TIMKEN CO
S-3, 1998-02-09
BALL & ROLLER BEARINGS
Previous: TEXFI INDUSTRIES INC, DEF 14A, 1998-02-09
Next: TRAINER WORTHAM & CO INC, SC 13G, 1998-02-09


<PAGE>   1
    As filed with the Securities and Exchange Commission on February 9, 1998

                                                 Registration Statement No. 333-
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 ---------------
                                    FORM S-3
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

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

                               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 Number)


                            1835 DUEBER AVENUE, S.W.
                             CANTON, OHIO 44706-2798
                                 (330) 438-3000
          (Address, Including Zip Code, and Telephone Number, Including
             Area Code, of Registrant's Principal Executive Offices)

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

                              Larry R. Brown, Esq.
                    Senior Vice President and General Counsel
                               The Timken Company
                            1835 Dueber Avenue, S.W.
                             Canton, Ohio 44706-2798
                                 (330) 438-3000
            (Name, Address, Including Zip Code, and Telephone Number,
                   Including Area Code, of Agent for Service)

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

                                   Copies to:

 Charles W. Hardin, Jr., Esq.                   Daniel M. Rossner, Esq.     
  Jones, Day, Reavis & Pogue                        Brown & Wood LLP        
         North Point                            One World Trade Center     
     901 Lakeside Avenue                              58th Floor           
   Cleveland, Ohio  44114                    New York, New York  10048-0557 
       (216) 586-3939                               (212) 839 -5300       

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

        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
    From time to time after the effective date of the Registration Statement
                  as determined in light of market conditions.

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

         If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

         If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]

         If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _____

         If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ______

         If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]


<PAGE>   2





                         CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================  ===================  ===================== ======================  ===================
                                                                                          Proposed Maximum
            Title of Each Class of             Amount to be        Proposed Maximum           Aggregate            Amount of
          Securities to be Registered          Registered(1)       Offering Price(1)      Offering Price(2)     Registration Fee
- ------------------------------------------  -------------------  --------------------- ----------------------  -------------------

<S>                                             <C>                      <C>                <C>                      <C>    
Debt Securities                                 $300,000,000             100%               $300,000,000             $88,500
==========================================  ===================  ===================== ======================  ===================

<FN>
(1)  Such amount in U.S. dollars or the equivalent thereof in foreign currencies
     or foreign currency units as shall result in an aggregate initial public
     offering price for all securities of $300,000,000.

</TABLE>
(2)  Estimated solely for the purpose of calculating the registration fee.


                                 ---------------
         THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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


<PAGE>   3



                  SUBJECT TO COMPLETION, DATED FEBRUARY 9, 1998

PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY __, 1998)

                                  $300,000,000

                               THE TIMKEN COMPANY
                           MEDIUM-TERM NOTES, SERIES A

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

             DUE FROM NINE MONTHS TO THIRTY YEARS FROM DATE OF ISSUE

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

         The Timken Company (the "Company") may offer from time to time up to
$300,000,000 aggregate principal amount of its Medium-Term Notes, Series A or
the equivalent thereof in other currencies, including composite currencies such
as the European Currency Unit (the "Notes"). The interest rate on each Note will
be either a fixed rate (a "Fixed Rate Note") established by the Company at the
date of issue of such Note, which may be zero in the case of certain Notes
issued at a price representing a substantial discount from the principal amount
payable upon maturity, or a floating rate (a "Floating Rate Note") as set forth
therein and specified in a supplement hereto (a "Pricing Supplement"). Interest
rates are subject to change by the Company but no change will affect any Note
already issued or as to which an offer to purchase has been accepted by the
Company.

         Interest on each Fixed Rate Note is payable each February 15 and August
15 and at maturity. Interest on each Floating Rate Note is payable on the dates
set forth therein and in the applicable Pricing Supplement. Each Note will
mature on any day from nine months to thirty years from the date of issue, as
selected by the purchaser and agreed to by the Company. See "Description of
Notes." Unless otherwise specified in the applicable Pricing Supplement to this
Prospectus Supplement, the Notes may not be redeemed by the Company prior to
maturity. Notes denominated in United States dollars will be issued in fully
registered form in denominations of $1,000 or any amount in excess thereof which
is an integral multiple of $1,000. Any terms relating to Notes being denominated
in foreign currencies or composite currencies will be set forth in the
applicable Pricing Supplement. Each Note will be represented either by a Global
Note registered in the name of a nominee of The Depository Trust Company, as
Depositary (a "Book-Entry Note"), or by a certificate issued in definitive form,
as set forth in the applicable Pricing Supplement. Beneficial interests in
Global Notes representing Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and
its participants. Book-Entry Notes will not be issuable in certificated form
except under the circumstances described in the accompanying Prospectus.

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

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

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

<TABLE>
<CAPTION>
                           PRICE TO                  AGENTS'                            PROCEEDS TO
                           PUBLIC(1)                 COMMISSIONS(2)                     COMPANY(2)(3)

<S>                        <C>                       <C>                                <C>       
Per Note                   100%                      .125% - .750%                      99.875% - 99.250%
Total                      $300,000,000(4)           $375,000 - $2,250,000              $299,625,000 - $297,750,000
</TABLE>

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



(1)      Unless otherwise specified in the applicable Pricing Supplement, Notes
         will be sold at 100% of their principal amount.
(2)      The Company will pay a commission to the Agents for each Note sold
         through the Agents ranging from .125% to .750% of the principal amount
         of such Note, depending upon such Note's maturity. The Company may also
         sell Notes to the Agents, as principals, at negotiated discounts, for
         resale to investors.
(3)      Before deducting expenses payable by the Company estimated at $350,000.
(4)      Or the equivalent thereof in other currencies, including composite
         currencies.

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

         Offers to purchase the Notes are being solicited from time to time by
Morgan Stanley & Co. Incorporated, Key Capital Markets, Inc., J.P. Morgan
Securities Inc., and NationsBanc Montgomery Securities LLC, as agents (the
"Agents"), on behalf of the Company. Each Agent has agreed to use its reasonable
efforts to solicit purchases of the Notes. The Company may also sell Notes to an
Agent acting as principal for its own account for resale to one or more
investors at varying prices related to prevailing market prices at the time of
resale, to be determined by such Agent. In addition, the Company may sell the
Notes directly to investors in those jurisdictions where such offering by the
Company is authorized. No termination date for the offering of the Notes has
been established. The Company or the Agents may reject any order in whole or in
part. The Notes will not be listed on any securities exchange and there can be
no assurance that the Notes offered hereby will be sold or that there will be a
secondary market for the Notes. See "Plan of Distribution."

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

MORGAN STANLEY DEAN WITTER
                 KEY CAPITAL MARKETS, INC.
                                J.P. MORGAN & CO.
                                           NATIONSBANC MONTGOMERY SECURITIES LLC

February __, 1998


<PAGE>   4




         NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE AGENTS. THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY SECURITIES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

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

         CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
NOTES. SPECIFICALLY, THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
OR MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."

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

                     IMPORTANT CURRENCY EXCHANGE INFORMATION

         Purchasers are required to pay for the Notes in U.S. dollars, and
payments of principal, premium, if any, and interest on the Notes will also be
made in U.S. dollars, unless the applicable Pricing Supplement provides that
purchasers are instead required to pay for the Notes in a Specified Currency (as
hereinafter defined), and/or that payments of principal, premium, if any, and
interest on such Notes will be made in a Specified Currency. Currently, there
are limited facilities in the United States for the conversion of U.S. dollars
into foreign currencies and vice versa. In addition, most banks do not currently
offer non-U.S. dollar denominated checking or savings account facilities in the
United States. Accordingly, unless otherwise specified in a Pricing Supplement
or unless alternative arrangements are made, payment of principal, premium, if
any, and interest on Notes in a Specified Currency other than U.S. dollars will
be made to an account at a bank outside the United States. See "Description of
Notes" and "Foreign Currency Risks."

         Reference herein to "U.S. dollars" or "U.S. $" or "$" are to the
currency of the United States of America.

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

                              DESCRIPTION OF NOTES

         The following description of the particular terms of the Notes (which
represent a series of, and are referred to in the accompanying Prospectus as,
"Offered Securities") supplements the description of the general terms and
provisions of Offered Securities set forth in the accompanying Prospectus, to
which reference is hereby made. The particular terms of the Notes offered by
this Prospectus Supplement and each Pricing Supplement will be described herein
and therein.

         If the Company deems it advisable, the Company may reduce the aggregate
principal amount of Notes that may be offered pursuant to this Prospectus
Supplement and offer additional Offered Securities in other series pursuant to
the accompanying Prospectus. Upon any public offering or sale or solicitation of
an offer to buy any other series of Offered Securities covered by the
Prospectus, such series of Offered Securities and the particular terms of such
offer, sale or solicitation will be described in a Prospectus Supplement or
Prospectus Supplements relating thereto.

         If any Note is not to be denominated in U.S. dollars, the applicable
Pricing Supplement will specify the currency or currencies, including composite
currencies such as the European Currency Unit ("ECU"), in which the principal,
premium, if any, and interest, if any, with respect to such Note are to be paid,
along with any other terms relating to the non-U.S. dollar denomination,
including exchange rates for the Specified Currency as against the U.S. dollar
at selected times during the last five years, and any exchange controls
affecting such Specified Currency. See "Foreign Currency Risks."

         The following summaries of certain provisions of the Indenture (as
defined below) and the Notes do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Indenture and the Notes, including the definitions therein of certain terms.
Whenever particular provisions or defined terms of the Indenture and the Notes
are referred to, such provisions or defined terms are incorporated herein by
such reference.

GENERAL

         The Notes are being issued under an Indenture, dated as of February __,
1998 (the "Indenture"), between the Company and The Bank of New York, as trustee
(the "Trustee"). The Indenture is more fully described in the accompanying
Prospectus. The Notes will be unsecured obligations of the Company and will rank
on a parity with all other unsecured and unsubordinated indebtedness of the
Company. The Indenture does not limit the amount of indebtedness, either secured
or unsecured, which may be incurred by the

                                       S-2

<PAGE>   5
Company. The Notes will be offered on a continuing basis, will initially be
limited to an aggregate principal amount of up to $300,000,000 or the equivalent
thereof in one or more foreign or composite currencies and will mature on any
day from nine months to thirty years from the date of issue, as agreed to by the
Company and the purchaser prior to issuance.

         Unless otherwise indicated in the Pricing Supplement, the Notes will be
denominated in U.S. dollars and payments of principal of and interest on the
Notes will be made in U.S. dollars. The Notes will be issued only in fully
registered form and except for Notes dominated in foreign or composite
currencies or as otherwise provided in the Pricing Supplement, the Notes will be
issued in denominations of U.S. $1,000 or any amount in excess thereof which is
an integral multiple of U.S. $1,000. If any Note is not to be denominated in
U.S. dollars, certain provisions with respect thereto will be set forth in a
supplement hereto which will specify the currency or currencies, including
composite currencies such as the ECU, in which the principal and interest with
respect to such Note are to be paid (the "Specified Currency"), along with any
other terms relating to the non-U.S. dollar denomination.

         Unless otherwise specified in the Pricing Supplement, the Notes will be
issued in book-entry form. If specified in the Pricing Supplement, the Notes may
also be issued in certificated form. Notes issued in certificated form may be
transferred or exchanged at the offices described in the immediately following
paragraph. In the event Notes are issued in book-entry form through the
facilities of the Depositary, transfers or exchanges may be effected only
through a participating member of the Depositary. See "Book-Entry Notes." No
service charge will be made for any registration of transfer or exchange of
Notes issued in certificated form, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charges that may be imposed in
connection therewith.

         Payments on Notes issued in book-entry form will be made to the
Depositary. See "Book-Entry Notes." In the case of Notes issued in certificated
form, principal will be payable, the transfer of the Notes will be registrable,
and Notes will be exchangeable for Notes bearing identical terms and provisions,
at the office or agency of the Trustee in The City of New York designated for
such purpose (currently 101 Barclay Street, Floor 21W, New York, New York
10286). Payment of interest, other than interest payable at the maturity of a
Note (or on a redemption date, if such Note is redeemed by the Company prior to
its maturity), will be made by check mailed to the address of the person
entitled thereto as shown on the security register. Notwithstanding the
foregoing, unless otherwise specified in the Pricing Supplement, a holder of
$10,000,000 or more in aggregate principal amount of Notes issued in
certificated form which pay interest on the same interest payment date shall be
entitled to receive payments of interest (other than at maturity or the date of
redemption) by wire transfer of immediately available funds if appropriate wire
transfer instructions have been received by the Trustee on or before the regular
record date immediately preceding such interest payment date. In the case of
Notes issued in certificated form, payment of principal and interest at maturity
or the date of redemption will be made upon presentment and surrender of the
Note at the office or agency designated by the Company, in immediately available
funds by wire transfer, if appropriate instructions therefor have been received
at least 15 Business Days (as defined below) prior to the date of the related
payment; otherwise, such payment shall be made by check. "Business Day" means
any day other than a Saturday or Sunday that is neither a legal holiday nor a
day on which banking institutions are authorized or required by law or
regulation to close in The City of New York and (i) with respect to LIBOR Notes
(as defined below), is also a London Banking Day, (ii) with respect to Notes
denominated in a Specified Currency other than U.S. dollars or ECUs, is also a
business day in the principal financial center of the country of the Specified
Currency, and (iii) with respect to Notes denominated in ECUs, that is an ECU
clearing day, as determined by the ECU Banking Association in Paris.

PAYMENT CURRENCY

         Except as set forth below, if the principal of, premium, if any, or
interest on, any Note is payable in a Specified Currency other than U.S. dollars
and such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances beyond
the control of the Company 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 Company will
be entitled to satisfy its obligations to holders of such Notes 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 Company's control or are no longer used in the European
Monetary System, then all payments in respect of such 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 shall be
determined by the Company 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

                                       S-3
<PAGE>   6



of the Components shall be determined by the Company or its 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 amount 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 Company or its agent
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.

REDEMPTION

         If so provided in the Pricing Supplement, the Notes may be subject to
redemption, in whole or in part, by the Company on and after the initial
redemption date, if any, fixed at the time of sale. If no such date is indicated
with respect to a Note, such Note will not be redeemable prior to maturity. If
so provided in the Pricing Supplement, the Notes will be redeemable at the
option of the Holder on or after a specified date or dates prior to their
maturity, on the terms provided in the Pricing Supplement.

INTEREST AND PRINCIPAL PAYMENTS

         Interest will be payable to the person in whose name the Note is
registered at the close of business on the applicable record date (defined in
the Notes as being the date 15 calendar days prior to such interest payment
date, whether or not such interest payment date shall be a Business Day);
provided, that the interest payable at maturity or upon redemption (whether or
not the date of maturity or redemption is an interest payment date) will be
payable to the person to whom principal is payable. The initial interest payment
on a Note will be made on the first interest payment date falling after the date
the Note is issued; provided, however, that payments of interest on a Note
issued less than 15 calendar days before an interest payment date will be paid
on the next succeeding interest payment date to the holder of record on the
record date with respect to such succeeding 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 payee with a bank located outside the United States
and the holder of such Notes shall provide the Trustee with the appropriate wire
transfer instructions.

         Certain Notes may be considered to be issued with original issue
discount, which must be included in income for United States federal income tax
purposes at a constant rate. See "United States Taxation -- Tax Consequences to
Holders" below. Unless otherwise specified in the applicable Pricing Supplement,
if the principal of any such Note is declared to be due and payable immediately
as described under "Description of Securities -- Events of Default" in the
Prospectus, the amount of principal due and payable with respect to such Note
shall be limited to the aggregate principal amount of such Note multiplied by
the sum of its "issue price" (expressed as a percentage of the aggregate
principal amount) plus the original issue discount amortized from the date of
issue 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). Special considerations
applicable to any such Notes will be set forth in the applicable Pricing
Supplement.

FIXED RATE NOTES

         Each Fixed Rate Note will bear interest from the date of issuance at
the annual rate stated on the face thereof until the principal thereof is paid
or made available for payment. Such interest will be computed on the basis of a
360-day year of twelve 30-day months. Payments of interest on Fixed Rate Notes
will be made semiannually on each February 15 and August 15 and at maturity. If
any interest payment date for any Fixed Rate Note would fall on a day that is
not a Business Day, the interest payment shall be postponed to the next day that
is a Business Day, and no interest on such payment shall accrue for the period
from and after such interest payment date. If the maturity date (or date of
redemption) of any Fixed Rate Note would fall on a day that is not a Business
Day, the payment of interest and principal may be made on the next succeeding
Business Day, and no interest on such payment shall accrue for the period from
and after the maturity date (or date of redemption).

         Interest payments for Fixed Rate Notes will include accrued interest
from the date of issue or from the last date in respect of which interest has
been paid, as the case may be, to, but excluding, the interest payment date or
the date of maturity or earlier redemption, as the case may be. The interest
rates the Company will agree to pay on newly-issued Fixed Rate Notes are subject
to change without notice by the Company from time to time, but no such change
will affect any Fixed Rate Notes theretofore issued or as to which an offer to
purchase has been accepted by the Company.


                                       S-4

<PAGE>   7


FLOATING RATE NOTES

         Each Floating Rate Note will bear interest from the date of issuance
until the principal thereof is paid or made available for payment at a rate
determined by reference to an interest rate basis or formula (the "Base Rate"),
which may be adjusted by a Spread or Spread Multiplier (each as defined below).
The applicable Pricing Supplement will designate one of the following Base Rates
as applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate Note"),
(b) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the Federal
Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the
Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury Rate Note")
or (g) such other Base Rate as is set forth in such Pricing Supplement and in
such Floating Rate Note. The "Index Maturity" for any Floating Rate Note is the
period of maturity of the instrument or obligation from which the Base Rate is
calculated and will be specified in the applicable Pricing Supplement.

         Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, or (ii) multiplied by
the Spread Multiplier, if any. The "Spread" is the number of basis points (one
one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate for such Floating
Rate Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note.

         As specified in the applicable Pricing Supplement, a Floating Rate Note
may also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any interest period
("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the rate
of interest which may accrue during any interest period ("Minimum Interest
Rate"). In addition to any Maximum Interest Rate which may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on a
Floating Rate 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 law of general
application. Under current New York law, the maximum rate of interest, subject
to certain exceptions, for any loan in an amount of $250,000 or more but less
than $2,500,000 is 25% per annum on a simple interest basis. Such limitations
may not apply to loans in excess of $2,500,000.

         The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semiannually or annually (such period being the
"Interest Reset Period" for such Note, and the first day of each Interest Reset
Period being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the Pricing Supplement, the Interest
Reset Date will be, in the case of Floating Rate Notes (other than Treasury Rate
Notes) which reset daily, each Business Day; in the case of Floating Rate Notes
(other than Treasury Rate Notes) which reset weekly, the Wednesday of each week;
in the case of Treasury Rate Notes which reset weekly, the Tuesday of each week,
except as provided below; in the case of Floating Rate Notes which reset
monthly, the third Wednesday of each month; in the case of Floating Rate Notes
which reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which reset semiannually, the third
Wednesday of two months of each year, as specified in the applicable Pricing
Supplement; and in the case of Floating Rate Notes which reset annually, the
third Wednesday of one month of each year, as specified in the applicable
Pricing Supplement; provided, however, that (a) the interest rate in effect from
the date of issue to the first Interest Reset Date with respect to a Floating
Rate Note will be the initial interest rate set forth in the applicable Pricing
Supplement (the "Initial Interest Rate"); (b) the interest rate in effect for
the fifteen days immediately prior to maturity or redemption will be that in
effect on the fifteenth day preceding such maturity or redemption and (c) if any
Floating Rate 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 than an Interest Reset Date may occur prior to such
interest payment date, the Initial Interest Rate shall remain in effect through
the first Interest Reset Date occurring on or subsequent to such interest
payment date. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Reset Date shall be
postponed to the next succeeding Business Day, except that, 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.

         Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Notes with a daily, weekly or monthly Interest Reset Date, on the third
Wednesday of each month or on the third Wednesday of March, June, September and
December, as specified in the applicable Pricing Supplement; (ii) in the case of
Notes with a quarterly Interest Reset Date, on the third Wednesday of March,
June, September and December, (iii) in the case of Notes with a semiannual
Interest Reset Date, on the third Wednesday of the two months specified in the
applicable Pricing Supplement; and (iv) in the case of Notes with an annual
Interest Reset Date, on the third Wednesday of the month specified in the
applicable Pricing Supplement. If any interest payment date for any Floating
Rate Note would fall on a day that is not a Business Day with respect to such
Note, such interest payment date will be the following day that is a Business
Day with respect to such Note, except that, in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such interest payment
date shall be the immediately preceding day that is a Business Day with respect
to such LIBOR Note.



                                      S-5
<PAGE>   8
         Unless otherwise specified in the applicable Pricing Supplement,
interest payments for Floating Rate Notes (except Floating Rate Notes on which
interest is reset daily or weekly) shall be the amount of interest accrued from
the date of issue or from the last date to which interest has been paid to, but
excluding, the interest payment date. In the case of a Floating Rate Note on
which interest is reset daily or weekly, interest payments shall be the amount
of interest accrued from the date of issue or from the last date to which
interest has been paid, as the case may be, to and including the record date
immediately preceding such interest payment date, except that at maturity or
earlier redemption, the interest payable will include interest accrued to, but
excluding, the maturity date or the date of redemption, as the case may be.

         With respect to a Floating Rate Note, accrued interest shall be
calculated by multiplying the principal amount of such Floating Rate Note by an
accrued interest factor. Such accrued interest factor will be computed by adding
the interest factors calculated for each day in the period for which interest is
being paid. The interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360, in the cases of CD Rate Notes,
Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime
Rate Notes or by the actual number of days in the year, in the case of Treasury
Rate Notes. All percentages used in or resulting from any calculation of the
rate of interest on a Floating Rate 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 Floating Rate Notes 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).

         The applicable Pricing Supplement shall specify a calculation agent
(the "Calculation Agent") with respect to any issue of Floating Rate Notes. Upon
the request of the holder of any Floating Rate Note, the Calculation Agent will
provide the interest rate then in effect and, if determined, the interest rate
which will become effective on the next Interest Reset Date with respect to such
Floating Rate Note.

         The "Interest Determination Date" pertaining to an Interest Reset Date
for CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes and
Prime Rate Notes will be the second Business Day next preceding such Interest
Reset Date. The Interest Determination Date pertaining to the Interest Reset
Date for a LIBOR Note will be the second London Banking Day (as defined below)
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
a Treasury Rate Note will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
but such auction may be held on the preceding Friday. If, as the result of a
legal holiday, an auction is so held on the preceding Friday, such Friday will
be the Interest Determination Date pertaining to the Interest Reset Date
occurring in the next succeeding week. If an auction falls on a day that is an
Interest Reset Date, such Interest Reset Date will be the next following
Business Day.

         The "Calculation Date," where applicable, pertaining to an Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date or if such day is not a Business Day, the next
succeeding Business Day, or (ii) the Business Day preceding the applicable
Interest Payment Date or Maturity Date, as the case may be.

         Interest rates will be determined by the Calculation Agent as follows:

CD Rate Notes

         CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) specified
in the CD Rate Notes and in the applicable Pricing Supplement.

         Unless otherwise specified in the applicable Pricing Supplement, "CD
Rate" means, with respect to any Interest Determination Date, the rate on such
date for negotiable certificates of deposit having an Index Maturity designated
in the applicable Pricing Supplement 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 such 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 designated in the applicable Pricing Supplement 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" (the "Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent 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 an amount that is
representative for a single transaction at that time with a remaining maturity
closest to the Index Maturity designated in the Pricing Supplement 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; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the CD Rate in effect for the applicable period 

                                      S-6
<PAGE>   9


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 on the CD Rate Notes for which such CD Rate is being determined shall be
the Initial Interest Rate).

Commercial Paper Rate Notes

         Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified in the Commercial Paper Rate Notes and in the
applicable Pricing Supplement.

         Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement, as such rate shall be published in H.15(519), under the caption
"Commercial Paper-Nonfinancial." In the event that such rate is not published
prior to 9:00 A.M., New York City time, on the Calculation Date, then the
Commercial Paper Rate shall be the Money Market Yield of the rate on such
Interest Determination Date for commercial paper of the specified Index Maturity
as published in Composite Quotations under the caption "Commercial Paper." If by
3:00 P.M., New York City time, on such Calculation Date such rate is not yet
available in either H.15(519) or Composite Quotations, 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 of commercial paper in The City of New York selected by
the Calculation Agent for commercial paper of the specified Index Maturity,
placed for an industrial issuer whose bond rating is "AA," or the equivalent,
from a nationally recognized statistical rating agency; provided, however, that
if the dealers selected as aforesaid by the Calculation Agent are not quoting
offered rates 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 on the Commercial Paper Rate Notes
for which such Commercial Paper Rate is being determined shall be the Initial
Interest Rate).

         "Money Market Yield" shall be a 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 for which interest is being calculated.

Federal Funds Rate Notes

         Federal Funds Rate Notes will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.

         Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date, 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 the Composite Quotations under the heading "Federal Funds/Effective
Rate." If such rate is not yet published in either H.15(519) or the Composite
Quotations by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Interest Determination 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, prior to 9:00 A.M., New York City time, on such Interest Determination
Date arranged by three leading brokers of 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 set
forth above, the Federal Funds Rate 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 on the Federal Funds Rate Notes for which such Federal Funds Rate is
being determined shall be the Initial Interest Rate).

LIBOR Notes

         LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any, and subject to
the Minimum Interest Rate and Maximum Interest Rate, if any) specified in the
LIBOR Notes and in the applicable Pricing Supplement.

         Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" for each Interest Determination Date will be determined by the
Calculation Agent as follows:


                                      S-7
<PAGE>   10



                  (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), 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.

Prime Rate Notes


         Prime Rate Notes will bear interest at the interest rate (calculated
with reference to the Prime Rate and the Spread or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.



                                      S-8
<PAGE>   11
         Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, 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
pertaining to such Interest Determination 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).

Treasury Rate Notes

         Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.

         Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the rate
for the auction held on such date of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement, 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 designated in the applicable Pricing Supplement 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 Interest
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 designated in the applicable
Pricing Supplement; 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 on the Treasury Rate Notes
for which the Treasury Rate is being determined shall be the Initial Interest
Rate).

BOOK-ENTRY NOTES

         The Depositary has advised the Company and the Agents that it is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934
(the "Exchange Act"). The Depositary was created to hold securities for its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including certain of the Agents), banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who are
not participants may beneficially own securities held by the Depositary only
through participants.

         For a more complete description of Book-Entry Notes, see "Description
of Securities -- Global Securities" in the accompanying Prospectus.

                             FOREIGN CURRENCY RISKS

EXCHANGE RATES AND EXCHANGE CONTROLS

         Any investment in Notes that are denominated in a Specified Currency
other than U.S. dollars entails significant risks that are not associated with a
similar investment in a security denominated in U.S. dollars. Such risks
include, without limitation, the 


                                      S-9
<PAGE>   12



possibility of significant changes in rates of exchange between the U.S. dollar
and the various foreign currencies or composite currencies and the possibility
of the imposition or modification of exchange controls by either the U.S. or a
foreign government. Such risks generally depend on economic and political events
over which the Company has no control. In recent years, rates of exchange
between U.S. dollars and certain foreign currencies have been highly volatile
and such volatility may be expected to continue in the future. Fluctuations in
any particular exchange rate that have occurred in the past are not necessarily
indicative, however, of fluctuations in such rate that may occur during the term
of any Note. Depreciation against the U.S. dollar of the currency in which a
Note is payable would result in a decrease in the effective yield of such Note
below its coupon rate and, in certain circumstances, could result in a loss to
the investor on a U.S. dollar basis.

         THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN CURRENCY OR A
COMPOSITE CURRENCY AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE
INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN SPECIFIED CURRENCIES OTHER
THAN U.S. DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS
WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.

         The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium, if
any, and interest on, the Notes. Such persons should consult their own counsel
with regard to such matters.

         Governments have imposed from time to time, and may in the future
impose, exchange controls which could affect exchange rates as well as the
availability of a specified foreign currency at the time of payment of principal
of, premium, if any, or interest on, a Note. Even if there are actual exchange
controls, it is possible that the Specified Currency for any particular Note not
denominated in U.S. dollars would not be available when payments on such Note
are due. In that event, the Company would make required payments in U.S. dollars
on the basis of the Market Exchange Rate on the date of such payment, or if such
rate of exchange is not then available, on the basis of the Market Exchange Rate
as of the most recent practicable date.

         With respect to any Note denominated in a foreign currency or currency
unit, the applicable Pricing Supplement will include information with respect to
applicable current exchange controls, if any, and historic exchange rate
information on such currency or currency unit. The information contained therein
shall constitute a part of this Prospectus Supplement and is furnished as a
matter of information only and should not be regarded as indicative of the range
of or trends in fluctuations in currency exchange rates that may occur in the
future.

