (or, if such Repayment Date is not a Business Day, the next succeeding Business Day) by the Company at its office or agency in The City of New York, which will be located initially at the office of the Trustee at 450 West 33rd Street, New York, New York 10001-2697. If less than the entire principal amount of this Security is to be repaid, specify the portion thereof (which shall be $1,000 or an integral multiple thereof) which is to be repaid: $___________. If less than the entire principal amount of the within Security is to be repaid, specify the denomination(s) of the Security(ies) to be issued for the unpaid amount ($1,000 or any integral multiple of $1,000; provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination): $____. Dated: __________ _______________ Note: The signature to this Option to Elect Repayment must correspond with the name as written upon the face of this Security in every particular without alteration or enlargement or any change whatsoever. 16 _____________ ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - ............Custodian............ (Cust.) (Minor) Under Uniform Gifts to Minors Act ................................. (State) Additional abbreviations may also be used though not in the above list. _____________ FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________________ | | | | ______________________________________________________________________________ Please print or type name and address, including zip code of assignee ______________________________________________________________________________ the within Security of EATON CORPORATION and all rights thereunder and does hereby irrevocably constitute and appoint Attorney ________________________________________________________________________ to transfer the said Security on the books of the within-named Company, with full power of substitution in the premises. Dated ________________________________ SIGNATURE GUARANTEED: _______________________________________ ______________________ _____________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the Security in every particular, without alteration or enlargement or any change whatsoever. EX-4.L 6 EXHIBIT 4(L) 1 Exhibit 4(l) [FACE OF NOTE] CUSIP NO. REGISTERED FACE AMOUNT PRINCIPAL AMOUNT No. FL - EATON CORPORATION MEDIUM-TERM NOTE (SINGLE INDEXED NOTE) (FLOATING RATE) If the registered owner of this Security (as indicated below) is The Depository Trust Company (the "Depository") or a nominee of the Depository, this Security is a Global Security and the following two legends apply: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR OF THE DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR. IF APPLICABLE, THE "TOTAL AMOUNT OF OID", "YIELD TO MATURITY" AND "INITIAL ACCRUAL PERIOD OID" (COMPUTED UNDER THE APPROXIMATE METHOD) BELOW WILL BE COMPLETED SOLELY FOR THE PURPOSES OF APPLYING THE FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES. 2 2
ISSUE PRICE: OPTION TO ELECT REPAYMENT: [ ] YES [ ] NO ORIGINAL ISSUE DATE: OPTIONAL REPAYMENT DATE[S]: STATED MATURITY DATE: INITIAL INTEREST RATE: OPTIONAL REDEMPTION: [ ] YES [ ] NO BASE RATE: INITIAL REDEMPTION DATE: If LIBOR: [ ] LIBOR Telerate [ ] LIBOR Reuters INITIAL REDEMPTION PERCENTAGE: [ ] Other Designated LIBOR Page: ANNUAL REDEMPTION PERCENTAGE REDUCTION: Designated LIBOR Currency: INDEX MATURITY: MINIMUM DENOMINATIONS: [ ] $1,000 SPREAD (PLUS OR MINUS): [ ] Other: SPECIFIED CURRENCY: SPREAD MULTIPLIER: United States Dollars: [ ] YES [ ] NO Foreign Currency: CALCULATION AGENT: OPTION TO RECEIVE PAYMENTS IN SPECIFIED CURRENCY CALCULATION DATE: OTHER THAN U.S. DOLLARS: [ ] YES [ ] NO SINKING FUND: EXCHANGE RATE AGENT: MAXIMUM INTEREST RATE: MINIMUM INTEREST RATE: INTEREST DETERMINATION DATE: ADDITIONAL AMOUNTS: INTEREST RESET PERIOD: DEFEASANCE: [ ] YES [ ] NO INTEREST RESET DATES: COVENANT DEFEASANCE: [ ] YES [ ] NO INTEREST PAYMENT PERIOD: INDEXED CURRENCY: United States Dollars: [ ] YES [ ] NO INTEREST PAYMENT DATES: Foreign Currency: PRINCIPAL FINANCIAL CENTER REGULAR RECORD DATES: BASE EXCHANGE RATE: TOTAL AMOUNT OF OID: DETERMINATION AGENT: INITIAL ACCRUAL PERIOD OID: YIELD TO MATURITY: REFERENCE DEALERS: 1. ___ OTHER/DIFFERENT PROVISIONS: 2. ___ 3. ___
3 EATON CORPORATION, an Ohio corporation (herein referred to as the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________, or registered assigns, in the Specified Currency on the Stated Maturity Date shown above (except to the extent redeemed or repaid prior to the Stated Maturity Date), the principal sum of _______ (the "Face Amount"), plus or minus an amount determined by the Determination Agent (specified above) in accordance with the formula set forth below, and to pay interest on the Face Amount as described below and on the reverse hereof. If the Spot Rate exceeds or equals the Base Exchange Rate, the principal amount of this Security payable on the Maturity Date (as defined below) shall equal: Face Amount + (Face Amount x Spot Rate - Base Exchange Rate) ------------------------------ Base Exchange Rate If the Base Exchange Rate exceeds the Spot Rate, the principal amount of this Security payable on the Maturity Date shall equal: Face Amount - (Face Amount x Base Exchange Rate - Spot Rate) ------------------------------ Base Exchange Rate ; provided, however, that in no event shall such principal amount be less than zero. In making the above calculations, the (i) "Base Exchange Rate" is the exchange rate specified as such above and (ii) "Spot Rate" is the rate at which the Specified Currency can be exchanged for the Indexed Currency specified above (such rate stated as units of Indexed Currency per unit of the Specified Currency) as determined on the second Exchange Rate Day, as defined below, prior to the Maturity Date (the "Determination Date") by the Determination Agent based upon the arithmetic mean of the open market spot offer quotations for such Indexed Currency (spot bid quotations for the Specified Currency) obtained by the Determination Agent from the Reference Dealers specified above in The City of New York at 11:00 A.M., New York City time, on the Determination Date, for an amount of Indexed Currency equal to the Face Amount of this Security multiplied by the Base Exchange Rate, in terms of the Specified Currency for settlement on the Maturity Date. If such quotations from the Reference Dealers are not available on the Determination Date due to circumstances beyond the control of the Company or the Determination Agent, the Spot Rate will be determined on the basis of the most 4 2 recently available quotations from the Reference Dealers. If any of the Reference Dealers shall be unwilling or unable to provide the requested quotations, the Company may select other major money center bank or banks in The City of New York, in consultation with the Determination Agent, to act as Reference Dealer or Dealers in replacement therefor. In the absence of manifest error, the determination by the Determination Agent of the Spot Rate and the principal amount of this Security payable on the Maturity Date shall be final and binding on the Company, the Trustee (referred to on the reverse hereof) and the Holder (as defined below) of this Security. "Exchange Rate Day" means any day which is a Business Day in The City of New York and, if the Specified Currency or Indexed Currency is any currency or currency unit other than U.S. dollars, in the Principal Financial Center of the country of such Specified Currency or Indexed Currency. The Company shall pay interest on the Face Amount hereof at the Interest Rate shown above from the Original Issue Date shown above until the first Interest Reset Date shown above following the Original Issue Date (if the first Interest Reset Date is later than the Original Issue Date) and thereafter at the interest rate determined by reference to the Base Rate shown above, plus or minus the Spread, if any, or multiplied by the Spread Multiplier, if any, shown above, or adjusted by such other formula, if any, set forth on the face hereof, until the principal hereof is paid or made available for payment; provided, however, that the interest rate in effect for the ten days immediately prior to the Maturity Date (as defined below) of this Security will be that in effect on the tenth day preceding such date. The Company