-----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, GHQeKpc3T31RRXih8TMqomY4EJKsozEPCr/GZ4DkrI36I4lS1R1CT9fa3y0062GY JYoZrlBBuNbAc0eKARuvVA== 0000098362-96-000046.txt : 19961115 0000098362-96-000046.hdr.sgml : 19961115 ACCESSION NUMBER: 0000098362-96-000046 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIMKEN CO CENTRAL INDEX KEY: 0000098362 STANDARD INDUSTRIAL CLASSIFICATION: BALL & ROLLER BEARINGS [3562] IRS NUMBER: 340577130 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01169 FILM NUMBER: 96660484 BUSINESS ADDRESS: STREET 1: 1835 DUEBER AVE SW CITY: CANTON STATE: OH ZIP: 44706 BUSINESS PHONE: 2164713000 FORMER COMPANY: FORMER CONFORMED NAME: TIMKEN ROLLER BEARING CO DATE OF NAME CHANGE: 19710304 10-Q 1 1. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10Q [X]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 1996. Commission File No. 1-1169 THE TIMKEN COMPANY Exact name of registrant as specified in its charter Ohio 34-0577130 State or other jurisdiction of I.R.S. Employer incorporation or organization Identification No. 1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798 Address of principal executive offices Zip Code (330) 438-3000 Registrant's telephone number, including area code Not Applicable Former name, former address and former fiscal year if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___ ___ Common shares outstanding at September 30, 1996, 31,257,822. PART I. FINANCIAL INFORMATION 2. THE TIMKEN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) Sep. 30 Dec. 31 1996 1995 ------ ------ ASSETS (Thousands of Dollars) Current Assets Cash and cash equivalents......................... $15,309 $7,262 Accounts receivable, less allowances, (1996-$7,670; 1995-$6,632)........................ 323,342 284,924 Deferred income taxes............................. 54,179 50,183 Inventories (Note 2) ............................. 427,482 367,889 ------ ------ Total Current Assets.................... 820,312 710,258 Property, Plant and Equipment..................... 2,442,432 2,337,450 Less allowances for depreciation................. 1,374,215 1,298,068 ------ ------ 1,068,217 1,039,382 Costs in excess of net assets of acquired business, less amortization, (1996-$17,626; 1995-$14,985)... 128,054 102,854 Deferred income taxes............................. 14,203 31,176 Other assets...................................... 50,428 42,255 ------ ------ Total Assets................................ $2,081,214 $1,925,925 ====== ====== LIABILITIES Current Liabilities Accounts payable and other liabilities............ $221,659 $229,096 Short-term debt and commercial paper.............. 232,955 60,078 Accrued expenses.................................. 177,140 173,189 ------ ------ Total Current Liabilities............... 631,754 462,363 Noncurrent Liabilities Long-term debt (Note 3) .......................... 140,930 151,154 Accrued pension cost.............................. 27,265 97,524 Accrued postretirement benefits cost.............. 394,825 393,706 ------ ------ 563,020 642,384 Shareholders' Equity (Note 4) Common stock...................................... 314,144 317,455 Earnings invested in the business................. 589,409 517,802 Cumulative foreign currency translation adjustment (17,113) (14,079) ------ ------ Total Shareholders' Equity.............. 886,440 821,178 Total Liabilities and Shareholders' Equity.. $2,081,214 $1,925,925 ========== ========== PART I. FINANCIAL INFORMATION 3. Continued THE TIMKEN COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Nine Months Ended Three Months Ended Sep. 30 Sep. 30 Sep. 30 Sep. 30 1996 1995 1996 1995 ------ ------ ------ ------ (Thousands of dollars, except per share data) Net sales....................................... $1,778,924 $1,674,159 $581,417 $519,463 Cost of product sold............................ 1,359,670 1,286,640 443,767 403,912 ------ ------ ------ ------ Gross Profit................................. 419,254 387,519 137,650 115,551 Selling, administrative and general expenses.... 234,460 225,974 77,326 77,552 ------ ------ ------ ------ Operating Income............................. 184,794 161,545 60,324 37,999 Interest expense................................ (12,406) (15,162) (4,672) (4,781) Other - net..................................... (8,606) (9,575) (3,545) (2,427) ------ ------ ------ ------ Other Income (Expense)....................... (21,012) (24,737) (8,217) (7,208) Income Before Income Taxes................... 163,782 136,808 52,107 30,791 Provision for Income Taxes (Note 5)............. 63,875 52,261 20,322 11,763 ------ ------ ------ ------ Net Income................................... $99,907 $84,547 $31,785 $19,028 ======== ======== ======== ======== Net Income Per Share * ...................... $3.18 $2.71 $1.01 $0.61 ======== ======== ======== ======== Dividends Per Share.......................... $0.90 $0.81 $0.30 $0.27 ======== ======== ======== ======== * Per average shares outstanding................ 31,420,553 31,159,689 31,424,410 31,244,711
PART I. FINANCIAL INFORMATION Continued 4. THE TIMKEN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended Cash Provided (Used) Sep. 30 Sep. 30 1996 1995 ------ ------ OPERATING ACTIVITIES (Thousands of dollars) Net Income.............................................. $99,907 $84,547 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 93,892 92,756 Provision (credit) for deferred income taxes........... 13,433 5,790 Stock issued in lieu of cash to employee benefit plans. 3,300 4,383 Changes in operating assets and liabilities: Accounts receivable................................... (29,192) (32,058) Inventories and other assets.......................... (39,713) (72,561) Accounts payable and accrued expenses................. (85,910) 22,469 Foreign currency translation.......................... (481) (22) ------ ------ Net Cash Provided (Used) by Operating Activities..... 55,236 105,304 INVESTING ACTIVITIES Purchases of property, plant and equipment - net....... (100,841) (89,313) Purchase of subsidiaries............................... (75,634) 0 ------ ------ Net Cash Provided (Used) by Investing Activities..... (176,475) (89,313) FINANCING ACTIVITIES Cash dividends paid to shareholders.................... (22,485) (21,493) Purchase of Treasury Shares............................ (12,426) 0 Payments on long-term debt............................. (196) 269 Proceeds from issuance of long-term debt............... 20,000 0 Short-term debt activity - net......................... 144,471 2,755 ------ ------ Net Cash Provided (Used) by Financing Activities..... 129,364 (18,469) Effect of exchange rate changes on cash................. (78) (137) Increase or (Decrease) in Cash and Cash Equivalents..... 8,047 (2,615) Cash and Cash Equivalents at Beginning of Period........ 7,262 12,121 ------ ------ Cash and Cash Equivalents at End of Period.............. $15,309 $9,506 ====== ====== PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 5. Note 1 -- Basis of Presentation The accompanying consolidated condensed financial statements (unaudited) have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes included in the company's annual report on Form 10-K for the year ended December 31, 1995. 9/30/96 12/31/95 Note 2 -- Inventories ------ ------ (Thousands of dollars) Finished products $138,558 $130,894 Work-in-process and raw materials 247,979 195,126 Manufacturing supplies 40,945 41,869 ------ ------ $427,482 $367,889 ====== ====== Note 3 -- Long-term Debt 9/30/96 12/31/95 ------ ------ (Thousands of dollars) 7-1/2% State of Ohio Pollution Control Revenue Refunding Bonds, maturing on January 1, 2002 $17,000 $17,000 State of Ohio Water Development Revenue Refunding Bond, maturing on May 1, 2007. The variable interest rate is tied to the bank's tax exempt weekly interest rate. The rate at September 30, 1996 is 3.85%. 8,000 8,000 State of Ohio Air Quality and Water Development Revenue Refunding Bonds, maturing on June 1, 2001. The variable interest rate is tied to the bank's tax exempt weekly interest rate. The rate at September 30, 1996 is 3.85% 21,700 21,700 Fixed Rate Medium-term Notes, Series A, due at various dates through July, 2026 with interest rates ranging from 7.20% to 9.25% 123,000 103,000 Other 1,625 1,768 ------ ------ 171,325 151,468 Less: Current Maturities 30,395 314 ------ ------ $140,930 $151,154 ====== ====== PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 6. Continued Note 4 -- Shareholders' Equity 09/30/96 12/31/95 ------ ------ Class I and Class II serial preferred stock (Thousands of dollars) without par value: Authorized -- 10,000,000 shares each class Issued - none $0 $0 Common Stock without par value: Authorized -- 200,000,000 shares Issued (including shares in treasury) 1996 - 31,525,227 shares 1995 - 31,354,307 shares Stated Capital 53,064 53,064 Other paid-in capital 271,526 264,567 Less cost of Common Stock in treasury 1996 - 267,405 shares 1995 - 4444 shares 10,446 176 ------ ------ $314,144 $317,455 ====== ====== An analysis of the change in capital and earnings invested in the business is as follows:
Common Stock -------------------- Earnings Foreign Other Invested Currency Stated Paid-In in the Translation Treasury Capital Capital Business Adjustment Stock Total ------ ------ ------ ------ ------ ------ (Thousands of dollars) Balance December 31, 1995 $53,064 $264,567 $517,802 ($14,079) ($176) $821,178 Net Income 99,907 99,907 Dividends paid - $.90 per share (28,300) (28,300) Employee benefit and dividend reinvestment plans: 6,959 (10,270) (3,311) Treasury - issued/acquired 262,961 shares Common Stock - issued 170,920 shares Foreign currency translation adjustment (3,034) (3,034) ------ ------ ------ ------ ------ ------ Balance September 30, 1996 $53,064 $271,526 $589,409 ($17,113)($10,446) $886,440 ====== ====== ====== ====== ====== ======
PART I. NOTES TO FINANCIAL STATEMENTS 7. (Unaudited) Continued Note 5 -- Income Tax Provision Nine Months Ended Three Months Ended Sep. 30 Sep. 30 Sep. 30 Sep. 30 1996 1995 1996 1995 ------ ------ ------ ------ U.S. (Thousands of dollars) Federal $48,834 $35,684 $15,010 $7,359 State & Local 7,577 6,604 2,055 1,911 Foreign 7,464 9,973 3,257 2,493 ------ ------ ------ ------ $63,875 $52,261 $20,322 $11,763 ====== ====== ====== ====== Taxes provided exceed the U.S. statutory rate primarily due to state and local taxes. 8. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations During the third quarter of 1996, The Timken Company continued its trend of improved financial performance, resulting in record sales and earnings for the quarter and nine months ended September 30. Net sales for the third quarter were $581.4 million, up 11.9% from 1995's third quarter record level of $519.5 million. This increase resulted in part from sales gains in the U.S. automotive market, which were bolstered by higher demand for steel tubing and parts and an increase in sales of higher value Sensor-pac bearings. In addition, the company achieved higher sales in Mexico, Australia and Argentina as well as in its miniature precision bearing and U.S. specialty alloy steel markets. The company increased sales during the first nine months of 1996 despite weakness in certain markets, including heavy trucks, freight cars and locomotives in the U.S. and trucks and construction and agricultural equipment in Europe. Sales in 1996 were also higher than the year-earlier period because of acquisitions the company completed during 1996. Gross profit for the quarter was $137.7 million (23.7% of net sales) compared to $115.6 million (22.2% of net sales) in the same period a year ago. The company's efforts to accelerate continuous improvement in its manufacturing plants had a positive impact on manufacturing performance and contributed to the growth in gross profit. Higher natural gas costs were more than offset by lower steel raw material costs and lower labor costs resulting from less overtime and a reduction of the company's contingency workforce. Selling, administrative, and general expenses were $77.3 million (13.3% of net sales) in the third quarter of 1996 compared to $77.6 million (14.9% of net sales) in 1995. The company's on-going efforts to streamline its administrative functions helped to offset higher expense due to the company's new pay-for-performance plan for salaried associates that was implemented in the fourth quarter of 1995. The company also incurred higher expense in the third quarter and first nine months of 1996 related to its recent acquisitions and the development of improved scheduling and product and process costing systems. Bearing Business net sales were $382.6 million in the third quarter of 1996 compared to $351.5 million in the year-earlier period. During the fist nine months, the Bearing Business achieved higher 9. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont.) sales despite weakness in the heavy truck, and locomotive markets in the U.S. and softening of the truck and construction and agricultural equipment markets in Europe. Strengthened business in Mexico, Argentina, and Australia and higher-value "smart" bearings equipped with sensors and used in anti-lock braking systems buoyed sales. In addition, the bearing business achieved growth in its U.S. aftermarket sales and in its computer disk drive and aerospace markets. Sales from the business' recently acquired bearing company, Timken Polska Sp.z o.o. and its Chinese joint venture, Yantai Timken Company, Ltd., also contributed to higher Bearing Business sales in the third quarter of 1996. Bearing Business operating income was $37.9 million in 1996's third quarter, up from the $33.4 million reported in the third quarter of 1995. Cost reductions in manufacturing attributable to the company's efforts to accelerate continuous improvement contributed to growth in operating income, although still more slowly than planned. The bearing business reduced overtime and its contingency workforce as it focused more on production schedules and manufacturing output in order to more effectively manage inventories. Improved performance by the company's European and Miniature Precision Bearing operations also contributed to the year-to-year improvement in operating income. In addition, the third quarter 1996 was positively affected by a write-up related to annual taking of physical inventory. The 1996 write-up was considerably less than one recorded in the year-ago period. Steel Business sales of $198.8 million in the third quarter of 1996 were 18.3% higher than the $168 million recorded a year earlier. The business achieved an increase in specialty steel sales at the company's Latrobe Steel Company subsidiary in addition to higher demand for large bars, steel parts, and automotive tubing. Sales from Ohio Alloy Steels, Inc. and Houghton and Richards, Inc., newly acquired subsidiaries of Latrobe Steel Company, also contributed to higher third quarter sales. Steel Business operating income in the third quarter of 1996 was $22.4 million, up from the $4.6 million in the year-earlier period. The Steel Business achieved an increase in profits primarily as a result of the higher sales and continuous improvement efforts in its manufacturing processes. Third quarter results were also affected by lower scrap prices and higher natural gas costs. Operating income in 10. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont.) 1995's third quarter was adversely affected by a physical inventory adjustment. More favorable interest rates in the third quarter of 1996 resulted in lower interest expense compared to the year-ago period despite higher average outstanding debt. Financial Condition Total assets increased by $155.3 million from December 31, 1995, primarily as a result of the company's acquisitions that were completed during the first nine months of 1996. In addition, the increase in assets resulted in part from higher accounts receivable and inventories. The $29.2 million increase in accounts receivable, as reflected in the Consolidated Condensed Statements of Cash Flows, relates primarily to the increase in sales. The number of days' sales in receivables at September 30, 1996, was lower than the year- end 1995 level. Inventories and other assets increased by $39.7 million compared to year-end 1995. The increase in inventories relates primarily to the higher level of activity; however, the number of days' supply in inventory at the end of the third quarter was higher than the previous year-end level. The company expects to reduce its days' supply in inventory by year-end. The $85.9 million decrease in accounts payable and accrued expenses relates primarily to additional funds the company contributed to its pension plans during the third quarter. Debt of $373.9 million at the end of the third quarter of 1996 exceeded the $211.2 million at year-end 1995. In addition to funding the pension plans, cash was required for the purchase of property, plant and equipment, to cover the increase in working capital and to finance the company's various growth initiatives. Any future increase in cash needs will be met by added short-term borrowing and issuance of medium-term notes. The 29.7% debt to total capital ratio was higher than the 20.5% at year-end 1995 due to the higher debt level described above. Purchases of property, plant and equipment - net during the nine months ended September 30, 1996, were $100.8 million compared to $89.3 million one year earlier. The company also invested $75.6 million in the purchase of subsidiaries. The company continues to invest in activities consistent with the strategies it is pursuing to 11. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont.) achieve an industry leadership position. Further capital investments in technologies in the company's plants throughout the world and new acquisitions provide Timken with the opportunity to accelerate growth and strengthen its positions in new and existing markets. The company is continuing in its effort to accelerate continuous improvement in its manufacturing plants worldwide. The Steel Business is on track to achieve the results expected from this effort announced in 1993. The Bearing Business is achieving savings but is somewhat behind the planned savings schedule. Separation costs associated with layoffs resulting from the implementation of cost saving initiatives are being charged to accounting reserves that were established in 1993. During the third quarter, the company completed its acquisition of the tool steel service center of Houghton & Richards, Inc. (H & R), headquartered in Marlborough, Massachusetts. H & R will operate as a subsidiary of Latrobe Steel Company, a Timken Company subsidiary since 1975. This acquisition will expand the scope of Latrobe's products and services to tool steel customers and will enhance its tool steel distribution network. On September 9, 1996, the company's Steel Business announced plans to invest $55 million in a rolling mill and bar processing equipment at its Harrison Steel Plant located in Canton, Ohio. This investment is part of the company's growth strategy and will move the company closer to achieving a cost and quality leadership position in the manufacture of continuous-cast, small- and intermediate-sized, steel bars. It is anticipated that the new rolling mill will be operational by mid-1998. On September 10, 1996, the company announced that it had entered into negotiations to acquire the tool steel finishing and distribution businesses of Sanderson Kayser Ltd., a United Kingdom steelmaker, from its British parent GEI International PLC. The Sanderson Kayser businesses will become part of Latrobe Steel Company, a Timken Company subsidiary known for its leadership in specialty steel manufacturing and, increasingly, in tool steel distribution. On September 16, 1996, the company announced a planned $5 million investment in its New Philadelphia Precision Tapered Bearing Business to expand the facility and increase the plant's production capacity by 50 percent. The 10,000-square-foot expansion, which is expected 12. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont.) to be completed in the second quarter of 1997, will provide space for a manufacturing cell to produce specialized printing press bearings and other precision products. The plan also calls for new equipment to improve production of precision bearings for machine tool customers. On October 14, 1996, the company announced plans to invest $30 million in new technology to expand its steel parts manufacturing capabilities and increase product lines. The new investments include a $15 million profile ring mill to be built in Columbus, N.C., to manufacture profiled rings, and a $15 million hot-forming facility to be built at a site yet to be finalized. These initiatives are an extension of the Steel Business' core competencies and will solidly position the company as a prime supplier of rings to the bearing industry. The ring mill, which will be added to the company's Tryon Peak Plant, will produce a variety of shaped rings from Timken steel for the bearing industry. The hot-forming facility will produce forged bearing components from Timken steel bars. On October 18, 1996, the company announced that it was in negotiations to acquire the tapered roller bearing business of Gnutti Carlo S.p.A., a leading European manufacturer of tapered roller bearings located near Brescia in northern Italy. This acquisition will give the company a stronger position in Europe and enable it to offer a broader range of products to its customers. On November 1, 1996, the Board of Directors declared a quarterly cash dividend of $.30 per share payable December 2, 1996, to shareholders of record at the close of business on November 15, 1996. The company's basic labor agreement with the United Steelworkers of America (AFL-CIO), representing production and maintenance workers at the company's Canton, Wooster, and Columbus, Ohio plants, expires on September 22, 1997. The collective bargaining agreement provides for early negotiations in 1996. The two parties have been meeting but have not reached an early agreement at this time. Some of the statements set forth in this document that are not historical in nature are forward-looking statements. The company cautions readers that actual results may differ materially from those projected or implied in forward-looking statements made by or on behalf of the company due to a variety of important factors, such as: 13. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont.) a) changes in world economic conditions. This includes, but is not limited to, the potential instability of governments and legal systems in countries in which the company conducts business, and significant changes in currency valuations. b) changes in customer demand on sales and product mix. This includes the effect of customer strikes and the impact of changes in industrial business cycles. c) competitive factors, including changes in market penetration and the introduction of new products by existing and new competitors. d) changes in operating costs. This includes the effect of changes in the company's manufacturing processes; changes in costs associated with varying levels of operations; changes resulting from inventory management initiatives and different levels of customer demands; the effects of unplanned work stoppages; changes in the cost of labor and benefits; and the cost and availability of raw materials and energy. e) the success of the company's operating plans, including its ability to achieve the total planned benefits of its continuous improvement programs and the ability of recently acquired companies to meet initially projected operating results. f) unanticipated litigation, claims or assessments. This includes, but is not limited to, claims or problems related to product warranty and environmental issues. 14. Part II. OTHER INFORMATION Item 1. Legal Proceedings The company is currently involved in negotiations with the Ohio Attorney General's office regarding alleged violations of the company's NPDES water discharge permits at its Canton, Ohio location. The company believes it has substantial defenses to the violations alleged by the Attorney General, and that the matter will ultimately be settled for an amount that will not be material to its financial condition or results of operations. In August 1994, the company's Latrobe Steel Company subsidiary was served with a complaint filed by seven former employees. Each of the employees had been terminated from employment in late 1993 as part of the company's administrative streamlining efforts. The plaintiffs' original claims of wrongful termination in violation of public policy, breach of contract and promissory estoppel were dismissed. Plaintiffs' remaining claims include discrimination on account of age and/or disability status. The relief requested includes reinstatement, back pay, front pay, liquidated damages, attorneys' fees and compensatory and punitive damages under the Americans With Disabilities Act and Pennsylvania law. The company has denied all of the plaintiff's allegations and believes that it has valid defenses to the plaintiffs' claims. Discovery in this matter has been completed. The claims of five plaintiffs have been consolidated by the court for one trial and the claims of the remaining two plaintiffs have been consolidated for another trial. The trials are expected to begin in mid-November 1996. At this time, the company believes that the ultimate resolution of this matter will not be material to its financial condition or results of operations. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. 15. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a). Exhibits 4 Fifth Amendment Agreement dated August 31, 1996, to the amended and restated credit agreement as amended February 23, 1993, May 31, 1994, November 15, 1994, and August 15, 1995, between Timken and certain banks. 4.1 First Supplemental Indenture, dated as of July 24, 1996 by and between The Timken Company and Mellon Bank, N.A. 11 Computation of Per Share Earnings 27 Article 5 16. SIGNATURES 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. The Timken Company _______________________________ Date November 13, 1996 BY /s/ Joseph F. Toot, Jr. ________________________ _______________________________ Joseph F. Toot, Jr., Director; President and Chief Executive Officer Date November 13, 1996 BY /s/ G. E. Little ________________________ _______________________________ G. E. Little Vice President - Finance EX-4 2 FIFTH AMENDMENT AGREEMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT Fifth amendment agreement ("Amendment Agreement") made as of August 31, 1996, by and among THE TIMKEN COMPANY, an Ohio corporation ("Borrower"), KEYBANK NATIONAL ASSOCIATION (formerly known as Society National Bank), successor by merger to Ameritrust Company National Association, and the various other commercial banking institutions signatories hereto (collectively, the "Banks"), and KEYBANK NATIONAL ASSOCIATION, as Agent for the Banks (the "Agent"). WHEREAS, Borrower, Banks, and Agent are parties to a certain Amended and Restated Credit Agreement dated as of December 31, 1991, as amended on February 26, 1993 (First Amendment Agreement), May 31, 1994 (Second Amendment Agreement), November 15, 1994 (Third Amendment Agreement) and August 15, 1995 (Fourth Amendment Agreement), which provides, among other things, for a revolving credit in the original aggregate amount of Three Hundred Million Dollars ($300,000,000) at any one time outstanding until August 31, 2000, all upon certain terms and conditions (as amended, the "Credit Agreement"); WHEREAS, The Bank of Nova Scotia ("Nova Scotia") desires to withdraw as a Bank under the Credit Agreement, and Societe General and United National Bank and Trust desire to assume the Commitment of Nova Scotia; WHEREAS, Borrower, Banks and Agent desire to further amend the Credit Agreement by extending the Commitment Period to August 31, 2001, by amending Annex A and by making certain other amendments thereto; WHEREAS, each capitalized term used herein and not defined herein shall be defined in accordance with the Credit Agreement; NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein and for other valuable consideration, Borrower, Banks and Agent agree as follows: 1. The Credit Agreement is hereby amended by deleting the definition of "Commitment Period" in Article I in its entirety, and substituting the following in place thereof: "'Commitment Period' shall mean the period from the date hereof to August 31, 2001 (unless extended pursuant to Section 2.7 hereof)." 2. The Credit Agreement is hereby amended by deleting the definition of "LIBOR Margin" in Article I in its entirety, and substituting the following in place thereof: "`LIBOR Margin' shall be calculated as follows based on the ratings accorded to Borrower's senior debt by Standard & Poor's (`S&P') or Moody's Investors Service, Inc. (`Moody's'), whichever is higher: S&P Rating Moody's Rating LIBOR Margin A or higher A2 or higher 15.00 Basis Points A- A3 15.00 Basis Points BBB+ Baa1 20.00 Basis Points BBB Baa2 22.50 Basis Points BBB- or less Baa3 or less 25.00 Basis Points The LIBOR Margin shall be in effect for so long as the rating determining the LIBOR Margin is in effect." 3. The Credit Agreement is hereby amended by deleting the date "August 31, 2000" wherever it appears in Section 2.1, and substituting for that deleted date, the date "August 31, 2001". 