GOVERNING LAW AND JUDGMENTS

         The Notes will be governed by and construed in accordance with the laws
of the State of New York. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a court in the
United States, it is likely that such court would grant judgment relating to the
Notes only in U.S. dollars.

                             UNITED STATES TAXATION

         The following summary describes the principal United States federal
income tax consequences to initial holders purchasing Notes at the "issue price"
(as defined below) of ownership and disposition of the Notes. This summary is
based on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), administrative pronouncements, judicial decisions and existing and
proposed Treasury Regulations, including regulations concerning the treatment of
debt instruments issued with original issue discount (the "OID Regulations"),
changes to any of which subsequent to the date of this Prospectus Supplement may
affect the tax consequences described herein, possibly with retroactive effect.
This summary discusses only Notes held as capital assets within the meaning of
Section 1221 of the Code. It does not discuss all of the tax consequences that
may be relevant to a holder in light of its particular circumstances or to
holders subject to special rules, such as certain financial institutions,
insurance companies, dealers in securities or foreign currencies, persons
holding Notes as a hedge against, or which are hedged against, currency risks,
that are part of a straddle, conversion or other integrated transaction, persons
who are not "Holders" (as defined below) or holders whose functional currency
(as defined in Code Section 985) is not the U.S. dollar. Finally, this summary
does not discuss Original Issue Discount Notes (as defined below) that qualify
as "applicable high-yield discount obligations" under Section 163(i) of the
Code. Holders of Original Issue Discount Notes that are "applicable high-yield
discount obligations" may be subject to special rules. Persons considering the
purchase of Notes should consult their tax advisors with regard to the
application of the United States federal income tax laws to their particular
situations as well as any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction.


                                      S-10
<PAGE>   13
         As used herein, the term "Holder" means a beneficial owner of a Note
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation created in or under the laws of the
United States or any State thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source, (iv)
a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantive decisions of the trust, or
(v) a partnership or other entity created or organized in or under the laws of
the United States or any State thereof and properly classified as a U.S. entity.

TAX CONSEQUENCES TO HOLDERS

Payments of Interest on Notes

         Qualified stated interest (as defined below under "-Original Issue
Discount Notes") paid on a Note will generally be taxable to a Holder as
ordinary interest income at the time it accrues or is received in accordance
with the Holder's method of accounting for federal income tax purposes. Under
the OID Regulations, all payments of interest on a Note that matures one year or
less from its date of issuance will be included in the stated redemption price
at maturity of that Note and will be taxed in the manner described below under
"- Original Issue Discount Notes." Special rules governing the treatment of
interest paid with respect to Original Issue Discount Notes, including certain
Floating Rate Notes and Foreign Currency Notes, are discussed below. Any other
special United States federal income tax considerations, not otherwise discussed
herein, which are applicable to any particular issue of Notes will be discussed
in the applicable Pricing Supplement.

Original Issue Discount Notes

         A Note that is issued for an amount less than its stated redemption
price at maturity will generally be considered to have been issued at an
original issue discount for United States federal income tax purposes (an
"Original Issue Discount Note"). The issue price of a Note will equal the first 
price at which a substantial amount of the Notes is sold to the public (not
including bond houses, brokers or similar persons or organizations acting in
the capacity of underwriters, placement agents or wholesalers). The stated
redemption price at maturity of a Note will equal the sum of all payments
required under the Note other than payments of qualified stated interest.
"Qualified stated interest" is stated interest unconditionally payable as a
series of payments in cash or property (other than debt instruments of the
issuer) at least annually during the entire term of the Note and equal to the
outstanding principal balance of the Note multiplied by a single fixed rate or
certain variable rates of interest, or certain combinations thereof. Special
tax considerations (including possible original issue discount) may arise with
respect to Floating Rate Notes providing for (i) one Base Rate followed by one
or more Base Rates, (ii) a single fixed rate followed by a floating rate or
(iii) a Qualifying Spread Multiplier.

         Purchasers of Floating Rate Notes subject to any of the special tax

considerations described in the preceding paragraph should carefully examine    
the applicable Pricing Supplement and should consult their tax advisors with
respect to such considerations since the tax consequences will depend, in part,
on the particular terms of the purchased Notes. Special rules may also apply if
a Floating Rate Note is subject to a cap, floor, governor or similar
restriction that is not fixed throughout the term of the Note and is reasonably
expected as of the issue date to cause the yield on the Note to be
significantly less or more than the expected yield determined without the
restriction. Floating Rate Notes that do not qualify as variable rate debt
instruments may be treated as contingent payment debt instruments. See 
"- Contingent Payment Debt Instruments."

         If the difference between a Note's stated redemption price at maturity
and its issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of
the Note's stated redemption price at maturity multiplied by the number of
complete years to maturity, then the Note will not be considered to have
original issue discount. Holders of Notes with a de minimis amount of original
issue discount will generally include such original issue discount in income, as
capital gain, on a pro rata basis as principal payments are made on the Note.

         A Holder of Original Issue Discount Notes will be required to include
any qualified stated interest payments in income in accordance with the Holder's
method of accounting for federal income tax purposes. Holders of Original Issue
Discount Notes that mature more than one year from their date of issuance will
be required to include original issue discount in income for United States
federal income tax purposes as it accrues, in accordance with a constant yield
method based on a compounding of interest, before the receipt of some or all of
the cash payments attributable to such income. Under this method, Holders of
Original Issue Discount Notes generally will be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods. The amount of original issue discount includible in income by a Holder
of an Original Issue Discount Note is the sum of the daily portions of original
issue discount with respect to the Original Issue Discount Note for each day
during the taxable year or portion of the taxable year on which the Holder holds
such Original Issue Discount Note ("accrued original issue discount"). The daily
portion is determined by allocating to each day in any accrual period a pro rata
portion of the original issue discount allocable to that accrual period.
"Accrual periods" with respect to a Note may be of any length selected by the
Holder and may vary in length over the term of the Note as long as (i) no
accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Note occurs on either the final or first date of an
accrual period. The amount of original issue discount allocable to an accrual
period equals the excess of (a) the product of the Original Issue Discount
Note's adjusted issue price at the beginning of the accrual period and such

                                      S-11
<PAGE>   14



Note's yield to maturity (determined on the basis of compounding at the close of
each accrual period and properly adjusted for the length of the accrual period)
over (b) the sum of the payments of qualified stated interest on the Note
allocable to the accrual period. The "adjusted issue price" of an Original Issue
Discount Note at the beginning of any accrual period is the issue price of the
Note increased by (x) the amount of accrued original issue discount for each
prior accrual period and decreased by (y) the amount of any payments previously
made on the Note that were not qualified stated interest payments. For purposes
of determining the amount of original issue discount allocable to an accrual
period, if an interval between payments of qualified stated interest on the Note
contains more than one accrual period, the amount of qualified stated interest
payable at the end of the interval (including any qualified stated interest that
is payable on the first day of the accrual period immediately following the
interval) is allocated pro rata on the basis of relative lengths to each accrual
period in the interval, and the adjusted issue price at the beginning of each
accrual period in the interval must be increased by the amount of any qualified
stated interest that has accrued prior to the first day of the accrual period
but that is not payable until the end of the interval. The amount of original
issue discount allocable to an initial short accrual period may be computed
using any reasonable method if all other accrual periods other than a final
short accrual period are of equal length. The amount of original issue discount
allocable to the final accrual period is the difference between (x) the amount
payable at the maturity of the Note (other than any payment of qualified stated
interest) and (y) the Note's adjusted issue price as of the beginning of the
final accrual period.

         Acquisition Premium. A Holder that purchases a Note for an amount less
than or equal to the sum of all amounts payable on the Note after the purchase
date other than payments of qualified stated interest but in excess of its
adjusted issue price (any such excess being "acquisition premium") and that does
not make the election described below under "- Constant Yield Election" is
permitted to reduce the daily portions of original issue discount by a fraction,
the numerator of which is the excess of the Holder's adjusted basis in the Note
immediately after its purchase over the adjusted issue price of the Note, and
the denominator of which is the excess of the sum of all amounts payable on the
Note after the purchase date, other than payments of qualified stated interest,
over the Note's adjusted issue price.

         Market Discount. A Note, other than a Note with a fixed maturity date
not exceeding one year from the date of issue, will be treated as purchased at a
market discount (a "Market Discount Note") if the Note's stated redemption price
at maturity or, in the case of an Original Issue Discount Note, the Note's
revised issue price, exceeds the amount for which the Holder purchased the Note
by at least 1/4 of 1 percent of such Note's stated redemption price at maturity
or revised issue price, as the case may be, multiplied by the number of complete
years remaining from the time of acquisition to the Note's maturity. If such
excess is not sufficient to cause the Note to be a Market Discount Note, then
such excess constitutes "de minimis market discount." The "revised issue price"
of a Note generally equals its issue price increased by the amount of any
original issue discount that has accrued on the Note.

         Any gain recognized on the maturity or disposition of a Market Discount
Note will be treated as ordinary income to the extent that such gain does not
exceed the accrued market discount on such Note. Alternatively, a Holder of a
Market Discount Note may elect to include market discount in income currently
over the life of such Note. Such an election shall apply to all debt instruments
with market discount acquired by the electing Holder on or after the first day
of the first taxable year to which the election applies. This election may not
be revoked without the consent of the Internal Revenue Service.

         Market discount on a Market Discount Note will accrue on a
straight-line basis unless the Holder makes the election described below under
"- Constant Yield Election." A Holder of a Market Discount Note that does not
elect to include market discount in income currently generally will be required
to defer deductions for interest on borrowings allocable to such Note in an
amount not exceeding the accrued market discount on such Note until the maturity
or disposition of such Note.

         Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase
price of a Note is attributable to pre-issuance accrued interest, (ii) the first
stated interest payment on the Note is to be made within one year of the Note's
issue date and (iii) the payment will equal or exceed the amount of pre-issuance
accrued interest, then the Holder may elect to decrease the issue price of the
Note by the amount of pre-issuance accrued interest. In that event, a portion of
the first stated interest payment will be treated as a return of the excluded
pre-issuance accrued interest and not as an amount payable on the Note.



                                      S-12
<PAGE>   15
         Short-Term Notes. Under the OID Regulations, an Original Issue Discount
Note that matures one year or less from its date of issuance will be treated as
"short-term." In general, a cash method Holder of a short-term Original Issue
Discount Note is not required to accrue original issue discount for United
States federal income tax purposes unless it elects to do so, but may be
required to include any stated interest in income as the interest is received.
Holders who report income for United States federal income tax purposes on the  
accrual method and certain other Holders, including banks, regulated investment
companies, common trust funds, Holders who hold Notes as part of certain
identified hedging transactions, certain pass-through entities and dealers in
securities, are required to include original issue discount in income on such
short-term Original Issue Discount Notes as it accrues on a straight-line
basis, unless the Holder makes the Constant Yield Election described below. In
the case of a Holder who is not required and who does not elect to include
original issue discount in income currently, any gain realized on the sale,
exchange or retirement of a short-term Original Issue Discount Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis (or, if the Holder makes the Constant Yield Election
described below) through the date of sale, exchange or retirement. In addition,
such Holders will be required to defer deductions for any interest paid on
indebtedness incurred to purchase or carry  short-term Original Issue Discount
Notes in an amount not exceeding the deferred interest income, until such
deferred interest income is recognized.

         For purposes of determining the amount of original issue discount
subject to these rules, all interest payments on a short-term Original Issue
Discount Note, including stated interest, are included in the short-term
Original Issue Discount Note's stated redemption price at maturity.

         Constant Yield Election. Under the OID Regulations, a Holder may make
an election (the "Constant Yield Election") to include in gross income all
interest that accrues on a Note (including stated interest, acquisition
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium) in accordance with a constant
yield method based on the compounding of interest.

         In applying the constant yield method to a Note with respect to which
the Constant Yield Election has been made, the issue price of the Note will
equal the electing Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition by
the electing Holder, and no payments on the Note will be treated as payments of
qualified stated interest. This election will generally apply only to the Note
with respect to which it is made and may not be revoked without the consent of
the Internal Revenue Service. If this election is made with respect to a Note
with amortizable bond premium, then the electing Holder will be deemed to have
elected to apply amortizable bond premium (as defined below) against interest
with respect to all debt instruments with amortizable bond premium, other than
debt instruments the interest on which is excludible from gross income, held by
the electing Holder as of the beginning of the taxable year in which the Note
with respect to which the election is made is acquired or thereafter acquired
during such taxable year. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the Internal Revenue Service.

         If the Constant Yield Election is made with respect to a Market
Discount Note, the electing Holder will be treated as having made the election
discussed above under "- Market Discount" to include market discount in income
currently over the life of all debt instruments held or thereafter acquired by
such Holder.

         If a Holder makes a Constant Yield Election for a Note having
amortizable bond premium (as defined below), such election will result in a
deemed election to amortize bond premium for all of the Holder's debt
instruments having amortizable bond premium and may be revoked only with the
permission of the Internal Revenue Service with respect to debt instruments
acquired after revocation.

         Redemptions. Original Issue Discount Notes containing a redemption
provision may be subject to rules that differ from the general rules discussed
above. Purchasers of Original Issue Discount Notes with such a feature should
carefully examine the applicable Pricing Supplement and should consult their tax
advisors with respect to such a feature since the tax consequences with respect
to original issue discount will depend, in part, on the particular terms and the
particular features of the purchased Note.

         Aggregation Rules. The OID Regulations provide that, in certain
circumstances, if more than one debt instrument is issued in connection with the
same transaction or related transactions, some or all of such debt instruments
may be aggregated and treated as a single debt instrument with a single issue
price, maturity date, yield to maturity and stated redemption price at maturity
for purposes of calculating and accruing any original issue discount. This rule
ordinarily applies only to instruments of a single issuer issued to a single
holder. Unless otherwise provided in the related Pricing Supplement, the Company
does not expect to treat any of the Notes as being subject to the aggregation
rules for purposes of computing original issue discount.

Sale, Exchange or Retirement of the Notes

         Except as otherwise described herein, upon the sale, exchange or
retirement of a Note, a Holder will recognize taxable gain (or loss) equal to
the amount by which the amount realized on the sale, exchange or retirement
exceeds (or is exceeded by) such Holder's adjusted tax basis in the Note. For
these purposes, the amount realized does not include any amount attributable to
accrued interest on the Note. Amounts attributable to accrued interest are
treated as interest as described under "- Payments of Interest on Notes" above,
in accordance with the Holder's method of accounting for United States federal
income tax purposes as described therein. A Holder's adjusted tax basis in a
Note will generally equal the cost of the Note to such Holder, increased by the
amount of any original issue discount previously included in income by the
Holder with respect to such Note and reduced by any amortized premium and any
principal payments received by the Holder and, in the case of an Original Issue
Discount Note, by the amounts of any other payments that do not constitute
qualified stated interest (as defined above).

         Subject to the discussion under "- Foreign Currency Notes" below, gain
or loss realized on the sale, exchange or retirement of a Note will be capital
gain or loss (except in the case of a short-term Original Issue Discount Note,
to the extent of any original issue discount, or in the case of a Market
Discount Note, to the extent of any accrued market discount, not previously
included in the Holder's taxable income). Such capital gain or loss will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the Note has been held for more than one year, and for non-corporate taxpayers
will be subject to a maximum tax rate of 20% (in the 

                                      S-13
<PAGE>   16



case of a Note held for longer than 18 months) or 28% (in the case of a Note
held for longer than one year but not longer than 18 months). See "- Original
Issue Discount Notes" above. The distinction between long-term capital gain or
loss and ordinary income or loss is also relevant for purposes of, among other
things, limitations on the deductibility of capital losses and limitations on
the deductibility of investment interest expense.

Amortizable Bond Premium

         If a Holder purchases a Note for an amount that is greater than the
amount payable at maturity, such Holder will be considered to have purchased
such Note with "amortizable bond premium" equal in amount to such excess, and
may elect to amortize such premium, using a constant yield method, over the
remaining term of the Note (where such Note is not optionally redeemable prior
to its maturity date). If such Note may be optionally redeemed prior to maturity
after the Holder has acquired it, the amount of amortizable bond premium is
determined with reference to the amount payable on maturity or, if it results in
a smaller premium attributable to the period of earlier redemption date, with
reference to the amount payable on the earlier redemption date. A Holder that
elects to amortize bond premium must reduce his tax basis in the Note by the
amount of the premium amortized in any year. An election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the taxpayer and may be revoked only with the consent of the
Internal Revenue Service.

         Under Regulations effective for debt instruments acquired on or after
March 2, 1998, the amount of bond premium allocable to an accrual period that
exceeds the amount of qualified stated interest allocable to that period may be
deducted, but only to the extent the Holder's prior income inclusions on the
Note exceed the total amount treated by the Holder as a bond premium deduction
in prior periods. Any such disallowed deductions may be carried forward and
treated as bond premium in subsequent periods.

Foreign Currency Notes

         The following summary relates to Notes that are denominated in a
currency or currency unit other than the U.S. dollar ("Foreign Currency Note").

         A Holder that uses the cash method of accounting and that receives a
payment of qualified stated interest in a foreign currency with respect to a
Foreign Currency Note will be required to include in income the U.S. dollar
value of the foreign currency payment upon receipt (determined on the date of
receipt) regardless of whether the payment is in fact converted to U.S. dollars
at that time, and such U.S. dollar value will be the Holder's tax basis in the
foreign currency.

         In the case of accrual method taxpayers and Holders of Original Issue
Discount Notes, a Holder will be required to include in income the U.S. dollar
value of the amount of interest income (including original issue discount, but
reduced by amortizable bond premium to the extent applicable) that has accrued
and is otherwise required to be taken into account with respect to a Foreign
Currency Note during an accrual period. The U.S. dollar value of such accrued
income will be determined by translating such income at the average rate of
exchange for the accrual period or, with respect to an accrual period that spans
two taxable years, at the average rate for the partial period within each
taxable year. Such Holder will recognize ordinary income or loss with respect to
accrued interest income on the date such income is actually received. The amount
of ordinary income or loss recognized will equal the difference between the U.S.
dollar value of the foreign currency payment received (determined on the date
such payment is received) in respect of such accrual period and the U.S. dollar
value of interest income that has accrued during such accrual period (as
determined above). A Holder may elect to translate interest income (including
original issue discount) into U.S. dollars at the spot rate on the last day of
the interest accrual period (or, in the case of a partial accrual period, the
spot rate on the last date of the taxable year) or, if the date of receipt is
within five business days of the last day of the interest accrual period, the
spot rate on the date of receipt. A Holder that makes such an election must
apply it consistently to all debt instruments from year to year and cannot
change the election without the consent of the Internal Revenue Service.

         Original issue discount and amortizable bond premium with respect to a
Foreign Currency Note are to be determined in the relevant foreign currency.

         Any loss realized on the sale, exchange or retirement of a Foreign
Currency Note with amortizable bond premium by a Holder who has not elected to
amortize such premium will be a capital loss to the extent of such bond premium.
If such an election is made, amortizable bond premium taken into account on a
current basis shall reduce interest income in units of the relevant foreign
currency. Exchange gain or loss is realized on such amortized bond premium with
respect to any period by treating the bond premium amortized in such period as a
return of principal.

         A Holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustment to such Holder's tax basis, will be the U.S. dollar value
of the foreign currency amount paid for such Foreign Currency Note, or of the
foreign currency amount of the adjustment, determined on the date of such
purchase or adjustment. A Holder that purchases a Foreign Currency Note with
previously owned foreign currency will recognize ordinary income or loss in an
amount equal to the difference, if any, between such Holder's tax basis in the
foreign currency and the U.S. dollar fair market value of the Foreign Currency
Note on the date of purchase.


                                      S-14
<PAGE>   17
         Gain or loss realized upon the sale, exchange or retirement of a
Foreign Currency Note that is attributable to fluctuations in currency exchange
rates will be ordinary income or loss that will not be treated as interest
income or expense. Gain or loss attributable to fluctuations in exchange rates
will equal the difference between (i) the U.S. dollar value of the foreign
currency principal amount of such Note, and any payment with respect to accrued
interest determined on the date such payment is received or the Note is disposed
of, and (ii) the U.S. dollar value of the foreign currency principal amount of
such Note, determined on the date such Holder acquired such Note, and the U.S.
dollar value of the accrued interest received, determined by translating such
interest at the average exchange rate for the accrual period. Such foreign
currency gain or loss will be recognized only to the extent of the total gain or
loss realized by a Holder on the sale, exchange or retirement of the Foreign
Currency Note. The source of such foreign currency gain or loss will be
determined by reference to the residence of the Holder or the "qualified
business unit" of the Holder on whose books the Note is properly reflected. Any
gain or loss realized by such a Holder in excess of such foreign currency gain
or loss will be capital gain or loss except in the case of a short-term Original
Issue Discount Note, to the extent of any original issue discount not previously
included in the Holder's income, or in the case of a Market Discount Note, to
the extent of accrued market discount.

         A Holder will have a tax basis in any foreign currency received on the
sale, exchange or retirement of a Foreign Currency Note equal to the U.S. dollar
value of such foreign currency, determined at the time of such sale, exchange or
retirement. Under a special rule for purchases and sales of publicly traded
Foreign Currency Notes by a cash method taxpayer, units of foreign currency paid
or received are translated into U.S. dollars at the spot rate on the settlement
date of the purchase or sale; accordingly, no exchange gain or loss will result
from currency fluctuations between the trade date and the settlement of such a
purchase or sale. An accrual method taxpayer may elect the same treatment
required of cash-method taxpayers with respect to the purchase and sale of
publicly traded Foreign Currency Notes provided the election is applied
consistently. Such election cannot be changed without the consent of the
Internal Revenue Service. Any gain or loss realized by a Holder on a sale or
other disposition of foreign currency (including its exchange for U.S. dollars
or its use to purchase Foreign Currency Notes) will be ordinary income or loss.

Extension of Maturity

         In general, whether the extension of the maturity of a Note not
occurring by operation of the original terms of the Note will result in a
taxable exchange depends on the changes in the yield, if any, in the timing and
amounts of payments, and on any changes in other relevant terms. The alteration
of the terms of a debt instrument (a "modification") will, if significant,
result in a deemed exchange of the original debt instrument for a modified debt
instrument. In addition, certain changes that occur by operation of the original
terms of a debt instrument, such as an option exercisable by a holder that
results in a deferral or reduction of any scheduled payment, are considered
"modifications" and, if significant, will result in a deemed exchange of the
original debt instrument for a "modified" debt instrument.

         The determination of whether a modification is significant is made
based on all relevant facts and circumstances. A modification that changes the
timing of payments due under a debt instrument is a significant modification if
it results in the "material deferral" of scheduled payments. The materiality of
the deferral depends upon all the relevant facts and circumstances, including
the length of the deferral, the original term of the instrument, the amounts of
the payments that are deferred, and the time period between the modification and
the actual deferral of payments. However, deferral will not be material if a
deferred payment is unconditionally payable no later than the earlier of the
expiration of five years or 50 percent of the original term of the instrument.

         The extension of the maturity of a Note not occurring by operation of
the original terms of the Note will result in an exchange for United States
federal income tax purposes if the extension results in the material deferral of
a scheduled payment or payments. If the terms of a debt instrument are modified
to defer one or more payments, then for purposes of the original issue discount
provisions the debt instrument will be treated as retired and reissued on the
date of the modification for an amount equal to the instrument's adjusted issue
price on that date. This result obtains even though the modification does not
otherwise cause an exchange for United States federal income tax purposes under
the principles discussed above.

Contingent Payment Debt Instruments

         Floating Rate Notes that do not qualify as variable rate debt
instruments may be treated as contingent payment debt instruments for United    
States federal income tax purposes. The treatment of such Notes will vary
depending on their exact terms. Under the OID Regulations, the amount of
interest included in a Holder's income for any year with respect to a Note
deemed to be a contingent payment debt instrument generally will be determined
by projecting the amounts of fixed and contingent payments and the yield on the
instrument, with variances between actual and projected amounts ultimately
increasing or decreasing the Holder's taxable income. The payment schedule
consists of all fixed payments on the debt instrument and a projected amount
for each contingent payment.

         The yield of a Note deemed to be a contingent payment debt instrument
that is issued for money or publicly traded property is first determined by
reference to comparable yields at which the issuer would issue a fixed rate debt
instrument having similar terms and conditions, with the payment schedule then
set to fit the yield. Projected payments are generally based on the forward
price of payments where price quotes are readily available for contingencies.
Where price quotes are not readily available for contingencies, 


                                      S-15
<PAGE>   18



projected payments will be based on the expected amount of the payment as of the
issue date, set in some cases by reference to the comparable yield.

Anti-Abuse Regulation

         If a principal purpose in structuring a debt instrument or engaging in
a transaction is to achieve a result that is unreasonable in light of the
purposes of Section 163(e) or Sections 1271 through 1275 of the Code (relating
to, inter alia, original issue discount, amortizable bond premium, acquisition
premium, market discount, and pre-issuance accrued interest) or any related
Section of the Code, the Internal Revenue Service may apply or depart from the
Regulations under the applicable Sections as necessary or appropriate to achieve
a reasonable result. Whether a result is reasonable is determined based on all
the facts and circumstances, giving significant attention to whether the
treatment of a particular debt instrument is expected to have a substantial
effect on the U.S. tax liability of the issuer or holder.

Backup Withholding and Information Reporting

         In general, information reporting requirements will apply to payments
of principal, any premium and interest on a Note and the proceeds of the sale of
a Note before maturity within the United States to, and to the accrual of
original issue discount on an Original Issue Discount Note with respect to,
non-corporate Holders, and such Holders may be subject to backup withholding at
a rate of 31% on such payments. Backup withholding will apply only if the Holder
(i) fails to furnish its Taxpayer Identification Number ("TIN") which, for an
individual, would be his Social Security number, (ii) furnishes an incorrect
TIN, (iii) is notified by the Internal Revenue Service that it has failed to
properly report payments of interest and dividends or (iv) under certain
circumstances, fails to certify, under penalty of perjury, that it has furnished
a correct TIN and has not been notified by the Internal Revenue Service that it
is subject to backup withholding for failure to report interest and dividend
payments. Holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable.

         The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's United States federal income tax
liability and may entitle such Holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.

         On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations"), which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.

         THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.

                              PLAN OF DISTRIBUTION

         The Notes are being offered on a continuing basis by the Company
through the Agents, who have agreed to use their reasonable efforts to solicit
offers to purchase the Notes. Unless otherwise specified in the applicable
Pricing Supplement, the Company will pay each Agent a commission which,
depending upon the maturity, will range from .125% to .750% of the purchase
price of such Note sold through such Agent. The Company may also sell Notes to
an Agent, as principal, for resale to investors at varying prices related to
prevailing market prices at the time of resale, as determined by such Agent. The
Company reserves the right to sell Notes directly to investors on its own behalf
in those jurisdictions where it is authorized to do so. In the case of such
sales made directly by the Company, no commission will be payable to the Agents.
The Company has agreed to reimburse the Agents for certain expenses.

         The Company may also sell Notes to an Agent as principal for its own
account at discounts to be agreed upon at the time of sale. Such Notes may be
resold to investors and other purchasers at prevailing market prices, or prices
related thereto at the time of such resale, as determined by the Agent or, if so
agreed, at a fixed public offering price. In addition, the Agents may offer the
Notes they have purchased as principal to other dealers. The Agents may sell
Notes to any dealer at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed to any dealer will not be
in excess of the discount to be received by such Agent from the Company. After
the initial public offering of Notes to be resold to investors and other
purchasers, the public offering price (in the case of Notes to be resold at a
fixed public offering price), concession and discount may be changed.


                                      S-16
<PAGE>   19



         In order to facilitate the offering of the Notes, the Agents may engage
in transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Agents may overallot in connection with the offering,
creating a short position in the Notes for their own account. In addition, to
cover overallotments or to stabilize the price of the Notes, the Agents may bid
for, and purchase, the Notes in the open market. Finally, the Agents may reclaim
selling concessions allowed to any agent or a dealer for distributing the Notes
in the offering, if the Agents repurchase previously distributed Notes in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the Notes above independent market levels. The Agents are not required to
engage in these activities and may end any of these activities at any time.

         The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice and may reject any proposed purchase of Notes in
whole or in part whether placed directly with the Company or through one of the
Agents. An Agent will have the right to reject any offer to purchase Notes
solicited by it in whole or in part.

         Payment of the purchase price of the Notes will be required to be made
in immediately available funds in The City of New York on the date of
settlement.

         The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company has agreed to
indemnify each Agent against certain liabilities, including certain liabilities
under the Securities Act or to contribute to payments the Agents may be required
to make in respect of such liabilities. Each of the Agents may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.