will pay interest on each Interest Payment Date, if any, specified above, commencing with the first Interest Payment Date next succeeding the Original Issue Date, and on the Stated Maturity Date, any Redemption Date or Repayment Date (each such date being hereinafter referred to as the "Maturity Date" with respect to the principal repayable on such date); provided, however, that any payment of principal (or premium, if any) or interest, if any, to be made on any Interest Payment Date or on the Maturity Date that is not a Business Day (as defined below) shall be made on the next succeeding Business Day (except that if the Base Rate specified above is LIBOR, and such day falls in the next succeeding calendar month, such payment will be made on the next preceding Business Day) as described on the reverse hereof. For purposes of this Security, unless otherwise specified on the face hereof, "Business Day" means any day that is not a Saturday or Sunday and that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York; provided, however, that, if the Specified Currency shown above is a Foreign Currency, such day is also not a day on which commercial banks are authorized or required by law, regulation or executive order to close in the Principal Financial Center (as defined below) of the country issuing the Specified Currency (or, if the Specified Currency is the euro, such day is also a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open); provided further that, with respect to Securities as to which LIBOR is an applicable Base Rate, such day is also a London Business Day. "London Business Day" means a day on which 5 3 commercial banks are open for business (including dealings in the LIBOR Currency (as defined below)) in London. "Principal Financial Center" means (i) the capital city of the country issuing the Specified Currency or the Indexed Currency, as the case may be, or (ii) the capital city of the country to which the LIBOR Currency relates, as applicable, except, in the case of (i) or (ii) above, that with respect to United States dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos, South African rand and Swiss francs, the "Principal Financial Center" shall be The City of New York, Sydney and (solely in the case of the Specified Currency) Melbourne, Toronto, Frankfurt, Amsterdam, London (solely in the case of the LIBOR Currency), Johannesburg and Zurich, respectively. Interest on this Security will accrue from, and including, the immediately preceding Interest Payment Date to which interest has been paid or duly provided for (or from, and including, the Original Issue Date if no interest has been paid or duly provided for) to, but excluding, the applicable Interest Payment Date or the Maturity Date, as the case may be (each, an "Interest Period"). The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture and subject to certain exceptions described herein (referred to on the reverse hereof), be paid to the person (the "Holder") in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the fifteenth day (whether or not a Business Day) next preceding such Interest Payment Date (a "Regular Record Date"); provided, however, that, if this Security was issued between a Regular Record Date and the initial Interest Payment Date relating to such Regular Record Date, interest for the period beginning on the Original Issue Date and ending on such initial Interest Payment Date shall be paid on the Interest Payment Date following the next succeeding Regular Record Date to the Holder hereof on such Regular Record Date; and provided further that interest payable on the Maturity Date will be payable to the person to whom the principal hereof shall be payable. Any such interest not so punctually paid or duly provided for on any Interest Payment Date other than the Maturity Date ("Defaulted Interest") will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to the Holder of this Security not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more fully provided in the Indenture. Unless otherwise specified above, all payments in respect of this Security will be made in U.S. dollars regardless of the Specified Currency shown above unless the Holder hereof makes the election described below. If the Specified Currency shown above is other than U.S. dollars, the Exchange Rate Agent (referred to on the reverse hereof) will arrange to convert any such amounts so payable in respect hereof into U.S. dollars in the manner described on the reverse hereof; provided, however, that the Holder hereof may, if so indicated above, elect to receive all or a specified portion of any payment of principal, premium, if any, and/or interest, if 6 4 any, in respect of this Security in such Specified Currency by delivery of a written request to the corporate trust office of the Trustee in The City of New York, on or prior to the applicable Regular Record Date or at least fifteen days prior to the Maturity Date, as the case may be. Such request may be in writing (mailed or hand delivered) or by cable, telex or other form of facsimile transmission. The Holder hereof may elect to receive payment in such Specified Currency for all principal, premium, if any, and interest payments, if any, and need not file a separate election for each payment. Such election will remain in effect until revoked by written notice to the Trustee, but written notice of any such revocation must be received by the Trustee on or prior to the applicable Regular Record Date or at least fifteen days prior to the Maturity Date, as the case may be. Notwithstanding the foregoing, if the Company determines that the Specified Currency is not available for making payments in respect hereof due to the imposition of exchange controls or other circumstances beyond the Company's control, or is no longer used by the government of the country issuing such currency or for the settlement of transactions by public institutions of or within the international banking community, then the Holder hereof may not so elect to receive payments in the Specified Currency and any such outstanding election shall be automatically suspended, until the Company determines that the Specified Currency is again available for making such payments. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency will not constitute a default under the Indenture. In the event of an official redenomination of the Specified Currency, the obligations of the Company with respect to payments on this Security shall be deemed, immediately following such redenomination, to provide for payment of that amount of redenominated currency representing the amount of such obligations immediately before such redenomination. Except as set forth above, in no event shall any adjustment be made to any amount payable hereunder as a result of any change in the value of the Specified Currency shown above relative to any other currency due solely to fluctuations in exchange rates. Until this Security is paid in full or payment therefor in full is duly provided for, the Company will at all times maintain a Paying Agent (which Paying Agent may be the Trustee) in The City of New York (which, unless otherwise specified above, shall be the "Place of Payment"). The Company has initially appointed The Chase Manhattan Bank, at its office in The City of New York as Paying Agent. Unless otherwise shown above, payment of interest on this Security (other than on the Maturity Date) will be made by check mailed to the registered address of the Holder hereof as of the Regular Record Date; provided, however, that, if (i) the Specified Currency is U.S. dollars and this is a Global Security (as defined on the reverse hereof) or (ii) the Specified Currency is a Foreign Currency, and the Holder has elected to receive payments in such Specified Currency as 7 5 provided for above, such interest payments will be made by transfer of immediately available funds, but only if appropriate wire transfer instructions have been received in writing by the Trustee on or prior to the applicable Regular Record Date. Simultaneously with any election by the Holder hereof to receive payments in respect hereof in the Specified Currency (if other than U.S. dollars), such Holder may provide appropriate wire transfer instructions to the Trustee, and all such payments will be made in immediately available funds to an account maintained by the payee with a bank, but only if such bank has appropriate facilities therefor. Unless otherwise specified above, the principal hereof (and premium, if any) and interest hereon payable on the Maturity Date will be paid in immediately available funds upon surrender of this Security at the office of the Trustee maintained for that purpose in the Borough of Manhattan, The City of New York (or at such other location as may be specified above). The Company will pay any administrative costs imposed by banks in making payments in immediately available funds but, except as otherwise provided under Additional Amounts above, any tax, assessment or governmental charge imposed upon payments will be borne by the Holders of the Securities in respect of which such payments are made. Interest on this Security, if any, will be computed on the basis of a 360-day year of twelve 30-day months. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. 8 Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its facsimile corporate seal. EATON CORPORATION By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: [CORPORATE SEAL] Attest: ------------------------- Name: Title: Secretary TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture Dated: THE CHASE MANHATTAN BANK, as Trustee By: ----------------------------- Authorized Officer 9 [REVERSE OF NOTE] EATON CORPORATION MEDIUM-TERM NOTE Section 1. General. This Security is one of a duly authorized issue of securities (herein called the "Securities") of the Company, issued and to be issued in one or more series under an indenture, dated as of April 1, 1994, as it may be supplemented from time to time (herein called the "Indenture"), between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture with respect to a series of which this Security is a part), to which Indenture and all indentures supplemental thereto, reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof limited in aggregate principal amount to U.S.$800,000,000 (or the equivalent thereof in one or more foreign currencies) or such other principal amount as shall be provided pursuant to the Indenture. Section 2. Payments. If the Specified Currency is other than U.S. dollars and the Holder hereof fails to elect payment in such Specified Currency in accordance with the procedures set forth on the face hereof, the amount of U.S. dollar payments to be made in respect hereof will be determined by the Exchange Rate Agent specified on the face hereof or a successor thereto (the "Exchange Rate Agent") based on the highest bid quotation in The City of New York at approximately 11:00 A.M., New York City time, on the second Business Day preceding the applicable payment date received by the Exchange Rate Agent from three recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the Company for the purchase by the quoting dealer of the Specified Currency for U.S. dollars for settlement on such payment date in the aggregate amount of the Specified Currency payable to all Holders of Securities scheduled to receive U.S. dollar payments and at which the applicable dealer commits to execute a contract. If three such bid quotations are not available, payments will be made in the Specified Currency. If the Specified Currency is other than U.S. dollars and the Holder hereof has elected payment in such Specified Currency in accordance with the procedures set forth on the face hereof and the Specified Currency is not available due to the imposition of exchange controls or to other circumstances beyond the Company's control, the Company will be entitled to satisfy its obligations to the Holder of this Security by making such payment in U.S. dollars on the basis of the noon buying rate in The City of New York for cable transfers of such Specified Currency as certified for customs purposes (or, if not so certified as otherwise determined) by the Federal Reserve Bank of New York (the "Market Exchange Rate") as computed by the Exchange Rate Agent on the second Business Day prior to the applicable payment date or, if the Market 10 2 Exchange Rate is then not available, on the basis of the most recently available Market Exchange Rate or as otherwise indicated above. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency will not constitute a default under the Indenture. All determinations referred to above made by the Exchange Rate Agent shall be at its sole discretion (except to the extent expressly provided that any determination is subject to approval by the Company) and, in the absence of manifest error, shall be conclusive for all purposes and binding on the Holder of this Security, and the Exchange Rate Agent shall have no liability therefor. All currency exchange costs will be borne by the Company. Section 3. Interest Rate Calculations. Unless otherwise set forth on the face hereof, the following provisions of this Section 3 shall apply to the calculation of interest on this Security. If the first Interest Reset Date is later than the Original Issue Date, this Security will bear interest from its Original Issue Date to the first Interest Reset Date at the Initial Interest Rate set forth on the face hereof. Thereafter, the interest rate hereon for each Interest Reset Period (as defined below) will be determined by reference to the Base Rate set forth on the face hereof, as adjusted by the Spread, the Spread Multiplier or other formula, if any, set forth on the face hereof. As set forth on the face hereof, this Security may also have either or both of the following: (i) a maximum limitation, or ceiling, on the rate at which interest may accrue during any Interest Period (as defined below) ("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the rate at which interest may accrue during any Interest Period ("Minimum Interest Rate"). In addition to any Maximum Interest Rate that may be set forth on the face hereof, the interest rate on this Security will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. The rate of interest hereon will be reset daily, weekly, monthly, quarterly, semiannually or annually or at another interval (each, an "Interest Reset Period"), as set forth on the face hereof. The date or dates on which interest will be reset (each, an "Interest Reset Date") will be, if this Security resets (i) daily, each Business Day; (ii) weekly, the Wednesday of each week (unless the Base Rate set forth on the face hereof is the Treasury Rate, in which case, the Tuesday of each week (except as provided below)); (iii) monthly, the third Wednesday of each month; (iv) quarterly, the third Wednesday of each of the four months set forth on the face hereof; (v) semiannually, the third Wednesday of each of the two months set forth on the face hereof; and (vi) annually, the third Wednesday of the month of each year set forth on the face hereof; provided, however, that (a) if the first Interest Reset Date is later than the Original Issue 11 3 Date, the interest rate in effect from the Original Issue Date to the first Interest Reset Date will be the Initial Interest Rate as set forth on the face hereof and (b) the interest rate in effect for the ten days immediately prior to the Maturity Date will be that in effect on the tenth day preceding the Maturity Date. If the Base Rate set forth on the face hereof is the Treasury Rate and a Treasury auction shall fall on the Interest Reset Date for this Security, then such Interest Reset Date shall instead be the first Business Day immediately following such Treasury auction. If any Interest Reset Date would otherwise be a day that is not a Business Day, such Interest Reset Date shall be postponed to the next succeeding Business Day, except that, if the Base Rate set forth on the face hereof is LIBOR, if such Business Day is in the next succeeding calendar month, such Interest Reset Date shall be the immediately preceding Business Day. The interest payable hereon on each Interest Payment Date and on the Maturity Date shall be the amount of interest accrued from and including the Original Issue Date or the next preceding Interest Payment Date in respect of which interest, if any, has been paid or duly provided for, as the case may be, to, but excluding, the next succeeding Interest Payment Date or the Maturity Date, as the case may be, (each such period, an "Interest