4. The Credit Agreement is hereby amended by deleting Section 2.5 in its entirety and substituting the following in place thereof: "SECTION 2.5. FACILITY FEES; TERMINATION OR REDUCTION OF COMMITMENTS. Borrower agrees to pay to Agent, for the ratable account of each Bank, as a consideration for its Commitment hereunder, a facility fee calculated at a rate or rates as hereinafter provided in this Section 2.5 (based on a year having 360 days and calculated for the actual number of days elapsed) from the date hereof to and including the last day of the Commitment Period, on the average daily amount of such Bank's Commitment hereunder, payable on __________, 1996, and quarter- annually thereafter. The facility fee shall be calculated as follows at a rate expressed in terms of Basis Points per annum based on the ratings accorded to Borrower's senior unsecured long-term debt by S&P or Moody's, whichever is higher: S&P Rating Moody's Rating Facility Fee A or higher A2 or higher 8.00 Basis Points A- A3 10.00 Basis Points BBB+ Baa1 12.50 Basis Points BBB Baa2 15.00 Basis Points BBB- or less Baa3 or less 22.50 Basis Points Borrower may at any time or from time to time terminate in whole or ratably in part the Commitments of the Banks hereunder to an amount not less than the aggregate principal amount of the loans then outstanding, by giving Agent not less than two (2) Cleveland banking days' notice, provided that any such partial termination shall be in an aggregate amount for all the Banks of Ten Million Dollars ($10,000,000) or any integral multiple thereof. The Agent shall promptly notify each Bank of its proportionate amount and the date of each such termination. After each such termination, the facility fees payable hereunder shall be calculated upon the Commitments of the Banks as so reduced. If the Borrower terminates in whole the Commitments of the Banks, on the effective date of such termination (the Borrower having prepaid in full the unpaid principal balance, if any, of the Notes outstanding together with all interest (if any) and facility fees accrued and unpaid) all of the Notes outstanding shall be delivered to the Agent marked 'Cancelled' and redelivered to the Borrower. Any partial reduction in the Commitments of the Banks shall be effective during the remainder of the Commitment Period." 5. The Credit Agreement is hereby amended by adding a new Section 2.7 reading as follows: "SECTION 2.7. Extension of Commitment Period; Mandatory Termination of Commitments. The Banks, in their absolute and sole discretion, may, upon the Company's request, extend for successive one (1) year periods the term of the Commitment Period. The first of such requests by the Company shall be in writing addressed to the Agent and shall be made not less than thirty (30) days prior to August 31, 2001. Any subsequent request for an extension of the Commitment Period for a successive one (1) year period shall likewise be made to the Agent not less than thirty (30) days prior to the next succeeding August 31 in the applicable year. If any such request is granted by all the Banks, the Commitment Period shall automatically be extended to the date of such extension. No Bank shall be obligated to grant the Company any such extension and no such extension shall be effective as to any Bank unless consented to in writing by all of the Banks. Unless the Commitment Period is extended (as herein provided), the Commitments shall terminate on the last day of the Commitment Period and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date." 6. Section 6.8 (Borrowings), Section 6.12 (Acquisitions) and Section 6.13 (Keep Well Agreements) of the Credit Agreement are hereby deleted in their entirety. 7. Section 6.9 of the Credit Agreement is hereby amended by deleting subpart (viii) and adding new subparts (viii), (ix) and (x) reading as follows: "(viii) any lien(s) created, assumed or existing on property or assets of any Consolidated Subsidiary at the time of acquisition thereof (including acquisition through merger or consolidation), (ix) liens on property or assets of a Consolidated Subsidiary other than a wholly-owned Subsidiary, and (x) any lien renewing, extending or refunding any lien permitted by clauses (iv), (v), (vi), (vii) and (viii) above, provided that the principal amount secured is not increased, and the lien is not extended to other property." 8. Section 6.11(ii) of the Credit Agreement is hereby amended by deleting it in its entirety and substituting the following in place thereof: "(ii) own, purchase, or acquire (a) U.S. government treasuries, (b) U.S. federal agency securities, (c) municipal bonds and notes, (d) bank investments including repurchase agreements, bankers' acceptances, certificates of deposit, and Eurodollar time deposits, (e) corporate investments including commercial paper, master notes, and corporate obligations, (f) institutional money market funds." 9. The Credit Agreement is hereby amended by deleting Annex A in its entirety and substituting Annex A-1 attached hereto in place thereof. 10. The Credit Agreement is hereby amended by deleting Exhibit A and Exhibit A-1 and substituting in place thereof, new Exhibit A and new Exhibit A-1 in the form of Exhibit A and Exhibit A-1 attached hereto. 11. Concurrently with the execution of this Amendment Agreement, Borrower shall execute and deliver to each Bank a Revolving Credit Note (Prime Rate Loans and Domestic Fixed Rate Loans) and a Revolving Credit Note (LIBOR Loans), of even date herewith, and being in the form and substance of Exhibit A and Exhibit A-1 attached hereto with the blanks appropriate filled. After receipt of such new promissory notes, each Bank will mark the promissory notes being replaced hereby "Replaced" and return the same to Borrower. 12. Borrower hereby represents and warrants to the Agent and the Banks that (a) Borrower has the legal power and authority to execute and deliver this Amendment Agreement; (b) the officials executing this Amendment Agreement have been duly authorized to execute and deliver the same and bind Borrower with respect to the provisions hereof; (c) the execution and delivery hereof by Borrower and the performance and observance by Borrower of the provisions hereof do not violate or conflict with the organizational agreements of Borrower or any law applicable to Borrower or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against Borrower; (d) as of the date of this Amendment Agreement, the representations and warranties contained in Article VII of the Credit Agreement are true and correct, and (e) this Amendment Agreement constitutes a valid and binding obligation of Borrower in every respect, enforceable in accordance with its terms. 13. Borrower hereby represents and warrants to the Agent and the Banks that no Possible Default exists under the Credit Agreement, nor will any occur immediately after the execution and delivery of this Amendment Agreement by the performance or observance of any provision hereof. 14. Each reference to the Credit Agreement that is made in the Credit Agreement or any other writing shall hereafter be construed as a reference to the Credit Agreement as amended hereby. Except as herein otherwise specifically provided, all provisions of the Credit Agreement shall remain in full force and effect and be unaffected hereby. 15. The rights and obligations of all parties hereto shall be governed by the laws of the State of Ohio. 16. This Amendment Agreement may be executed in any number of counterparts each of which, when so executed and delivered, shall be an original, but such counterparts shall together constitute one and the same instrument. After execution of this Amendment Agreement by all the parties hereto, this Amendment Agreement shall be effective as of __________________, 1996. THE TIMKEN COMPANY KEYBANK NATIONAL ASSOCIATION,(formerly known as Society National Bank), individually and as Agent By:/s/ G. E. Little__________ And__________________________ By:/s/ Marianne Mail________ MORGAN GUARANTY TRUST COMPANY THE BANK OF NEW YORK OF NEW YORK By:/s/ Patricia P. Lunka______ By:/s/ Robert J. Joyce________ MIDLAND BANK, PLC BANK ONE, AKRON,N.A. By:/s/ David Phillips_________ By:/s/ Bernard McRae, Jr._____ CREDIT SUISSE MELLON BANK,N.A. By:/s/ Christopher J. Eldin____ By:/s/ Dwayne R. Finney_______ And:_________________________ NBD BANK NATIONSBANK, N.A. (formerly By:/s/ Paul DeMelo_____________ known as Nationsbank of North Carolina, N.A.) By:/s/ Michael Monte________ SOCIETE GENERAL THE NORTHERN TRUST COMPANY By:/s/ E. Bellaiche____________ By:/s/ James S. Minehart_____ THE BANK OF NOVA SCOTIA UNITED NATIONAL BANK AND TRUST By:/s/ A. S. Norsworthy________ By:/s/ Leo Doyle_____________ ANNEX A-1 Banking Institutions Parties to the Amended and Restated Credit Agreement Dated as of December 31, 1991, as amended, with The Timken Company; Commitments and Percentages Name of Bank Maximum Amount Percentages KEYBANK NATIONAL ASSOCIATION $44,158,000 14.719 MORGAN GUARANTY TRUST COMPANY OF NEW YORK 36,826,000 12.275 THE BANK OF NEW YORK 24,252,000 8.084 BANK ONE, AKRON, N.A. 24,252,000 8.084 CREDIT SUISSE 24,252,000 8.084 MELLON BANK, N.A. 24,252,000 8.084 NBD BANK 24,252,000 8.084 THE NORTHERN TRUST COMPANY 24,252,000 8.084 NATIONSBANK, N.A. 24,252,000 8.084 MIDLAND BANK, PLC 24,252,000 8.084 SOCIETE GENERALE 20,000,000 6.667 UNITED NATIONAL BANK AND TRUST 5,000,000 1.667 TOTALS $300,000,000 100.00 EXHIBIT A REVOLVING CREDIT NOTE (Prime Rate Loans and Domestic Fixed Rate Loans) $_________________ Canton, Ohio _________________, 1996 FOR VALUE RECEIVED, the undersigned, THE TIMKEN COMPANY, an Ohio corporation (the "Borrower"), promises to pay at the end of the Commitment Period, to the order of _________________________________________________________________ (the "Bank") at the Main Office of KeyBank National Association, Agent, 127 Public Square, Cleveland, Ohio 44114-1306, the principal sum of ________________________________________________________DOLLARS or the aggregate unpaid principal amount of all Prime Rate Loans and all Domestic Fixed Rate Loans evidenced by this note made by the Bank to the Borrower pursuant to Section 2.1 of the credit agreement hereinafter referred to, whichever is less, in lawful money of the United States of America. Capitalized terms used herein shall have the meanings ascribed to them in said credit agreement. The Borrower promises also to pay interest on the unpaid principal amount of each such loan from time to time outstanding from the date of such loan until the payment in full thereof at the rates per annum which shall be determined in accordance with the provisions of Section 2.1 of the credit agreement. Said interest shall be payable on each date provided for in said Section 2.1; provided, however, that interest on any principal portion which is not paid when due shall be payable on demand. The portions of the principal sum hereof from time to time representing Prime Rate Loans and Domestic Fixed Rate Loans, and payments of principal of either thereof, will be shown on the grid(s) attached hereto and made a part hereof. All loans by the Bank to the Borrower pursuant to the credit agreement (except LIBOR Loans) and all payments on account of principal hereof shall be recorded by the Bank prior to transfer hereof and endorsed on such grid(s). If this note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the credit agreement hereinafter referred to, the principal hereof and the unpaid interest thereon shall bear interest, until paid, for Prime Rate Loans and Domestic Fixed Rate Loans at a rate per annum which shall be two per cent (2%) above the Prime Rate from time to time in effect. All payments of principal of and interest on this note shall be made in immediately available funds. This note is issued in substitution of and as a replacement for that certain Revolving Credit Note dated August 15, 1995, and is one of the Revolving Credit Notes referred to in the amended and restated credit agreement dated as of December 31, 1991, between the Borrower, the banks named therein and KeyBank National Association, as Agent, as amended from time to time, and is entitled to the benefits thereof. Reference is made to such credit agreement for a description of the right of the undersigned to anticipate payments hereof, the right of the holder hereof to declare this note due prior to its stated maturity, and other terms and conditions upon which this note is issued. Address: 1835 Dueber Avenue THE TIMKEN COMPANY Canton, Ohio 44706 By:____________________________ and___________________________ EXHIBIT A-1 REVOLVING CREDIT NOTE (LIBOR Loans) $_______________ Canton, Ohio _____________________,1996 FOR VALUE RECEIVED, the undersigned, THE TIMKEN COMPANY, an Ohio corporation (the "Borrower"), promises to pay at the end of the Commitment Period, to the order of _____________________________________________________________ (the "Bank") at the Main Office of KeyBank National Association, 127 Public Square, Cleveland, Ohio 44114-1306 the principal sum of _____________________________________________________DOLLARS or the aggregate unpaid principal amount of all LIBOR Loans evidenced by this note made by the Bank to the Borrower pursuant to Section 2.1 of the credit agreement hereinafter referred to, whichever is less, in lawful money of the United States of America. Capitalized terms used herein shall have the meanings ascribed to them in said credit agreement. The Borrower promises also to pay interest on the unpaid principal amount of each such loan from time to time outstanding from the date of such loan until the payment in full thereof at the rates per annum which shall be determined in accordance with the provisions of Section 2.1 of the credit agreement. Said interest shall be payable on each date provided for in said Section 2.1; provided, however, that interest on any principal portion which is not paid when due shall be payable on demand. The portions of the principal sum hereof from time to time representing LIBOR Loans, and payments of principal thereof, will be shown on the grid(s) attached hereto and made a part hereof. All LIBOR Loans by the Bank to the Borrower pursuant to the credit agreement and all payments on account of principal hereof shall be recorded by the Bank prior to transfer hereof and endorsed on such grid(s). If this note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the credit agreement hereinafter referred to, the principal hereof and the unpaid interest thereon shall bear interest, until paid, for LIBOR Loans at a rate per annum which shall be two per cent (2%) above the Prime Rate from time to time in effect. All payments of principal of and interest on this note shall be made in immediately available funds. This note is issued in substitution of and as a replacement for that certain Revolving Credit Note dated August 15, 1995, and is one of the Revolving Credit Notes referred to in the amended and restated credit agreement dated as of December 31, 1991, between the Borrower, the banks named therein and KeyBank National Association, as Agent, as amended from time to time, and is entitled to the benefits thereof. Reference is made to such credit agreement for a description of the right of the undersigned to anticipate payments hereof, the right of the holder hereof to declare this note due prior to its stated maturity, and other terms and conditions upon which this note is issued. Address: 1835 Dueber Avenue THE TIMKEN COMPANY Canton, Ohio 44706 By:________________________ and________________________ EX-4.1 3 THE TIMKEN COMPANY and MELLON BANK, N.A. as Trustee FIRST SUPPLEMENTAL INDENTURE Dated as of July 24, 1996 THIS FIRST SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"), dated as of July 24, 1996, between THE TIMKEN COMPANY, an Ohio corporation (the "Issuer"), and MELLON BANK, N.A., a national banking association organized under the laws of the United States of America (the "Trustee"). WITNESSETH; WHEREAS, Issuer and Society Trust Company of New York ("Society"), formerly known as Ameritrust Company of New York entered into that certain Indenture, dated as of July 1, 1990 (the "Indenture"); WHEREAS, Issuer, Society and Trustee entered into that certain Agreement of Resignation, Appointment and Acceptance, dated as of July 3, 1996, whereby Trustee was appointed as successor to Society under the Indenture; WHEREAS, capitalized terms used herein and not otherwise defined herein are used herein as defined in the Indenture; WHEREAS, the amendments to the Indenture as hereinafter set forth are such as are permitted under Section 8.1 of the Indenture; NOW, THEREFORE: The Issuer and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective holders from time to time of the Securities and of the Coupons, if any, appertaining thereto as follows: 1. Section 2.3. Section 2.3(9) appearing on page 11 of the Indenture is hereby amended in its entirety to read as follows: "if other than denominations of $1,000 and any integral multiple of $1,000 in excess thereof in the case of Registered Securities, the denominations in which Securities of the series shall be issuable." 