         Unless otherwise provided in the Pricing Supplement, the Notes will not
be listed on any securities exchange, but the Agents presently intend to make a
market in the Notes, as permitted by applicable laws and regulations. The Agents
are not obligated, however, to make a market in the Notes and any such market
making may be discontinued at any time at the sole discretion of the Agents. No
assurance can be given as to the liquidity of any trading in the Notes.

         Morgan Stanley & Co. Incorporated acts as financial advisor to the
Company from time to time. In the ordinary course of their respective
businesses, affiliates of Key Capital Markets, Inc., J.P. Morgan Securities Inc.
and NationsBanc Montgomery Securities LLC have engaged, and will in the future
engage, in normal commercial banking and investment banking transactions with
the Company. In addition, an affiliate of Key Capital Markets, Inc. acts in a
fiduciary capacity on behalf of the Company in connection with a certain benefit
plan for certain employees of the Company. The Agents and/or certain of their
affiliates have provided, and will in the future continue to provide, investment
banking and other financial services for the Company and certain of its
affiliates in the ordinary course of business for which they have received and
will receive customary compensation.


                                      S-17
<PAGE>   20




Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute any offer to sell or the
solicitation of an offer to buy.

                  Subject to Completion, Dated February 9, 1998
PROSPECTUS

                                  $300,000,000

                               THE TIMKEN COMPANY

                                 DEBT SECURITIES

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

         The Timken Company ("Timken" or the "Company") may offer from time to
time in one or more series its debentures, notes or other evidence of
indebtedness (the "Securities"), up to an aggregate principal amount not to
exceed the equivalent of $300,000,000, on terms to be determined at the time of
sale by market conditions. As used herein, Securities shall include Securities
denominated in U.S. dollars or, at the option of the Company if so specified in
a Prospectus Supplement (the "Prospectus Supplement"), in any other currency,
including composite currencies such as the European Currency Unit. The specific
designation, aggregate principal amount, maturity, rate and time of payment of
any interest, purchase price, any terms for mandatory or optional redemption
(including any sinking fund), any modification of the covenants and any other
specific terms in connection with the sale of the Securities in respect of which
this Prospectus is being delivered (the "Offered Securities"), together with the
terms of the offering of such Securities, will be set forth in an accompanying
Prospectus Supplement or an accompanying Pricing Supplement (each, a "Pricing
Supplement"). The Company presently expects that any Securities issued hereunder
will be in the form of its Medium-Term Notes, Series A. To the extent that such
Notes are issued and sold, the Company's ability to issue other Securities
hereunder will be correspondingly reduced.

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

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

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

         The Securities may be offered directly, through agents designated from
time to time, through dealers or through underwriters. Such agents, dealers or
underwriters may include Morgan Stanley & Co. Incorporated, Key Capital Markets,
Inc., J.P. Morgan Securities Inc., NationsBanc Montgomery Securities LLC and/or
other parties, acting alone or with other parties. See "Plan of Distribution."
Any such agents, dealers or underwriters are set forth in the Prospectus
Supplement. If an agent of the Company or a dealer or underwriter is involved in
the offering of the Offered Securities, the agent's commission, dealer's
purchase price, underwriter's discount and net proceeds to the Company will be
set forth in, or may be calculated from, the Prospectus Supplement and the net
proceeds to the Company from such sale will be the purchase price of such
Securities less such commission in the case of an agent, the purchase price of
such Securities in the case of a dealer, and the public offering price less such
discount in the case of an underwriter and less, in each case, the other
expenses of the Company. See "Plan of Distribution" for possible indemnification
arrangements for agents, dealers and underwriters.

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

                The date of this Prospectus is February __, 1998




<PAGE>   21




         NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT OR PRICING SUPPLEMENT IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT OR PRICING
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE AGENTS. THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT OR PRICING SUPPLEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

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

                              AVAILABLE INFORMATION

         The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web site
located at http://www.sec.gov., that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission. As the Company's equity securities
are listed on the New York Stock Exchange ("NYSE"), such material can also be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Securities and Exchange Commission a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933 (the "Act") with respect to the Securities. The Prospectus and any
Prospectus Supplement and Pricing Supplement omit certain information set forth
in the Registration Statement in accordance with the rules and regulations of
the Commission. For further information, reference is made to the Registration
Statement, including the exhibits filed therewith. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.

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

                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

         The Company hereby incorporates in this Prospectus by reference the
following documents (Commission File No. 1-01169), heretofore filed with the
Commission, pursuant to the Exchange Act, to which reference hereby is made:

         1. The Company's Annual Report on Form 10-K for the year ended December
31, 1996.

         2. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.

         3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997.

         4. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.

         5. The Company's Current Report on Form 8-K as filed with the
Commission on April 15, 1997.

         6. The Company's Current Report on Form 8-K as filed with the
Commission on February 6, 1998.

         All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of Securities shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.

         Any person to whom a copy of this Prospectus is delivered may obtain
without charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, except for the exhibits to such documents
which are not specifically 


                                       2
<PAGE>   22
incorporated by reference into such documents. Requests should be directed to
Larry R. Brown, Senior Vice President and General Counsel, The Timken Company,
1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798; telephone (330) 438-3000.

                           FORWARD-LOOKING STATEMENTS

         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: (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 cycle; (c) competitive factors, including changes in market
penetration and the introduction of new products by existing and new
competitors; (d) changes in operating costs, which 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 benefits from its on-going
continuous improvement programs, its ability to integrate acquisitions into
Company operations, the ability of recently acquired companies to achieve
satisfactory operating results and the Company's ability to maintain appropriate
relations with unions that represent Company associates in certain locations in
order to avoid disruptions of business; (f) unanticipated litigation, claims or
assessments, which includes, but is not limited to, claims or problems related
to product warranty and environmental issues; and (g) changes in worldwide
financial markets to the extent they affect the Company's ability to raise
capital, have an impact on the overall performance of the Company's pension fund
investments and cause changes in the economy which affect customer demand.

                                   THE COMPANY

         Timken, an outgrowth of a business originally founded in 1899 by Henry
Timken, was incorporated in 1904 under the laws of the State of Ohio as The
Timken Roller Bearing Company. Timken's products are divided into two industry
segments. The first includes anti-friction bearings; the second industry segment
is steel.

         Sales of the Company's bearings are made predominantly to manufacturers
in the automotive, machinery, railroad, aerospace and agricultural industries,
and to service replacement markets. The Company's tapered roller bearings are
used in a wide variety of products including passenger cars, trucks, railroad
cars and locomotives, aircraft wheels, machine tools, rolling mills and farm and
construction equipment. Super precision bearings, in the general ball and
straight roller bearing segment, are used in aircraft, missile guidance systems,
computer peripherals and medical instruments.

         Steel products include steels of intermediate alloy, low alloy and
carbon grades, vacuum processed alloys, tool steel and other custom-made steel
products including parts made from specialty steel. These are available in a
wide range of solid and tubular sections with a variety of finishes. A
significant portion of the Company's steel products is consumed in its bearing
operations. In addition, sales are made to other antifriction bearing companies
and to aircraft, automotive, forging, tooling and oil and gas drilling
industries. Sales are also made to steel service centers. Tool steels
increasingly are being sold through newly acquired distribution facilities.

         The Company's principal executive offices are located at 1835 Dueber
Avenue, S.W., Canton, Ohio 44706-2798, telephone (330) 438-3000.

                       RATIO OF EARNINGS TO FIXED CHARGES

         The following table sets forth the ratio of earnings to fixed charges
for the Company for each of the last five fiscal years ended December 31, 1996
and for the nine months ended September 30, 1997 and September 30, 1996. For the
purpose of calculating the ratio of earnings to fixed charges, "earnings"
consist of income (loss) before income taxes, extraordinary item, cumulative
effects of accounting changes, amortization of capitalized interest and fixed
charges excluding capitalized interest. "Fixed charges" consist of interest
(both expensed and capitalized), and the portion of rentals deemed to represent
an interest factor.

<TABLE>
<CAPTION>
                         NINE MONTHS ENDED                                          FISCAL YEAR ENDED
                         -----------------                                          -----------------
                           SEPTEMBER 30,                                              DECEMBER 31,
                       1997             1996            1996            1995(1)          1994(1)         1993(1)          1992(1)
                 ---------------- ---------------- ---------------  ---------------  --------------- ---------------- --------------
<S>                   <C>              <C>              <C>              <C>              <C>              <C>              <C> 
Ratio of
earnings to
fixed charges         11.04            11.45            11.10            8.31             4.62             .38              1.39


- ----------
<FN>
(1) Restated to include portions of capitalized interest as part of fixed
    charges.
</TABLE>
                                       3
<PAGE>   23



                                 USE OF PROCEEDS

         Except as otherwise described in a Prospectus Supplement or Pricing
Supplement, the Company intends to use the net proceeds from the sale of the
Securities for general corporate purposes, including capital expenditures,
additions to working capital, possible acquisitions and reduction of existing
indebtedness, including short-term debt. Pending such application, such net
proceeds may be invested in short-term marketable securities. The Company may
raise additional funds from time to time through equity or debt financings.

                            DESCRIPTION OF SECURITIES

         The Securities will be issued under an Indenture (the "Indenture")
dated as of February __, 1998, between the Company and The Bank of New York, as
trustee (the "Trustee"). The Indenture, which is an exhibit to the Registration
Statement, is incorporated by reference herein. The following summaries of
certain provisions of the Indenture and the Securities do not purport to be
complete and are subject to and are qualified in their entirety by reference to
the Indenture and the Securities. Whenever a defined term is used, its
definition is set forth herein or in the Indenture or in the Securities. Further
terms of the Offered Securities are set forth in the Prospectus Supplement and
the Pricing Supplement.

         The provisions of the Indenture described below under "Certain
Restrictions on the Company" are the only provisions contained in the Indenture
that restrict the ability of the Company to incur additional debt, including
debt in the event of a highly leveraged transaction involving the Company. While
such covenants give the Board of Directors of the Company some discretion to
exclude from Principal Manufacturing Property, as defined below, properties
which are not of material importance to the Company and its subsidiaries, taken
as a whole, the Board has no ability to waive the applicability of these
covenants.

GENERAL

         The Indenture does not limit the aggregate principal amount of
Securities which may be issued thereunder and provides that Securities may be
issued from time to time in one or more series and may be denominated and
payable in foreign currencies or units based on or relating to foreign
currencies, including European Currency Units. The Securities will be unsecured
obligations of the Company and will rank on a parity with all other unsecured
and unsubordinated indebtedness of the Company.

         The Prospectus Supplement and any applicable Pricing Supplement will
describe the following terms of the Offered Securities, to the extent such terms
are applicable to such Offered Securities: (a) the designation of the Offered
Securities; (b) any limit on the aggregate principal amount of the Offered
Securities; (c) the date or dates on which the Offered Securities will mature;
(d) the rate or rates or method of determination thereof at which the Offered
Securities will bear any interest and the date or dates from which such interest
will accrue; (e) the date or dates on which any interest on the Offered
Securities will be payable and the regular record dates for the interest payable
on such interest payment dates; (f) the place or places where the principal of
and any interest on the Offered Securities shall be payable; (g) the price or
prices at which, the period or periods within which and the terms and conditions
upon which the Offered Securities may be redeemed, in whole or in part, pursuant
to any optional or mandatory redemption, sinking fund, or analogous provisions;
(h) whether the Offered Securities will be issuable as Registered Securities or
Unregistered Securities, or both, and any terms or restrictions applicable to
the offer, sale, delivery and exchange of Unregistered Securities; (i) the
extent to which any of the Securities will be issued in temporary or permanent
Global form, or the manner in which any interest payable on a temporary or
permanent Global Security will be paid; (j) if the Offered Securities are
Original Issue Discount Securities, the portion of the principal amount payable
upon declaration of acceleration of the maturity of the Offered Securities; (k)
the coin or currency, which may include a composite currency such as the
European Currency Unit, in which the Offered Securities are denominated and in
which payment of the principal of and interest on the Offered Securities will be
payable, if other than the coin or currency of the United States; (l) the manner
in which the amount of payments of principal of and interest on the Offered
Securities is to be determined if such determination is to be made with
reference to an index based on a coin or currency other than that in which the
Offered Securities are denominated; (m) whether and under what circumstances the
Company will pay additional amounts on Offered Securities held by a person who
is not a U.S. person in respect of any tax, assessment or governmental charge
withheld or deducted and, if so, whether the Company will have the option to
redeem such Offered Securities rather than pay such additional amounts; (n)
information with respect to book-entry procedures, if applicable; (o) any
trustees or other agents with respect to the Offered Securities; and (p) any
other specific terms of the Offered Securities, including any terms which may be
required by or advisable under United States laws or regulations.

         If so provided in the Prospectus Supplement, Securities may be issued
as Original Issue Discount Securities (bearing either no interest or bearing
interest at a rate which at the time of issuance is below the prevailing market
rate) to be sold at a substantial discount below their principal amount. If any
Security is not to be denominated in U.S. dollars, certain provisions with
respect thereto will be set forth in a foreign currency Prospectus Supplement,
which will specify the currency or currencies, including composite currencies
such as the European Currency Unit, in which the principal and any related
interest with respect to such Security are to 


                                       4
<PAGE>   24
be paid, along with any other terms relating to the non-U.S. dollar
denomination. In such cases, special federal income tax and other considerations
applicable to such Offered Securities will be described in the Prospectus
Supplement.

REGISTRATION AND TRANSFER

         Unless otherwise indicated in the applicable Prospectus Supplement,
Securities will be issued only as Registered Securities. If Unregistered
Securities are issued, the United States federal income tax consequences and
other special considerations, procedures and limitations applicable to such
Unregistered Securities will be described in the Prospectus Supplement relating
thereto.

         Securities issued as Registered Securities will be without coupons.
Securities issued as Unregistered Securities will have interest coupons
attached, unless issued as zero coupon securities.

         Registered Securities (other than a Global Security) may be presented
for transfer (with the form of transfer endorsed thereon duly executed or
accompanied by a duly executed written instrument or instruments of transfer in
form satisfactory to the Company and the Trustee) or exchange for other
Securities of the same series bearing identical terms and provisions at the
office of the Registrar specified according to the terms of the Indenture. With
respect to Registered Securities having The City of New York as a place of
payment, the Company will appoint the Trustee as agent for such transfer or
exchange. Such transfer or exchange will be made without service charge, but the
Company may require payment of any taxes or other governmental charges arising
therefrom. Provisions relating to the exchange of Unregistered Securities for
other Securities of the same series bearing identical terms and provisions
(including, if applicable, Registered Securities) will be described in the
applicable Prospectus Supplement.

GLOBAL SECURITIES

         The Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Depositary") identified in the Prospectus Supplement,
relating to such series. Global Securities may be issued as either Registered
Securities or Unregistered Securities and in either temporary or permanent form.
Unless the terms of a Global Security expressly permit such Global Security to
be exchanged in whole or in part for individual Securities represented thereby,
a Global Security may not be transferred except as a whole by the Depositary for
such Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any such nominee to a successor Depositary selected or approved by
the Company or any nominee of such successor.

         The specific terms of the depositary arrangement with respect to a
series of Securities, and certain limitations and restrictions relating to a
series of Unregistered Securities in the form of one or more Global Securities,
will be described in the Prospectus Supplement relating to such series. Unless
otherwise indicated in the applicable Prospectus Supplement, the following
provisions will apply to all depositary arrangements.

         Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts represented by such Global Security to
the accounts of persons that have accounts with such Depositary. Such accounts
shall be designated by the underwriters or agents for the transaction or by the
Company if such Securities are offered and sold directly by the Company.
Ownership of beneficial interests in a Global Security will be limited to
persons that have accounts with the applicable Depositary ("participants") or
persons that may hold interests through participants. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depositary or
its nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants). The
laws of some states may require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security.

         So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Securities
represented by such Global Security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in a Global Security will not
be entitled to have any of the individual Securities of the series represented
by such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of such Securities of such series in
definitive form and will not be considered the owners or Holders thereof under
the Indenture.

         Payments of principal of and interest, if any, on individual Securities
represented by a Global Security registered in the name of a Depositary or its
nominee will be made to the Depositary or its nominee, as the case may be, as
the registered owner of the Global Security representing such Securities. None
of the Company, the Trustee, any paying agent or any authenticating agent for
such Securities will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests of a Global Security for such Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
                                       5
<PAGE>   25
         Subject to certain restrictions relating to Unregistered Securities,
the Company expects that the Depositary for a series of Securities or its
nominee, upon receipt of any payment of principal or interest in respect of a   
permanent Global Security representing any of such Securities will immediately
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of such Depositary or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in such
Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such participants. With respect to
owners of beneficial interests in a temporary Global Security representing
Unregistered Securities, receipt by such beneficial owners of payments of
principal or interest in respect thereof will be subject to additional
restrictions.

         If at any time the Depositary for a Global Security notifies the
Company that it is at any time unwilling or unable to continue as depositary (or
if at any time such Depositary shall no longer be eligible or in good standing
under certain laws) and a successor depositary is not appointed by the Company
within 90 days after the receipt of such notice or after becoming aware of such
ineligibility, the Company will issue individual Securities of such series in
definitive form in exchange for the Global Security representing such series of
Securities. In addition, the Company may at any time and in its sole discretion
determine that all Outstanding (but not less than all) Securities of a series
issued or issuable in the form of one or more Global Securities shall no longer
be represented by such Global Security. In such event, the Company will issue
individual Securities of such series in definitive form in exchange for the
Global Security or Securities representing such series of Securities. In any
such instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of Securities of the series
represented by such Global Security equal in principal amount to such beneficial
interest and to have such Securities registered in its name (if the Securities
of such series are issuable as Registered Securities). Securities of such series
so issued in definitive form will be issued (a) as Registered Securities in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples of $1,000 in excess thereof if the Securities of such series are
issuable as Registered Securities, (b) as Unregistered Securities in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples of $1,000 in excess thereof if the Securities of such series are
issuable as Unregistered Securities or (c) as either Registered or Unregistered
Securities, if the Securities of such series are issuable in either form.
Certain restrictions may apply, however, on the issuance of an Unregistered
Security in definitive form in exchange for an interest in a Global Security.

PAYMENT AND PAYING AGENTS

         Unless otherwise indicated in an applicable Prospectus Supplement,
payment of principal on Registered Securities will be made at the offices of the
Trustee. Payment of any interest on Registered Securities will be made by check
mailed to the address of the person entitled thereto at such address shall
appear in the security register. In the case of Global Securities, such payment
will be made to the Depositary or its nominee in accordance with the
then-existing arrangements between the paying agent and the Depositary. See
"Global Securities" above. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Registered
Securities will be made to the person in whose name such Security is registered
at the close of business on the regular record date for such payment.

         Unless otherwise indicated in an applicable Prospectus Supplement,
payment of principal and any interest on Unregistered Securities will be
payable, subject to any applicable laws and regulations, at the offices of such
paying agents outside the United States as the Company may designate from time
to time. Unless otherwise indicated in an applicable Prospectus Supplement,
payment of interest on Unregistered Securities will be made only against
surrender of the Coupon relating to such interest payment date. No payment with
respect to any Unregistered Security will be made at any office or agency of the
Company located in the United States or by check mailed to any address in the
United States or by transfer to an account maintained with a bank located in the
United States unless pursuant to applicable United States laws and regulations
then in effect such payment can be made without adverse tax consequences to the
Company. Notwithstanding the foregoing, payments in Dollars on Unregistered
Securities of any series and Coupons appertaining thereto which are payable in
Dollars may be made at an agency of the Company maintained in The City of New
York if such payment in Dollars at each agency maintained by the Company outside
the United States for payment on such Unregistered Securities is illegal or
effectively precluded by exchange controls or other similar restrictions.

EVENTS OF DEFAULT

         The following are Events of Default under the Indenture with respect to
Securities of any series: (a) failure to pay any interest on any Security of
that series when due, continued for 30 days; (b) failure to pay principal of
any Security of that series when due; (c) failure to deposit any sinking fund   
payment, when due, in respect of any Security of that series; (d) failure to
perform or observe any other term, covenant, or agreement contained in the
Indenture, continued for 90 days after written notice thereof, as provided in
the Indenture; (e) certain events of bankruptcy, insolvency or reorganization;
and (f) failure to comply with any other covenant the noncompliance with which
specifically would constitute an Event of Default with respect to Securities of
such series.


                                       6
<PAGE>   26
         The Indenture provides that (a) if an Event of Default due to the
default in payment of principal of, or interest on, any series of Securities,
or due to the default in the performance or breach of any other covenant or     
warranty of the Company applicable to the  Securities of such series but not
applicable to all Outstanding Securities, shall have occurred and be
continuing, either the Trustee or the Holders of 25% in principal amount of the
Securities of such series then may declare the  principal (or, if the
Securities of such series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of such series) of all
Securities of such series and interest accrued thereon to be due and payable
immediately, (b) if an Event of Default due to the default in the performance of
any other covenant or agreement contained in the indenture applicable to all
Outstanding Securities shall have occurred and be continuing, either the
Trustee or the Holders of 25% in principal amount of the Outstanding Securities
(treated as one class) may declare the principal (or, if the Securities are
Original Discount Securities, such portion of the principal amount as may be
specified in the terms of such series) of all Securities and interest accrued
thereon to be due and payable immediately and (c) if an Event of Default due
to certain events of bankruptcy, insolvency or reorganization of the Company
shall have occurred and be continuing, then, the principal (or, if the
Securities of such series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of such series) of all
Securities and interest accrued thereon shall become due and payable
immediately. 

         The Indenture provides that the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable indemnity against the costs, expenses and liabilities which
might be incurred by it in compliance with any such direction. The Holders of a
majority in aggregate principal amount of the Outstanding Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee with respect to the Securities of that series,
provided that (i) such direction shall not be in conflict with any rule of law
or the Indenture, and (ii) subject to certain provisions concerning the duties
and responsibilities of the Trustee, the Trustee shall have the right to decline
to follow any such direction if the Trustee, being advised by counsel, shall
determine that the action or proceeding so directed may not lawfully be taken or
if the Trustee in good faith by its board of directors, the executive committee,
or a trust committee of directors or Responsible Officers of the Trustee shall
determine that the action or proceedings so directed would involve the Trustee
in personal liability or if the Trustee in good faith shall so determine that
the actions or forebearances specified in or pursuant to such direction would be
unduly prejudicial to the interests of Holders of the Securities of all series
so affected not joining in the giving of said direction, it being understood
that (subject to the above-mentioned provisions) the Trustee shall have no duty
to ascertain whether or not such actions or forebearances are unduly prejudicial
to such Holders.

         The Company is required to furnish to the Trustee annually a statement
of certain officers of the Company to the effect that, to the best of their
knowledge, the Company is not in default in the performance of the terms of the
Indenture or, if they have knowledge that the Company is in default, specifying
such default.

MODIFICATION AND WAIVER

         The Indenture provides that the Company and the Trustee may enter into
supplemental indentures without the consent of the Holders of Securities to: (a)
secure any Securities, (b) evidence the assumption by a successor corporation of
the obligations of the Company, (c) add covenants for the protection of the
Holders of Securities, (d) cure any ambiguity or correct any inconsistency in
the Indenture, (e) establish the form or terms of Securities of any series and
(f) evidence the acceptance of appointment by a successor trustee.

         Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of each series affected
by such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the Holder of each Outstanding Security
affected thereby: (a) extend the final maturity of any Security; (b) reduce the
principal amount of, or any amount payable on redemption of, or reduce the rate
or extend the time of payment of interest on, any Security; (c) reduce the
amount of principal of an Original Issue Discount Security payable upon
acceleration of the maturity thereof; (d) change the coin or currency of payment
of principal of, or interest on, any Security; (e) impair or affect the right of
any Holder of Securities to institute suit for the enforcement of any payment on
or with respect to any Security; or (f) reduce the percentage in principal
amount of Outstanding Securities of any series, the consent of the Holders of
which is required for modification or amendment of the Indenture.

         The Holders of a majority in aggregate principal amount of the
Outstanding Securities of each series may, on behalf of all Holders of
Securities of that series, waive any past default under the Indenture with
respect to Securities of that series, except a default in respect of a covenant
or provision contained in the Indenture which cannot be modified or amended
without the consent of the Holder of each Security affected.

DISCHARGE AND DEFEASANCE

         The Company is permitted to discharge and defease its obligations under
the Indenture although Securities remain Outstanding by depositing with the
Trustee, as trust funds, an amount in cash or, in the case of Securities
denominated in U.S. Dollars, cash, U.S. Government Obligations or a combination
thereof, sufficient to pay and discharge the principal of and interest on the
Securities, as and when the same become due and payable. To exercise such an
option the Company is required, among other things, 

                                       7
<PAGE>   27



to deliver to the Trustee an Opinion of Counsel that the Holders of such
Securities will not recognize income, gain or loss for United States federal
income tax purposes as a result of such defeasance.

CERTAIN DEFINITIONS

         The term "Attributable Debt" means, as to any particular lease under
which any Person is at the time liable, at any date as of which the amount
thereof is to be determined, the total net amount of rent required to be paid by
such Person under such lease during the remaining term thereof (after giving
effect to any extensions at the option of the lessee), discounted from the
respective due dates thereof to such date at the average rate per annum borne by
the Securities for the preceding 365 days.

         The term "Consolidated Net Tangible Assets" means the aggregate amount
of assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities (excluding any thereof
constituting Funded Debt by reason of being renewable or extendible) and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other intangibles, all as set forth on the most recent consolidated
balance sheet of the Company and its consolidated Subsidiaries and computed in
accordance with generally accepted accounting principles.

         The term "Domestic Subsidiary" means a Subsidiary of the Company except
a Subsidiary (a) which neither transacts any substantial portion of its business
nor regularly maintains any substantial portion of its fixed assets within the
United States of America, or (b) which is engaged primarily in financing the
operation of the Company or its Subsidiaries, or both, outside the United States
of America.

         The term "Subsidiary" means any corporation at least a majority of the
voting stock of which is owned or controlled, directly or indirectly, by the
Company or any of its Subsidiaries.

         The term "Exempted Debt" means the sum of the following items
outstanding as of the date Exempted Debt is being determined: (i) indebtedness
of the Company and its Subsidiaries incurred after the date of the Indenture and
secured by mortgages created or assumed pursuant to the second paragraph under
"Certain Restrictions on the Company--Limitations on Liens" below and (ii)
Attributable Debt of the Company and its Subsidiaries in respect of every sale
and leaseback transaction entered into after the date of the Indenture and
pursuant to the second paragraph under "Certain Restrictions on the Company--
Limitation on Sale and Lease-back" below.

         The term "Funded Debt" means all indebtedness for money borrowed having
a maturity of more than one year from the date as of which the amount thereof is
to be determined or having a maturity of less than one year but by its terms
being renewable or extendible beyond one year from such date at the option of
the borrower.

         The term "principal" includes premium, if any.

         The term "Principal Manufacturing Property" means any building,
structure or other facility, together with the land upon which it is erected and
fixtures comprising a part thereof, used primarily for manufacturing or
warehousing and located in the United States of America, owned or leased by the
Company or any Domestic Subsidiary. The term "Principal Manufacturing Property"
does not include: (a) property financed through the issuance of tax exempt
governmental obligations or (b) any property that the Board of Directors of the
Company determines is not materially important to the total business of the
Company and its Subsidiaries.

CERTAIN RESTRICTIONS ON THE COMPANY

         The following restrictions apply to the Offered Securities unless the
Prospectus Supplement otherwise provides.

         Limitations on Liens. While any Securities are Outstanding, the Company
will not, nor will it permit any Domestic Subsidiary to, incur, issue, assume or
guarantee any indebtedness for money borrowed ("Debt") secured by any mortgage
or other encumbrance ("Mortgage") on any Principal Manufacturing Property of the
Company or its Domestic Subsidiaries or any shares of stock or Debt of any
Domestic Subsidiary which owns a Principal Manufacturing Property, without
concurrently securing the Securities equally and ratably with such Debt so long
as such Debt shall be so secured. This restriction does not apply to Debt
secured by (1) Mortgages of the Company or its Domestic Subsidiaries existing at
the time of the Indenture; (2) Mortgages on property of, or on any shares of
stock of, any corporation existing at the time it becomes a Domestic Subsidiary;
(3) Mortgages on property or shares of stock of a Domestic Subsidiary existing
at the time of acquisition thereof (including acquisition through merger or
consolidation) or to secure the payment of all or any part of the purchase price
or construction cost thereof or to secure any Debt incurred prior to, at the
time of, or within 180 days after, the acquisition of such property or shares or
the completion of any such construction and commencement of full operation of
such property for the purpose of financing all or any part of the purchase price
or construction thereof; (4) Mortgages in favor of the Company or any Domestic
Subsidiary; (5) Mortgages in favor of the United States, any state or any
subdivision thereof, or any federal or state department, agency or
instrumentality, to secure progress, advance 


                                       8
<PAGE>   28



or other payments pursuant to any contract or statute; or (6) extensions,
renewals or replacements (or successive extensions, renewals or replacements),
in whole or in part, of any Mortgage referred to in (1) through (5).