Period"). If the Maturity Date falls on a day which is not a Business Day, the payment of principal, premium, if any, and interest, if any, with respect to the Maturity Date will be paid on the next succeeding Business Day with the same force and effect as if made on the Maturity Date, and no interest shall accrue on the amount so payable as a result of such delayed payment. If an Interest Payment Date other than the Maturity Date falls on a day that is not a Business Day, such Interest Payment Date will be postponed to the next day that is a Business Day and interest will accrue for the period of such postponement (except if the Base Rate specified above is LIBOR, and such day falls in the next succeeding calendar month, such Interest Payment Date will be advanced to the immediately preceding Business Day), it being understood that, to the extent this sentence is inconsistent with Section 112 of the Indenture, the provisions of this sentence shall apply in lieu of such Section. Accrued interest will be calculated by multiplying the principal amount hereof by an accrued interest factor. Such accrued interest factor will be computed by adding the interest factor calculated for each day in the Interest Period or from the date from which accrued interest is being calculated. The interest factor for each such day is computed by dividing the interest rate applicable on such day by 360, if the Base Rate set forth on the face hereof is the CD Rate, Commercial Paper Rate, Federal Funds Rate, Prime Rate or LIBOR (each as described below), or by the actual number of days in the year, if the Base Rate set forth on the face hereof is the Treasury Rate or the CMT Rate (each as described below). The interest rate applicable to any day that is an Interest Reset Date is the interest rate as determined, in accordance with the procedures hereinafter set forth, with respect to the Interest Determination Date (as defined below) pertaining to such Interest Reset Date. The interest rate applicable to any other day is the interest rate for the immediately preceding Interest Reset Date (or, if none, the Initial Interest Rate, as set forth on the face hereof). 12 4 All percentages resulting from any calculation with respect hereto will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 7.123455% (or 0.07123455) being rounded to 7.123455% (or 0.07123455) and 7.12345% (or 0.0712345) being rounded to 7.12345% (or 0.0712345)), and all currency amounts used in or resulting from such calculation will be rounded to the nearest one-hundredth of a unit (with five one-thousandths of a unit being rounded upwards). Interest will be payable on, if this Security resets (i) daily, weekly or monthly, the third Wednesday of each month; (ii) quarterly, the third Wednesday of the four months set forth on the face hereof; (iii) semiannually, the third Wednesday of the two months set forth on the face hereof; and (iv) annually, the third Wednesday of the month set forth on the face hereof (each, an "Interest Payment Date"), and in each case, on the Maturity Date. If the Base Rate set forth on the face hereof is the CD Rate, the CMT Rate, the Commercial Paper Rate, the Federal Funds Rate or the Prime Rate, the "Interest Determination Date" pertaining to an Interest Reset Date for this Security will be the second Business Day immediately preceding such Interest Reset Date; if the Base Rate set forth on the face hereof is LIBOR, the "Interest Determination Date" pertaining to an Interest Reset Date for this Security will be the second London Business Day immediately preceding such Interest Reset Date unless the Designated LIBOR Currency is British pounds sterling, in which case the "Interest Determination Date" will be such Interest Reset Date; and if the Base Rate set forth on the face hereof is the Treasury Rate, the "Interest Determination Date" pertaining to an Interest Reset Date for this Security will be the day of the week in which such Interest Reset Date falls on which Treasury bills (as defined below) would normally be auctioned. Treasury bills are usually sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday, except that sometimes such auction may be held on the preceding Friday. If, as the result of a legal holiday, an auction is so held on the preceding Friday, such Friday will be the Interest Determination Date pertaining to the Interest Reset Date occurring in the next succeeding week. Unless otherwise set forth on the face hereof, the "Calculation Date", where applicable, pertaining to an Interest Determination Date is the earlier of (i) the tenth calendar day after such Interest Determination Date, or if any such day is not a Business Day, the next succeeding Business Day and (ii) the Business Day immediately preceding the applicable Interest Payment Date or the Maturity Date, as the case may be. The Company will appoint and enter into an agreement with an agent (a "Calculation Agent") to calculate the rate of interest on the Securities of this series which bear interest at a floating rate. Unless otherwise set forth on the face hereof, The Chase Manhattan Bank will be the Calculation Agent. At the request of the Holder hereof, the Calculation Agent 13 5 will provide the interest rate then in effect and, if determined, the interest rate that will become effective on the next Interest Reset Date. Subject to applicable provisions of law and except as specified herein, with respect to each Interest Determination Date, the rate of interest shall be the rate determined by the Calculation Agent in accordance with the provisions of the applicable heading below. Determination of CD Rate. If the Base Rate set forth on the face hereof is the CD Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the CD Rate and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "CD Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate on such date for negotiable certificates of deposit having the Index Maturity set forth on the face hereof as published in H.15(519) (as defined below), under the heading "CDs (secondary market)" or, if not yet published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the CD Rate will be the rate on such Interest Determination Date for negotiable certificates of deposit having the Index Maturity set forth on the face hereof as published in H.15 Daily Update (as defined below), or such other recognized electronic source used for the purpose of displaying such rate, under the caption "CDs (secondary market)". If by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date such rate is not yet published in H.15(519), H.15 Daily Update or such other recognized electronic source, the CD Rate on such Interest Determination Date will be calculated by the Calculation Agent and will be the average of the secondary market offered rates as of 10:00 A.M., New York City time, on such Interest Determination Date, of three leading non-bank dealers in negotiable U.S. dollar certificates of deposit in The City of New York selected by the Calculation Agent (after consultation with the Company) for negotiable certificates of deposit of major United States money market banks of the highest credit standing (in the market for negotiable certificates of deposit) having a remaining maturity closest to the Index Maturity set forth on the face hereof in a denomination of U.S. $5,000,000; provided, however, that, if fewer than three dealers are quoting as mentioned in this sentence, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. "H.15 Daily Update" means the daily update of H.15(519), available through the world-wide web site of the Board of Governors of the Federal Reserve System at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or publication. Determination of Commercial Paper Rate. If the Base Rate set forth on the face hereof is the Commercial Paper Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the Commercial Paper Rate and the Spread, 14 6 Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "Commercial Paper Rate" means, with respect to any Interest Determination Date pertaining thereto, the Money Market Yield (calculated as described below) of the rate on such date for commercial paper having the Index Maturity set forth on the face hereof, as such rate shall be published in H.15(519) under the caption "Commercial Paper -- Nonfinancial" or, if