2. Section 2.7 The first paragraph of Section 2.7 appearing on page 15 of the Indenture is hereby amended in its entirety to read as follows; "SECTION 2.7 Denomination and Date of Securities; Payments of Interest. The Securities of each series shall be issuable as Registered Securities or Unregistered Securities in denominations established as contemplated by Section 2.3 or, with respect to the Registered Securities of any series, if not so established, in denominations of $1,000 and any integral multiple of $1,000 in excess thereof. If denominations of Unregistered Securities of any series are not so established such Securities shall be issuable in denominations of $1,000 and any integral multiple in excess thereof. The Securities of each series shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plan as the officers of the Issuer executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof. 3. Exhibits A and B to the Indenture are hereby deleted in their entirety and replaced by, respectively, Exhibits A and B attached hereto. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed all as of July 24, 1996. THE TIMKEN COMPANY By:/s/ Gene Little Title: MELLON BANK, N.A. By:/s/ Clive Nagy Title: REGISTERED NO. FXR Exhibit A AMENDED AND RESTATED FORM OF FIXED RATE NOTE THE TIMKEN COMPANY MEDIUM-TERM NOTE, SERIES A IF APPLICABLE, THE "TOTAL AMOUNT OF OID," "ORIGINAL YIELD TO MATURITY" AND "INITIAL ACCRUAL PERIOD OID" (COMPUTED UNDER THE APPROXIMATE METHOD) SET FORTH BELOW HAS BEEN COMPLETED SOLELY FOR THE PURPOSES OF APPLYING THE FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES. GLOBAL MEDIUM-TERM NOTE, SERIES A: YES ____ NO ____ If this Note is designated as a Global Medium-Term Note, Series A, the following shall apply: Unless this Certificate is presented by an authorized representative of The Depositary Trust Company, a New York corporation ("DTC"), to the Company or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of DTC and any payment is made to Cede & Co. or such other entity as requested by an authorized representative of DTC, 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. Original Issue Initial Redemption Interest Rate: Maturity Date: Date: Date: Interest Accrual Initial Redemption Interest Payment Dates: Date: Percentage: February 15 August 15 Total Amount of Annual Redemption Applicability of Specified OID: Percentage Reduction: Modified Payment Currenty: Upon Acceleration: Original Yield Optional Repayment If yes, state Issue To Maturity: Date(s): Price: Initial Accrual Period OID: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture. MELLON BANK, N.A., as Trustee BY:______________________ Authorized Signer THE TIMKEN COMPANY Medium-Term Fixed Rate Notes The Timken Company, an Ohio corporation, (the "Issuer") for value received, hereby promises to pay to or registered assignees, the principal sum of , on the Maturity Date specified above (except to the extent redeemed or repaid prior to the Maturity Date) and to pay interest thereon at the Interest Rate per annum specified above from the Original Issue Date specified above until the principal hereof is paid or duly made available for payment (except as provided below), semiannually in arrears on the fifteenth day of February and August in each year commencing on the Interest Payment Date next succeeding the Original Issue Date specified above, and on the Maturity Date (or any redemption or repayment date); provided, however, that if the Original Issue Date occurs between a Record Date, as defined below, and the next succeeding Interest Payment Date, interest payments will commence on the second Interest Payment Date succeeding the Original Issue Date to the registered Holder of this Note on the Record Date with respect to such second Interest Payment Date. Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for, or, if no interest has been paid or duly provided for, from the Original Issue Date, until the principal hereof has been paid or duly made available for payment (except as provided below). The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date, will, subject to certain exceptions described herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the date 15 calendar days prior to an Interest Payment Date (whether or not a Business Day) (the "Record Date"); provided, however, that interest payable on the Maturity Date (or any redemption or repayment date) will be payable to the person to whom the principal hereof shall be payable. As used herein, "Business Day" means any day that is not a Saturday or Sunday and that in The City of New York is not a day on which banking institutions are authorized or obligated by law to close and (i) with respect to Notes denominated in a Specified Currency other than U.S. dollars or European Currency Units ("ECUs") in the capital city of the country of the Specified Currency and (ii) with respect to Notes denominated in ECUs, in Brussels, Belgium. Payment of the principal of this Note and interest due at the Maturity Date (or any redemption or repayment date) will be made in immediately available funds upon surrender of this Note at the office or agency of the Trustee as defined on the reverse hereof, maintained for that purpose in the Borough of Manhattan, The City of New York, or at such other office or agency as the Issuer may determine, by wire transfer, if appropriate instructions therefor have been received at least 15 Business Days prior to the date of the related payment; otherwise such payment shall be made by check. Payment of the principal of and interest on this Note will be made in such coin or currency of the United States of America or in a Specified Currency other than U.S. dollars as indicated herein as at the time of payment is legal tender for payment of public and private debts; provided, however, that U.S. dollar payments of interest, other than interest due at maturity or any date of redemption or repayment, will be made by United States dollar check mailed to the address of the Person entitled thereto as such address shall appear in the Note register. A Holder of U.S. $10,000,000 or more in aggregate principal amount of Notes having the same Interest Payment Date will be entitled to receive payments of interest, other than interest due at maturity or any date of redemption or repayment, by wire transfer of immediately available funds if appropriate wire transfer instructions in writing have been received by the Trustee not less than 15 calendar days prior to the applicable Interest Payment Date. Payments of interest on Notes in a Specified Currency other than U.S. dollars will be made by wire transfer of immediately available funds to an account maintained, by the Holder with a bank located outside the United States and the Holder of such Notes shall provide the Trustee with the appropriate wire transfer instructions. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture, as defined on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed under its corporate seal. DATED: THE TIMKEN COMPANY By:________________________ Title: This Note is one of a duly authorized issue of Medium-Term Notes, Series A having maturities from nine months to 30 years from the date of issue (the "Notes") of the Issuer. The Notes are issuable under an Indenture, dated as of July l, 1990 (herein called the "Indenture") between the Issuer and Mellon Bank, N.A. (as successor to Ameritrust Company of New York), as Trustee (herein called the "Trustee,"), 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 of the Issuer, the Trustee and Holders of the Notes and the terms upon which the Notes are, and are to be, authenticated and delivered. The terms of individual Notes may vary with respect to interest rates, interest rate formulas, issue dates, maturity dates, or otherwise, all as provided in the Indenture. To the extent not inconsistent herewith the terms of the Indenture are hereby incorporated by reference herein. If no Initial Redemption Date is specified on the face hereof, this Note may not be redeemed prior to the Maturity Date. If so indicated on the face of this Note, this Note may be redeemed at the option of the Issuer, on or after the Initial Redemption Date, if any, specified on the face hereof, together with interest accrued and unpaid thereon to the date of redemption (except as provided below). Notice of redemption shall be mailed to the registered Holders of the Notes designated for redemption at their addresses as the same shall appear on the Note register not less than 30 nor more than 60 days prior to the date of redemption, subject to all the conditions and provisions of the Indenture. In the event of redemption of this Note in part only, a new Note or Notes for the amount of the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. The "Redemption Price" shall initially be the Initial Redemption Percentage, specified on the face hereof, of the principal amount of this Note to be redeemed and, if not 100% of such principal amount, shall decline on each anniversary of the Initial Redemption Date, specified on the face hereof, by the Annual Redemption Percentage Reduction, if any, specified on the face hereof, of the principal amount to be redeemed until the Redemption Price is 100% of such principal amount. If no Option Repayment Date(s) is set forth on the face hereof, this Note may not be repaid prior to the Maturity Date. If so indicated on the face of this Note, this Note may be subject to repayment at the option of the Holder on the Optional Repayment Date(s) specified on the face hereof, together with interest accrued and unpaid thereon to the date of repayment (except as provided below). For this Note to be repaid in whole or in part at the option of the Holder hereof, the Trustee must receive not less than 30 or more than 45 days prior to the Optional Repayment Date (i) the Note with the form entitled "Option to Elect Repayment" below duly completed or (ii) a telegram, telex, facsimile transmission or a letter from a member of a national securities exchange or the National Association of Securities Dealers, Inc. or a commercial bank or a trust company in the United States of America setting forth the name of the Holder of this Note, the principal amount hereof, the certificate number of this Note or a description of the Note's tenor or terms, the principal amount hereof to be prepaid, a statement that the option to elect repayment is being exercised thereby and a guarantee that this Note to be prepaid with the form entitled "Option to Elect Repayment" below duly completed will be received by the Trustee no later than five Business Days after the date of such telegram, telex, facsimile transmission or letter and this Note and form duly completed are received by the Trustee by such fifth Business Day. Exercise of such repayment option shall be irrevocable. Such option may be exercised by the Holder for less than the entire principal amount provided that the principal amount remaining Outstanding after repayment is at least $100,000 or any larger amount that is an integral multiple of $1,000. In the event of repayment of this Note in part only, a new Note or Notes for the amount of the portion hereof that is not repaid shall be issued in the name of the Holder hereof upon the cancellation hereof. Interest payments on this Note will include interest accrued to but excluding the Interest Payment Dates or Maturity Date (or earlier redemption or repayment date), as the case may be. Interest payments for this Note will be computed and paid on the basis of a 360-day year of twelve 30-day months. In the case where the Interest Payment Date or the Maturity Date (or any redemption or repayment date) does not fall on a Business Day, payment of interest or principal otherwise payable on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or on the Maturity Date (or the redemption or repayment date), and no interest shall accrue for the period from and after the Interest Payment Date or the Maturity Date (or the redemption or repayment date) to such next succeeding Business Day. This Note and all the obligations of the Issuer hereunder are direct, unsecured obligations of the Issuer, and rank without preference or priority among themselves and pari passu with all other existing and future unsecured and unsubordinated indebtedness of the Issuer. This Note, and any Note or Notes issued upon transfer or exchange hereof, is issuable only in fully registered form, without coupons, and, if denominated in U.S. dollars, is issuable only in denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess thereof. If this Note is denominated in a Specified Currency other than U.S. dollars, it is issuable only in