         Notwithstanding the limitations on liens described above, the Company
or any Domestic Subsidiary may incur, issue, assume or guarantee any Debt
secured by a Mortgage on any Principal Manufacturing Property of the Company or
its Domestic Subsidiaries or any shares of stock or Debt of any Domestic
Subsidiary, in addition to that permitted above and without any obligation to
secure the Securities, provided that at the time of such incurrences, issuance,
assumption or guarantee of such Debt, and after giving effect thereto, Exempted
Debt does not exceed 15% of the Consolidated Net Tangible Assets of the Company
and its Subsidiaries, taken as a whole.

         Limitation on Sale and Lease-back. While any Securities are
Outstanding, the Company will not, nor will it permit any Domestic Subsidiary
to, sell and lease-back for more than three years any Principal Manufacturing
Property acquired or placed into service more than 180 days before such lease
arrangement, unless (a) the Company would be entitled to incur Debt secured by a
Mortgage on such Principal Manufacturing Property in a principal amount
equivalent to the Attributable Debt in respect of such arrangement without
equally and ratably securing the Securities or (b) the Company retires Funded
Debt or causes Funded Debt to be retired equal to the net proceeds of such sale.

         Notwithstanding the limitations on sale and lease-back transactions
described above, the Company or any Domestic Subsidiary may enter into a sale
and lease-back transaction of a Principal Manufacturing Property in addition to
that permitted above and without any obligation to retire any Securities or
other indebtedness referred to above, provided that at the time of entering into
such sale and lease-back transaction and after giving effect thereto, Exempted
Debt does not exceed 15% of the Consolidated Net Tangible Assets of the Company
and its Subsidiaries, taken as a whole.

CONSOLIDATION, MERGER AND SALE OF ASSETS

         The Company may, without the consent of the Trustee or the Holders of
Outstanding Securities, consolidate or merge with or into, or convey, transfer
or lease its properties and assets substantially as an entirety to, any other
corporation, provided that any successor corporation is a corporation organized
under the laws of the United States of America or any state thereof and that
such successor corporation expressly assumes all obligations of the Company
under the Securities and that certain other conditions are met, and, thereafter,
except in the case of a lease, the Company shall be relieved of all obligations
under the Indenture.

APPLICABLE LAW

         The Securities and the Indenture will be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.

         A judgment for money damages by a court in the United States, including
a money judgment based on an obligation expressed in a foreign currency, will
ordinarily be rendered only in U.S. dollars. The Judiciary Law of the State of
New York provides, however, that an action based upon an obligation denominated
in a currency other than U.S. dollars will be rendered in the foreign currency
of the underlying obligation and converted into U.S. dollars at a rate of
exchange prevailing on the date of the entry of the judgment or decree.

CONCERNING THE TRUSTEE

         The Bank of New York will be the Trustee under the Indenture.

         Under the Indenture, the Company has agreed to pay reasonable
compensation to the Trustee, to reimburse the Trustee for all of its reasonable
expenses and to indemnify the Trustee for certain liabilities incurred by the
Trustee in the performance of its obligations under the Indenture. The Company's
obligations under the foregoing sentence constitute additional indebtedness
under the Indenture and will be a senior claim to that of the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the Holders of particular Securities or
Coupons.


                                       9
<PAGE>   29


                              PLAN OF DISTRIBUTION

         The Company may sell Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents. Any such underwriter or agent involved in the offer
and sale of the Offered Securities will be named in the applicable Prospectus
Supplement. The Company also may, from time to time, authorize dealers, acting
as the Company's agents, to offer and sell the Offered Securities upon the terms
and conditions as are set forth in the Prospectus Supplement. The Company has
reserved the right to sell Offered Securities directly to investors on its own
behalf in those jurisdictions where it is authorized to do so.

         Underwriters may offer and sell the Offered Securities at a fixed price
or prices, which may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. In connection with the sale of the Offered Securities, underwriters may
be deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Offered Securities for whom they may act as agent.
Underwriters may sell the Offered Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.

         Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers, are
set forth in the applicable Prospectus Supplement or Pricing Supplement.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Act.

                                  LEGAL MATTERS

         The validity of the Offered Securities will be passed upon for the
Company by Jones, Day, Reavis & Pogue, North Point, 901 Lakeside Avenue,
Cleveland, Ohio 44114.

         Certain legal matters relating to the Offered Securities will be passed
upon for the underwriters and certain other purchasers by Brown & Wood LLP, One
World Trade Center, New York, New York 10048.

                                     EXPERTS

         The consolidated financial statements of The Timken Company
incorporated by reference in The Timken Company's Annual Report (Form 10-K) for
the year ended December 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.


                                       10
<PAGE>   30



                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

         The following is a list of the expenses to be incurred by the Company
in connection with the issuance and distribution of the Securities being
registered hereby, other than underwriting discounts and commissions. All of the
amounts shown are estimates except for the Registration fee.


<TABLE>
<S>                                                    <C>     
Registration fee                                       $ 88,500
Printing and engraving costs                           $ 15,000
Accounting fees and expenses                           $ 15,000
Trustee fees and expenses                              $ 20,000
Legal fees and expenses                                $ 50,000
Rating Agencies' fees                                  $150,000
Miscellaneous expenses                                 $ 11,500
                                                       --------
                                    Total              $350,000
                                                       ========
</TABLE>


ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

         Section 1 of Article IV of the Company's Amended Regulations provide
that the Company shall indemnify its directors, officers and employees, and may
indemnify its agents, to the fullest extent permitted by law under prescribed
conditions and subject to various qualifications. Article IV of the Company's
Amended Regulations is set forth in the Company's Form 10-K for the period ended
December 31, 1992, filed with the Securities and Exchange Commission under the
Exchange Act, and is incorporated herein by reference.

         The Company has entered into contracts with certain of its directors
and officers that indemnify them against many of the types of claims that may be
made against them. The Company also maintains insurance coverage for the benefit
of directors and officers with respect to many types of claims that may be made
against them, some of which may be in addition to those described in Article IV
of the Company's Amended Regulations.

         Reference is made to Section 1701.13(E) of the Ohio Revised Code
relating to indemnification of directors, officers, employees and agents of an
Ohio corporation. Specifically, Section 1701.13(E) of the Ohio Revised Code
provides as follows:

                  (E)(1) A corporation may indemnify or agree to indemnify any
         person who was or is a party or is threatened to be made a party, to
         any threatened, pending, or completed action, suit, or proceeding,
         whether civil, criminal, administrative, or investigative, other than
         an action by or in the right of the corporation, by reason of the fact
         that he is or was a director, officer, employee, or agent of the
         corporation, or is or was serving at the request of the corporation as
         a director, trustee, officer, employee, member, manager, or agent of
         another corporation, domestic or foreign, nonprofit or for profit,
         limited liability company, or a partnership, joint venture, trust, or
         other enterprise, against expenses, including attorney's fees,
         judgments, fines, and amounts paid in settlement actually and
         reasonably incurred by him in connection with such action, suit, or
         proceeding, if he acted in good faith and in a manner he reasonably
         believed to be in or not opposed to the best interests of the
         corporation, and, with respect to any criminal action or proceeding, if
         he had no reasonable cause to believe his conduct was unlawful. The
         termination of any action, suit, or proceeding by judgement, order,
         settlement, conviction, or upon a plea of nolo contendere or its
         equivalent, shall not, of it self, create a presumption that the person
         did not act in good faith and in a manner he reasonably believed to be
         in or not opposed to the best interests of the corporation, and, with
         respect to any criminal action or proceeding, he had reasonable cause
         to believe that his conduct was unlawful.

                  (2) A corporation may indemnify or agree to indemnify any
         person who was or is a party, or is threatened to be made a party, to
         any threatened, pending, or completed action or suit by or in the right
         of the corporation to procure a judgment in its favor, by reason of the
         fact that he is or was a director, officer, employee, or agent of the
         corporation, or is or was serving at the request of the corporation as
         a director, trustee, officer, employee, member, manager, or agent of
         another corporation, domestic or foreign, nonprofit or for profit,
         limited liability company, or a partnership, joint venture, trust, or
         other enterprise, against expenses, including attorney's fees, actually
         and reasonably incurred by him in connection with the defense or
         settlement of such action or suit, if he acted in good faith and in a
         manner he reasonably believed to be in or not opposed to the best
         interests of the corporation, except that no indemnification shall be
         made in respect of any of the following:



                                      II-1
<PAGE>   31
                           (a) Any claim, issue, or matter as to which such
                  person is adjudged to be liable for negligence or misconduct
                  in the performance of his duty to the corporation unless, and
                  only to the extent that, the court of common pleas or the
                  court in which such action or suit was brought determines,
                  upon application, that, despite the adjudication of liability,
                  but in view of all the circumstances of the case, such person
                  is fairly and reasonably entitled to indemnity for such
                  expenses as the court of common pleas or such other court
                  shall deem proper;

                           (b) Any action or suit in which the only liability
                  asserted against a director is pursuant to section 1701.95 of
                  the Revised Code.

                  (3) To the extent that a director, trustee, officer, employee,
         member, manager, or agent has been successful on the merits or
         otherwise in defense of any action, suit, or proceeding referred to in
         division (E)(1) or (2) of this section, or in defense of any claim,
         issue, or matter therein, he shall be indemnified against expenses,
         including attorney's fees, actually and reasonably incurred by him in
         connection with the action, suit, or proceeding.

                  (4) Any indemnification under division (E)(1) or (2) of this
         section, unless ordered by a court, shall be made by the corporation
         only as authorized in the specific case, upon a determination that
         indemnification of the director, trustee, officer, employee, member,
         manager, or agent is proper in the circumstances because he has met the
         applicable standard of conduct set forth in division (E)(1) or (2) of
         this section. Such determination shall be made as follows:

                           (a) By a majority vote of a quorum consisting of
                  directors of the indemnifying corporation who were not and are
                  not parties to or threatened with the action, suit, or
                  proceeding referred to in division (E)(1) or (2) of this
                  section;

                           (b) If the quorum described in division (E)(4) (a) of
                  this section is not obtainable or if a majority vote of a
                  quorum of disinterested directors so directs, in a written
                  opinion by independent legal counsel other than an attorney,
                  or a firm having associated with it an attorney, who has been
                  retained by or who has performed services for the corporation
                  or any person to be indemnified within the past five years;

                           (c)  By the shareholders;

                           (d) By the court of common pleas or the court in
                  which the action, suit, or proceeding referred to in division
                  (E)(1) or (2) of this section was brought.

         Any determination made by the disinterested directors under division
(E)(4) (a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or brought
the action or suit by or in the right of the corporation under division (E)(2)
of this section, and, within ten days after receipt of such notification, such
person shall have the right to petition the court of common pleas or the court
in which such action or suit was brought to review the reasonableness of such
determination.

                  (5)(a) Unless at the time of a director's act or omission that
         is the subject of an action, suit, or proceeding refereed to in
         division (E)(1) or (2) of this section, the articles or the regulations
         of a corporation state, by specific reference to this division, that
         the provisions of this division do not apply to the corporation and
         unless the only liability asserted against a director in an action,
         suit, or proceeding referred to in divisions (E)(1) and (2) of this
         section is pursuant to section 1701.95 of the Revised Code, expenses,
         including attorney's fees, incurred by a director in defending the
         action, suit, or proceeding shall be paid by the corporation as they
         are incurred, in advance of the final disposition of the action, suit,
         or proceeding, upon receipt of an undertaking by or on behalf of the
         director in which he agrees to do both of the following:

                           (i) Repay such amount if it is proved by clear and
                  convincing evidence in a court of competent jurisdiction that
                  his action or failure to act involved an act or omission
                  undertaken with deliberate intent to cause injury to the
                  corporation or undertaken with reckless disregard for the best
                  interests of the corporation;

                           (ii) Reasonably cooperate with the corporation
                  concerning the action, suit, or proceeding.

                  (b) Expenses, including attorney's fees, incurred by a
         director, trustee, officer, employee, member, manager, or agent in
         defending any action, suit, or proceeding referred to in division
         (E)(1) or (2) of this section, may be paid by the corporation as they
         are incurred, in advance of the final disposition of the action, suit,
         or proceeding, as authorized by the directors in the specific case,
         upon receipt of an undertaking by or on behalf of the director,
         trustee, officer, employee, member, manager, or agent to repay such
         amount, if it ultimately is determined that he is not entitled to be
         indemnified by the corporation.

                                      II-2
<PAGE>   32
                  (6) The indemnification authorized by this section shall not
         be exclusive of, and shall be in addition to, any other rights granted
         to those seeking indemnification under the articles, the regulations,
         any agreement, a vote of shareholders or disinterested directors, or
         otherwise, both as to action in their official capacities and as to
         action in another capacity while holding their offices or positions,
         and shall continue as to a person who has ceased to be a director,
         trustee, officer, employee, member, manager, or agent and shall inure
         to the benefit of the heirs, executors, and administrators of such a
         person.

                  (7) A corporation may purchase and maintain insurance or
         furnish similar protection, including, but not limited to, trust funds,
         letters of credit, or self-insurance, on behalf of or for any person
         who is or was a director, officer, employee, or agent of the
         corporation, or is or was serving at the request of the corporation as
         a director, trustee, officer, employee, member, manager, or agent of
         another corporation, domestic or foreign, nonprofit or for profit, a
         limited liability company, or a partnership, joint venture, trust, or
         other enterprise, against any liability asserted against him and
         incurred by him in any such capacity, or arising out of his status as
         such, whether or not the corporation would have the power to indemnify
         him against such liability under this section. Insurance may be
         purchased from or maintained with a person in which the corporation has
         a financial interest.

                  (8) The authority of a corporation to indemnify persons
         pursuant to division (E)(1) or (2) of this section does not limit the
         payment of expenses as they are incurred, indemnification, insurance,
         or other protection that may be provided pursuant to divisions (E)(5),
         (6), and (7) of this section. Divisions (E) (1) and (2) of this section
         do not create any obligation to repay or return payments made by the
         corporation pursuant to divisions (E)(5), (6), or (7).

                  (9) As used in division (E) of this section, "corporation"
         includes all constituent entities in a consolidation or merger and the
         new or surviving corporation, so that any person who is or was a
         director, officer, employee, trustee, member, manager, or agent of such
         a constituent entity, or is or was serving at the request of such
         constituent entity as a director, trustee, officer, employee, member,
         manager, or agent of another corporation, domestic or foreign,
         nonprofit or for profit, a limited liability company, or a partnership,
         joint venture, trust, or other enterprise, shall stand in the same
         position under this section with respect to the new or surviving
         corporation as he would if he had served the new or surviving
         corporation in the same capacity.

                  Reference is also made to the indemnification provisions in
the form of Distribution Agreement filed as exhibit 1.1 to this Registration
Statement and to the undertaking "(c)" in Item 17 of this Registration
Statement.


ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

         (a) Exhibits. The following exhibits are filed herewith and made a part
hereof:



Exhibit              Description of Exhibit
- -------              ----------------------

1.1                  Form of Distribution Agreement.

4.1                  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 the Company and certain banks was filed with
                     Form 10-Q for the period ended September 30, 1996, and is
                     incorporated herein by reference.

4.2                  Fourth Amended Agreement dated August 15, 1995, to the
                     amended and restated credit agreement as amended February
                     23, 1993, May 31, 1994, and November 15, 1994, between the
                     Company and certain banks, was filed with Form 10-Q for the
                     period ended September 30, 1995, and is incorporated herein
                     by reference.

4.3                  Third Amendment Agreement dated November 15, 1994, to the
                     amended restated credit agreement as amended February 23,
                     1993, and May 31, 1994, between the Company and certain
                     banks, was filed with Form 10-Q for the period ended
                     September 30, 1995, and is incorporated herein by
                     reference.

4.4                  Second Amendment Agreement dated May 31, 1994, to the
                     amended restated credit agreement as amended February 23,
                     1993, between the Company and certain banks, was filed with
                     Form 10-Q for the period ended June 30,1 994, and is
                     incorporated herein by reference.

                                      II-3
<PAGE>   33



4.5                  First Amendment Agreement dated February 26, 1993, to the
                     restated credit agreement as amended December 31, 1991,
                     between the Company and certain banks was filed with Form
                     10-K for the period ended December 31, 1992, and is
                     incorporated herein by reference.

4.6                  Credit Agreement amended as of December 31, 1991, between
                     the Company and certain banks was filed with Form 10-K for
                     the period ended December 31, 1991, and is incorporated
                     herein by reference.

4.7                  Indenture dated as of July 1, 1990, between the Company and
                     Ameritrust Company of New York, which was filed with
                     Timken's Form S-3 registration statement dated July 12,
                     1990, and is incorporated herein by reference.

4.8                  First Supplemental Indenture, dated as of July 24, 1996, by
                     and between the Company and Mellon Bank, N.A. was filed
                     with Form 10-Q for the period ended September 30, 1996, and
                     is incorporated herein by reference.

4.9                  The Company is also a party to agreements with respect to
                     other long-term debt in total amount less than 10% of the
                     registrant's consolidated total assets. The registrant
                     agrees to furnish a copy of such agreements upon request.

4.10                 Form of Indenture.

5.1                  Opinion of Jones, Day, Reavis & Pogue as to the validity of
                     the securities being offered.

12.1                 Computation of Ratio of Earnings to Fixed Charges.

23.1                 Consent of Ernst & Young LLP.

23.2                 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
                     5.1)

24.1                 Power of Attorney

25.1                 Statement of Eligibility of The Bank of New York under the
                     Trust Indenture Act of 1939 on Form T-1 relating to the
                     Indenture.


ITEM 17.  UNDERTAKINGS.

         (a)  The undersigned registrant hereby undertakes:

         (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

         (i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

         (ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.

         (iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

provided, however, that the undertakings set forth in paragraphs (a)(1)(i) and
(a)(1)(ii) of this section do not apply if the registration statement is on Form
S-3, Form S-8 or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in this registration statement.


                                      II-4
<PAGE>   34



         (2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

         (b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

         (c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

         (d) The undersigned registrant hereby undertakes that:

         (1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

         (2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

         (e) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the Trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
such Act.







                                      II-5
<PAGE>   35



                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Canton, State of Ohio, on February 9, 1998.

                                         THE TIMKEN COMPANY


                                         By:  /S/ Gene E. Little
                                              ---------------------------------
                                              Senior Vice President - Finance

         Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.


<TABLE>
<CAPTION>
Signature                                                 Title                        Date
- ---------                                                 -----                        ----

<S>                                    <C>                                             <C>
*                                      Director, Chairman, President and               February 9, 1998
- --------------------------------       Chief Executive Officer
W. R. Timken, Jr.                      

/s/ Gene E. Little                     Senior Vice President-                          February 9, 1998
- --------------------------------       Finance(Principal Financial and
Gene E. Little                         Accounting Officer)
*                                      Director                                        February 9, 1998
- --------------------------------
Robert Anderson
*                                      Director                                        February 9, 1998
- --------------------------------
Stanley C. Gault
*                                      Director                                        February 9, 1998
- --------------------------------
J. Clayburn LaForce, Jr.
*                                      Director                                        February 9, 1998
- --------------------------------
Robert W. Mahoney
*                                      Director                                        February 9, 1998
- --------------------------------
Jay A. Precourt
*                                      Director                                        February 9, 1998
- --------------------------------
John M. Timken, Jr.
*                                      Director                                        February 9, 1998
- --------------------------------
W. J. Timken
*                                      Director                                        February 9, 1998
- --------------------------------
Joseph F. Toot, Jr.
*                                      Director                                        February 9, 1998
- --------------------------------
Martin D. Walker
*                                      Director                                        February 9, 1998
- --------------------------------
Charles H. West
*                                      Director                                        February 9, 1998
- --------------------------------
Alton W. Whitehouse
</TABLE>

* The undersigned, by signing his name hereto, does hereby sign and execute this
Registration Statement pursuant to the Powers of Attorney executed by the
above-named officers and directors of the Registrant and which have been filed
with the Securities and Exchange Commission on behalf of such officers and
directors.


 /s/ Gene E. Little                                    February 9, 1998
- --------------------------------
Gene E. Little, Attorney-in-Fact


                                      II-6
<PAGE>   36


                                  EXHIBIT INDEX

Exhibit                        Description Of Exhibit
- -------                        ----------------------

1.1                  Form of Distribution Agreement.

4.1                  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 the Company and certain banks was filed with
                     Form 10-Q for the period ended September 30, 1996, and is
                     incorporated herein by reference.

4.2                  Fourth Amended Agreement dated August 15, 1995, to the
                     amended and restated credit agreement as amended February
                     23, 1993, May 31, 1994, and November 15, 1994, between the
                     Company and certain banks, was filed with Form 10-Q for the
                     period ended September 30, 1995, and is incorporated herein
                     by reference.

4.3                  Third Amendment Agreement dated November 15, 1994, to the
                     amended restated credit agreement as amended February 23,
                     1993, and May 31, 1994, between the Company and certain
                     banks, was filed with Form 10-Q for the period ended
                     September 30, 1995, and is incorporated herein by
                     reference.

4.4                  Second Amendment Agreement dated May 31, 1994, to the
                     amended restated credit agreement as amended February 23,
                     1993, between the Company and certain banks, was filed with
                     Form 10-Q for the period ended June 30,1 994, and is
                     incorporated herein by reference.

4.5                  First Amendment Agreement dated February 26, 1993, to the
                     restated credit agreement as amended December 31, 1991,
                     between the Company and certain banks was filed with Form
                     10-K for the period ended December 31, 1992, and is
                     incorporated herein by reference.

4.6                  Credit Agreement amended as of December 31, 1991, between
                     the Company and certain banks was filed with Form 10-K for
                     the period ended December 31, 1991, and is incorporated
                     herein by reference.

4.7                  Indenture dated as of July 1, 1990, between the Company and
                     Ameritrust Company of New York, which was filed with
                     Timken's Form S-3 registration statement dated July 12,
                     1990, and is incorporated herein by reference.

4.8                  First Supplemental Indenture, dated as of July 24, 1996, by
                     and between the Company and Mellon Bank, N.A. was filed
                     with Form 10-Q for the period ended September 30, 1996, and
                     is incorporated herein by reference.

4.9                  The Company is also a party to agreements with respect to
                     other long-term debt in total amount less than 10% of the
                     registrant's consolidated total assets. The Registrant
                     agrees to furnish a copy of such agreements upon request.

4.10                 Form of Indenture.

5.1                  Opinion of Jones, Day, Reavis & Pogue as to the validity of
                     the securities being offered.

12.1                 Computation of Ratio of Earnings to Fixed Charges.

23.1                 Consent of Ernst & Young LLP.

23.2                 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
                     5.1).

24.1                 Power of Attorney.

25.1                 Statement of Eligibility of The Bank of New York under the
                     Trust Indenture Act of 1939 on Form T-1 relating to the
                     Indenture.



                                      II-7



<PAGE>   1
                                                                     Exhibit 1.1


                               THE TIMKEN COMPANY

                                  $300,000,000

                           Medium-Term Notes, Series A

                Due from 9 Months to 30 Years from Date of Issue

                             DISTRIBUTION AGREEMENT


                                                                 February , 1998



Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036

Key Capital Markets, Inc.
127 Public Square
Cleveland, Ohio 44114

J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260

NationsBanc Montgomery Securities LLC
100 North Tryon Street
NC1-007-07-01
Charlotte, NC 28255

Dear Sirs:

                  The Timken Company, an Ohio corporation (the "Company"),
confirms its agreement with Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), Key Capital Markets, Inc. ("Key Capital"), J.P. Morgan Securities
Inc. ("J.P. Morgan") and NationsBanc Montgomery Securities LLC ("NationsBanc")
(each of Morgan Stanley, Key Capital, J.P. Morgan and NationsBanc, an "Agent"
and collectively, the "Agents") with respect to the issue and sale from time to
time by the Company of up to U.S.$300,000,000 aggregate principal amount of its
medium-term notes, Series A (or the equivalent thereof in one or more foreign
currencies or composite currencies due from 9 months to 30 years from date of
issue (the "Notes"). The Notes will be issued under an Indenture, dated as of
February , 1998 (the "Indenture"), between the Company and The Bank of New York,
as Trustee (the "Trustee"), and will have the maturities,


<PAGE>   2



interest rates, redemption provisions, if any, and other terms as set forth in
supplements to the Base Prospectus referred to below.

                  Subject to the reservation by the Company of the right to
appoint additional Agents who will agree to be subject to the terms hereof and
to sell Notes directly on its own behalf in those jurisdictions where such
offering by the Company is authorized, the Company hereby appoints the Agents as
its exclusive agents for the purpose of soliciting and receiving offers to
purchase Notes from the Company by others and, on the basis of the
representations and warranties herein contained, but subject to terms and
conditions herein set forth, each of the Agents agrees to use reasonable efforts
to solicit and receive offers to purchase Notes upon terms acceptable to the
Company at such times and in such amounts as the Company shall from time to time
specify. In addition, either Agent may also purchase Notes as principal and, if
requested by such Agent, the Company will enter into a Terms Agreement relating
to such sale (a "Terms Agreement") in accordance with the provisions of Section
2(b) hereof. In acting under this Agreement and in connection with the sale of
any Notes by the Company (other than Notes sold to such Agent as principal),
such Agent is acting solely as agent of the Company and does not assume any
obligation towards or relationship of agency or trust with any purchaser of
Notes.

                  The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including a prospectus,
relating to the Notes, which has been declared effective. Such registration
statement, including the exhibits thereto, as amended at the Commencement Date
(as hereinafter defined), is hereinafter referred to as the "Registration
Statement". The Company proposes to file with the Commission from time to time,
pursuant to Rule 424 under the Securities Act of 1933, as amended (the
"Securities Act"), supplements to the prospectus included in the Registration
Statement that will describe certain terms of the Notes. The prospectus in the
form in which it appears in the Registration Statement is hereinafter referred
to as the "Base Prospectus". The term "Prospectus" means the Base Prospectus
together with the prospectus supplement or supplements (each a "Prospectus
Supplement") specifically relating to Notes, as filed with, or transmitted for
filing to, the Commission pursuant to Rule 424. As used herein, the terms "Base
Prospectus" and "Prospectus" shall include in each case the documents, if any,
incorporated by reference therein. The terms "supplement" and "amendment" or
"amend" as used in this Agreement shall include all documents that are deemed to
be incorporated by reference in the Prospectus that are filed subsequent to the
date of the Base Prospectus by the Company with the Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act").

                  1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with each of the Agents as of the Commencement Date, as
of each date on which the Company accepts an offer to purchase Notes (including
any purchase by an Agent as principal, pursuant to a Terms Agreement or
otherwise), as of each date the Company issues and sells Notes and as of each
date the Registration Statement or the Base Prospectus is amended or
supplemented, as follows (it being understood that such representations,
warranties and agreements shall be deemed to relate to the Registration
Statement, the Base Prospectus and the Prospectus, each as amended or
supplemented to each such date):


                                        2

<PAGE>   3



                  (a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.

                  (b) (i) Each document incorporated by reference in the
Prospectus complied or will comply when filed with the Commission in all
material respects with the Exchange Act and the rules and regulations of the
Commission thereunder, (ii) each part of the Registration Statement, when such
part became effective, did not contain and each such part, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (iii) the Registration Statement
and the Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder and (iv) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this Section l(b) do not apply (i) to statements or omissions in
the Registration Statement or the Prospectus based upon information relating to
the Agents furnished to the Company in writing by the Agents expressly for use
therein or (ii) to that part of the Registration Statement that constitutes the
Statement of Eligibility (Form T-1) under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), of the Trustee.

                  (c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its property and
to conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

                  (d) Each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.

                  (e) Each of this Agreement and any applicable Terms Agreement
has been duly authorized, executed and delivered by the Company and is a valid
and binding agreement of the Company, in each case enforceable in accordance
with its terms except as (i) rights to indemnity and contribution hereunder or
thereunder may be limited under applicable law, (ii) the enforceability hereof
and thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (iii) the availability of equitable remedies may
be limited by equitable principles of general applicability.

                                        3

<PAGE>   4



                  (f) The Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement of the Company, enforceable in
accordance with its terms except (i) as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, (ii) as the enforceability thereof
is subject to general principles of equity, including the possible
unavailability of specific performance or injunctive relief, regardless of
whether such enforceability is considered in a proceeding in equity or at law,
and without limiting the generality of (ii) above, (iii) as the enforceability
thereof may be limited by governmental authority to limit, delay or prohibit the
making of payments in foreign currency or currency units or payments outside the
United States and (iv) U.S. courts may not give effect to rates of exchange in
effect at the time any judgment payable in a foreign currency may be rendered
against the Company by any foreign court.