not yet published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the Commercial Paper Rate shall be the Money Market Yield of the rate on such Interest Determination Date for commercial paper having the Index Maturity set forth on the face hereof as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying such rate, under the caption "Commercial Paper -- Nonfinancial". If by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date such rate is not yet published in H.15(519), H.15 Daily Update or such other recognized electronic source, the Commercial Paper Rate on such Interest Determination Date shall be calculated by the Calculation Agent and shall be the Money Market Yield of the average of the offered rates as of 11:00 A.M., New York City time, on such Interest Determination Date of three leading dealers in U.S. dollar commercial paper in The City of New York selected by the Calculation Agent (after consultation with the Company) for commercial paper having the Index Maturity set forth on the face hereof placed for an industrial issuer whose bond rating is "Aa", or the equivalent, from a nationally recognized securities rating agency; provided, however, that, if fewer than three dealers are quoting as mentioned in this sentence, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. "Money Market Yield" shall be a yield (expressed as a percentage) calculated in accordance with the following formula: MONEY MARKET YIELD = D x 360 x 100 ------------- 360 - (D x M) where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal; and "M" refers to the actual number of days in the Interest Period for which interest is being calculated. Determination of Federal Funds Rate. If the Base Rate set forth on the face hereof is the Federal Funds Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the Federal Funds Rate and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "Federal Funds Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate on such date for federal funds as published in H.15(519) under the caption "Federal Funds (Effective)" as such rate is displayed on Telerate Page 120 (or any other 15 7 page as may replace such page on such service) ("Telerate Page 120"). If such rate does not appear on Telerate Page 120 or is not yet published in H.15(519) by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the Federal Funds Rate will be the rate on such Interest Determination Date as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying such rate, under the caption "Federal Funds (Effective)". If by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date such rate does not appear on Telerate Page 120 or is not yet published in H.15(519), H.15 Daily Update or such other recognized electronic source, the Federal Funds Rate for such Interest Determination Date will be calculated by the Calculation Agent and will be the average of the rates for the last transaction in overnight Federal Funds arranged by three leading dealers of Federal Funds transactions in The City of New York, which dealers have been selected by the Calculation Agent (after consultation with the Company), as of 9:00 A.M., New York City time, on such Interest Determination Date; provided, however, that, if fewer than three dealers are quoting as mentioned in this sentence, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. Determination of LIBOR. If the Base Rate set forth on the face hereof is LIBOR, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to LIBOR and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, "LIBOR" means the rate determined by the Calculation Agent in accordance with the following provisions: (i) If "LIBOR Reuters" is specified on the face hereof, LIBOR will be the average of the offered rates for deposits in the LIBOR Currency having the Index Maturity set forth on the face hereof on the applicable Interest Reset Date, as such rates appear on the Designated LIBOR Page as of 11:00 A.M., London time, on that Interest Determination Date, if at least two such offered rates appear on the Designated LIBOR Page. (ii) If "LIBOR Telerate" is specified on the face hereof, LIBOR will be the rate for deposits in the LIBOR Currency having the Index Maturity set forth on the face hereof on the applicable Interest Reset Date, as such rate appears on the Designated LIBOR Page as of 11:00 A.M., London time, on that Interest Determination Date. If such rate does not appear, LIBOR for such Interest Determination Date will be determined as described in (iii) below. (iii) If the Designated LIBOR Page by its terms provides only for a single rate, that single rate will be used regardless of whether the foregoing provisions require more than one rate. With respect to an Interest Determination Date, if LIBOR Reuters is the applicable method for determining LIBOR and fewer than two offered rates (or no rate, if 16 8 applicable) appear on the Designated LIBOR Page as specified in (i) above or if LIBOR Telerate is the applicable method for determining LIBOR and no rate appears on the Designated LIBOR Page as specified in (ii) above, then LIBOR will be determined on the basis of the offered rates at which deposits in the LIBOR Currency for the period of the Index Maturity set forth on the face hereof on the Interest Determination Date and in a principal amount that is representative of a single transaction in that market at that time are offered by four major banks in the London interbank market at approximately 11:00 AM., London time, for the period commencing on the Interest Reset Date to prime banks in the London interbank market. The Calculation Agent will select the four banks and request the principal London office of each of those banks to provide a quotation of its rate for deposits in the LIBOR Currency. If at least two quotations are provided, LIBOR for that Interest Determination Date will be the average of those quotations. If fewer than two quotations are provided as mentioned above, LIBOR will be the average of the rates quoted by three major banks in the Principal Financial Center selected by the Calculation Agent at approximately 11:00 A.M. in the Principal Financial Center, on the Interest Determination Date for loans to leading European banks in the LIBOR Currency having the Index Maturity set forth on the face hereof, for the period commencing on the Interest Reset Date and in a principal amount that is representative for a single transaction in the LIBOR Currency in that market at that time. The Calculation Agent will select the three banks referred to above. If fewer than three banks selected by the Calculation Agent are quoting as mentioned above, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. "LIBOR Currency" means the Designated LIBOR Currency specified on the face hereof as to which LIBOR shall be calculated or, if no such currency is specified on the face hereof, United States dollars. "Designated LIBOR Page" means, if "LIBOR Reuters" is specified on the face hereof, the display on the Reuters Monitor Money Rates Service (or any successor service) on the page specified on the face hereof (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency; or if "LIBOR Telerate" is specified on the face hereof or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified on the face hereof as the method of calculating LIBOR, the display on Bridge Telerate, Inc. (or any successor service, "Telerate") on the page specified on the face hereof (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency. Determination of Prime Rate. If the Base Rate set forth on the face hereof is the Prime Rate, this Security will bear interest for each Interest Reset Period at the interest rate 17 9 calculated with reference to the Prime Rate and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "Prime Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate on such date as published in H.15(519) under the caption "Bank Prime Loan" or, if not yet published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the rate on such Interest Determination Date as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying such rate, under the caption "Bank Prime Loan." If the rate is not published in H.15 (519), H.15 Daily Update or another recognized electronic source by 3:00 P.M., New York City time, on the Calculation Date, then the Calculation Agent