denominations of the equivalent of U.S. $1,000 (rounded down to an integral multiple of 1,000 units of such Specified Currency), or any amount in excess thereof which is an integral multiple of 1,000 units of such Specified Currency, as determined by reference to the noon dollar buying rate in New York City for cable transfers of such Specified Currency published by the Federal Reserve Bank of New York (the "Market Exchange Rate") on the Business Day immediately preceding the date of issuance; provided, however, in the case of ECUs, the Market Exchange Rate shall be the rate of exchange determined by the Commission of the European Communities (or any successor thereto) as published in the Official Journal of the European Communities, or any successor publication, on the Business Day immediately preceding the date of issuance. The Trustee has been appointed registrar for the Notes, and the Trustee will maintain at its office in The City of New York a register for the registration and transfer of Notes. This Note may be transferred at the aforesaid office of the Trustee by surrendering this Note for cancellation, accompanied by a written instrument of transfer in form satisfactory to the Trustee and duly executed by the registered Holder hereof in person or by the Holder's attorney duly authorized in writing, and thereupon the Trustee will issue in the name of the transferee or transferees, in exchange herefor, a new Note or Notes having identical terms and provisions and for a like aggregate principal amount in authorized denominations, subject to the terms and conditions set forth herein; provided, however, that the Trustee will not be required (i) to register the transfer of or exchange any Note that has been called for redemption in whole or in part, except the unredeemed portion of Notes being redeemed in part, (ii) to register the transfer of or exchange any Note if the Holder thereof has exercised his right, if any, to require the Issuer to repurchase such Note in whole or in part, except the portion of such Note not required to be repurchased, or (iii) to register the transfer of or exchange Notes to the extent and during the period so provided in the Indenture with respect to the redemption of Notes. Notes are exchangeable at said office for other Notes of other authorized denominations of equal aggregate principal amount having identical terms and provisions. All such exchanges of Notes will be free of charge, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge in connection therewith. All Notes surrendered for exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Trustee and executed by the registered Holder in person or by the Holder's attorney duly authorized in writing. The date of registration of any Note delivered upon any exchange or transfer of Notes shall be such that no gain or loss of interest results from such exchange or transfer. In case any Notes shall at any time become mutilated, defaced or be destroyed, lost or stolen and such Note or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in the premises) shall be delivered to the Trustee, a new Note of like tenor will be issued by the Issuer in exchange for the Note so mutilated or deface, or in lieu of the Note so destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen Note, only upon receipt of evidence satisfactory to the Trustee and the Issuer that such Note was destroyed or lost or stolen and, if required, upon receipt also of indemnity satisfactory to each of them. All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new Note shall be borne by the owner of the Note mutilated, defaced, destroyed, lost or stolen. The Indenture provides that, (a) if an Event of Default (as defined in the Indenture) due to the default in payment of principal of or interest on any series of Securities issued under the Indenture, including the series of Medium-Term Notes, Series A of which this Note forms a part, or due to the default in the performance or breach of any other covenant or warranty of the Issuer applicable to the Securities of such series but not applicable to all Outstanding Securities issued under the Indenture shall have occurred and be continuing, either the Trustee or the Holders of not less than 25% in principal amount of the Securities of each affected series (each such series voting as a separate class) may then declare the principal of all Securities of all such series and interest accrued thereon to be due and payable immediately and (b) if an Event of Default due to a default in the performance of any other of the covenants or agreements in the Indenture applicable to all Outstanding Securities issued thereunder, including this Note, or due to certain events of bankruptcy, insolvency or reorganization of the Issuer, shall have occurred and be continuing, either the Trustee or the Holders of not less than 25% in principal amount of all Securities issued under the Indenture then Outstanding (treated as one class) may declare the principal of all such Securities and interest accrued thereon to be due and payable immediately, but upon certain conditions such declarations may be annulled and past defaults may be waived (except a continuing default in payment of principal or interest on such Securities) by the Holders of a majority in principal amount of the Securities of all affected series then Outstanding. If the face hereof indicates that this Note is subject to "Modified Payment upon Acceleration," then if the principal hereof is declared to be due and payable as described in the preceding paragraph, the amount of principal due and payable with respect to this Note shall be limited to the aggregate principal amount hereof multiplied by the sum of the Issue Price specified on the face hereof (expressed as a percentage of the aggregate principal amount) plus the original issue discount amortized from the Original Issue Date to the date of declaration, which amortization shall be calculated using the "interest method" (computed in accordance with generally accepted accounting principles in effect on the date of declaration). The Indenture permits the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of each series issued under the Indenture then Outstanding and affected, to execute supplemental indentures adding any provisions to or modifying in any manner the rights of the Holders of each series so affected; provided that the Issuer and the Trustee shall not, without the consent of the Holder of each Outstanding Security affected thereby, (a) extend the final maturity of any such security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption or repayment thereof, or change the currency of payment thereof, or impair or affect the rights of any Holder to institute suit for the payment thereof without the consent of the Holder of each Security so affected; or (b) reduce the aforesaid percentage in principal amount of Securities the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of each Security so affected. Except as set forth below, if the principal of, or interest on, this Note is payable in a Specified Currency other than U.S. dollars and such Specified Currency is not available to the Issuer for making payments hereon due to the imposition of exchange controls or other circumstances beyond the control of the Issuer or is no longer used by the government of the country issuing such currency or for the settlement of transactions by public institutions within the international banking community, then the Issuer will be entitled to satisfy its obligations to the Holder of this Note by making such payments in U.S. dollars on the basis of the Market Exchange Rate on the date of such payment or, if the Market Exchange Rate is not available on such date, as of the most recent practicable date. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency other than U.S. dollars will not constitute an Event of Default. If payment in respect of a Note is required to be made in ECUs and ECUs are unavailable due to the imposition of exchange controls or other circumstances beyond the Issuer's control or are no longer used in the European Monetary System, then all payments in respect of this Note shall be made in U.S. dollars until ECUs are again available or so used. The amount of each payment in U.S. dollars shall be computed on the basis of the equivalent of the ECU in U.S. dollars, determined as described below, as of the second Business Day prior to the date on which such payment is due. The equivalent of the ECU in U.S. dollars as of any date (the "Day of Valuation") shall be determined by the Issuer or its agent on the following basis. The component currencies of the ECU for this purpose (the "Components") shall be the currency amounts that were components of the ECU as of the last date on which the ECU was used in the European Monetary System. The equivalent of the ECU in U.S. dollars shall be calculated by aggregating the U.S. dollar equivalents of the Components. The U.S. dollar equivalent of each of the Components shall be determined by the Issuer or such agent on the basis of the most recently available Market Exchange Rates for such Components. If the official unit of any Component is altered by way of combination or subdivision, the number of units of that currency as a Component shall be divided or multiplied in the same proportion. If two or more Components are consolidated into a single currency, the amounts of those currencies as Components shall be replaced by an amount in such single currency equal to the sum of the amounts of the consolidated component currencies expressed in such single currency. If any Component is divided into two or more currencies, the amount of the original component currency shall be replaced by the amounts of such two or more currencies, each of which shall be equal to the amount of the original component currency separated into the number of currencies into which such original currency was divided. All determinations referred to above made by the Issuer or its agent shall be at its sole discretion and shall, in the absence of manifest error, be conclusive to the extent permitted by law for all purposes and binding on Holders of Notes. So long as this Note shall be Outstanding, the Issuer will cause to be maintained an office or agency for the payment of the principal of and interest on this Note as herein provided in the Borough of Manhattan, The City of New York, and an office or agency in said Borough of Manhattan for the registration, transfer and exchange as aforesaid of the Notes. The Issuer may designate other agencies for the payment of said principal and interest at such place or places (subject to applicable laws and regulations) as the Issuer may decide. So long as there shall be such an agency, the Issuer shall keep the Trustee advised of the names and locations of such agencies, if any are so designated. With respect to moneys paid by the Issuer and held by the Trustee for the payment of the principal of or interest on any Notes, that remain unclaimed at the end of two years after such principal or interest shall have become due and payable (whether at maturity or upon call for redemption or otherwise), (i) the Trustee shall notify the Holders of such Notes that such moneys shall be repaid to the Issuer and any person claiming such moneys shall thereafter look only to the Issuer for payment thereof and (ii) such moneys shall be so repaid to the Issuer. Upon such repayment all liability of the Trustee with respect to such moneys shall thereupon cease, without, however, limiting in any way any obligation that the Issuer may have to pay the principal of or interest on this Note as the same shall become due. No provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the time, place, and rate, and in the coin or currency, herein prescribed unless otherwise agreed between the Issuer and the registered Holder of this Note. Prior to due presentment of this Note for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Holder in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Note, for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. This Note shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. All terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. 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 UNIFORM 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 OR ASSIGNEE] ________________________________________! ________________________________________! [PLEASE PRINT OR TYPE NAME AND ADDRESS INCLUDING ZIP CODE, OF ASSIGNEE] the within Note and all rights thereunder, hereby irrevocably constituting and appointing such person attorney to transfer such Note on the books of the Issuer, with full power of substitution in the premises. Dated:___________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever. OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably requests and instructs the Issuer to repay the within Note (or portion hereof specified below) pursuant to its terms at a price equal to the applicable Repayment Price thereof together with interest to the Repayment Date, to the undersigned at (Please print or typewrite name and address of the undersigned) If less than the entire principal amount of the within Note is to be repaid, specify the portion thereof which the Holder elects to have repaid ____________________; and specify the denomination or denominations (which shall be in authorized denominations) of the Notes to be issued to the Holder for the portion of the within Note not being repaid (in the absence of any such specification, one such Note will be issued for the portion not being repaid): Dated:__________________ ___________________________________ (Signature) Exhibit B AMENDED AND RESTATED FORM OF FLOATING RATE NOTE REGISTERED No. FLR THE TIMKEN COMPANY MEDIUM-TERM NOTE, SERIES A (Floating Rate) GLOBAL MEDIUM-TERM NOTE, SERIES A: YES ___ NO ___ If this Note is designated as a Global Medium-Term Note, Series A, the following shall apply: Unless this certificate is presented by an authorized representative of The Depository Trust Company to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., 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. BASE RATE: ORIGINAL ISSUE DATE: MATURITY DATE: INDEX MATURITY: INTEREST ACCRUAL DATE: INTEREST PAYMENT PERIOD: SPREAD (PLUS OR INITIAL INTEREST RATE: INTEREST PAYMENT MINUS): DATE(S): ALTERNATE RATE EVENT INITIAL INTEREST RESET INTEREST RESET PERIOD: SPREAD: DATE: SPREAD MULTIPLIER: MAXIMUM INTEREST RATE: INTEREST RESET DATE(S): OPTIONAL REPAYMENT MINIMUM INTEREST RATE: CALCULATION AGENT: DATE(S): INITIAL REDEMPTION DATE: SPECIFIED CURRENCY: INITIAL REDEMPTION PERCENTAGE: ANNUAL REDEMPTION PERCENTAGE REDUCTION: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture. MELLON BANK, N.A., as Trustee By ___________________ Authorized Signer The Timken Company, an Ohio corporation (the "Issuer"), for value received, hereby promises to pay to , or registered assignees, the principal sum of on the Maturity Date specified above (except to the extent redeemed or repaid prior to the Maturity Date) and to pay interest thereon, from the Original Issue Date specified above at a rate per annum equal to the Initial Interest Rate specified above until the Initial Interest Reset Date specified above, and thereafter at a rate per annum determined in accordance with the provisions specified on the reverse hereof until the principal hereof is paid or duly made available for payment. The Issuer will pay interest in arrears monthly, quarterly, semiannually or annually as specified above as the Interest Payment Period on each Interest Payment Date (as specified above), commencing with the first Interest Payment Date next succeeding the Original Issue Date specified above, and on the Maturity Date (or any redemption or repayment date); provided, however, that if the Original Issue Date occurs between a Record Date, as defined below, and the next succeeding Interest Payment Date, interest payments will commence on the second Interest Payment Date succeeding the Original Issue Date to the registered Holder of this Note on the Record Date with respect to such second Interest Payment Date; and provided, further, that if an Interest Payment Date or the Maturity Date or redemption or repayment date would fall on a day that is not a Business Day, as defined on the reverse hereof, such Interest Payment Date, Maturity Date or redemption or repayment date shall be the following day that is a Business Day, except that, in the case of a LIBOR Note, if such next Business Day falls in the next calendar month, the Interest Payment Date, Maturity Date or redemption or repayment date shall be the immediately preceding day that is a Business Day. Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from the Original Issue Date or, if the Interest Reset Period specified above is daily or weekly, from, and including, the date hereof (if no interest has been paid on this Note) or from, and excluding, the last date in respect of which interest has been paid or duly provided for, as the case may be. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, subject to certain exceptions described herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the date 15 calendar days prior to an Interest Payment Date (whether or not a Business Day) (the "Record Date"); provided, however, that interest payable on the Maturity Date (or any redemption or repayment date) will be payable to the person to whom the principal hereof shall be payable. Payment of the principal of this Note and interest due hereon at the Maturity Date (or any redemption or repayment date) will be made in immediately available funds upon surrender of this Note at the office or agency of the Trustee, as defined on the reverse hereof, maintained for that purpose in the Borough of Manhattan, The City of New York, or at such other office or agency as the Issuer may determine, by wire transfer, if appropriate instructions therefor have been received at least 15 Business Days prior to the date of the related payment; otherwise such payment shall be made by check. Payment of the principal of and interest on this Note will be made in such coin or currency of the United States of America or in a Specified Currency other than U.S. dollars as indicated herein as at the time of payment is legal tender for payment of public and private debts; provided, however, that U.S. dollar payments of interest, other than interest due at maturity or any date of redemption or repayment, will be made by United States dollar check mailed to the address of the person entitled thereto as such address shall appear in the Note register. A Holder of U.S. $10,000,000 or more in aggregate principal amount of Notes having the same Interest Payment Date will be entitled to receive payments of interest, other than interest due at maturity or any date of redemption or repayment, by wire transfer of immediately available funds if appropriate wire transfer instructions in writing have been received by the Trustee not less than 15 calendar days prior to the applicable Interest Payment Date. Payments of interest on Notes in a Specified Currency other than U.S. dollars will be made by wire transfer of immediately available funds to an account maintained by the Holder with a bank located outside the United States, and the Holder of such Notes shall provide the Trustee with the appropriate wire transfer instructions. Reference is hereby made to the further provisions of this Note 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 Note shall not be entitled to any benefit under the Indenture, as defined on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed under its corporate seal. DATED: THE TIMKEN COMPANY By:________________________ Title: This Note is one of a duly authorized issue of Medium- Term Notes, Series A having maturities from nine months to 30 years from the date of issue (the "Notes") of the Issuer. The Notes are issuable under an Indenture, dated as of July l, 1990 (herein called the "Indenture") between the Issuer and Mellon Bank, N.A. (as successor to Ameritrust Company of New York), as Trustee (herein called the "Trustee"), 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 of the Issuer, the Trustee and Holders of the Notes and the terms upon which the Notes are, and are to be, authenticated and delivered. The terms of individual Notes may vary with respect to interest rates, interest rate formulas, issue dates, maturity dates, or otherwise, all as provided in the Indenture. To the extent not inconsistent herewith, the terms of the Indenture are hereby incorporated by reference herein. If no Initial Redemption Date is specified on the face hereof, this Note may not be redeemed prior to the Maturity Date. If so indicated on the face of this Note, this Note may be redeemed at the option of the Issuer, on or after the Initial Redemption Date, if any, specified on the face hereof, together with interest accrued and unpaid thereon to the date of redemption. Notice of redemption shall be mailed to the registered Holders of the Notes designated for redemption at their addresses as the same shall appear on the Note register not less than 30 nor more than 60 days prior to the date of redemption, subject to all the conditions and provisions of the Indenture. In the event of redemption of this Note in part only, a new Note or Notes for the amount of the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. The "Redemption Price" shall initially be the Initial Redemption Percentage, specified on the face hereof, of the principal amount of this Note to be redeemed and, if not 100% of such principal amount, shall decline on each anniversary of the Initial Redemption Date, specified on the face hereof, by the Annual Redemption Percentage Reduction, if any, specified on the face hereof, of the principal amount to be redeemed until the Redemption Price is 100% of such principal amount. If no Option Repayment Date(s) is set forth on the face hereof, this Note may not be repaid prior to the Maturity Date. If so indicated on the face of this Note, this Note may be subject to repayment at the option of the Holder, on the Optional Repayment Date(s) specified on the face hereof, together with interest accrued and unpaid thereon to the date of repayment. For this Note to be repaid in whole or in part at the option of the Holder hereof, the Trustee must receive not less than 30 or more than 45 days prior to the Optional Repayment Date (i) the Note with the form entitled "Option to Elect Repayment" below duly completed or (ii) a telegram, telex, facsimile transmission or a letter from a member of a national securities exchange or the National Association of Securities Dealers, Inc. or a commercial bank or a trust company in the United States of America setting forth the name of the Holder of this Note, the principal amount hereof, the certificate number of this Note or a description of the Note's tenor or terms, the principal amount hereof to be prepaid, a statement that the option to elect repayment is being exercised thereby and a guarantee that this Note with the form entitled "Option to Elect Repayment" below duly completed will be received by the Trustee no later than five Business Days after the date of such telegram, telex, facsimile transmission or letter and this Note and form duly completed are received by the Trustee by such fifth Business Day. Exercise of such repayment option shall be irrevocable. Such option may be exercised by the Holder for less than the entire principal amount hereof provided that the principal amount remaining Outstanding after repayment is at least $1,000 or any larger amount that is an integral multiple of $1,000. In the event of repayment of this Note in part only, a new Note or Notes for the amount of the portion hereof that is not repaid shall be issued in the name of the Holder hereof upon the cancellation hereof. This Note will bear interest at the rate determined in accordance with the applicable provisions below by reference to the Base Rate shown on the face hereof based on the Index Maturity, if any, shown on the face hereof (i) plus or minus the Spread, if any, or (ii) multiplied by the Spread Multiplier, if any, specified on the face hereof. Commencing with the Initial Interest Reset Date specified on the face hereof, the rate at which interest on this Note is payable shall be reset as of each Interest Reset Date (as used herein, the term "Interest Reset Date" shall include the Initial Interest Reset Date). The Interest Reset Date(s) will be the Interest Reset Date(s) specified on the face hereof; provided, however, that (i) the interest rate in effect for the period from the Original Issue Date to the Initial Interest Reset Date specified on the face hereof will be the Initial Interest Rate, (ii) the interest rate in effect hereon for the 15 days immediately prior to the Maturity Date hereof (or, with respect to any principal amount to be redeemed or repaid, any redemption or repayment date) shall be that in effect on the 15th day preceding the Maturity Date hereof or such date of redemption or repayment, as the case may be, and (iii) if any Note is issued between a Record Date and the related Interest Payment Date, and such Note has daily or weekly Interest Reset Dates, then notwithstanding the fact that an Interest Reset Date may occur prior to such Interest Payment Date, the Initial Interest Rate set forth on the face hereof shall remain in effect through the first Interest Reset Date occurring on or subsequent to such Interest Payment Date. 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 day that is a Business Day, except that, in the case of a LIBOR Note, if such Business Day is in the next succeeding calendar month, such Interest Reset Date shall be the next preceding Business Day. As used herein, "Business Day" means any day that is not a Saturday or Sunday and that in The City of New York is not a day on which banking institutions are authorized by law to close and (i) with respect to Notes denominated in a Specified Currency other than U.S. dollars or European Currency Units ("ECUs"), in the capital city of the country of the Specified Currency, and (ii) with respect to Notes denominated in ECUs, in Brussels, Belgium. The Interest Determination Date pertaining to an Interest Reset Date for Notes bearing interest calculated by reference to the CD Rate, Commercial Paper Rate, Federal Funds Rate and Prime Rate will be the second Business Day next preceding such Interest Reset Date. The Interest Determination Date pertaining to an Interest Reset Date for Notes bearing interest calculated by reference to LIBOR shall be the second London Banking Day preceding such Interest Reset Date. "London Banking Day" means any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. The Interest Determination Date pertaining to an Interest Reset Date for Notes bearing interest calculated by reference to the Treasury Rate shall be the day of the week in which such Interest Reset Date falls on which Treasury bills normally would be auctioned; provided, however, that if as a result of a legal holiday an auction is held on the Friday of the week preceding such Interest Reset Date, the related Interest Determination Date shall be such preceding Friday; and provided, further, that if an auction shall fall on any Interest Reset Date, then the Interest Reset Date shall instead be the first Business Day following the date of such auction. The "Calculation Date" pertaining to any Interest Determination Date will be the earlier of the tenth calendar day after such Interest Determination Date or the next succeeding Record Date after such Interest Determination Date or, if either such day is not a Business Day, the next succeeding Business Day. Determination of CD Rate. If the Base Rate specified on the face hereof is the CD Rate, the CD Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the rate on such date for negotiable certificates of deposit having the Index Maturity specified on the face hereof as published by the Board of Governors of the Federal Reserve System in "Statistical Release H.15(519), Selected Interest Rates," or any successor publication of the Board of Governors of the Federal Reserve System ("H.15(519)"), under the heading "CDs (Secondary Market)," or, if not so published by 9:00 A.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 of the Index Maturity specified on the face hereof as published by the Federal Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M. Quotations for U.S. Government Securities" ("Composite Quotations") under the heading "Certificates of Deposit." If neither of such rates is published by 3:00 P.M., New York City time, on such Calculation Date, then the CD Rate on such Interest Determination Date will be calculated by the Calculation Agent referred to on the face hereof and will be the arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York City time, on such Interest Determination Date, for certificates of deposit in the denomination of $5,000,000 with a remaining maturity closest to the Index Maturity specified on the face hereof of three leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The City of New York selected by the Calculation Agent for negotiable certificates of deposit of major United States money center banks of the highest credit standing in the market for negotiable certificates of deposit; provided, however, that if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the rate of interest in effect for the applicable period will be the same as the CD Rate for the immediately preceding Interest Reset Period (or, if there was no such Interest Reset Period, the rate of interest payable hereon shall be the Initial Interest Rate). Determination of Commercial Paper Rate. If the Base Rate specified on the face hereof is the Commercial Paper Rate, the Commercial Paper Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the Money Market Yield (as defined herein) of the rate on such date for commercial paper having the Index Maturity specified on the face hereof, as such rate shall be published in H.15(519) under the heading "Commercial Paper," or if not so published prior to 9:00 A.