                  (g) The Notes have been duly authorized and, when executed and
authenticated in accordance with the Indenture and delivered to and duly paid
for by the purchasers thereof as contemplated herein, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of the
Company, enforceable in accordance with their respective terms except (i) as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally, (ii) as
the enforceability thereof is subject to general principles of equity, including
the possible unavailability of specific performance or injunctive relief,
regardless of whether such enforceability is considered in a proceeding in
equity or at law, and without limiting the generality of (ii) above, (iii) as
the enforceability thereof may be limited by governmental authority to limit,
delay or prohibit the making of payments in foreign currency or currency units
or payments outside the United States and (iv) U.S. courts may not give effect
to rates of exchange in effect at the time any judgment payable in a foreign
currency may be rendered against the Company by any foreign court.

                  (h) The execution and delivery by the Company of, and the
performance by the Company of its obligations under this Agreement, the Notes,
the Indenture and any applicable Terms Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or any agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its subsidiaries, taken
as a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of or qualification with any governmental body
or agency is required for the performance by the Company of its obligations
under this Agreement, the Notes, the Indenture and any applicable Terms
Agreement, except such as have been obtained and such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Notes.

                  (i) There has not been any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus.


                                        4

<PAGE>   5



                  (j) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as an exhibit to the Registration Statement
that are not described or filed as required.

                  (k) Each of the Company and its subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of and
from, and has made all declarations and filings with, all federal, state, local
and other governmental authorities, all self-regulatory organizations and all
courts and other tribunals, to own, lease, license and use its properties and
assets and to conduct its business in the manner described in the Prospectus,
except to the extent that the failure to obtain or file would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole.

                  2.   Solicitations as Agent; Purchases as Principal.
                       -----------------------------------------------

                  (a) SOLICITATIONS AS AGENT. In connection with the actions of
each Agent as agent hereunder, such Agent severally agrees, as agent of the
Company, to use reasonable efforts to solicit offers to purchase Notes upon the
terms and conditions set forth in the Prospectus as then amended or
supplemented.

                  The Company reserves the right, in its sole discretion, to
instruct each Agent to suspend at any time, for any period of time or
permanently, the solicitation of offers to purchase Notes. Upon receipt of at
least one business day's prior notice from the Company, such Agent will
forthwith suspend solicitations of offers to purchase Notes from the Company
until such time as the Company has advised such Agent that such solicitation may
be resumed. While such solicitation is suspended, the Company shall not be
required to deliver any certificates, opinions or letters in accordance with
Sections 5(a), 5(b) and 5(c); PROVIDED, HOWEVER, that if the Registration
Statement or Prospectus is amended or supplemented during the period of
suspension (other than by an amendment or supplement providing solely for a
change in the interest rates, redemption provisions, amortization schedules or
maturities offered on the Notes or for a change such Agent deems to be
immaterial), such Agent shall not be required to resume soliciting offers to
purchase Notes until the Company has delivered such certificates, opinions and
letters as such Agent may request.

                  The Company agrees to pay to each Agent, as consideration for
the sale of each Note resulting from a solicitation made or an offer to purchase
received by such Agent, a commission in the form of a discount from the purchase
price of such Note equal to the following percentage of the purchase price of
such Note:


                                        5

<PAGE>   6



<TABLE>
<CAPTION>
                  Term                                    Commission Rate
         ------------------------------------------------------------------
<S>                                                           <C>
         From 9 months to less than 1 year                    .125%
         From 1 year to less than 18 months                   .150%
         From 18 months to less than 2 years                  .200%
         From 2 years to less than 3 years                    .250%
         From 3 years to less than 4 years                    .350%
         From 4 years to less than 5 years                    .450%
         From 5 years to less than 6 years                    .500%
         From 6 years to less than 7 years                    .550%
         From 7 years to less than 10 years                   .600%
         From 10 years to less than 15 years                  .625%
         From 15 years to less than 20 years                  .700%
         From 20 years to and including 30 years              .750%
</TABLE>

                  Each Agent shall communicate to the Company, orally or in
writing, each offer to purchase Notes received by such Agent as agent that in
such Agent's judgment should be considered by the Company. The Company shall
have the sole right to accept offers to purchase Notes and may reject any offer
in whole or in part and may accept offers to purchase Notes solicited by one and
not the other Agent or offers solicited by each Agent. Each Agent shall have the
right to reject any offer to purchase Notes that such Agent considers to be
unacceptable, and any such rejection shall not be deemed a breach of such
Agent's agreements contained herein.

                  (b) PURCHASES AS PRINCIPAL. Each sale of Notes to an Agent as
principal shall be made in accordance with the terms of this Agreement and, if
requested by such Agent, the Company will enter into a Terms Agreement that will
provide for the sale of such Notes to and the purchase thereof by such Agent.
Each Terms Agreement will be substantially in the form of Exhibit A hereto but
may take the form of an exchange of any form of written telecommunication
between an Agent and the Company.

                  Each Agent's commitment to purchase Notes as principal,
whether pursuant to a Terms Agreement or otherwise, shall be deemed to have been
made on the basis of the representations and warranties of the Company herein
contained and shall be subject to the terms and conditions herein set forth.
Each agreement by an Agent to purchase Notes as principal (whether or not set
forth in a Terms Agreement) shall specify the principal amount of Notes to be
purchased by such Agent pursuant thereto, the Settlement Date (as hereinafter
defined), the maturity date of such Notes, the price to be paid to the Company
for such Notes, the interest rate and interest rate formula, if any, applicable
to such Notes and any other terms of such Notes. Each such agreement shall also
specify any requirements for officers' certificates, opinions of counsel and
letters from the independent public accountants of the Company pursuant to
Section 4 hereof. A Terms Agreement may also specify certain provisions relating
to the reoffering of such Notes by an Agent.

                  Each Terms Agreement shall specify the time and place of
delivery of and payment for such Notes. With respect to each sale of Notes to an
Agent as principal that is not made pursuant to a Terms Agreement, the
procedural details relating to the issue and delivery of such


                                        6

<PAGE>   7



Notes and the payment therefor shall be as set forth in the Administrative
Procedures (as hereinafter defined). Each date of delivery of and payment for
Notes to be purchased by an Agent as principal, whether pursuant to a Terms
Agreement or otherwise, is referred to herein as a "Settlement Date".

                  (c) ADMINISTRATIVE PROCEDURES. Each Agent and the Company
agree to perform the respective duties and obligations specifically provided to
be performed in the Medium-Term Notes Administrative Procedures (attached hereto
as Exhibit B) (the "Administrative Procedures"), as amended from time to time.
The Administrative Procedures may be amended only by written agreement of the
Company and each Agent.

                  (d) DELIVERY. The documents required to be delivered by
Section 4 of this Agreement as a condition precedent to the Agents' obligation
to begin soliciting offers to purchase Notes as agents of the Company shall be
delivered at the office of Brown & Wood LLP, counsel for the Agents, not later
than 9:00 a.m., New York City time, on the date hereof, or at such other time
and/or place as the Agents and the Company may agree upon in writing, but in no
event later than the day prior to the date on which the Agents begin soliciting
offers to purchase Notes or the first date on which the Company accepts any
offer by an Agent to purchase Notes as principal (the "Commencement Date").

                  3. AGREEMENTS. The Company agrees with each Agent that:

                  (a) Prior to the termination of the offering of the Notes
pursuant to this Agreement or any Terms Agreement, the Company will not file any
Prospectus Supplement relating to the Notes or any amendment to the Registration
Statement unless the Company has previously furnished to each Agent a copy
thereof for such Agent's review and will not file any such proposed supplement
or amendment to which any Agent reasonably objects; PROVIDED, HOWEVER, that the
foregoing requirement shall not apply to any of the Company's periodic filings
with the Commission required to be filed pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, copies of which filings the Company will cause to be
delivered to each Agent, upon written request by such Agent, promptly after
being mailed for filing with the Commission. Subject to the foregoing sentence,
the Company will promptly cause each Prospectus Supplement to be filed with or
transmitted for filing to the Commission in accordance with Rule 424(b). The
Company will promptly advise each Agent (i) of the filing of any amendment or
supplement to the Base Prospectus, (ii) of the filing and effectiveness of any
amendment to the Registration Statement, (iii) of any request by the Commission
for any amendment to the Registration Statement or any additional information,
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threatening of
any proceeding for that purpose and (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Notes
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company will use its best efforts to prevent the issuance
of any such stop order or notice of suspension of qualification and, if issued,
to obtain as soon as possible the withdrawal thereof. If the Base Prospectus is
amended or supplemented as a result of the filing under the Exchange Act of any
document incorporated by reference in the Prospectus, the Agents shall not be
obligated to solicit offers to purchase Notes so long as they are not reasonably
satisfied with such document.

                                        7

<PAGE>   8



                  (b) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Securities Act, any event occurs or condition
exists as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact, or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
when the Prospectus, as then amended or supplemented, is delivered to a
purchaser, not misleading, or if, in the opinion of any Agent delivered to the
Company or in the opinion of the Company, it is necessary at any time to amend
or supplement the Prospectus, as then amended or supplemented, to comply with
applicable law, the Company will immediately notify each Agent by telephone
(with confirmation in writing) to suspend solicitation of offers to purchase
Notes and, if so notified by the Company, each Agent shall forthwith suspend
such solicitation and cease using the Prospectus as then amended or
supplemented. If the Company shall decide to amend or supplement the
Registration Statement or Prospectus as then amended or supplemented, it shall
so advise each Agent promptly by telephone (with confirmation in writing) and,
at its expense, shall prepare and cause to be filed promptly with the Commission
an amendment or supplement to the Registration Statement or Prospectus as then
amended or supplemented that will correct such statement or omission or effect
such compliance and will supply such amended or supplemented Prospectus to each
Agent in such quantities as such Agent may reasonably request. If such amendment
or supplement and any documents, certificates, opinions and letters furnished to
the Agents pursuant to paragraph (f) below and Section 5(a), 5(b) and 5(c) in
connection with the preparation and filing of such amendment or supplement are
satisfactory in all respects to such Agents, upon filing of such amendment or
supplement with the Commission or upon the effectiveness of an amendment to the
Registration Statement, such Agents will resume the solicitation of offers to
purchase Notes hereunder. Notwithstanding any other provision of this Section
3(b), until the distribution of any Notes an Agent may own as principal has been
completed, if any event described above in this paragraph (b) occurs, the
Company will, at its own expense, forthwith prepare and cause to be filed
promptly with the Commission an amendment or supplement to the Registration
Statement or Prospectus as then amended or supplemented, satisfactory in all
respects to such Agent, and will supply such amended or supplemented Prospectus
to such Agent in such quantities as such Agent may reasonably request. If such
amendment or supplement and any documents, certificates, opinions and letters
furnished to such Agent pursuant to paragraph (f) below and Sections 5(a), 5(b)
and 5(c) in connection with the preparation and filing of such amendment or
supplement are satisfactory in all respects to such Agent, upon the filing of
such amendment or supplement with the Commission or upon the effectiveness of an
amendment to the Registration Statement, such Agent may resume its resale of
Notes as principal.

                  (c) The Company will make generally available to its security
holders and to each Agent as soon as practicable earning statements that satisfy
the provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder covering twelve month periods
beginning, in each case, not later than the first day of the Company's fiscal
quarter next following the "effective date" (as defined in Rule 158 under the
Securities Act) of the Registration Statement with respect to each sale of
Notes. If such fiscal quarter is the last fiscal quarter of the Company's fiscal
year, such earning statement shall be made available not later than 90 days
after the close of the period covered thereby and in all other cases shall be
made available not later than 45 days after the close of the period covered
thereby.


                                        8

<PAGE>   9



                  (d) The Company will furnish to each Agent, without charge,
two signed copies of the Registration Statement, including exhibits and all
amendments thereto, and during the period mentioned in Section 3(b) above, as
many copies of the Prospectus, any documents incorporated by reference therein
and any supplements and amendments thereto as each Agent may reasonably request.

                  (e) The Company will endeavor to qualify the Notes for offer
and sale under the securities or Blue Sky laws of such jurisdictions as the
Agents shall reasonably request and to maintain such qualifications for as long
as the Agents shall reasonably request; provided, however, that the Company
shall not be obligated to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in which it is not so
qualified.

                  (f) During the term of this Agreement, the Company shall
furnish to each Agent such relevant documents and certificates of officers of
the Company relating to the business, operations and affairs of the Company, the
Registration Statement, the Base Prospectus, any amendments or supplements
thereto, the Indenture, the Notes, this Agreement, the Administrative
Procedures, any Terms Agreement and the performance by the Company of its
obligations hereunder or thereunder as such Agent may from time to time
reasonably request and shall notify each Agent promptly in writing of any
downgrading, or of its receipt of any notice of any intended or potential
downgrading or of a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization", as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act.

                  (g) The Company will, whether or not any sale of Notes is
consummated, pay all expenses incident to the performance of its obligations
under this Agreement and any Terms Agreement, including: (i) the preparation and
filing of the Registration Statement and the Prospectus and all amendments and
supplements thereto, (ii) the preparation, issuance and delivery of the Notes,
(iii) the fees and disbursements of the Company's counsel and accountants and of
the Trustee and its counsel, (iv) the qualification of the Notes under
securities or Blue Sky laws in accordance with the provisions of Section 3(e),
including filing fees and the fees and disbursements of counsel for the Agents
in connection therewith and in connection with the preparation of any Blue Sky
or Legal Investment Memoranda, (v) the printing and delivery to the Agents in
quantities as hereinabove stated of copies of the Registration Statement and all
amendments thereto and of the Base Prospectus and any amendments or supplements
thereto, (vi) the reproduction and delivery to the Agents of copies of the
Indenture and any Blue Sky or Legal Investment Memoranda, (vii) any fees charged
by rating agencies for the rating of the Notes, (viii) the fees and expenses, if
any, incurred with respect to any filing with the National Association of
Securities Dealers, Inc., (ix) the fees and disbursements of counsel for the
Agents incurred in connection with the offering and sale of the Notes, including
any opinions to be rendered by such counsel hereunder, and (x) any out-of-pocket
expenses incurred by the Agents, including any advertising expenses incurred by
the Agents with the approval of the Company.

                  (h) Between the date of any agreement by an Agent to purchase
Notes as principal and the Settlement Date with respect to such agreement, the
Company will not, without such Agent's prior consent, offer, sell, contract to
sell or otherwise dispose of any debt securities


                                        9

<PAGE>   10



of the Company substantially similar to the Notes (other than (i) the Notes that
are to be sold pursuant to such agreement and (ii) commercial paper issued in
the ordinary course of business), except as may otherwise be provided in such
agreement.

                  4. CONDITIONS OF THE OBLIGATIONS OF THE AGENTS. Each Agent's
obligation to solicit offers to purchase Notes as agent of the Company, each
Agent's obligation to purchase Notes as principal pursuant to any Terms
Agreement or otherwise and the obligation of any other purchaser to purchase
Notes will be subject to the accuracy of the representations and warranties on
the part of the Company herein, to the accuracy of the statements of the
Company's officers made in each certificate furnished pursuant to the provisions
hereof and to the performance and observance by the Company of all covenants and
agreements herein contained on its part to be performed and observed (in the
case of any Agent's obligation to solicit offers to purchase Notes, at the time
of such solicitation, and, in the case of any Agent's or any other purchaser's
obligation to purchase Notes, at the time the Company accepts the offer to
purchase such Notes and at the time of purchase) and (in each case) to the
following additional conditions precedent:

                  (a) At the time of such solicitation or the time of such
purchase, as the case may be:

                               (i) There shall not have occurred any change, or
                  any development involving a prospective change, in the
                  condition, financial or otherwise, or in the earnings,
                  business or operations, of the Company and its subsidiaries,
                  taken as a whole, from that set forth in the Registration
                  Statement that, in the judgment of any Agent, is material and
                  adverse and that makes it, in the judgment of any Agent,
                  impracticable to market the Notes on the terms and in the
                  manner contemplated in the Prospectus except, in the case of
                  any purchase of Notes, as disclosed to the Agents in writing
                  by the Company before the Company accepted the offer to
                  purchase such Notes.

                               (ii) There shall not have occurred any (A)
                  suspension or material limitation of trading generally on or
                  by, as the case may be, the New York Stock Exchange, the
                  American Stock Exchange, the National Association of
                  Securities Dealers, Inc., the Chicago Board Options Exchange,
                  the Chicago Mercantile Exchange or the Chicago Board of Trade,
                  (B) suspension of trading of any securities of the Company on
                  any exchange or in the over-the-counter market, (C)
                  declaration of a general moratorium on commercial banking
                  activities in New York by either Federal or New York State
                  authorities or (D) any outbreak or escalation of hostilities
                  or any change in financial markets or any calamity or crisis
                  that, in the judgment of any Agent, is material and adverse
                  and, in the case of any of the events described in clauses
                  (ii)(A) through (D), such event, singly or together with any
                  other such event, makes it, in the judgment of any Agent,
                  impracticable to market the Notes on the terms and in the
                  manner contemplated by the Prospectus, as amended or
                  supplemented, except, in the case of any purchase of Notes,
                  for any such event occurring before the Company accepted the
                  offer to purchase such Notes.



                                       10

<PAGE>   11



                                (iii) There shall not have been any downgrading,
                  nor any notice given of any intended or potential downgrading
                  or of a possible change that does not indicate the direction
                  of the possible change, in the rating accorded any of the
                  Company's securities by any "nationally recognized statistical
                  rating organization", as such term is defined for purposes of
                  Rule 436(g)(2) under the Securities Act, except, in the case
                  of any purchase of Notes, as disclosed to the Agents in
                  writing by the Company before the Company accepted the offer
                  to purchase such Notes.

                  (b) On the Commencement Date and, if called for by any
agreement by an Agent to purchase Notes as principal, on the corresponding
Settlement Date, each Agent shall have received:

                                (i) The opinion, dated as of such date, of
                  Jones, Day, Reavis & Pogue, independent counsel for the
                  Company, to the effect set forth in Exhibit C hereto.

                                (ii) The opinion, dated as of such date, of
                  Larry R. Brown, Senior Vice President and General Counsel of 
                  the Company, to the effect set forth in Exhibit D hereto.

                                (iii) The opinion, dated as of such date, of
                  Brown & Wood LLP, special counsel for the Agents, in form and
                  substance satisfactory to the Agents.

                  (c) On the Commencement Date and, if called for by any
agreement by an Agent to purchase Notes as principal, on the corresponding
Settlement Date, each Agent shall have received a certificate, dated such
Commencement Date or Settlement Date, as the case may be, signed by an executive
officer of the Company to the effect that the representations and warranties of
the Company contained herein are true and correct as of such date and the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied on or before such date.

                  The officer signing and delivering such certificate may rely
upon the best of his knowledge as to proceedings threatened.

                  (d) On the Commencement Date and, if called for by any
agreement by an Agent to purchase Notes as principal, on the corresponding
Settlement Date, the Company's independent public accountants shall have
furnished to each Agent a letter or letters, dated as of the Commencement Date
or such Settlement Date, as the case may be, in form and substance satisfactory
to such Agent containing statements and information of the type ordinarily
included in accountant's "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into the Registration Statement and the Prospectus, as
amended or supplemented.

                  (e) On the Commencement Date and on each Settlement Date, the
Company shall have furnished to each Agent such appropriate further information,
certificates and documents as such Agent may reasonably request.


                                       11

<PAGE>   12



                  5. ADDITIONAL AGREEMENTS OF THE COMPANY. (a) Each time the
Registration Statement or Prospectus is amended or supplemented (other than by
an amendment or supplement providing solely for a change in the interest rates,
redemption provisions, amortization schedules or maturities offered on the Notes
or for a change an Agent deems to be immaterial), the Company will deliver or
cause to be delivered forthwith to each Agent a certificate signed by an
executive officer of the Company, dated the date of such amendment or
supplement, as the case may be, in form reasonably satisfactory to such Agent,
of the same tenor as the certificate referred to in Section 4(c) relating to the
Registration Statement or the Prospectus as amended and supplemented to the time
of delivery of such certificate.

                  (b) Each time the Company furnishes a certificate pursuant to
Section 5(a), the Company shall furnish or cause to be furnished forthwith to
each Agent a written opinion of independent counsel for the Company and the
General Counsel of the Company. Any such opinions shall be dated the date of
such amendment or supplement, as the case may be, shall be in a form
satisfactory to each Agent and shall be of the same tenor as the opinions
referred to in Sections 4(b)(i) and 4(b)(ii), but modified to relate to the
Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such opinion. In lieu of such opinions, counsel last
furnishing such opinions to an Agent may furnish to such Agent a letter to the
effect that such Agent may rely on such last opinion to the same extent as
though it were dated the date of such letter (except that statements in such
last opinion will be deemed to relate to the Registration Statement and the
Prospectus as amended and supplemented to the time of delivery of such letter.)

                  (c) Each time the Registration Statement or the Prospectus is
amended or supplemented to set forth amended or supplemental financial
information or such amended or supplemental information is incorporated by
reference in the Registration Statement or the Prospectus, the Company shall
cause its independent public accountants forthwith to furnish each Agent with a
letter, dated the date of such amendment or supplement, as the case may be, in
form satisfactory to such Agent, of the same tenor as the letter referred to in
Section 4(d), with regard to the amended or supplemental financial information
included or incorporated by reference in the Registration Statement or the
Prospectus as amended or supplemented to the date of such letter.

                  6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Agent and each person, if any, who controls
such Agent within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages or liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or in any
amendment thereof or the Prospectus (as amended if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to such Agent furnished to the Company in writing by such
Agent expressly for use therein.


                                       12

<PAGE>   13



                  (b) Each Agent agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
the Agents, but only with reference to information relating to such Agent
furnished to the Company in writing by such Agent expressly for use in the
Registration Statement or the Prospectus or any amendments or supplements
thereto.

                  (c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceedings
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred; in such case such firm shall be designated in writing by
Morgan Stanley if more than one Agent is indemnified pursuant to paragraph (a)
above. In the case that the Agent other than Morgan Stanley is the indemnified
party pursuant to paragraph (a) above, such firm shall be designated in writing
by such Agent. In the case of parties indemnified pursuant to paragraph (b)
above, such firm shall be designated in writing by the Company. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the third
sentence of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement unless there is a good faith dispute as to
the reasonableness of such fees. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.


                                       13

<PAGE>   14



                  (d) If the indemnification provided for in paragraph (a) or
(b) of this Section 6 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein in
connection with any offering of Notes, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and each
Agent participating in the offering of the Notes that gave rise to such losses,
claims, damages or liabilities (a "Relevant Agent") from the offering of such
Notes or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and each Relevant Agent in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and each Relevant Agent in connection with the offering of such
Notes shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of such Notes (before deducting expenses) received by
the Company bear to the total discounts and commissions received by each
Relevant Agent in respect thereof. The relative fault of the Company and of each
Relevant Agent shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or by such Relevant Agent and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. If more than one Agent is a Relevant Agent in respect to a proceeding,
each Relevant Agent's obligation to contribute pursuant to this Section 6 shall
be several, in the proportion that the principal amount of the Notes that are
the subject of such proceeding and that were offered and sold through such
Relevant Agent bears to the aggregate principal amount of the Notes that are the
subject of such proceeding, and not joint.

                  (e) The Company and each Agent agree that it would not be just
or equitable if contribution pursuant to this Section 6 were determined by PRO
RATA allocation or by other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages
and liabilities referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6, the Agents shall not be required to contribute any amount in excess
of the amount by which the total price at which the Notes referred to in
paragraph (d) above that were offered and sold to the public through the Agents
exceeds the amount of any damages that the Agents have otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 6 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.

                  7. POSITION OF THE AGENTS. In soliciting offers to purchase
the Notes, each Agent is acting solely as an agent for the Company, and not as a
principal, and does not assume


                                       14

<PAGE>   15



any obligation towards or relationship of agency or trust with any purchaser of
Notes. Each Agent shall make reasonable efforts to assist the Company in
obtaining performance by each purchaser whose offer to purchase Notes has been
solicited by such Agent and accepted by the Company, but such Agent shall not
have any liability to the Company in the event any such purchase is not
consummated for any reason. If the Company shall default in its obligations to
deliver Notes to a purchaser whose offer it has accepted, the Company shall hold
such Agent harmless against any loss, claim, damage or liability arising from or
as a result of such default and shall, in particular, pay to such Agent the
commission such Agent would have received had such sale been consummated.

                  8. TERMINATION. This Agreement may be terminated at any time
either by the Company or by an Agent upon the giving of written notice of such
termination to the other party hereto. Any Terms Agreement shall be subject to
termination in the absolute discretion of the parties thereto on the terms set
forth or incorporated by reference therein. The termination of this Agreement
shall not require termination of any agreement by an Agent to purchase Notes as
principal, and the termination of any such agreement shall not require
termination of this Agreement. If this Agreement is terminated, the provisions
of the third paragraph of Section 2(a), the last two sentences of Section 3(b)
and Sections 3(c), 3(g), 6, 7, 9 and 13 shall survive; PROVIDED that if at the
time of termination an offer to purchase Notes has been accepted by the Company
but the time of delivery to the purchaser or its agent of such Notes has not
occurred, the provisions of Sections 2(c), 3(a), 3(b), 3(e), 3(f), 3(h) and 4
shall also survive. If any Terms Agreement is terminated, the provisions of
Sections 2(c), 3, 4, 6, 9 and 13 (which shall have been incorporated by
reference in such Terms Agreement) shall survive.

                  9. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
indemnity and contribution agreements, representations, warranties and other
statements of the Company, its officers and the Agents set forth in or made
pursuant to this Agreement or any agreement by the Agents to purchase Notes as
principal will remain in full force and effect, regardless of any termination of
this Agreement or any such agreement, any investigation made by or on behalf of
the Agents or the Company or any of the officers, directors or controlling
persons referred to in Section 6 and delivery of and payment for the Notes.

                  10. NOTICES. All communications hereunder will be in writing
and effective only on receipt, and, if sent to Morgan Stanley, will be mailed,
delivered or telefaxed and confirmed to it at 1585 Broadway, 2nd Floor, New
York, New York 10036, Attention: Manager, Continuously Offered Products (telefax
number: 212-761-0780), with a copy to it at 1585 Broadway, 34th Floor, New York,
New York 10036, Attention: Peter Cooper, Investment Banking Information Center
(telefax number: 212-761-0260); if sent to Key Capital, will be mailed,
delivered or telefaxed and confirmed to it at 127 Public Square, Cleveland, Ohio
44114, Attention: Dennis Melchior - Medium-Term Note Desk (telefax number:
216-737-4629); if sent to J.P. Morgan, will be mailed, delivered or telefaxed
and confirmed to it at 60 Wall Street, 3rd Floor, New York, New York 10260,
Attention: Manager, Credit Department (telefax number: 212-761-0687); if sent to
NationsBanc, will be mailed, delivered or telefaxed and confirmed to it at 100
North Tryon Street, NC1-007-07-01, Charlotte, NC 28255, Attention: Medium-Term
Note Desk (telefax number: 704-388-9939) or, if sent to the Company, will be
mailed, delivered


                                       15

<PAGE>   16



or telefaxed and confirmed to it at 1835 Dueber Avenue, S.W., Canton, Ohio
44706-2798, Attention: Gene Little.

                  11. SUCCESSORS. This Agreement and any Terms Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors and the officers, directors and controlling persons
referred to in Section 6 and the purchasers of Notes (to the extent expressly
provided in Section 4), and no other person will have any right or obligation
hereunder.

                  12. COUNTERPARTS. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.

                  13. APPLICABLE LAW. This Agreement will be governed by and
construed in accordance with the internal laws of the State of New York.

                  14. HEADINGS. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.




                                       16

<PAGE>   17



         If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and each of you.

                                        Very truly yours,

                                        THE TIMKEN COMPANY

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



The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.

MORGAN STANLEY & CO. INCORPORATED


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

KEY CAPITAL MARKETS, INC.


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

J.P. MORGAN SECURITIES INC.