will determine the Prime Rate to be the average of the rates of interest publicly announced by each bank that appears on the Reuters Screen US PRIME1 Page as that bank's prime rate or base lending rate as in effect for that Interest Determination Date. If at least one rate but fewer than four rates appear on the Reuters Screen US PRIME1 Page on the Interest Determination Date, then the Prime Rate will be the average of the prime rates or base lending rates quoted (on the basis of the actual number of days in the year divided by a 360-day year) as of the close of business on the Interest Determination Date by three major money center banks in the City of New York selected by the Calculation Agent. If the banks selected by the Calculation Agent are not quoting as mentioned above, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. "Reuters Screen US PRIME1 Page" means the display designated as Page "USPRIME1" on the Reuters Monitor Money Rates Service (or any successor service, or such other page as may replace the USPRIME1 Page on that service) for the purpose of displaying prime rates or base lending rates of major United States banks. Determination of Treasury Rate. If the Base Rate set forth on the face hereof is the Treasury Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the Treasury Rate and the Spread, Spread Multiplier or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "Treasury Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate for the auction of direct obligations of the United States ("Treasury bills") held on such Interest Determination Date having the Index Maturity set forth on the face hereof under the caption "INVESTMENT RATE" on the display on Telerate on page 56 (or any other page as may replace such page on such service) ("Telerate Page 56") or page 57 (or any other page as may replace such page on such service) ("Telerate Page 57") by 3:00 P.M., New York City time, on the Calculation date for that Interest Determination Date. 18 10 The following procedures will be followed if the Treasury Rate cannot be determined as described above: If the rate is not published by 3:00 P.M., New York City time, on the Calculation Date, the Treasury Rate will be the Bond Equivalent Yield of the auction rate of such Treasury bills as published in H.15 Daily Update or such recognized electronic source used for the purpose of displaying such rate under the caption "U.S. Government securities/ Treasury bills/Auction high." If the rate is not published by 3:00 P.M., New York City time, on the Calculation Date and cannot be determined as described in the immediately preceding paragraph, the Treasury Rate will be the Bond Equivalent Yield of the auction rate of such Treasury bills as otherwise announced by the United States Department of Treasury. If the results of the most recent auction of Treasury bills having the Index Maturity set forth on the face hereof are not published or announced as described above by 3:00 P.M., New York City time, on the Calculation Date, or if no auction is held on the Interest Determination Date, then the Treasury Rate will be the Bond Yield Equivalent on such Interest Determination Date of Treasury bills having the Index Maturity set forth on the face hereof as published in H.15(519) under the caption "U.S. Government securities/Treasury bills/Secondary market" or, if not yet published by 3:00 p.m., New York City time, on the related Calculation Date, the rate on such Interest Determination Date of such Treasury Bills as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying such rate, under the caption "U.S. Government securities/Treasury bills/Secondary market." If such rate is not published in H.15 (519), H.15 Daily Update or another recognized electronic source, then the Calculation Agent will determine the Treasury Rate to be the Bond Yield Equivalent of the average of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on the Interest Determination Date of three leading primary United States government securities dealers for the issue of Treasury bills with a remaining maturity closest to the Index Maturity set forth on the face hereof. The Calculation Agent will select the three dealers referred to above. If fewer than three dealers are quoting as described above, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. 19 11 "Bond Equivalent Yield" means a yield (expressed as a percentage) calculated in accordance with the following formula: Bond Equivalent Yield = D x N x 100 --------------- 360 - (D x M) where "D" refers to the applicable per annum rate for Treasury bills quoted on a bank discount basis, "N" refers to 365 or 366, as the case may be, and "M" refers to the actual number of days in the applicable Interest Reset Period. Determination of CMT Rate. If the Base Rate set forth on the face hereof is the CMT Rate, this Security will bear interest for each Interest Reset Period at the interest rate calculated with reference to the CMT Rate and the Spread, Spread Multiplier, or other formula, if any, set forth on the face hereof. Unless otherwise set forth on the face hereof, the "CMT Rate" means, with respect to any Interest Determination Date pertaining thereto, the rate displayed on the Designated CMT Telerate Page (as defined below) under the caption ". . . Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately 3:45 P.M.", under the column for the Designated CMT Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page is 7051 or any successor page, the rate on such Interest Determination Date and (ii) if the Designated CMT Telerate Page is 7052 or any successor page, the rate for the weekly or the monthly average, as applicable, ended immediately preceding the week or month in which the related Interest Determination Date occurs. If such rate is no longer displayed on the relevant page, or if not displayed by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, then the interest rate for such Interest Determination Date shall be the rate for the Designated CMT Maturity Index as published in H.15(519). If such rate is no longer published, or if not published by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, then the interest rate for such Interest Determination Date shall be the rate for the Designated CMT Maturity Index (or other United States Treasury rate for the Designated CMT Maturity Index) as may then be published by either the Board of Governors of the Federal Reserve System or the United States Department of the Treasury that the Calculation Agent determines (with the concurrence of the Company) to be comparable to the rate formerly displayed on the Designated CMT Telerate Page and published in H.15(519). If such information is not provided by 3:00 P.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, then the interest rate for such Interest Determination Date shall be calculated by the Calculation Agent and shall be a yield to maturity, based on the arithmetic average of the secondary market closing offer side prices as of approximately 3:30 P.M., New York City time, on such Interest Determination Date, reported by three leading primary United States government securities dealers (each, a "Reference Dealer") in The City of New York, for the most recently issued direct noncallable fixed rate obligations of the United States ("U.S. Treasury Notes") with an original maturity of approximately the Designated CMT Maturity Index and a 20 12 remaining term to maturity of not less than such Designated CMT Maturity Index minus one year. The three Reference Dealers shall be determined by (i) the selection of five Reference Dealers by the Calculation Agent (after consultation with the Company) and (ii) the elimination of the Reference Dealers providing the highest (or, in the event of equality, one of the highest) and the lowest (or, in the event of equality, one of the lowest) quotations for such Interest Determination Date. If the Calculation Agent cannot obtain three such U.S. Treasury Note quotations, the interest rate for such Interest Determination Date shall be calculated by the Calculation Agent and shall be a yield to maturity based on the arithmetic average of the secondary market offer side prices as of approximately 3:30 P.M., New York City time, on the Interest Determination Date reported, according to their written records, by three