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 of the Index Maturity specified on the face hereof as published in Composite Quotations under the heading "Commercial Paper." If neither of such rates is published by 3:00 P.M., New York City time, on such Calculation Date, then the Commercial Paper Rate shall be the Money Market Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on such Interest Determination Date of three leading dealers in commercial paper in The City of New York selected by the Calculation Agent for commercial paper of the Index Maturity specified on the face hereof, placed for an industrial issuer whose bond rating is "AA," or the equivalent, from a nationally recognized rating agency; provided, however, that if the dealers elected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the rate of interest in effect for the applicable period will be the same as the Commercial Paper Rate for the immediately preceding Interest Reset Period (or, if there was no such Interest Reset Period, the rate of interest payable hereon shall be the Initial Interest Rate). "Money Market Yield" shall be the yield 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 specified on the face hereof is the Federal Funds Rate, the Federal Funds Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the rate on such date for Federal Funds as published in H.15(519) under the heading "Federal Funds (Effective)," or, if not so published by 9:00 A.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 Composite Quotations under the heading "Federal Funds/Effective Rate." If neither of such rates is published by 3:00 P.M., New York City time, on such Calculation Date, the Federal Funds Rate for such Interest Determination Date will be calculated by the Calculation Agent and will be the arithmetic mean of the rates for the last transaction in overnight Federal funds as of 11:00 A.M., New York City time, on such Interest Determination Date arranged by three leading brokers in Federal funds transactions in The City of New York selected by the Calculation Agent; provided, however, that if the brokers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the rate of interest in effect for the applicable period will be the same as the Federal Funds Rate for the immediately preceding Interest Reset Period (or, if there was no such Interest Reset Period, the rate of interest payable hereon shall be the Initial Interest Rate). Determination of LIBOR. If the Base Rate specified on the face hereof is LIBOR, LIBOR with respect to this Note shall be determined on each Interest Determination Date as follows: (i) As of the Interest Determination Date, LIBOR will be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the arithmetic mean of the offered rates (unless the specified Designated LIBOR Page (as defined below) by its terms provides only for a single rate, in which case such single rate shall be used) for deposits in the Index Currency having the Index Maturity designated in the applicable Pricing Supplement, commencing on the second London Banking Day immediately following such Interest Determination Date, that 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 (unless, as aforesaid, only a single rate is required) on such Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in the applicable Pricing Supplement, the rate for deposits in the Index Currency having the Index maturity designated in the applicable Pricing Supplement, commencing on the second London Banking Day immediately following such Interest Determination Date, that appears on the Designated LIBOR Page as of 11:00 A.M., London time, on that Interest Determination Date. If fewer than two offered rates appear (if "LIBOR Reuters" is specified in the applicable Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified in the applicable Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified in the applicable Pricing Supplement), LIBOR in respect of the related Interest Determination Date will be determined as if the parties had specified the rate described in clause (ii) below. (ii) With respect to an Interest Determination Date on which fewer than two offered rates appear (if "LIBOR Reuters" is specified in the applicable Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified in the applicable Pricing Supplement), the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, as selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for deposits in the Index Currency for the period of the Index Maturity designated in the applicable Pricing Supplement, commencing on the second London Banking Day immediately following such Interest Determination Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on such Interest Determination Date and in a principal amount of not less than $1,000,000 (or the equivalent in the Index Currency, if the Index Currency is not the U.S. dollar) that is representative of a single transaction in such Index Currency in such market at such time. If at least two such quotations are provided, LIBOR determined on such Interest Determination Date will be the arithmetic mean of such quotations. If fewer than two quotations are provided, LIBOR determined on such Interest Determination Date will be the arithmetic mean of the rates quoted at approximately 11:00 A.M. (or such other time specified in the applicable Pricing Supplement), in the applicable principal financial center for the country of the Index Currency on such Interest Determination Date, by three major banks in such principal financial center selected by the Calculation Agent for loans in the Index Currency to leading European banks, having the Index Maturity designated in the applicable Pricing Supplement and in a principal amount of not less than $1,000,000 commencing on the second London Banking Day immediately following such Interest Determination Date (or the equivalent in the Index Currency, if the Index Currency is not the U.S. dollar) that is representative for a single transaction in such Index Currency in such market at such time; provided, however, that if the banks so selected by the Calculation Agent are not quoting as mentioned in this sentence, LIBOR in effect for the applicable period will be the same as LIBOR for the immediately preceding Interest Reset Period (or, if there was no such Interest Reset Period, the rate of interest payable on the LIBOR Notes for which such LIBOR is being determined shall be the Initial Interest Rate). Index Currency means the currency (including composite currencies) specified in the applicable Pricing Supplement as the currency for which LIBOR shall be calculated. If no such currency is specified in the applicable Pricing Supplement, the Index Currency shall be U.S. dollars. Designated LIBOR Page means either (a) if "LIBOR Reuters" is designated in the applicable Pricing Supplement, the display on the Reuters Monitor Money Rates Service for the purpose of displaying the London interbank rates of major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is designated in the applicable Pricing Supplement, the display on the Dow Jones Telerate Service for the purpose of displaying the London interbank rates of major banks for the applicable Index Currency. If neither LIBOR Reuters nor LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the applicable Index Currency will be determined as if LIBOR Telerate (and, if the U.S. dollar is the Index Currency, Page 3750) had been specified. Determination of Prime Rate. If the Base Rate specified on the face hereof is the Prime Rate, the Prime Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the rate set forth in H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate is not yet published by 9:00 A.M., New York City time, on the Calculation Date, the Prime Rate for such Interest Determination Date will be the arithmetic mean of the rates of interest publicly announced by each bank named on the Reuters Screen USPRIME1 (as defined below) as such bank's prime rate or base lending rate as in effect for such Interest Determination Date as quoted on the Reuters Screen USPRIME1 on such Interest Determination Date, or, if fewer than four such rates appear on the Reuters Screen USPRIME1 for such Interest Determination Rate, the rate shall be the arithmetic mean of the prime rates quoted on the basis of the actual number of days in the year divided by 360 as of the close of business on such Interest Determination Date by at least two of the three major money center banks in The City of New York selected by the Calculation Agent from which quotations are requested. If fewer than two quotations are provided, the Prime Rate shall be calculated by the Calculation Agent and shall be determined as the arithmetic mean on the basis of the prime rates in The City of New York by the appropriate number of substitute banks or trust companies organized and doing business under the laws of the United States, or any State thereof, in each case having total equity capital of at least U.S. $500 million and being subject to supervision or examination by federal or state authority, selected by the Calculation Agent to quote such rate or rates; provided, however, that if the banks or trust companies selected as aforesaid by the Calculation Agent are not quoting as set forth above, the "Prime Rate" in effect for the applicable period will be the same as the Prime Rate for the immediately preceding Interest Reset Period (or, if there was no such Interest Reset Period, the rate of interest payable on the Prime Rate Notes for which such Prime Rate is being determined shall be the Initial Interest Rate). "Reuters Screen USPRIME1" means the display designated as page "USPRIME1" on the Reuters Monitor Money Rates Services (or such other page as may replace the USPRIME1 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 specified on the face hereof is the Treasury Rate, the Treasury Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the rate for the auction held on such date of direct obligations of the United States ("Treasury Bills") having the Index Maturity specified on the face hereof, as published in H.15(519) under the heading "Treasury Bills--auction average (investment)," or if not so published by 9:00 A.M., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the auction average rate on such Interest Determination Date (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise announced by the United States Department of the Treasury. In the event that the results of the auction of Treasury Bills having the Index Maturity specified on the face hereof are not published or reported as provided above by 3:00 P.M., New York City time, on such Calculation Date or if no such auction is held on such Determination Date, then the Treasury Rate shall be calculated by the Calculation Agent and shall be a yield to maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on such Interest Determination Date, of three leading primary United States government securities dealers selected by the Calculation Agent for the issue of Treasury Bills with a remaining maturity closest to the Index Maturity specified on the face hereof; provided, however, that if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Treasury Rate for such Interest Reset Date will be the same as the Treasury Rate for the immediately preceding Interest Reset Period (or, if there was no such Interest Reset Period, the rate of interest payable hereon shall be the Initial Interest Rate). Notwithstanding the foregoing, the interest rate hereon shall not be greater than the Maximum Interest Rate, if any, or less than the Minimum Interest Rate, if any, specified on the face hereof. The Calculation Agent shall calculate the interest rate hereon in accordance with the foregoing on or before each Calculation Date. The interest rate on this Note will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States Federal law of general application. At the request of the Holder hereof, the Calculation Agent will provide to the Holder hereof the interest rate hereon then in effect and, if determined, the interest rate that will become effective as of the next Interest Reset Date. Interest payments on this Note will include interest accrued to but excluding the Interest Payment Dates or Maturity Date (or any redemption or repayment date), as the case may be; provided, however, that if the Interest Reset Period with respect to this Note is daily or weekly, interest payable on any Interest Payment Date, other than interest payable on any date on which principal hereof is payable, will include interest accrued through and including the Record Date next preceding the applicable Interest Payment Date. Accrued interest hereon shall be an amount calculated by multiplying the face amount hereof by an accrued interest factor. Such accrued interest factor shall be computed by adding the interest factor calculated for each day in the period for which interest is being paid. The interest factor for each such date shall be computed by dividing the interest rate applicable to such day by 360 if the Base Rate is CD Rate, Commercial Paper Rate, Federal Funds Rate, Prime Rate or LIBOR, as specified on the face hereof, or by the actual number of days in the year if the Base Rate is the Treasury Rate, as specified on the face hereof. All percentages resulting from any calculation of the rate of interest on this Note will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (.0000001), with five one-millionths of a percentage point rounded upward, and all dollar amounts used in or resulting from such calculation on this Note will be rounded to the nearest cent (with one-half cent rounded upward). The interest rate in effect on any Interest Reset Date will be the applicable rate as reset on such date. The interest rate applicable to any other day is the interest rate from the immediately preceding Interest Reset Date (or, if none, the Initial Interest Rate). This Note and all the obligations of the Issuer hereunder are direct, unsecured obligations of the Issuer and rank without preference or priority among themselves and pari passu with all other existing and future unsecured and unsubordinated indebtedness of the Issuer. This Note, and any Note or Notes issued