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


NATIONSBANC MONTGOMERY SECURITIES LLC


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

                                       17

<PAGE>   18



                                                                       EXHIBIT A


                               THE TIMKEN COMPANY

                                MEDIUM-TERM NOTES

                                 TERMS AGREEMENT


                                              ____________________________, 19__


The Timken Company
1835 Dueber Avenue, S.W.
Canton, Ohio 44706-2798

Attention:

                  Re:      Distribution Agreement dated February  ,
                           1998 (The "Distribution Agreement")
                           ----------------------------------------

         The undersigned agrees to purchase the following principal amount of
your Medium-Term Notes: $

                                    Fixed Rate                 Floating Rate
All Notes:                          Notes:                     Notes:
- ----------                          ------                     ------

Purchase                            Interest                   Base rate:
 price:                               Rate:

                                    Applicability 
                                      of modified 
                                      payment upon
                                      acceleration:

Price to public:
                                                               Index
Settlement                          Amortization                  maturity:
  date and time:                      schedule:
                                                               Spread (plus or
Place of                                                          minus):
  delivery:
                                                               Spread
                                                                  multiplier:


                                       A-1

<PAGE>   19



Initial accrual period OID:


Original yield
  to maturity:
                                                              Alternate rate
                                                                 event spread:

Maturity                                                      Initial interest
  date:                                                          rate:

Optional Redemption
  Dates:

Specified Currency:                                           Interest reset
                                                                 dates:

                                                              Maximum interest
                                                                 rate:

Initial redemption                                            Minimum interest
  date:                                                          rate:

Initial redemption                                            Interest payment
  percentage:                                                    period:

                                                              Interest payment
                                                                 dates:

                                                              Interest reset
Annual redemption                                                period:
  percentage decrease:

Other terms:
                                                              Calculation agent:

         The provisions of Sections 1, 2(b) and 2(c) and 3 through 6 and 8
through 13 of the Distribution Agreement and the related definitions are
incorporated by reference herein and shall be deemed to have the same force and
effect as if set forth in full herein.



                                       A-2

<PAGE>   20



         The following information, opinions, certificates, letters and
documents referred to in Section 4 of the Distribution Agreement will be
required: _______________________________


                                           [NAME OF AGENT]



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


Accepted:

The TIMKEN COMPANY



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


                                       A-3

<PAGE>   21




                                                                       EXHIBIT B




                               THE TIMKEN COMPANY

                                  $300,000,000

                                MEDIUM-TERM NOTES

                            ADMINISTRATIVE PROCEDURES

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





          Explained below are the administrative procedures and specific terms
of the offering of Medium-Term Notes (the "Notes"), from time to time by The
Timken Company (the "Company") pursuant to the Distribution Agreement, dated as
of February , 1998 (the "Distribution Agreement") among the Company and Morgan
Stanley & Co. Incorporated, Key Capital Markets, Inc., J.P. Morgan Securities
Inc., and NationsBanc Montgomery Securities LLC (the "Agents"). The Notes will
be issued under an Indenture dated as of February , 1998 (the "Indenture")
between the Company and The Bank of New York, as trustee (the "Trustee"). In the
Distribution Agreement, the Agents have agreed to use reasonable efforts to
solicit purchases of the Notes, and the administrative procedures explained
below will govern the issuance and settlement of any Notes sold through an
Agent, as agent of the Company. An Agent, as principal, may also purchase Notes
for its own account, and if requested by such Agent, the Company and such Agent
will enter into a terms agreement (a "Terms Agreement"), as contemplated by the
Distribution Agreement. The administrative procedures explained below will
govern the issuance and settlement of any Notes purchased by an Agent, as
principal, unless otherwise specified in the applicable Terms Agreement.

          The Trustee will be the Registrar, Calculation Agent, Authenticating
Agent and Paying Agent for the Notes and will perform the duties specified
herein. Each Note will be represented by either a Global Security (as defined
below) delivered to the Trustee, as agent for The Depository Trust Company
("DTC"), and recorded in the book-entry system maintained by DTC (a "Book-Entry
Note") or a certificate delivered to the holder thereof or a person designated
by


                                       B-1

<PAGE>   22



such holder (a "Certificated Note"). Except as set forth in the Indenture, an
owner of a Book-Entry Note will not be entitled to receive a Certificated Note.

          Book-Entry Notes, which may be payable only in U.S. dollars, will be
issued in accordance with the administrative procedures set forth in Part I
hereof as they may subsequently be amended as the result of changes in DTC's
operating procedures. Certificated Notes will be issued in accordance with the
administrative procedures set forth in Part II hereof. Unless otherwise defined
herein, terms defined in the Indenture, the Notes or any prospectus supplement
relating to the Notes shall be used herein as therein defined.

          The Company will advise the Agents in writing of the employees of the
Company with whom the Agents are to communicate regarding offers to purchase
Notes and the related settlement details.


             PART I: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES


          In connection with the qualification of the Book-Entry Notes for
eligibility in the book-entry system maintained by DTC, the Trustee will perform
the custodial, document control and administrative functions described below, in
accordance with its respective obligations under a Letter of Representation from
the Company and the Trustee to DTC, dated as of February , 1998, and a
Medium-Term Note Certificate Agreement between the Trustee and DTC, dated as of
August 17, 1989 (the "MTN Certificate Agreement"), and its obligations as a
participant in DTC, including DTC's Same-Day Funds Settlement System ("SDFS").

Issuance:                           On any date of settlement (as defined under
                                    "Settlement" below) for one or more
                                    Book-Entry Notes, the Company will issue a
                                    single global security in fully registered
                                    form without coupons (a "Global Security")
                                    representing up to U.S. $200,000,000
                                    principal amount of all such Notes that have
                                    the same Original Issue Date, Maturity Date
                                    and other terms. Each Global Security will
                                    be dated and issued as of the date of its
                                    authentication by the Trustee. Each Global
                                    Security will bear an "Interest Accrual
                                    Date," which will be (i) with respect to an
                                    original Global Security (or any portion
                                    thereof), its original issuance date and
                                    (ii) with respect to any Global Security (or
                                    any portion thereof) issued subsequently
                                    upon exchange of a Global Security, or in
                                    lieu of a destroyed, lost or stolen Global
                                    Security, the most recent Interest Payment
                                    Date to which interest has been paid or duly
                                    provided for on the predecessor Global
                                    Security (or if no such payment or provision
                                    has been made, the original issuance date of
                                    the predecessor Global Security), regardless
                                    of the date of authentication of such
                                    subsequently issued Global Security.
                                    Book-Entry Notes

                                       B-2

<PAGE>   23



                                    may be payable only in U.S. dollars. No
                                    Global Security will represent any
                                    Certificated Note.

Denominations:                      Book-Entry Notes will be issued in principal
                                    amounts of U.S. $1,000 or any amount in
                                    excess thereof that is an integral multiple
                                    of U.S. $1,000. Global Securities will be
                                    denominated in principal amounts not in
                                    excess of U.S. $200,000,000. If one or more
                                    Book-Entry Notes having an aggregate
                                    principal amount in excess of $200,000,000
                                    would, but for the preceding sentence, be
                                    represented by a single Global Security,
                                    then one Global Security will be issued to
                                    represent each U.S. $200,000,000 principal
                                    amount of such Book-Entry Note or Notes and
                                    an additional Global Security will be issued
                                    to represent any remaining principal amount
                                    of such Book-Entry Note or Notes. In such a
                                    case, each of the Global Securities
                                    representing such Book-Entry Note or Notes
                                    shall be assigned the same CUSIP number.


Preparation of                      If any offer to purchase a Book-Entry
Pricing Supplement:                 Note is accepted by or on behalf of the
                                    Company, the Company will prepare a pricing
                                    supplement (a "Pricing Supplement")
                                    reflecting the terms of such Note. The
                                    Company (i) will arrange to file 1 copy of
                                    such Pricing Supplement with the Commission
                                    in accordance with the applicable paragraph
                                    of Rule 424(b) under the Securities Act and
                                    (ii) will, as soon as possible and in any
                                    event not later than the date on which such
                                    Pricing Supplement is filed with the
                                    Commission, deliver the number of copies of
                                    such Pricing Supplement to the relevant
                                    Agent as such Agent shall request.

                                    In each instance that a Pricing Supplement
                                    is prepared, the relevant Agent will affix
                                    the Pricing Supplement to Prospectuses prior
                                    to their use. Outdated Pricing Supplements,
                                    and the Prospectuses to which they are
                                    attached (other than those retained for
                                    files), will be destroyed.

Settlement:                         The receipt by the Company of immediately
                                    available funds in payment for a Book-Entry
                                    Note and the authentication and issuance of
                                    the Global Security representing such Note
                                    shall constitute "settlement" with respect
                                    to such Note. All offers accepted by the
                                    Company will be settled on the third
                                    Business Day next succeeding the date of
                                    acceptance

                                       B-3

<PAGE>   24



                                    pursuant to the timetable for settlement set
                                    forth below, unless the Company, the Trustee
                                    and the purchaser agree to settlement on
                                    another day, which shall be no earlier than
                                    the next Business Day.

Settlement                          Settlement Procedures with regard to each
Procedures:                         Book-Entry Note sold by the Company to or
                                    through an Agent (unless otherwise specified
                                    pursuant to a Terms Agreement) shall be as
                                    follows:

                                            A. The relevant Agent will advise
                                            the Company by telephone that such
                                            Note is a Book-Entry Note and of the
                                            following settlement information:

                                                 1. Principal amount.

                                                 2. Maturity Date.

                                                 3. In the case of a Fixed Rate
                                                 Book-Entry Note, the Interest
                                                 Rate, whether such Note will
                                                 pay interest annually or
                                                 semiannually and whether such
                                                 Note is an Amortizing Note,
                                                 and, if so, the amortization
                                                 schedule, or, in the case of a
                                                 Floating Rate Book-Entry Note,
                                                 the Initial Interest Rate (if
                                                 known at such time), Interest
                                                 Payment Date(s), Interest
                                                 Payment Period, Calculation
                                                 Agent, Base Rate, Index
                                                 Maturity, Interest Reset
                                                 Period, Initial Interest Reset
                                                 Date, Interest Reset Dates,
                                                 Spread or Spread Multiplier (if
                                                 any), Minimum Interest Rate (if
                                                 any), Maximum Interest Rate (if
                                                 any) and the Alternate Rate
                                                 Event Spread (if any).

                                                 4. Redemption or repayment
                                                 provisions (if any).

                                                 5. Settlement date (Original
                                                 Issue Date).

                                                 6. Interest Accrual Date.

                                                 7. Price.

                                                 8. Agent's commission (if any)
                                                 determined as provided in the
                                                 Distribution Agreement.


                                       B-4

<PAGE>   25



                                                 9. Whether the Note is an
                                                 Original Issue Discount Note
                                                 (an "OID Note"), and if it is
                                                 an OID Note, the total amount
                                                 of OID, the yield to maturity,
                                                 the initial accrual period OID
                                                 and the applicability of
                                                 Modified Payment upon
                                                 Acceleration (and, if so, the
                                                 Issue Price).

                                                 10. Any other applicable terms.

                                            B. The Company will advise the
                                            Trustee by telephone or electronic
                                            transmission (confirmed in writing
                                            at any time on the same date) of the
                                            information set forth in Settlement
                                            Procedure "A" above. The Company
                                            will then assign a CUSIP number to
                                            the Global Security representing
                                            such Note and will notify the
                                            Trustee and the relevant Agent of
                                            such CUSIP number by telephone as
                                            soon as practicable.

                                            C. The Trustee will enter a pending
                                            deposit message through DTC's
                                            Participant Terminal System,
                                            providing the following settlement
                                            information to DTC, the relevant
                                            Agent:

                                                 1. The information set forth in
                                                 Settlement Procedure "A".

                                                 2. The Initial Interest Payment
                                                 Date for such Note, the number
                                                 of days by which such date
                                                 succeeds the related DTC Record
                                                 Date (which in the case of
                                                 Floating Rate Notes which reset
                                                 daily or weekly, shall be the
                                                 date five calendar days
                                                 immediately preceding the
                                                 applicable Interest Payment
                                                 Date and, in the case of all
                                                 other Notes, shall be the
                                                 Record Date as defined in the
                                                 Note) and, if known, the amount
                                                 of interest payable on such
                                                 Initial Interest Payment Date.

                                                 3. The CUSIP number of the
                                                 Global Security representing
                                                 such Note.

                                                 4. Whether such Global Security
                                                 will represent any other
                                                 Book-Entry Note (to the extent
                                                 known at such time).

                                       B-5

<PAGE>   26



                                                 5. Whether such Note is an
                                                 Amortizing Note (by an
                                                 appropriate notation in the
                                                 comments field of DTC's
                                                 Participant Terminal System).

                                                 6. The number of participant
                                                 accounts to be maintained by
                                                 DTC on behalf of the relevant
                                                 Agent and the Trustee.

                                            D. The Trustee will complete and
                                            authenticate the Global Security
                                            representing such Note.

                                            E. DTC will credit such Note to the
                                            Trustee's participant account at
                                            DTC.


                                            F. The Trustee will enter an SDFS
                                            deliver order through DTC's
                                            Participant Terminal System
                                            instructing DTC to (i) debit such
                                            Note to the Trustee's participant
                                            account and credit such Note to the
                                            relevant Agent's participant account
                                            and (ii) debit such Agent's
                                            settlement account and credit the
                                            Trustee's settlement account for an
                                            amount equal to the price of such
                                            Note less such Agent's commission
                                            (if any). The entry of such a
                                            deliver order shall constitute a
                                            representation and warranty by the
                                            Trustee to DTC that (a) the Global
                                            Security representing such
                                            Book-Entry Note has been issued and
                                            authenticated and (b) the Trustee is
                                            holding such Global Security
                                            pursuant to the MTN Certificate
                                            Agreement.

                                            G. Unless the relevant Agent is the
                                            end purchaser of such Note, such
                                            Agent will enter an SDFS deliver
                                            order through DTC's Participant
                                            Terminal System instructing DTC (i)
                                            to debit such Note to such Agent's
                                            participant account and credit such
                                            Note to the participant accounts of
                                            the Participants with respect to
                                            such Note and (ii) to debit the
                                            settlement accounts of such
                                            Participants and credit the
                                            settlement account of such Agent for
                                            an amount equal to the price of such
                                            Note.

                                            H. Transfers of funds in accordance
                                            with SDFS deliver orders described
                                            in Settlement Procedures "F" and "G"
                                            will be settled in accordance with
                                            SDFS

                                       B-6

<PAGE>   27



                                            operating procedures in effect on
                                            the settlement date.

                                            I. The Trustee will credit to the
                                            account of the Company maintained at
                                            Mellon Bank N.A., ABA 04030 0026-1,
                                            Account #171-9666, in immediately
                                            available funds the amount
                                            transferred to the Trustee in
                                            accordance with Settlement Procedure
                                            "F".

                                            J. Unless the relevant Agent is the
                                            end purchaser of such Note, such
                                            Agent will confirm the purchase of
                                            such Note to the purchaser either by
                                            transmitting to the Participants
                                            with respect to such Note a
                                            confirmation order or orders through
                                            DTC's institutional delivery system
                                            or by mailing a written confirmation
                                            to such purchaser.

                                            K. Monthly, the Trustee will send to
                                            the Company a statement setting
                                            forth the principal amount of Notes
                                            outstanding as of that date under
                                            the Indenture.

Settlement                          For sales by the Company of Book-Entry Notes
Procedures                          to or through an Agent (unless otherwise
Timetable:                          specified pursuant to a Terms Agreement) for
                                    settlement on the first Business Day after
                                    the sale date, Settlement Procedures "A"
                                    through "J" set forth above shall be
                                    completed as soon as possible but not later
                                    than the respective times in New York City
                                    set forth below:

                                    Settlement
                                    Procedure         Time
                                    ---------         ----

                                       A        11:00 A.M. on sale date
                                       B        12:00 Noon on sale date
                                       C        2:00 P.M. on sale date
                                       D        9:00 A.M. on settlement date
                                       E        10:00 A.M. on settlement date
                                       F-G      2:00 P.M. on settlement date
                                       H        4:45 P.M. on settlement date
                                       I-J      5:00 P.M. on settlement date

                                    If a sale is to be settled more than one
                                    Business Day after the sale date, Settlement
                                    procedures "A", "B" and "C" shall be
                                    completed as soon as practicable but no
                                    later than 11:00 A.M., 12:00 Noon and 2:00
                                    P.M., respectively, on


                                       B-7

<PAGE>   28



                                    the first Business Day after the sale date.
                                    If the Initial Interest Rate for a Floating
                                    Rate Book-Entry Note has not been determined
                                    at the time that Settlement Procedure "A" is
                                    completed, Settlement Procedures "B" and "C"
                                    shall be completed as soon as such rate has
                                    been determined but no later than 12:00 Noon
                                    and 2:00 P.M., respectively, on the first
                                    Business Day before the settlement date.
                                    Settlement Procedure "H" is subject to
                                    extension in accordance with any extension
                                    of Fedwire closing deadlines and in the
                                    other events specified in the SDFS operating
                                    procedures in effect on the settlement date.

                                    If settlement of a Book-Entry Note is
                                    rescheduled or cancelled, the Trustee, after
                                    receiving notice from the Company or the
                                    relevant Agent, will deliver to DTC, through
                                    DTC's Participant Terminal System, a
                                    cancellation message to such effect by no
                                    later than 2:00 P.M. on the Business Day
                                    immediately preceding the scheduled
                                    settlement date.

Failure                             If the Trustee fails to enter an SDFS
to Settle:                          deliver order with respect to a Book-Entry
                                    Note pursuant to Settlement Procedure "F",
                                    the Trustee may deliver to DTC, through
                                    DTC's Participant Terminal System, as soon
                                    as practicable a withdrawal message
                                    instructing DTC to debit such Note to the
                                    Trustee's participant account, provided that
                                    the Trustee's participant account contains a
                                    principal amount of the Global Security
                                    representing such Note that is at least
                                    equal to the principal amount to be debited.
                                    If a withdrawal message is processed with
                                    respect to all the Book-Entry Notes
                                    represented by a Global Security, the
                                    Trustee will mark such Global Security
                                    "cancelled," make appropriate entries in the
                                    Trustee's records and send such cancelled
                                    Global Security to the Company. The CUSIP
                                    number assigned to such Global Security
                                    shall, in accordance with the procedures of
                                    the CUSIP Service Bureau of Standard &
                                    Poor's Rating Services, be cancelled and not
                                    immediately reassigned. If a withdrawal
                                    message is processed with respect to one or
                                    more, but not all, of the Book-Entry Notes
                                    represented by a Global Security, the
                                    Trustee will exchange such Global Security
                                    for two Global Securities, one of which
                                    shall represent such Book-Entry Note or
                                    Notes and shall be cancelled immediately
                                    after issuance and the other of which shall
                                    represent the remaining Book-Entry Notes
                                    previously represented by the


                                       B-8

<PAGE>   29



                                    surrendered Global Security and shall bear
                                    the CUSIP number of the surrendered Global
                                    Security.

                                    If the purchase price for any Book-Entry
                                    Note is not timely paid to the Participants
                                    with respect to such Note by the beneficial
                                    purchaser thereof (or a person, including an
                                    indirect participant in DTC, acting on
                                    behalf of such purchaser), such Participants
                                    and, in turn, the relevant Agent may enter
                                    SDFS deliver orders through DTC's
                                    Participant Terminal System reversing the
                                    orders entered pursuant to Settlement
                                    Procedures "F" and "G", respectively.
                                    Thereafter, the Trustee will deliver the
                                    withdrawal message and take the related
                                    actions described in the preceding
                                    paragraph.

                                    Notwithstanding the foregoing, upon any
                                    failure to settle with respect to a
                                    Book-Entry Note, DTC may take any actions in
                                    accordance with its SDFS operating
                                    procedures then in effect.

                                    In the event of a failure to settle with
                                    respect to one or more, but not all, of the
                                    Book-Entry Notes to have been represented by
                                    a Global Security, the Trustee will provide,
                                    in accordance with Settlement Procedures "D"
                                    and "F", for the authentication and issuance
                                    of a Global Security representing the
                                    Book-Entry Notes to be represented by such
                                    Global Security and will make appropriate
                                    entries in its records.

                                    Nothing herein shall be deemed to require
                                    the Trustee to risk or expend its own funds
                                    in connection with any payments to the
                                    Company, the Agents or DTC or any
                                    Noteholder, it being understood by all
                                    parties that payments made by the Trustee to
                                    the Company or the Agents or DTC, or any
                                    Noteholder shall be made only to the extent
                                    that funds are provided to the Trustee for
                                    such purpose.


            PART II: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES


         The Trustee will serve as Registrar in connection with the Certificated
Notes.

Issuance:                           Each Certificated Note will be dated and
                                    issued as of the date of its authentication
                                    by the Trustee. Each Certificated Note will
                                    bear an Original Issue Date, which will be
                                    (i) with


                                       B-9

<PAGE>   30



                                    respect to an original Certificated Note (or
                                    any portion thereof), its original issuance
                                    date (which will be the settlement date) and
                                    (ii) with respect to any Certificated Note
                                    (or portion thereof) issued subsequently
                                    upon transfer or exchange of a Certificated
                                    Note or in lieu of a destroyed, lost or
                                    stolen Certificated Note, the original
                                    issuance date of the predecessor
                                    Certificated Note, regardless of the date of
                                    authentication of such subsequently issued
                                    Certificated Note.

Preparation                         If any offer to purchase a Certificated Note
of Pricing                          is accepted by or on behalf of the Company,
Supplement:                         the Company will prepare a Pricing
                                    Supplement reflecting the terms of such
                                    Note. The Company (i) will arrange to file
                                    10 copies of such Pricing Supplement with
                                    the Commission in accordance with the
                                    applicable paragraph of Rule 424(b) under
                                    the Securities Act and (ii) will, as soon as
                                    possible and in any event not later than the
                                    date on which such Pricing Supplement is
                                    filed with the Commission, deliver the
                                    number of copies of such Pricing Supplement
                                    to the relevant Agent as such Agent shall
                                    request.

                                    In each instance that a Pricing Supplement
                                    is prepared, the relevant Agent will affix
                                    the Pricing Supplement to Prospectuses prior
                                    to their use. Outdated Pricing Supplements,
                                    and the Prospectuses to which they are
                                    attached (other than those retained for
                                    files), will be destroyed.

Settlement:                         The receipt by the Company of immediately
                                    available funds in exchange for an
                                    authenticated Certificated Note delivered to
                                    the relevant Agent and such Agent's delivery
                                    of such Note against receipt of immediately
                                    available funds shall constitute
                                    "settlement" with respect to such Note. All
                                    offers accepted by the Company will be
                                    settled on the third Business Day next
                                    succeeding the date of acceptance pursuant
                                    to the timetable for settlement set forth
                                    below, unless the Company and the purchaser
                                    agree to settlement on another date, which
                                    date shall be no earlier than the next
                                    Business Day.

Settlement                          Settlement Procedures with regard to each
Procedures:                         Certificated Note sold by the Company to or
                                    through an Agent (unless otherwise specified
                                    pursuant to a Terms Agreement) shall be as
                                    follows:


                                      B-10

<PAGE>   31



                                    A. The relevant Agent will advise the
                                    Company by telephone that such Note is a
                                    Certificated Note and of the following
                                    settlement information:

                                    1. Name in which such Note is to be
                                    registered ("Registered Owner").

                                    2. Address of the Registered Owner and
                                    address for payment of principal and
                                    interest.

                                    3. Taxpayer identification number of the
                                    Registered Owner (if available).

                                    4. Principal amount.

                                    5. Maturity Date.

                                    6. In the case of a Fixed Rate Certificated
                                    Note, the Interest Rate, whether such Note
                                    will pay interest annually or semiannually
                                    and whether such Note is an Amortizing Note
                                    and, if so, the amortization schedule, or,
                                    in the case of a Floating Rate Certificated
                                    Note, the Initial Interest Rate (if known at
                                    such time), Interest Payment Date(s),
                                    Interest Payment Period, Calculation Agent,
                                    Base Rate, Index Maturity, Interest Reset
                                    Period, Initial Interest Reset Date,
                                    Interest Reset Dates, Spread or Spread
                                    Multiplier (if any), Minimum Interest Rate
                                    (if any), Maximum Interest Rate (if any) and
                                    the Alternate Rate Event Spread (if any).

                                    7. Redemption or repayment provisions (if
                                    any).

                                    8. Settlement date (Original Issue Date).

                                    9. Interest Accrual Date.

                                    10. Price.

                                    11. Agent's commission (if any) determined
                                    as provided in the Distribution Agreement.

                                    12. Denominations.

                                    13. Specified Currency.

                                    14. Whether the Note is an OID Note, and if
                                    it is an OID Note, the total amount of OID,
                                    the yield to maturity,


                                      B-11

<PAGE>   32



                                    the initial accrual period OID and the
                                    applicability of Modified Payment upon
                                    Acceleration (and if so, the Issue Price).

                                    15. Any other applicable terms.

                                    B. The Company will advise the Trustee by
                                    telephone or electronic transmission
                                    (confirmed in writing at any time on the
                                    same date) of the information set forth in
                                    Settlement Procedure "A" above.

                                    C. The Company will have delivered to the
                                    Trustee a pre-printed four-ply packet for
                                    such Note, which packet will contain the
                                    following documents in forms that have been
                                    approved by the Company, the relevant Agent
                                    and the Trustee:

                                    1. Note with customer confirmation.

                                    2. Stub One - For the Trustee.

                                    3. Stub Two - For the relevant Agent.

                                    4. Stub Three - For the Company.

                                    D. The Trustee will complete such Note and
                                    authenticate such Note and deliver it (with
                                    the confirmation) and Stubs One and Two to
                                    the relevant Agent, and such Agent will
                                    acknowledge receipt of the Note by stamping
                                    or otherwise marking Stub One and returning
                                    it to the Trustee. Such delivery will be
                                    made only against such acknowledgment of
                                    receipt and evidence that instructions have
                                    been given by such Agent for payment to the
                                    account of the Company at Mellon Bank N.A.,
                                    ABA 04030 0026-1, Account #171- 9666, or to
                                    such other account as the Company shall have
                                    specified to such Agent and the Trustee, in
                                    immediately available funds, of an amount
                                    equal to the price of such Note less such
                                    Agent's commission (if any). In the event
                                    that the instructions given by such Agent
                                    for payment to the account of the Company
                                    are revoked, the Company will as promptly as
                                    possible wire transfer to the account of
                                    such Agent an amount of immediately
                                    available funds equal to the amount of such
                                    payment made.

                                    E. Unless the relevant Agent is the end
                                    purchaser of such Note, such Agent will
                                    deliver such Note (with confirmation)


                                      B-12

<PAGE>   33



                                    to the customer against payment in
                                    immediately available funds. Such Agent will
                                    obtain the acknowledgment of receipt of such
                                    Note by retaining Stub Two.

                                    F. The Trustee will send Stub Three to the
                                    Company by first-class mail. Monthly, the
                                    Trustee will also send to the Company a
                                    statement setting forth the principal amount
                                    of the Notes outstanding as of that date
                                    under the Indenture and setting forth a
                                    brief description of any sales of which the
                                    Company has advised the Trustee that have
                                    not yet been settled.

Settlement                          For sales by the Company of Certificated to
Notes Procedures                    or through an Agent (unless otherwise
Timetable:                          specified pursuant to a Terms Agreement),
                                    Settlement Procedures "A" through "F" set
                                    forth above shall be completed on or before
                                    the respective times in New York City set
                                    forth below:

                                    Settlement
                                    Procedure                Time
                                    ---------                ----

                                        A           2:00 P.M. on day before
                                                    settlement date
                                        B           3:00 P.M. on day before
                                                    settlement date
                                        C-D         2:15 P.M. on settlement date
                                        E           3:00 P.M. on settlement date
                                        F           5:00 P.M. on settlement date

Failure                             If a purchaser fails to accept delivery of
to Settle:                          and make payment for any Certificated Note,
                                    the relevant Agent will notify the Company
                                    and the Trustee by telephone and return such
                                    Note to the Trustee. Upon receipt of such
                                    notice, the Company will immediately wire
                                    transfer to the account of such Agent an
                                    amount equal to the price of such Note less
                                    such Agent's commission in respect of such
                                    Note (if any). Such wire transfer will be
                                    made on the settlement date, if possible,
                                    and in any event not later than the Business
                                    Day following the settlement date. If the
                                    failure shall have occurred for any reason
                                    other than a default by such Agent in the
                                    performance of its obligations hereunder and
                                    under the Distribution Agreement, then the
                                    Company will reimburse such Agent or the
                                    Trustee, as appropriate, on an equitable
                                    basis for its loss of the use of the funds
                                    during the period when they were credited to
                                    the account of the


                                      B-13

<PAGE>   34



                                    Company. Immediately upon receipt of the
                                    Certificated Note in respect of which such
                                    failure occurred, the Trustee will mark such
                                    Note "cancelled," make appropriate entries
                                    in the Trustee's records and send such Note
                                    to the Company.

                                    Nothing herein shall be deemed to require
                                    the Trustee to risk or expend its own funds
                                    in connection with any payments to the
                                    Company, the Agents or any Noteholder, it
                                    being understood by all parties that
                                    payments made by the Trustee to the Company
                                    or the Agents, or any Noteholder shall be
                                    made only to the extent that funds are
                                    provided to the Trustee for such purpose.