Reference Dealers in The City of New York, selected in the manner described above, for U.S. Treasury Notes with an original maturity of the number of years that is the next highest to the Designated CMT Maturity Index and a remaining term to maturity closest to the Designated CMT Maturity Index, which has an outstanding balance of at least $100 million. If only three or four of such Reference Dealers are quoting as described above, then the interest rate shall be based on the arithmetic average of the offer side prices so obtained from all such Reference Dealers, without eliminating the Reference Dealers providing the highest and the lowest of such quotes. If fewer than three such Reference Dealers are quoting as described above, the interest rate for the period commencing on the Interest Reset Date following such Interest Determination Date will be the interest rate in effect on such Interest Determination Date. If two such U.S. Treasury Notes have remaining terms to maturity equally close to the Designated CMT Maturity Index, the quotes for the U.S. Treasury Note with the shorter remaining term to maturity shall be used. "Designated CMT Telerate Page" means the display on Telerate on the page set forth on the face hereof (or any other page as may replace such page on that service for the purpose of displaying treasury constant maturities as reported in H.15(519)). If no such page is so specified, the Designated CMT Telerate Page shall be 7052. "Designated CMT Maturity Index" means the original period to maturity of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified on the face hereof with respect to which the CMT Rate will be calculated. If no such maturity is so specified, the Designated CMT Maturity Index shall be two years. References herein to "U.S. dollars" or "U.S. $" or "$" are to the currency of the United States of America. Section 4. Redemption. If so specified on the face hereof, the Company may at its option redeem this Security in whole or from time to time in part in increments of $1,000 (provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination specified on the face hereof) on or after the date designated as the Initial Redemption Date on the face hereof at 100% of the unpaid principal amount hereof or the 21 13 portion thereof redeemed (or, if this Security is a Discount Security, such lesser amount as is provided for below) multiplied by the Initial Redemption Percentage specified on the face hereof, together with accrued interest to the Redemption Date. Such Initial Redemption Percentage shall decline at each anniversary of the Initial Redemption Date by an amount equal to the Annual Redemption Percentage Reduction, if any, specified on the face hereof until the Redemption Price is 100% of the unpaid principal amount hereof. The Company may exercise such option by causing the Trustee to mail a notice of such redemption at least 30 but not more than 60 days prior to the Redemption Date. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If less than all of the Securities with like tenor and terms to this Security are to be redeemed, the Securities to be redeemed shall be selected by the Trustee by such method as the Trustee shall deem fair and appropriate. However, if less than all the Securities of the series with differing tenor and terms to this Security are to be redeemed then the Company in its sole discretion shall select the particular Securities to be redeemed and shall notify the Trustee in writing thereof at least 45 days prior to the relevant Redemption Date. Section 5. Repayment. If so specified on the face hereof, this Security shall be repayable prior to the Stated Maturity Date at the option of the Holder on each applicable Optional Repayment Date shown on the face hereof at a repayment price equal to 100% of the principal amount to be repaid, together with accrued interest to the Repayment Date. In order for this Security to be repaid, the Trustee must receive at least 30 but not more than 45 days prior to an Optional Repayment Date, this Security with the form attached hereto entitled "Option to Elect Repayment" duly completed. Any tender of this Security for repayment shall be irrevocable. The repayment option may be exercised by the Holder of this Security in whole or in part in increments of $1,000 (provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination specified on the hereof). Upon any partial repayment, this Security shall be canceled and a new Security or Securities for the remaining principal amount hereof shall be issued in the name of the Holder of this Security. Section 6. Discount Securities. If this Security (such Security being referred to as a "Discount Security") (a) has been issued at an Issue Price lower, by more than a de minimis amount (as determined under United States federal income tax rules applicable to original issue discount instruments), than the stated redemption price at maturity (as defined below) hereof and (b) would be considered an original issue discount security for United States federal income tax purposes, then the amount payable on this Security in the event of redemption by the Company, repayment at the option of the Holder or acceleration of the maturity hereof, in lieu of the principal amount due at the Stated Maturity Date hereof, shall be the Amortized Face Amount (as defined below) of this Security as of the date of such redemption, repayment or acceleration. The "Amortized Face Amount" of this Security shall be the amount equal to the sum of (a) the Issue Price (as set forth on the face hereof) plus (b) the aggregate of the portions of the original issue discount (the excess of the amounts considered as part of the "stated redemption price at 22 14 maturity" of this Security within the meaning of Section 1273(a)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), whether denominated as principal or interest, over the Issue Price of this Security) which shall theretofore have accrued pursuant to Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code) from the date of issue of this Security to the date of determination, minus (c) any amount considered as part of the "stated redemption price at maturity" of this Security which has been paid on this Security from the date of issue to the date of determination. Section 7. Modification and Waivers; Obligation of the Company Absolute. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series. Such amendment may be effected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of all Outstanding Securities of each series affected thereby. The Indenture also contains provisions permitting the Holders of not less than a majority in principal amount of the Outstanding Securities of any series at the time, on behalf of the Holders of all Outstanding Securities of such series, to waive compliance by the Company with certain provisions of the Indenture. Provisions in the Indenture also permit the Holders of not less than a majority in principal amount of all Outstanding Securities of any series to waive on behalf of all of the Holders of Securities of such series certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Security and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. The Securities are unsecured and rank pari passu with all other unsecured and unsubordinated indebtedness of the Company. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the Specified Currency herein prescribed, except as set forth in Section 2 on the reverse hereof. Section 8. Defeasance and Covenant Defeasance. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Security and (b) certain restrictive covenants and the related defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security, unless otherwise specified on the face hereof. 