upon transfer or exchange hereof, is issuable only in fully registered form, without Coupons, and, if denominated in U.S. dollars, is issuable only in denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess thereof. If this Note is denominated in a Specified Currency other than U.S. dollars, it is issuable only in denominations of the equivalent of U.S. $1,000 (rounded down to an integral multiple of 1,000 units of such Specified Currency), or any amount in excess thereof which is an integral multiple of 1,000 units of such Specified Currency, as determined by reference to the noon dollar buying rate in New York City for cable transfers of such Specified Currency published by the Federal Reserve Bank of New York (the "Market Exchange Rate") on the Business Day immediately preceding the date of issuance; provided, however, in the case of ECUs, the Market Exchange Rate shall be the rate of exchange determined by the Commission of the European Communities (or any successor thereto) as published in the Official Journal of the European Communities, or any successor publication, on the Business Day immediately preceding the day of issuance. The Trustee has been appointed registrar for the Notes, and the Trustee will maintain at its office in The City of New York a register for the registration and transfer of Notes. This Note may be transferred at the aforesaid office of the Trustee by surrendering this Note for cancellation, accompanied by a written instrument of transfer in form satisfactory to the Trustee and duly executed by the registered Holder hereof in person or by the Holder's attorney duly authorized in writing, and thereupon the Trustee shall issue in the name of the transferee or transferees, in exchange herefor, a new Note or Notes having identical terms and provisions for a like aggregate principal amount in authorized denominations, subject to the terms and conditions set forth herein; provided, however, that the Trustee will not be required (i) to register the transfer of or exchange any Note that has been called for redemption in whole or in part, except the unredeemed portion of Notes being redeemed in part, (ii) to register the transfer of or exchange any Note if the Holder thereof has exercised his right, if any, to require the Issuer to repurchase such Note in whole or in part, except the portion of such Note not required to be repurchased, or (iii) to register the transfer of or exchange Notes to the extent and during the period so provided in the Indenture with respect to the redemption of Notes. Notes are exchangeable at said office for other Notes of other authorized denominations of equal aggregate principal amount having identical terms and provisions. All such exchanges and transfers of Notes will be free of charge, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge in connection therewith. All Notes surrendered for exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Trustee and executed by the registered Holder in person or by the Holder's attorney duly authorized in writing. The date of registration of any Note delivered upon any exchange or transfer of Notes shall be such that no gain or loss of interest results from such exchange or transfer. In case any Notes shall at any time become mutilated, defaced or be destroyed, lost or stolen and such Note or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in the premises) shall be delivered to the Trustee, a new Note of like tenor will be issued by the Issuer in exchange for the Note so mutilated, or in lieu of the Note so destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen Note, only upon receipt of evidence satisfactory to the Trustee and the Issuer that such Note was destroyed or lost or stolen and, if required, upon receipt also of indemnity satisfactory to each of them. All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new Note shall be borne by the owner of the Note mutilated, defaced, destroyed, lost or stolen. The Indenture provides that, (a) if an Event of Default (as defined in such Indenture) due to the default in payment of principal of or interest on any series of Securities issued under the Indenture, including the series of Medium-Term Notes, Series A of which this Note forms a part, or due to the default in the performance or breach of any other covenant or warranty of the Issuer applicable to the Securities of such series but not applicable to all Outstanding Securities issued under the Indenture shall have occurred and be continuing, either the Trustee or the Holders of not less than 25% in principal amount of the Securities of each affected series (each such series voting as a separate class) may then declare the principal of all Securities of all such series and interest accrued thereon to be due and payable immediately and (b) if an Event of Default due to a default in the performance of any other of the covenants or agreements in the Indenture applicable to all Outstanding Securities issued thereunder, including this Note, or due to certain events of bankruptcy, insolvency or reorganization of the Issuer, shall have occurred and be continuing, either the Trustee or the Holders of not less than 25% in principal amount of all Securities issued under the Indenture then Outstanding (treated as one class) may declare the principal of all such Securities and interest accrued thereon to be due and payable immediately, but upon certain conditions such declarations may be annulled and past defaults may be waived (except a continuing default in payment of principal or interest on such Securities) by the Holders of a majority in principal amount of the Securities of all affected series then Outstanding. The Indenture permits the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of each series issued under the Indenture then Outstanding and affected, to execute supplemental indentures adding any provisions to or modifying in any manner the rights of the Holders of each series so affected; provided that the Issuer and the Trustee shall not, without the consent of the Holder of each Outstanding Security affected thereby, (a) extend the final maturity of any such Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption or repayment thereof, or change the currency of payment thereof, or impair or affect the rights of any Holder to institute suit for the payment thereof without the consent of the Holder of each Security so affected; or (b) reduce the aforesaid percentage in principal amount of Securities the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of each Security so affected. Except as set forth below, if the principal of, or interest on, this Note is payable in a Specified Currency other than U.S. dollars and such Specified Currency is not available to the Issuer for making payments hereon due to the imposition of exchange controls or other circumstances beyond the control of the Issuer or is no longer used by the government of the country issuing such currency or for the settlement of transactions by public institutions within the international banking community, then the Issuer will be entitled to satisfy its obligations to the Holder of this Note by making such payments in U.S. dollars on the basis of the Market Exchange Rate on the date of such payment or, if the Market Exchange Rate is not available on such date, as of the most recent practicable date. Any payment made under such circumstances in U.S. dollars where the required payment is in a Specified Currency other than U.S. dollars will not constitute an Event of Default. If payment in respect of this Note is required to be made in ECUs and ECUs are unavailable due to the imposition of exchange controls or other circumstances beyond the Issuer's control or are no longer used in the European Monetary System, then all payments in respect of this Note shall be made in U.S. dollars until ECUs are again available or so used. The amount of each payment in U.S. dollars shall be computed on the basis of the equivalent of the ECU in U.S. dollars, determined as described below, as of the second Business Day prior to the date on which such payment is due. The equivalent of the ECU in U.S. dollars as of any date (the "Day of Valuation") shall be determined by the Issuer or its agent on the following basis. The component currencies of the ECU for this purpose (the "Components") shall be the currency amounts that were components of the ECU as of the last date on which the ECU was used in the European Monetary System. The equivalent of the ECU in U.S. dollars shall be calculated by aggregating the U.S. dollar equivalents of the Components. The U.S. dollar equivalent of each of the Components shall be determined by the Issuer or such agent on the basis of the most recently available Market Exchange Rates for such Components. If the official unit of any Component is altered by way of combination or subdivision, the number of units of that currency as a Component shall be divided or multiplied in the same proportion. If two or more Components are consolidated into a single currency, the amounts of those currencies as Components shall be replaced by an amount in such single currency equal to the sum of the amounts of the consolidated component currencies expressed in such single currency. If any Component is divided into two or more currencies, the amount of the original component currency shall be replaced by the amounts of such two or more currencies, each of which shall be equal to the amount of the original component currency separated into the number of currencies into which such original currency was divided. All determinations referred to above made by the Issuer or its agent shall be at its sole discretion and shall, in the absence of manifest error, be conclusive to the extent permitted by law for all purposes and binding on Holders of Notes. So long as this Note shall be Outstanding, the Issuer will cause to be maintained an office or agency for the payment of the principal of and interest on this Note as herein provided in the Borough of Manhattan, The City of New York, and an office or agency in said Borough of Manhattan for the registration, transfer and exchange as aforesaid of the Notes. The Issuer may designate other agencies for the payment of said principal and interest at such place or places (subject to applicable laws and regulations) as the Issuer may decide. So long as there shall be such an agency, the Issuer shall keep the Trustee advised of the names and locations of such agencies, if any are so designated. With respect to moneys paid by the Issuer and held by the Trustee for the payment of the principal of or interest on any Notes that remain unclaimed at the end of two years after such principal or interest shall have become due and payable (whether at maturity or upon call for redemption or otherwise), (i) the Trustee shall notify the Holders of such Notes that such moneys shall be repaid to the Issuer and any person claiming such moneys shall thereafter look only to the Issuer for payment thereof and (ii) such moneys shall be so repaid to the Issuer. Upon such repayment all liability of the Trustee with respect to such moneys shall thereupon cease, without, however, limiting in any way any obligation that the Issuer may have to pay the principal of or interest on this Note as the same shall become due. No provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the time, place, and rate, and in the coin or currency, herein prescribed unless otherwise agreed between the Issuer and the registered Holder of this Note. Prior to due presentment of this Note for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Holder in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Note, for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. This Note shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. All terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. 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 Note and all rights thereunder, hereby irrevocably constituting and appointing such person attorney to transfer such Note on the books of the Issuer, with full power of substitution in the premises. Dated:___________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever. OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably requests and instructs the Issuer to repay the within Note (or portion hereof specified below) pursuant to its terms at a price equal to the applicable Repayment Price thereof together with interest to the Repayment Date, to the undersigned at (Please print or typewrite name and address of the undersigned) If less than the entire principal amount of the within Note is to be repaid, specify the portion thereof which the Holder elects to have repaid ____________________; and specify the denomination or denominations (which shall be in authorized denominations) of the Notes to be issued to the Holder for the portion of the within Note not being repaid (in the absence of any such specification, one such Note will be issued for the portion not being repaid): Dated:____________________ __________________________________ (Signature) EX-11 4 Exhibit 11 - COMPUTATION OF PER SHARE EARNINGS (Thousands of dollars, except per share data)
Nine Months Ended Sept. 30 Three Months Ended Sept. 30 1996 1995 1996 1995 PRIMARY ---------------------------------------------------------------- Average shares outstanding 31,420,553 31,159,689 31,424,410 31,244,711 Net effect of stock options - based on the treasury stock method using average market price (1) (1) (1) (1) ---------------------------------------------------------------- 31,420,553 31,159,689 31,424,410 31,244,711 Net income (loss) $99,907 $84,547 $31,785 $19,028 Per-share amount $3.18 $2.71 $1.01 $0.61 ===== ===== ===== ===== FULLY DILUTED Average shares outstanding 31,420,553 31,159,689 31,424,410 31,244,711 Net effect of dilutive stock options - based on the treasury stock method using the average quarterly market price, if higher than exercise price 274,627 317,760 208,499 380,489 ---------------------------------------------------------------- 31,695,180 31,477,449 31,632,909 31,625,200 Net income (loss) $99,907 $84,547 $31,785 $19,028 Per-share amount $3.15 $2.69 $1.00 $0.60 ===== ===== ===== ===== (1) Incremental number of shares excluded from calculation since they do not have a dilutive effect.
EX-27 5
5 This schedule contains summary financial information extracted from the company's consolidated Balance Sheet and Profit & Loss financial statements and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1996 SEP-30-1996 15,309 0 331,012 7,670 427,482 820,312 2,442,432 1,374,215 2,081,214 631,754 140,930 0 0 314,144 572,296 2,081,214 1,778,924 1,778,924 1,359,670 1,359,670 0 0 12,406 163,782 63,875 99,907 0 0 0 99,907 3.18 3.15
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