                                      B-14

<PAGE>   35




                                                                       EXHIBIT C
                                                                       ---------





                                          February  , 1998

Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036

Key Capital Markets, Inc.
127 Public Square
Cleveland, Ohio 44114

J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260

NationsBanc Montgomery Securities LLC
100 North Tryon Street
NC1-007-07-01
Charlotte, NC 28255



                  Re:  The Timken Company Medium-Term Notes Due From 9 Months to
                       30 Years From Date of Issue
                       ---------------------------------------------------------

Gentlemen:

                  We have acted as counsel to The Timken Company (the "Company")
in connection with the issue and sale by the Company of up to $300,000,000
aggregate principal amount of its medium-term notes (or the equivalent thereof
in one or more foreign currencies or composite currencies) due from 9 months to
30 years from date of issue (the "Notes"), which may be issued from time to time
pursuant to an Indenture (the "Indenture") dated as of February , 1998 between
the Company and The Bank of New York, as trustee, and which may be sold pursuant
to the Distribution Agreement (the "Distribution Agreement") dated February ,
1998 between the Company, Morgan Stanley & Co. Incorporated, Key Capital
Markets, Inc., J.P. Morgan Securities Inc. and NationsBanc Montgomery Securities
LLC (the "Agents"). This opinion is furnished to you pursuant to Section 4(b)(i)
of the Distribution Agreement. Terms used in this opinion that are defined in
the Distribution Agreement are used as so defined unless otherwise indicated
herein.


                                       C-1

<PAGE>   36




                  In our capacity as counsel to the Company, we have examined
such documents, records and matters of law as we have deemed necessary for
purposes of this opinion, and based thereupon we are of the opinion that:

                  (1) The Company has been duly formed, is validly existing as a
         corporation in good standing under the laws of the State of Ohio, and
         has the necessary corporate power and authority to own its property and
         to conduct its business as described in the Prospectus.

                  (2) Each of the Distribution Agreement and any applicable
         Terms Agreement has been duly authorized, executed and delivered by the
         Company and is a valid and binding agreement of the Company, in each
         case enforceable in accordance with its terms except as (i) rights to
         indemnity and contribution thereunder may be limited under applicable
         securities law, (ii) the enforceability thereof may be limited by
         bankruptcy, insolvency, reorganization, moratorium or other similar
         laws affecting creditors' rights generally and (iii) the enforceability
         thereof is subject to general principles of equity, including the
         possible unavailability of specific performance or injunctive relief,
         regardless of whether such enforceability is considered in a proceeding
         in equity or at law.

                  (3) The Indenture has been duly qualified under the Trust
         Indenture Act and has been duly authorized, executed and delivered by
         the Company and is a valid and binding agreement of the Company,
         enforceable in accordance with its terms except (i) as the
         enforceability thereof may be limited by bankruptcy, insolvency,
         reorganization, moratorium or other similar laws affecting creditors'
         rights generally, (ii) as the enforceability thereof is subject to
         general principles of equity, including the possible unavailability of
         specific performance or injunctive relief, regardless of whether such
         enforceability is considered in a proceeding in equity or at law, and
         without limiting the generality of (ii) above, (iii) as the
         enforceability thereof may be limited by governmental authority to
         limit, delay or prohibit the making of payments in foreign currency or
         currency units or payments outside the United States and (iv) U.S.
         courts may not give effect to rates of exchange in effect at the time
         any judgment payable in a foreign currency may be rendered against the
         Company by any foreign court.

                  (4) The Notes have been duly authorized and when executed and
         authenticated in accordance with the Indenture and delivered to and
         duly paid for by the purchasers thereof as contemplated by the
         Distribution Agreement, will be entitled to the benefits of the
         Indenture and will be valid and binding obligations of the Company,
         enforceable in accordance with their respective terms except as the
         enforceability thereof (i) may be limited by bankruptcy, insolvency,
         reorganization, moratorium or other similar laws affecting creditors'
         rights generally, (ii) is subject to general principles of equity,
         including the possible unavailability of specific performance or
         injunctive relief, regardless of whether such enforceability is
         considered in a proceeding in equity, or at law, and without limiting
         the generality of (ii) above, (iii) may be limited by governmental
         authority to limit, delay or prohibit the making of payments in foreign
         currency or currency units or


                                       C-2

<PAGE>   37



         payments outside the United States and (iv) U.S. courts may not give
         effect to rates of exchange in effect at the time any judgment payable
         in a foreign currency may be rendered against the Company by any
         foreign court.

                  (5) The execution and delivery by the Company of, and the
         performance by the Company of its obligations under, the Distribution
         Agreement, the Notes, the Indenture and any applicable Terms Agreement
         will not contravene any provision of applicable law or the Amended
         Articles of Incorporation or the Amended Code of Regulations of the
         Company or any agreement or other instrument known to us which is
         binding upon the Company or any of its subsidiaries and which is
         material to the Company and its subsidiaries, taken as a whole, or, to
         the best of our knowledge, any judgment, order or decree of any
         governmental body, agency or court having jurisdiction over the Company
         or any of its subsidiaries, and no consent, approval, authorization or
         order of or qualification with any governmental body or agency is
         required for the performance by the Company of its obligations under
         the Distribution Agreement, the Notes, the indenture and any applicable
         Terms Agreement, except such as have been obtained and such as may be
         required by the securities or Blue Sky laws of the various states in
         connection with the offer and sale of the Notes.

                  We have participated in the preparation of the Registration
Statement and Prospectus (the documents incorporated into the Prospectus by
reference having previously been prepared and filed by the Company with only
very limited review by us). From time to time we have had discussions with
officers and employees of the Company, Ernst & Young LLP, the independent
accountants who examined certain of the financial statements of the Company and
its consolidated subsidiaries included in the Registration Statement and
Prospectus, and your representatives concerning the information contained in the
Registration Statement and Prospectus and the proposed responses to various
items in Form S-3. Based thereupon we are of the opinion that the Registration
Statement and the Prospectus (except for the financial statements and financial
schedules included therein, as to which we express no opinion) at the time the
Registration Statement became effective under the Securities Act complied as to
form in all material respects with the Securities Act and the rules and
regulations thereunder. In passing upon the form of such documents, we
necessarily have assumed, and have not checked or otherwise verified, the
correctness and completeness of the statements made therein and take no
responsibility therefor.

                  We are of the opinion that the statements contained in the
Registration Statement under the captions "Description of Securities," "Plan of
Distribution" and under Item 15, insofar as they purport to summarize the
provisions of documents referred to therein, present fair summaries of such
provisions, and are of the opinion ascribed to us in the Prospectus under thee
caption "United States Federal Taxation."

                  We have not independently verified and are not passing upon,
and do not assume any responsibility for, the accuracy, completeness, or
fairness (except as set forth in the immediately preceding paragraph above) of
the information contained in the Registration Statement and Prospectus,
including any document incorporated or deemed to be incorporated


                                       C-3

<PAGE>   38



therein by reference. Based upon the participation and discussions described
above, however, no facts have come to our attention that cause us to believe
that the Registration Statement (except for the financial statements end
financial schedules included therein and that part of the Registration Statement
that constitutes the Form T-1, In each case, as to which we express no view), at
the time it became effective contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, or that the Prospectus
(except for the financial statements and financial schedules included therein as
to which we express no view) contains any untrue statement of a material tact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.

                  The opinions expressed herein are limited to matters governed
by the laws of the States of Ohio and New York (other than the securities or
Blue Sky laws of such States) and the federal laws of the United States of
America. This opinion is rendered to you as of the date hereof, and we undertake
no responsibility to advise you of any changes in facts or law subsequent to the
date hereof.

                  This opinion is furnished by us, as counsel to the Company, to
you solely for your benefit pursuant to Section 4(b)(i) of the Distribution
Agreement, upon the understanding that we are not hereby assuming any
professional responsibility to any other person whatsoever.

                                            Very truly yours,



                                            JONES, DAY, REAVIS & POGUE



                                       C-4

<PAGE>   39



                                                                       EXHIBIT D
                                                                       ---------





                                              February  , 1998

Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036

Key Capital Markets, Inc.
127 Public Square
Cleveland, Ohio 44114

J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260

NationsBanc Montgomery Securities LLC
100 North Tryon Street
NC1-007-07-01
Charlotte, NC 28255



                  Re:  The Timken Company Medium-Term Notes Due From 9 Months to
                       30 Years From Date of Issue
                       ---------------------------------------------------------

Gentlemen:

                  I am the Senior Vice President and General Counsel of The
Timken Company (the "Company") and have acted as counsel to the Company in
connection with the issue and sale by the Company of up to $300,000,000 or the
equivalent thereof in one or more foreign or composite currencies) aggregate
principal amount of its medium-term notes due from 9 months to 30 years from
date of issue (the "Notes"), which may be issued from time to time pursuant to
an Indenture (the "Indenture") dated as of February , 1998 between the Company
and The Bank of New York, as trustee, and which may be sold pursuant to the
Distribution Agreement (the Distribution Agreements) dated February , 1998
between the Company, Morgan Stanley & Co. Incorporated, Key Capital Markets,
Inc., J.P. Morgan Securities Inc. and NationsBanc Montgomery Securities LLC (the
"Agents"). This opinion is furnished to you pursuant to Section 4(b)(ii) of the
Distribution Agreement. Terms used in this opinion that are defined in the
Distribution Agreement are used as so defined unless otherwise indicated herein.


                                       D-1

<PAGE>   40



                  In my capacity as counsel to the Company, I have examined such
documents, records and matters of law as I have deemed necessary for purposes of
this opinion, and based thereupon I am of the opinion that:

                  (1) The Company is in good standing as a foreign corporation
         in each jurisdiction in which the conduct of its business or its
         ownership or leasing of property requires such qualification, except to
         the extent that the failure to be so qualified or be in good standing
         would not have a material adverse effect on the Company and its
         subsidiaries, taken as a whole.

                  (2) Each of the Company's Significant Subsidiaries (as defined
         in Rule 405 under the Securities Act of 1933) has been duly
         incorporated, is validly existing as a corporation in good standing
         under the laws of its respective jurisdiction of incorporation, has the
         necessary corporate power and authority to own its property and to
         conduct its business as described in the Prospectus and is in good
         standing as a foreign corporation in each jurisdiction in which the
         conduct of its business or its ownership or leasing of property
         requires such qualification, except to the extent that the failure to
         be so qualified or be in good standing would not have a material
         adverse effect on the Company And its subsidiaries, taken as a whole.

                  (3) Each of the Company and its subsidiaries has all necessary
         consents, authorizations, approvals, orders, certificates and permits
         of and from, and has made all declarations and filings with, all
         federal, state, local and other governmental authorities, all
         self-regulatory organizations and all courts and other tribunals, to
         own, lease, license and use its properties and assets and to conduct
         its business in the manner described in the Prospectus, except to the
         extent that the failure to obtain or file would not have a material
         adverse effect on the Company and its subsidiaries, taken as a whole.

                  (4) The statements contained in the Registration Statement
         under "Item 3 of Part I of the Company's most recent annual report on
         Form 10-K incorporated by reference in the Prospectus and Item 1 of
         Part II of the Company's quarterly reports on Form 10-Q filed since the
         most recent annual report on Form 10-K incorporated by reference in the
         Prospectus, in each case insofar as such statements constitute a
         summary of the legal matters, documents or proceedings referred to
         therein, fairly present the information called for with respect to such
         legal matters, documents and proceedings and, insofar as they purport
         to summarize matters referred to therein, present fair summaries of
         such matters.

                  (5) After due inquiry, I do not know of any legal or
         governmental proceeding pending or threatened to which the Company or
         any of its subsidiaries is a party or to which any of the properties of
         the Company or any of its subsidiaries is subject that is required to
         be described in the Registration Statement or the Prospectus, and is
         not so described, or of any statute, regulation, contract or other
         document that is required to be described in the Registration Statement
         or the Prospectus or to be filed as an exhibit to such Registration
         Statement that is not described or filed as required.


                                       D-2

<PAGE>   41



                  (6) The execution and delivery by the Company of, and the
         performance by the Company of its obligations under, the Distribution
         Agreement, the Notes, the Indenture and any applicable Terms Agreement
         will not contravene any provision of applicable law or the Amended
         Articles of Incorporation or the Amended Code of Regulations of the
         Company or any agreement or other instrument known to me which is
         binding upon the Company or any of is subsidiaries and which is
         material to the Company and its subsidiaries, taken as a whole, or, to
         the best of my knowledge, any Judgment, order or decree of any
         governmental body, agency or court having Jurisdiction over the Company
         or any of its subsidiaries, and no consent, approval, authorization or
         order of or qualification with any governmental body or agency is
         required for the performance by the Company of its obligations under
         the Distribution Agreement, the Notes, the Indenture and any applicable
         Terms Agreement, except such as have been obtained and such as may be
         required by the securities or Blue Sky laws of the various states in
         connection with the offer and sale of the Notes.

                  (7) Each document incorporated by reference in the Prospectus
         (except for the financial statements and financial schedules included
         therein as to which I express no opinion) complied as to form when
         filed with the Commission in all material respects with the Exchange
         Act and the rules and regulations of the Commission thereunder.

                  (8) In my capacity as Senior Vice President And General 
         Counsel to the Company, no facts have come to my attention that cause
         me to believe that the Registration Statement (except for the  
         financial statements and financial schedules included therein and that
         part of the Registration Statement that constitutes the Form T-1, in
         each case, as to which I express no view), at the time it became
         effective contained any untrue statement of a material fact or omitted
         to state a material fact required to be stated therein or necessary in
         order to make the statements therein not misleading, or that the
         Prospectus (except for the financial statements and financial
         schedules included therein as to which I express no view) contains any
         untrue statement of a material fact or omits to state a material fact
         required to be stated therein or necessary in order to make the
         statements therein, in light of the circumstances under which they
         were made, not misleading.

                  The opinions expressed herein are limited to matters governed
by the laws of the State of Ohio (other than matters governed by the securities
or Blue Sky laws of ouch state) and the federal laws of the United States of
America.

                  This opinion is furnished by me, as counsel to the Company, to
you solely for your benefit pursuant to Section (b)(ii) of the Distribution
Agreement, upon the understanding that I am not hereby assuming any professional
responsibility to any other person whatsoever.

                                    Very truly yours,


                                    Larry R. Brown
                                    Senior Vice President and General Counsel


                                       D-3


<PAGE>   1



                                                                    Exhibit 4.10


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





                               THE TIMKEN COMPANY



                                       and



                              THE BANK OF NEW YORK

                                   as Trustee





                                    INDENTURE






                          Dated as of February __, 1998




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


<PAGE>   2



                             CROSS REFERENCE SHEET*

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

                                     Between

                  Provisions of the Trust Indenture Act of 1939 and Indenture
dated as of February __, 1998 among THE TIMKEN COMPANY and THE BANK OF NEW YORK,
Trustee:

<TABLE>
<CAPTION>
Section of the Act                                            Section of Indenture
- ------------------                                            --------------------

<S>                                                           <C>
310(a) (1) and (2)                                            6.9
310(a) (3) and (4)                                            Inapplicable
310(a)(5)............................................         6.8
310(b)...............................................         6.8 and 6.10(a), (b) and (d)
310(c)...............................................         Inapplicable
311(a)...............................................         6.13
311(b)...............................................         6.13
311(c)...............................................         Inapplicable
312(a)...............................................         4.1 and 4.2(a)
312(b)...............................................         4.2(a) and (b)(i) and (ii)
312(c)...............................................         4.2(c)
313(a)...............................................         4.4
313(b) (1)...........................................         Inapplicable
313(b) (2)...........................................         4.4(a)
313(c)...............................................         4.4(a)
313(d)...............................................         4.4(b)
314(a)...............................................         4.3
314 (b)..............................................         Inapplicable
314(c) (1) and (2)...................................         11.5
314(c) (3)...........................................         Inapplicable
314(d)...............................................         Inapplicable
314(e)...............................................         11.5
314(f)...............................................         Inapplicable
315(a) (1), (c) and (d)..............................         6.1
315(b)...............................................         5.11
315(e)...............................................         5.12
316(a) (1)...........................................         5.9 and 5.10
315(a) (2)...........................................         Not required
316(a) (last sentence)...............................         Definition of "Outstanding"
316(b)...............................................         5.7
317(a)...............................................         5.2
317(b)...............................................         3.4(a) and (b)
318(a)...............................................         11.7
</TABLE>

*This Cross Reference Sheet is not part of the Indenture.



<PAGE>   3




                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----

<S>                     <C>                                                                                       <C>
PARTIES.......................................................................................................... 1

RECITALS......................................................................................................... 1

         Authorization of Indenture.............................................................................. 1
         Company Compliance with Legal Requirements.............................................................. 1
         Purpose of and Consideration for Indenture.............................................................. 1

                                                    ARTICLE ONE

                                                    DEFINITIONS

SECTION 1.1             Certain Terms Defined.................................................................... 1
                        Attributable Debt........................................................................ 1
                        Authorized Newspaper..................................................................... 1
                        Board of Directors....................................................................... 2
                        Board Resolution......................................................................... 2
                        Business Day............................................................................. 2
                        Commission............................................................................... 2
                        Consolidated Net Tangible Assets......................................................... 2
                        Corporate Trust Office................................................................... 2
                        Coupon................................................................................... 2
                        Depositary............................................................................... 2
                        Dollar................................................................................... 2
                        Domestic Subsidiary...................................................................... 2
                        ECU...................................................................................... 2
                        European Communities..................................................................... 2
                        Event of Default......................................................................... 2
                        Exempted Debt.............................................................................2
                        Foreign Currency......................................................................... 3
                        Funded Debt.............................................................................. 3
                        Global Security.......................................................................... 3
                        Holder, holder of Securities, Securityholder............................................. 3
                        Indenture................................................................................ 3
                        interest................................................................................. 3
                        Issuer................................................................................... 3
                        Issuer Order............................................................................. 3
                        Officers' Certificate.................................................................... 3
                        Opinion of Counsel....................................................................... 3
                        Original Issue Date...................................................................... 3
                        Original Issue Discount Security......................................................... 3
                        Outstanding.............................................................................. 3
                        Person................................................................................... 4
                        principal................................................................................ 4
                        Principal Manufacturing Property......................................................... 4
                        Registered Security...................................................................... 4
                        Responsible Officer...................................................................... 4
                        Security or Securities................................................................... 5
                        Subsidiary............................................................................... 5
                        Trust Indenture Act of 1939.............................................................. 5
                        Trustee.................................................................................. 5
</TABLE>


                                       D-i

<PAGE>   4


<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----

<S>                     <C>                                                                                      <C>
                        Unregistered Security.................................................................... 5
                        U. S. Government Obligations............................................................. 5
                        Vice President........................................................................... 5
                        Voting Stock............................................................................. 5
                        Yield to Maturity........................................................................ 5

                                                    ARTICLE TWO

                                                    SECURITIES

SECTION 2.1             Forms Generally.......................................................................... 5
SECTION 2.2             Form of Trustee's Certificate of Authentication.......................................... 6
SECTION 2.3             Amount Unlimited; Issuable in Series..................................................... 6
SECTION 2.4             Authentication and Delivery of Securities................................................ 7
SECTION 2.5             Execution of Securities.................................................................. 8
SECTION 2.6             Certificate of Authentication............................................................ 9
SECTION 2.7             Denomination and Date of Securities; Payments of Interest................................ 9
SECTION 2.8             Registration, Transfer and Exchange...................................................... 9
SECTION 2.9             Mutilated, Defaced, Destroyed, Lost and Stolen Securities................................11
SECTION 2.10            Cancellation of Securities; Destruction Thereof......................................... 11
SECTION 2.11            Temporary Securities.................................................................... 11
SECTION 2.12            Medium-Term Notes....................................................................... 12
SECTION 2.13            Global Securities....................................................................... 12
SECTION 2.14            Computation of Interest................................................................. 13
SECTION 2.15            CUSIP Numbers........................................................................... 13

                                                  ARTICLE THREE

                                            COVENANTS OF THE ISSUER

SECTION 3.1             Payment of Principal and Interest....................................................... 14
SECTION 3.2             Offices for Payments, etc............................................................... 14
SECTION 3.3             Appointment to Fill a Vacancy in Office of Trustee...................................... 15
SECTION 3.4             Paying Agents........................................................................... 15
SECTION 3.5             Written Statement to Trustee............................................................ 15
SECTION 3.6             Luxembourg Publications..................................................................15
SECTION 3.7             Limitation on Liens..................................................................... 16
SECTION 3.8             Limitation on Sale and Lease-Back....................................................... 16
SECTION 3.9             Calculation of Original Issue Discount.................................................. 17

                                                   ARTICLE FOUR

                                     SECURITYHOLDERS LISTS AND REPORTS BY
                                          THE ISSUER AND THE TRUSTEE

SECTION 4.1             Issuer to Furnish Trustee Information as to Names and Addresses of
                        Securityholders......................................................................... 17
SECTION 4.2             Preservation and Disclosure of Securityholders Lists.................................... 17
SECTION 4.3             Reports by the Issuer................................................................... 18
SECTION 4.4             Reports by the Trustee...................................................................19
</TABLE>




                                      D-ii

<PAGE>   5


<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----

                                                   ARTICLE FIVE

                                 REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                                                ON EVENT OF DEFAULT

<S>                     <C>                                                                                      <C>
SECTION 5.1             Event of Default Defined; Acceleration of Maturity; Waiver of Default................... 19
SECTION 5.2             Collection of Indebtedness by Trustee; Trustee May Prove Debt............................21
SECTION 5.3             Application of Proceeds................................................................. 22
SECTION 5.4             Suits for Enforcement................................................................... 23
SECTION 5.5             Restoration of Rights on Abandonment of Proceedings..................................... 23
SECTION 5.6             Limitations on Suits by Securityholders................................................. 23
SECTION 5.7             Unconditional Right of Securityholders to Institute Certain Suits....................... 23
SECTION 5.8             Powers and Remedies Cumulative; Delay or Omission Not Waiver of
                        Default................................................................................. 23
SECTION 5.9             Control by Holders of Securities........................................................ 24
SECTION 5.10            Waiver of Past Defaults................................................................. 24
SECTION 5.11            Trustee to Give Notice of Default, But May Withhold in Certain
                        Circumstances............................................................................24
SECTION 5.12            Right of Court to Require Filing of Undertaking to Pay Costs.............................25

                                                   ARTICLE SIX

                                             CONCERNING THE TRUSTEE

SECTION 6.1              Duties and Responsibilities of the Trustee; During Default; Prior to
                         Default................................................................................ 25
SECTION 6.2              Certain Rights of the Trustee.......................................................... 26
SECTION 6.3              Trustee Not Responsible for Recitals, Disposition of Securities or
                         Application of Proceeds Thereof.........................................................27
SECTION 6.4              Trustee and Agents May Hold Securities Or Coupons; Collections, etc.....................27
SECTION 6.5              Moneys Held by Trustee..................................................................27
SECTION 6.6              Compensation and Indemnification of Trustee and Its Prior Claim.........................27
SECTION 6.7              Right of Trustee to Rely on Officers' Certificate, etc..................................27
SECTION 6.8              Qualification of Trustee; Conflicting Interests.........................................28
SECTION 6.9              Persons Eligible for Appointment as Trustee.............................................28
SECTION 6.10             Resignation and Removal; Appointment of Successor Trustee...............................28
SECTION 6.11             Acceptance of Appointment by Successor Trustee..........................................29
SECTION 6.12             Merger; Conversion; Consolidation or Succession to Business of Trustee..................30
SECTION 6.13             Preferential Collection of Claims Against the Issuer....................................30
SECTION 6.14             Appointment of Authenticating Agent.....................................................30

                                                   ARTICLE SEVEN

                                          CONCERNING THE SECURITYHOLDERS

SECTION 7.1              Evidence of Action Taken by Securityholders.............................................31
SECTION 7.2              Proof of Execution of Instruments and of Holding of Securities..........................31
SECTION 7.3              Holders to Be Treated as Owners.........................................................32
SECTION 7.4              Reserved................................................................................32
SECTION 7.5              Right of Revocation of Action Taken.....................................................32
</TABLE>



                                      D-iii

<PAGE>   6


<TABLE>
<CAPTION>
                                                                                                               Page

                                                   ARTICLE EIGHT

                                             SUPPLEMENTAL  INDENTURES

<S>                      <C>                                                                                     <C>
SECTION 8.1              Supplemental Indentures Without Consent of Securityholders..............................33
SECTION 8.2              Supplemental Indentures With Consent of Securityholders.................................33
SECTION 8.3              Effect of Supplemental Indenture........................................................34
SECTION 8.4              Documents to Be Given to Trustee........................................................34
SECTION 8.5              Notation on Securities in Respect of Supplemental Indentures............................35

                                                   ARTICLE NINE

                                     CONSOLIDATION, MERGER, SALE OR CONVEYANCE

SECTION 9.1              Issues May Consolidate; Merge;  etc.; on Certain Terms..................................35
SECTION 9.2              Successor Issuer Substituted............................................................35
SECTION 9.3              Opinion of Counsel to Trustee...........................................................35

                                                    ARTICLE TEN

                                     SATISFACTION AND DISCHARGE OF INDENTURE;
                                                 UNCLAIMED MONEYS

SECTION 10.1             Satisfaction and Discharge of Indenture.................................................36
SECTION 10.2             Application by Trustee of Funds Deposited for Payment of Securities.....................36
SECTION 10.3             Repayment of Moneys Held by Paying Agent................................................36
SECTION 10.4             Return of Moneys Held by Trustee and Paying Agent Unclaimed for
                         Two Years...............................................................................36
SECTION 10.5             Indemnity for U.S. Government Obligations...............................................37

                                                  ARTICLE ELEVEN

                                             MISCELLANEOUS PROVISIONS

SECTION 11.1             Incorporators, Stockholders, Officers and Directors of Issuer Exempt
                         from Individual Liability...............................................................37
SECTION 11.2             Provisions of Indenture for the Sole Benefit of Parties and Holders
                         of Securities and Coupons...............................................................37
SECTION 11.3             Successors and Assigns of Issuer Bound by Indenture.....................................37
SECTION 11.4             Notices and Demands on Issuer, Trustee and Holders of Securities
                         and Coupons.............................................................................37
SECTION 11.5             Officers' Certificates and Opinions of Counsel; Statements to Be
                         Contained Therein.......................................................................38
SECTION 11.6             Payments Due on Saturdays, Sundays and Holidays.........................................38
SECTION 11.7             Conflict of Any Provision of Indenture with Trust Indenture Act of 1939.................38
SECTION 11.8             New York Law to Govern..................................................................39
SECTION 11.9             Counterparts............................................................................39
SECTION 11.10            Effect of Headings......................................................................39
SECTION 11.11            Securities in a Foreign Currency or in ECUs ............................................39
SECTION 11.12            Judgment Currency.......................................................................39
</TABLE>




                                      D-iv

<PAGE>   7


<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----

                                                  ARTICLE TWELVE

                                    REDEMPTION OF SECURITIES AND SINKING FUNDS

<S>                      <C>                                                                                     <C>
SECTION 12.1             Applicability of Article................................................................40
SECTION 12.2             Notice of Redemption; Partial Redemptions...............................................40
SECTION 12.3             Payment of Securities Called for Redemption.............................................41
SECTION 12.4             Exclusion of Certain Securities from Eligibility for Selection for
                         Redemption..............................................................................41
SECTION 12.5             Mandatory and Optional Sinking Funds....................................................41

                                                 ARTICLE THIRTEEN

                                         MEETING OF HOLDERS OF SECURITIES

SECTION 13.1             Purposes for Which Meeting May Be Called................................................43
SECTION 13.2             Call, Notice and Place of Meetings......................................................43
SECTION 13.3             Persons Entitled to Vote at Meetings....................................................43
SECTION 13.4             Quorum; Action..........................................................................43
SECTION 13.5             Determination of Voting Rights; Conduct and Adjournment of
                         Meetings................................................................................44
SECTION 13.6             Counting Votes and Recording Action of Meetings.........................................45


TESTIMONIUM......................................................................................................45

SIGNATURES.......................................................................................................45

Exhibit A                Form of Fixed Rate Medium-Term Note, Series A

Exhibit B                Form of Floating Rate Medium-Term Note, Series A
</TABLE>


                                       D-v

<PAGE>   8




                             THIS INDENTURE, dated as of February __, 1998
between THE TIMKEN COMPANY, an Ohio corporation (the "Issuer"), and THE BANK OF
NEW YORK, a New York banking corporation (the "Trustee").