23 15 Section 9. Minimum Denominations. Authorized Denominations. Unless otherwise provided on the face hereof, this Security is issuable only in registered form without coupons in denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000. If this Security is denominated in a Specified Currency other than U.S. dollars or is a Discount Security, this Security shall be issuable in the denominations set forth on the face hereof. Section 10. Registration of Transfer. As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Security is registrable in the Security Register upon surrender of this Security for registration of transfer at a Place of Payment for the series of Securities of which this Security forms a part, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of like authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. If the registered owner of this Security is the Depository (such a Security being referred to as a "Global Security"), and (i) the Depository is at any time unwilling or unable to continue as depository and a successor depository is not appointed by the Company within 90 days following notice to the Company, or (ii) an Event of Default occurs, the Company will issue Securities in certificated form in exchange for this Global Security. In addition, the Company may at any time, and in its sole discretion, determine not to have Securities represented by a Global Security and, in such event, will issue Securities in certificated form in exchange in whole for this Global Security representing such Security. In any exchange pursuant to this paragraph, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Securities of this series in exchange for this Global Security, will authenticate and deliver individual Securities of this series in certificated form in an aggregate principal amount equal to the principal amount of this Global Security in exchange herefor. Securities issued in exchange for this Global Security pursuant to this paragraph shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in this Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. For purposes of the Indenture, this Global Security constitutes a Security issued in permanent global form. Securities so issued in certificated form will be issued in denominations of $1,000 (or such other Minimum Denomination specified on the face hereof) or any amount in excess thereof which is an integral multiple of $1,000 (or such Minimum Denomination) and will be issued in registered form only, without coupons. 24 16 As provided in the Indenture and subject to certain limitations therein and herein set forth, this Security is exchangeable for a like aggregate principal amount of Securities of this series of different authorized denominations but otherwise having the same terms and conditions, as requested by the Holder hereof surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder as the owner hereof for all purposes, whether or not this Security be overdue, and none of the Company, the Trustee nor any such agent shall be affected by notice to the contrary. Section 11. Events of Default. If an Event of Default with respect to the Securities of the series of which this Security forms a part shall have occurred and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect provided in the Indenture. Section 12. Defined Terms. All terms used in this Security which are defined in the Indenture and are not otherwise defined herein shall have the meanings assigned to them in the Indenture. Section 13. Governing Law. Unless otherwise specified on the face hereof, this Security shall be governed by and construed in accordance with the law of the State of New York. 25 OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably requests and instructs the Company to repay this Security (or the portion thereof specified below), pursuant to its terms, on the "Optional Repayment Date" first occurring after the date of receipt of the within Security as specified below (the "Repayment Date"), at a Repayment Price equal to 100% of the principal amount thereof, together with interest thereon accrued to the Repayment Date, to the undersigned at: - ---------------------------------- - ---------------------------------- (Please Print or Type Name and Address of the Undersigned.) For this Option to Elect Repayment to be effective, this Security with the Option to Elect Repayment duly completed must be received at least 30 but not more than 45 days prior to the Optional Repayment Date (or, if such Repayment Date is not a Business Day, the next succeeding Business Day) by the Company at its office or agency in The City of New York, which will be located initially at the office of the Trustee at 450 West 33rd Street, New York, New York 10001-2697. If less than the entire principal amount of the within Security is to be repaid, specify the portion thereof (which shall be $1,000 or an integral multiple thereof) which is to be repaid: $ . If less than the entire principal amount of this Security is to be repaid, specify the denomination(s) of the Security(ies) to be issued for the unpaid amount ($1,000 or any integral multiple of $1,000; provided that any remaining principal amount of this Security shall not be less than the Minimum Denomination): $ . Dated: ---------- --------------------- Note: The signature to this Option to Elect Repayment must correspond with the name as written upon the face of the within Security in every particular without alteration or enlargement or any change whatsoever. 26 ------------- ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - Custodian ------------------------- (Cust.) (Minor) Under Uniform Gifts to Minors Act ................................. (State) Additional abbreviations may also be used though not in the above list. FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________________ | | | | |_____________________________________|________________________________________ Please print or type name and address, including zip code of assignee - -------------------------------------------- the within Security of EATON CORPORATION and all rights thereunder and does hereby irrevocably constitute and appoint Attorney - ----------------------------------------------------------------------- to transfer the said Security on the books of the within-named Company, with full power of substitution in the premises. Dated ----------------- SIGNATURE GUARANTEED: ---------------------------------- - ------------------------- ----------------- NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the Security in every particular, without alteration or enlargement or any change whatsoever. EX-8 7 EXHIBIT 8 1 Exhibit 8 [SHEARMAN & STERLING LETTERHEAD] February 2, 2000 To the Board of Directors of Eaton Corporation Medium Term Notes -- Registration Statement/U.S. Federal Income Tax Opinion Ladies and Gentlemen: We are acting as special U.S. federal income tax counsel for Eaton Corporation (the "Company") in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), of a Prospectus Supplement to a Prospectus, contained in the Company's combined Registration Statement on Form S-3 and Amendments Nos. 1 and 2 to the Registration Statement No. 333-74355 (the "Registration Statement"), filed with the Commission on the date hereof. In connection with this opinion, we have reviewed the Prospectus dated November 10, 1999 and the Prospectus Supplement dated February 2, 2000. The Prospectus Supplement relates to the offering by the Company of its Medium Term Notes (the "Notes") in an aggregate principal amount of up to $800,000,000. Based upon and subject to the foregoing and consideration of applicable law, we are of the opinion that the discussion in the Prospectus Supplement under the caption "United States Taxation" accurately describes, subject to the limitations set forth therein, the material United States federal income tax consequences of the purchase, ownership and disposition of the Notes. The foregoing opinion is based upon the Internal Revenue Code of 1986, as amended, Treasury Regulations (including proposed Regulations and temporary Regulations) promulgated thereunder, rulings, official pronouncements and judicial decisions, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. We express no opinion as to any tax laws other than the federal income tax laws of the United States of America. 2 2 We hereby consent to the use of this opinion as an Exhibit to the Registration Statement and to the use of our name in the first paragraph under the caption "United States Taxation" in the Prospectus contained in the Registration Statement. In giving this consent, we do not thereby concede that we are within the category of persons whose consent is required by the Act or the General Rules and Regulations promulgated thereunder. Very truly yours, /s/ Shearman & Sterling -----END PRIVACY-ENHANCED MESSAGE-----