                                   WITNESSETH:

                             WHEREAS, the Issuer has duly authorized the issue
from time to time of its unsecured debentures, notes or other evidences of
indebtedness to be issued in one or more series (the "Securities") pursuant to
this Indenture; and

                             WHEREAS, all things necessary to make this
Indenture a valid indenture and agreement according to its terms have been done;

                             NOW, THEREFORE:

                             In consideration of the premises and the purchases
of the Securities by the holders thereof, 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:

                                   ARTICLE ONE

                                   DEFINITIONS

                             SECTION 1.1 CERTAIN TERMS DEFINED. The following
terms (except as otherwise expressly provided or unless the context otherwise
clearly requires) for all purposes of this Indenture and of any indenture
supplemental hereto shall have the respective meanings specified in this
Section. All other terms used in this Indenture that are defined in the Trust
Indenture Act of 1939 (the "TIA") or the definitions of which in the Securities
Act of 1933 (the "Securities Act") are referred to in the TIA, including terms
defined therein by reference to the Securities Act (except as herein otherwise
expressly provided or unless the context otherwise clearly requires), shall have
the meanings assigned to such terms in the TIA and in the Securities Act as in
force at the date of this Indenture. All accounting terms used herein and not
expressly defined shall have the meanings assigned to such terms in accordance
with "generally accepted accounting principles, and the term "GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES" means such accounting principles as are generally
accepted at the time of any computation. The words "HEREIN", HEREOF" and
"HEREUNDER" and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision. The terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular.

                             "ATTRIBUTABLE DEBT" means, as to any particular
lease under which any Person is at the time liable, at any date as of which the
amount thereof is to be determined, the total net amount of rent required to be
paid by such Person under such lease during the remaining term thereof (after
giving effect to any extensions at the option of the lessee), discounted from
the respective due dates thereof to such date at the average rate per annum
borne by the Securities for the preceding 365 days. The net amount of rent
required to be paid under any such lease for any such period shall be the amount
of the rent payable by the lessee with respect to such period, after excluding
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water and utility rates and similar charges. In the case of
any lease which is terminable by the lessee upon the payment of a penalty, such
net amount shall also include the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated.

                             "AUTHORIZED NEWSPAPER" means a newspaper (which, in
the case of The City of New York, will, if practicable, be The Wall Street
Journal (Eastern Edition), in the case of the United Kingdom, will, if
practicable, be the Financial Times (London Edition) and, in the case of
Luxembourg, will, if practicable, be the Luxemburger Wort, generally published
at least once a day for at least five days in each calendar week and of general
circulation in The City of New York, the United Kingdom or in Luxembourg, as
applicable. If it shall be impractical in the opinion of the Trustee to make any
publication of any notice required hereby in an Authorized Newspaper, any
publication or other



<PAGE>   9



notice in lieu thereof which is made or given with the approval of the Trustee
shall constitute a sufficient publication of such notice.

                             "BOARD OF DIRECTORS" means either the Board of
Directors of the Issuer or any committee of such Board duly authorized to act on
its behalf.

                             "BOARD RESOLUTION" means a copy of one or more
resolutions, certified by the secretary or an assistant secretary of the Issuer
to have been duly adopted by the Board of Directors and to be in full force and
effect, and delivered to the Trustee.

                             "BUSINESS DAY" means, with respect to any Security,
a day that in the city (or in any of the cities, if more than one) in which
amounts are payable, as specified in the form of such Security, is not a day on
which banking institutions are authorized by law or regulation to close.

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

                             "CONSOLIDATED NET TANGIBLE ASSETS" means the
aggregate amount of assets (less applicable reserves and other properly
deductible items) after deducting therefrom (a) all current liabilities
(excluding any thereof constituting Funded Debt by reason of being renewable or
extendible) and (b) all goodwill, trade names, trademarks, patents, unamortized
debt discount and expense and other intangibles, all as set forth on the most
recent consolidated balance sheet of the Issuer and its consolidated
Subsidiaries and computed in accordance with generally accepted accounting
principles.

                             "CORPORATE TRUST OFFICE" means the office of the
Trustee at which the corporate trust business of the Trustee shall, at any
particular time, be principally administered, which office is, at the date as of
which this Indenture is dated, located at 101 Barclay Street, Floor 21 West, New
York, New York 10286.

                             "COUPON" means any interest coupon appertaining to
a Security.

                             "DEPOSITARY" means, with respect to the Securities
of any series issuable or issued in whole or in part in the form of one or more
Global Securities, the Person designated as Depositary by the Issuer pursuant to
Section 2.3 until a successor Depositary shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Depositary" shall mean
or include each Person who is then a Depositary hereunder, and if at any time
there is more than one such Person, "Depositary" as used with respect to the
Securities of any such series shall mean the Depositary with respect to the
Securities of that series.

                             "DOLLAR" means the coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts.

                             "DOMESTIC SUBSIDIARY" means a Subsidiary of the
Issuer except a Subsidiary (a) which neither transacts any substantial portion
of its business nor regularly maintains any substantial portion of its fixed
assets within the United States of America, or (b) which is engaged primarily in
financing the operation of the Issuer or its Subsidiaries, or both, outside the
United States of America.

                             "ECU" means the European Currency Unit as defined
and revised from time to time by the Council of European Communities.

                             "EUROPEAN COMMUNITIES" means the European Economic
Community (the "EEC"), the European Coal and Steel Community and Euratom.

                             "EVENT OF DEFAULT" means any event or condition
specified as such in Section 5.1.


                                        2

<PAGE>   10



                             "EXEMPTED DEBT" means the sum of the following
items outstanding as of the date Exempted Debt is being determined: (i)
indebtedness of the Issuer and its Subsidiaries incurred after the date of this
Indenture and secured by mortgages created or assumed pursuant to Section 3.7(b)
and (ii) Attributable Debt of the Issuer and its Subsidiaries in respect of
every sale and leaseback transaction entered into after the date of this
Indenture and pursuant to Section 3.8(b).

                             "FOREIGN CURRENCY" means a currency issued by the
government of a country other than the United States of America.

                             "FUNDED DEBT" means all indebtedness for money
borrowed having a maturity of more than 12 months from the date as of which the
amount thereof is to be determined or having a maturity of less than 12 months
from the date as of which the amount thereof is to be determined but by its
terms being renewable or extendible beyond 12 months from such date at the
option of the borrower.

                             "GLOBAL SECURITY" means a Security that pursuant to
Section 2.1 is issued to evidence a series of Securities, that is delivered to
the Depositary or pursuant to the instructions of the Depositary and that shall
be registered in the name of the Depositary or its nominee.

                             "HOLDER", "HOLDER OF SECURITIES" OR
"SECURITYHOLDER" or other similar terms mean (a) in the case of any Registered
Security, the person in whose name such Security is registered in the security
register kept by the Issuer for that purpose in accordance with the terms
hereof, and (b) in the case of any Unregistered Security, the bearer of such
Security, or any Coupon appertaining thereto, as the case may be.

                             "INDENTURE" means this instrument as originally
executed and delivered or, if amended or supplemented as herein provided, as so
amended or supplemented, and shall include the forms and terms of the particular
series of Securities established as contemplated hereunder.

                             "INTEREST" means, when used with respect to
non-interest bearing Securities, interest payable after maturity.

                             "ISSUER" means (except as otherwise provided in
Article Six) The Timken Company, an Ohio corporation, and, subject to Article
Nine, its successors and assigns.

                             "ISSUER ORDER" means a written statement, request
or order of the Issuer signed in its name by the Chairman-Board of Directors,
the President, the Vice President-Finance and Treasurer, Director-Finance, Vice
President and General Counsel or Vice President-Strategic Management of the
Issuer.

                             "OFFICERS' CERTIFICATE" means a certificate signed
by the Chairman - Board of Directors, the President, or a Vice President and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary
of the Issuer and delivered to the Trustee. Each such certificate shall include
the statements provided for in Section 11.5, if and to the extent required
hereby.

                             "OPINION OF COUNSEL" means an opinion in writing
signed by the (i) general corporate counsel or (ii) such other legal counsel who
may be an employee of or counsel to the Issuer and who shall be satisfactory to
the Trustee. Each such opinion shall include the statements provided for in
Section 11.5, if and to the extent required hereby.

                             "ORIGINAL ISSUE DATE" of any Security (or portion
thereof) means the earlier of (a) the date of such Security or (b) the date of
any Security (or portion thereof) for which such Security was issued (directly
or indirectly) on registration of transfer, exchange or substitution.

                             "ORIGINAL ISSUE DISCOUNT SECURITY" means any
Security that provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity thereof
pursuant to Section 5.1.



                                        3

<PAGE>   11



                             "OUTSTANDING" (except as otherwise provided in
Section 6.8), when used with reference to Securities, means, as of any
particular time, all Securities authenticated and delivered by the Trustee under
this Indenture including any Global Security except

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

                             (b) Securities, or portions thereof, for the
                         payment or redemption of which moneys or U.S.
                         Government Obligations (as provided for in Section
                         10.1) in the necessary amount shall have been deposited
                         in trust with the Trustee or with any paying agent
                         (other than the Issuer) or shall have been set aside,
                         segregated and held in trust by the Issuer for the
                         holders of such Securities (if the Issuer shall act as
                         its own paying agent), PROVIDED that if such
                         Securities, or portions thereof, are to be redeemed
                         prior to the maturity thereof, notice of such
                         redemption shall have been given as herein provided, or
                         provision satisfactory to the Trustee shall have been
                         made for giving such notice; and

                             (c) Securities in substitution for which other
                         Securities shall have been authenticated and delivered,
                         or which shall have been paid, pursuant to the terms of
                         Section 2.9 (except with respect to any such Security
                         as to which proof satisfactory to the Trustee is
                         presented that such Security is held by a person in
                         whose hands such Security is a legal, valid and binding
                         obligation of the Issuer).

Provided that in determining whether the holders of the requisite principal
amount of Outstanding Securities of any or all series have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, (a) the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding for such purposes shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon a
declaration of acceleration of the maturity thereof pursuant to Section 5.1, and
(b) Securities owned beneficially by the Issuer or any other obligor on the
Securities with respect to which such determination is being made or any Person,
directly or indirectly, controlling or controlled by or under direct or indirect
control with the Issuer or any other obligor on the Securities with respect to
which such determination is being made shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
knows to be so owned shall be so disregarded. Securities so owned by the Issuer
which have been pledged in good faith may be regarded as Outstanding for such
purpose if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Issuer.

                             "PERSON" means any individual, corporation,
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.

                             "PRINCIPAL" whenever used with reference to the
Securities or any Security or any portion thereof, shall be deemed to include
"and premium, if any".

                             "PRINCIPAL MANUFACTURING PROPERTY" means any
building, structure or other facility, together with the land upon which it is
erected and fixtures comprising a part thereof, used primarily for manufacturing
or warehousing and located in the United States of America, owned or leased by
the Issuer or any Subsidiary, other than any such building, structure or other
facility or portion thereof or any such land or fixture (i) which is financed by
obligations issued by a State, or a possession of the United States, or any
political subdivision of any of the foregoing, or the District of Columbia, the
interest on which is excludable from gross income of the holders thereof
pursuant to the provisions of [Section 103(a)(1)] of the Internal Revenue Code
(or any successor of such provision) as in effect at the time of the issuance of
such obligations, or (ii) which, in the opinion of the Board of Directors of the
Issuer, is not of material importance to the total business conducted by the
Issuer and its Subsidiaries as a whole.

                             "REGISTERED SECURITY" means any Securities
registered on the security register of the Trustee.



                                        4

<PAGE>   12



                             "RESPONSIBLE OFFICER" when used with respect to the
Trustee means any vice president, any trust officer, any assistant trust
officer, any assistant secretary, any assistant treasurer, or any other officer
or assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject.

                             "SECURITY" OR "SECURITIES" (except as otherwise
provided in Section 6.8) has the meaning stated in the first recital of this
Indenture.

                             "SUBSIDIARY" means a corporation at least a
majority of the outstanding Voting Stock of which is owned or controlled,
directly or indirectly, by the Issuer or by one or more Subsidiaries of the
Issuer, or by the Issuer and one or more Subsidiaries of the Issuer.

                             "TRUST INDENTURE ACT OF 1939" (except as otherwise
provided in Sections 8.1 and 8.2) means the Trust Indenture Act of 1939 as in
force at the date as of which this Indenture was originally executed.

                             "TRUSTEE" means the Person identified as "Trustee"
in the first paragraph hereof and, subject to the provisions of Article Six,
shall also include any successor trustee. "Trustee" shall also mean or include
each Person who is then a trustee hereunder and if at any time there is more
than one such Person, "Trustee" as used with respect to the Securities of any
series shall mean the trustee with respect to the Securities of such series.

                             "UNREGISTERED SECURITY" means any Security other
than a Registered Security.

                             "U.S. GOVERNMENT OBLIGATIONS" means (i) direct
obligations of the United States for which its full faith and credit are pledged
for the full and timely payment thereof, (ii) obligations of a person controlled
or supervised by and acting as an agency or instrumentality of the United
States, the full and timely payment of which is unconditionally guaranteed as a
full faith and credit obligation of the United States, or (iii) certificates or
receipts representing direct ownership interests in obligations or specified
portions (such as principal or interest) of obligations described in (i) or
(ii), which obligations are held by a custodian in safekeeping on behalf of such
certificates or receipts.

                             "VICE PRESIDENT" when used with respect to the
Issuer or the Trustee, means any Vice President, whether or not designated by a
number or a word or words added before or after the title of "Vice President".

                             "VOTING STOCK" means stock of the class or classes
having general voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of such corporation
(irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).

                             "YIELD TO MATURITY" means the yield to maturity on
a series of securities, calculated at the time of issuance of such series, or,
if applicable, at the most recent redetermination of interest on such series,
and calculated in accordance with accepted financial practice.

                                   ARTICLE TWO

                                   SECURITIES

                             SECTION 2.1 FORMS GENERALLY. The Securities of each
series and the Coupons, if any, to be attached thereto shall be substantially in
the form of Exhibit A or Exhibit B to this Indenture or such other form (not
inconsistent with this Indenture) as shall be established by or pursuant to one
or more Board Resolutions (as set forth in a Board Resolution or, if so
authorized by Board Resolution, by an Officers' Certificate) or in one or more
indentures supplemental hereto, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture. The Securities may have imprinted or otherwise reproduced
thereon such legend or legends or endorsements, not inconsistent with the
provisions of this Indenture, as may be required to comply with any law or with
any rules or regulations pursuant thereto, or with any rules of any securities
exchange or to conform to general usage, all as may be determined by the
officers executing such Securities and Coupons, if any, as evidenced by their
execution of the Securities and Coupons.


                                        5

<PAGE>   13



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

                             SECTION 2.2 FORM OF TRUSTEE'S CERTIFICATE OF
AUTHENTICATION. The Trustee's certificate of authentication on all Securities
shall be in substantially the following form:

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


                         THE BANK OF NEW YORK,

                         as Trustee



                         By
                           ---------------------------------

                              Authorized Signatory

                             SECTION 2.3 AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.

                             The Securities may be issued in one or more series.
There shall be established in or pursuant to one or more Board Resolutions and
set forth in a Board Resolution, or, if so authorized by Board Resolution, in an
Officers' Certificate detailing such establishment, and/or established in one or
more indentures supplemental hereto, prior to the initial issuance of Securities
of any series,

                             (1) the designation of the Securities of the series
                          (which may be part of a series of Securities
                          previously issued);

                             (2) any limit upon the aggregate principal amount
                         of the Securities of the series that may be
                         authenticated and delivered under this Indenture
                         (except for Securities authenticated and delivered upon
                         registration of transfer of, or in exchange for, or in
                         lieu of, other Securities of the series pursuant to
                         Section 2.8, 2.9, 2.11, 8.5 or 12.3);

                             (3) if other than Dollars, the coin or currency in
                         which the Securities of that series are denominated
                         (including, but not limited to, any Foreign Currency or
                         ECU);

                             (4) any date on which the principal of the
                          Securities of the series is payable;

                             (5) the rate or rates at which the Securities of
                         the series shall bear interest, if any, the date or
                         dates from which such interest shall accrue, on which
                         such interest shall be payable and on which a record
                         shall be taken for the determination of Holders to whom
                         interest is payable and/or the method by which such
                         rate or rates or date or dates shall be determined;

                             (6) the place or places where the principal of and
                         any interest on Securities of the series shall be
                         payable (if other than as provided in Section 3.2);

                             (7) the price or prices at which, the period or
                         periods within which and the terms and conditions upon
                         which Securities of the series may be redeemed, in
                         whole or in part, at the option of the Issuer, pursuant
                         to any sinking fund or otherwise;



                                        6

<PAGE>   14



                             (8) the obligation, if any, of the Issuer to
                         redeem, purchase or repay Securities of the series
                         pursuant to any mandatory redemption, sinking fund or
                         analogous provisions or at the option of a Holder
                         thereof and the price or prices at which and the period
                         or periods within which and any terms and conditions
                         upon which Securities of the series shall be redeemed,
                         purchased or repaid, in whole or in part, pursuant to
                         such obligation;

                             (9) 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.

                             (10) if other than the principal amount thereof,
                         the portion of the principal amount of Securities of
                         the series which shall be payable upon declaration of
                         acceleration of the maturity thereof;

                             (11) if other than the coin or currency in which
                         the Securities of that series are denominated, the coin
                         or currency in which payment of the principal of or
                         interest on the Securities of such series shall be
                         payable;

                             (12) if the principal of or interest on the
                         Securities of such series are to be payable, at the
                         election of the Issuer or a holder thereof, in a coin
                         or currency other than that in which the Securities are
                         denominated, the period or periods within which, and
                         the terms and conditions upon which, such election may
                         be made;

                             (13) if the amount of payments of principal of and
                         interest on the Securities of the series may be
                         determined with reference to an index based on a coin
                         or currency other than that in which the Securities of
                         the series are denominated, the manner in which such
                         amounts shall be determined;

                             (14) whether the Securities of the series will be
                         issuable as Registered Securities or Unregistered
                         Securities (with or without Coupons), or both, any
                         restrictions applicable to the offer, sale or delivery
                         of Unregistered Securities and, if other than as
                         provided in Section 2.8, the terms upon which
                         Unregistered Securities of any series may be exchanged
                         for Registered Securities of such series and vice
                         versa;

                             (15) whether and under what circumstances the
                         Issuer will pay additional amounts on the Securities of
                         the series held by a person who is not a U.S. person in
                         respect of any tax, assessment or governmental charge
                         withheld or deducted and, if so, whether the Issuer
                         will have the option to redeem such Securities rather
                         than pay such additional amounts;

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

                             (17) whether or not the Securities of such series
                         shall be issued in whole or in part in the form of a
                         Global Security and, if so, the Depositary for such
                         Global Security;

                             (18) any trustees, authenticating or paying agents,
                         transfer agents or registrars or any other agents with
                         respect to the Securities of such series;

                             (19) any other events of default or covenants not
                         described in this Indenture with respect to the
                         Securities of such series; and

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



                                        7

<PAGE>   15



                             SECTION 2.4 AUTHENTICATION AND DELIVERY OF
SECURITIES. The Issuer may deliver Securities of any series having attached
thereto appropriate Coupons, if any, executed by the Issuer to the Trustee for
authentication together with the applicable documents referred to below in this
Section, and the Trustee shall thereupon authenticate and deliver such
Securities to or upon the order of the Issuer (contained in the Issuer Order
referred to below in this Section), or pursuant to such procedures acceptable to
the Trustee and to such recipients as may be specified from time-to-time by an
Issuer Order. The maturity date, Original Issue Date, interest rate and any
other terms of the Securities of such series and Coupons, if any, appertaining
thereto shall be determined by or pursuant to such Issuer Order and procedures.
If provided for in such procedures, such Issuer Order may authorize
authentication and delivery pursuant to oral instructions from the Issuer or its
duly authorized agent, which instructions shall be promptly confirmed in
writing. In authenticating such Securities and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall receive, and (subject to Section 6.1) shall be fully protected in
relying upon:

                             (1) an Issuer Order requesting such authentication
                         and setting forth delivery instructions if the
                         Securities and Coupons, if any, are not to be delivered
                         to the Issuer;

                             (2) any Board Resolution, Officers' Certificate
                         and/or executed supplemental indenture referred to in
                         Sections 2.1 and 2.3 by or pursuant to which the forms
                         and terms of the Securities and Coupons, if any, were
                         established;

                             (3) an Officers' Certificate setting forth the form
                         or forms and terms of the Securities and Coupons, if
                         any, stating that the form or forms and terms of the
                         Securities and Coupons, if any, have been established
                         pursuant to Sections 2.1 and 2.3 and comply with this
                         Indenture, and covering such other matters as the
                         Trustee may reasonably request; and

                             (4) an Opinion of Counsel to the effect that:

                                                (a) the form or forms and terms
                         of such Securities and Coupons, if any, have been
                         established pursuant to Sections 2.1 and 2.3 and comply
                         with this Indenture;

                                                (b) the authentication and
                         delivery of such Securities and Coupons, if any, by the
                         Trustee are authorized under the provisions of this
                         Indenture;

                                                (c) such Securities and Coupons,
                         if any, when authenticated and delivered by the Trustee
                         and issued by the Issuer in the manner and subject to
                         any conditions specified in such Opinion of Counsel,
                         will constitute valid and binding obligations of the
                         Issuer enforceable in accordance with their respective
                         terms and will be entitled to the benefits of this
                         Indenture;

                                                (d) all laws and requirements in
                         respect of the execution and delivery by the Issuer of
                         the Securities and Coupons, if any, have been complied
                         with;

                                                (e) covering such other matters
                         as the Trustee may reasonably request; and

                                                (f) the execution and delivery
                         by the Issuer of, and the performance by the Issuer of
                         its obligations under, the Securities and Coupons, if
                         any, will not contravene any provision of applicable
                         law or the articles of incorporation or regulations of
                         the Issuer or, to the best of such counsel's knowledge,
                         any agreement or other instrument binding upon the
                         Issuer or any of its subsidiaries that is material to
                         the Issuer and its subsidiaries, considered as one
                         enterprise, or any judgment, order or decree of any
                         governmental body, agency or court having jurisdiction
                         over the Issuer or any Subsidiary, and no consent,
                         approval or authorization of any governmental body or
                         agency is required for the performance by the Issuer of
                         its obligations under the Securities and Coupons, if
                         any, except such as are specified and have been
                         obtained and such as may be required by the securities
                         or blue sky laws of the various states in connection
                         with the offer and sale of the Securities and Coupons,
                         if any.


                                        8

<PAGE>   16



                             The Trustee shall have the right to decline to
authenticate and deliver any Securities under this Section if the Trustee, being
advised by counsel, determines that such action may not lawfully be taken by the
Issuer or if the Trustee in good faith by its board of directors or board of
trustees, executive committee, or a trust committee of directors or trustees or
Responsible Officers shall determine that such action would expose the Trustee
to personal liability to existing Holders or would affect the Trustee's own
rights, duties or immunities under the Securities, this Indenture or otherwise.

                             SECTION 2.5 EXECUTION OF SECURITIES. The Securities
and, if applicable, each Coupon appertaining thereto shall be signed on behalf
of the Issuer by the Chairman, the President or any Vice President which may,
but need not, be attested and under the corporate seal. Such signatures may be
the manual or facsimile signatures of the present or any future such officers.
The seal of the Issuer may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Securities.
Typographical and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or enforceability of
any Security that has been duly authenticated and delivered by the Trustee.

                             In case any officer of the Issuer who shall have
signed any of the Securities or Coupons, if any, shall cease to be such officer
before the Security or Coupon so signed (or the Security to which the Coupon so
signed appertains) shall be authenticated and delivered by the Trustee or
disposed of by the Issuer, such Security or Coupon nevertheless may be
authenticated and delivered or disposed of as though the person who signed such
Security or Coupon had not ceased to be such officer of the Issuer; and any
Security or Coupon may be signed on behalf of the Issuer by such persons as, at
the actual date of the execution of such Security or Coupon, shall be the proper
officers of the Issuer, although at the date of the execution and delivery of
this Indenture any such person was not such an officer.

                             SECTION 2.6 CERTIFICATE OF AUTHENTICATION. Only
such Securities as shall bear thereon a certificate of authentication
substantially as set forth in Section 2.2 hereof, executed by the Trustee by the
manual signature of one of its authorized signatories, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. No Coupon
shall be entitled to the benefits of this Indenture or shall be valid and
obligatory for any purpose until such certificate by the Trustee shall have
become duly executed on the Security to which such Coupon appertains. Such
certificate by the Trustee upon any Security executed by the Issuer shall be
conclusive evidence that the Security so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.

                             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.

                             Each Registered Security shall be dated the date of
its authentication. Each Unregistered Security shall be dated as provided in the
Board Resolution or the Officers' Certificate referred to in Section 2.3. The
Securities of each series shall bear interest, if any, from the date and such
interest shall be payable on the dates established as contemplated by Section
2.3.

                             The person in whose name any Registered Security of
any series is registered at the close of business on any record date applicable
to a particular series with respect to any interest payment date for such series
shall be entitled to receive the interest, if any, payable on such interest
payment date notwithstanding any transfer or exchange of such Registered
Security subsequent to the record date and prior to such interest payment date,
except if and to the extent the Issuer shall default in the payment of the
interest due on such interest payment date for such series, in which case such
defaulted interest shall be paid to the persons in whose names Outstanding
Registered Securities for such series are registered at the close of business on
a subsequent record date (which shall be not less than five Business Days prior
to the date of payment of such defaulted interest) established by notice given
by mail by or the Trustee to the holders of Securities not less than 15 days
preceding such subsequent record date. The term "record date" as used with
respect to any interest payment date (except a date for payment of defaulted
interest) for the Securities of any series shall

                                        9

<PAGE>   17



mean the date specified as such in the terms of the Registered Securities of
such series established as contemplated by Section 2.3, or, if no such date is
so established, the date 15 calendar days immediately preceding the interest
payment date.

                             SECTION 2.8 REGISTRATION, TRANSFER AND EXCHANGE.
The Issuer will keep at each office or agency to be maintained for the purpose
as provided in Section 3.2 for each series of Securities a register or registers
in which, subject to such reasonable regulations as it may prescribe, it will
provide for the registration of Securities of such series and the registration
of transfer of Registered Securities of such series. Such register shall be in
written form in the English language or in any other form capable of being
converted into such form within a reasonable time. At all reasonable times such
register or registers shall be open for inspection by the Trustee.

                             Upon due presentation for registration of transfer
of any Registered Security of any series at any such office or agency to be
maintained for the purpose as provided in Section 3.2, the Issuer shall execute
and the Trustee shall authenticate and deliver in the name of the transferee or
transferees a new Registered Security or Registered Securities of the same
series, maturity date, interest rate and Original Issue Date in authorized
denominations for a like aggregate principal amount.

                             Unregistered Securities (except for any temporary
Unregistered Securities) and Coupons (except for Coupons attached to any
temporary Unregistered Securities) shall be transferrable by delivery.

                             At the option of the Holder thereof, Registered
Securities of any series may be exchanged for a Registered Security or
Registered Securities of such series, maturity date, interest rate and Original
Issue Date of other authorized denominations and of a like aggregate principal
amount, upon surrender of such Registered Securities to be exchanged at the
agency of the Issuer that shall be maintained for such purpose in accordance
with Section 3.2 and upon payment, if the Issuer shall so require, of the
charges hereinafter provided. If the Securities of any series are issued in both
registered and unregistered form, except as otherwise specified pursuant to
Section 2.3, at the option of the Holder thereof, Unregistered Securities of any
series may be exchanged for Registered Securities of such series, maturity date,
interest rate and Original Issue Date of any authorized denominations and of a
like aggregate principal amount, upon surrender of such Unregistered Securities
to be exchanged at the agency of the Issuer that shall be maintained for such
purpose in accordance with Section 3.2, with, in the case of Unregistered
Securities that have Coupons attached, all unmatured Coupons and all matured
Coupons in default thereto appertaining, and upon payment, if the Issuer shall
so require, of the charges hereinafter provided. At the option of the Holder
thereof, if Unregistered Securities of any series, maturity date, interest rate
and Original Issue Date are issued in more than one authorized denomination,
except as otherwise specified pursuant to Section 2.3, such Unregistered
Securities may be exchanged for Unregistered Securities of such series, maturity
date, interest rate and Original Issue Date of other authorized denominations
and of a like aggregate principal amount, upon surrender of such Unregistered
Securities to be exchanged at the agency of the Issuer that shall be maintained
for such purpose in accordance with Section 3.2 or as specified pursuant to
Section 2.3, with, in the case of Unregistered Securities that have Coupons
attached, all unmatured Coupons and all matured Coupons in default thereto
appertaining, and upon payment, if the Issuer shall so require, of the charges
hereinafter provided. Unless otherwise specified pursuant to Section 2.3,
Registered Securities of any series may not be exchanged for Unregistered
Securities of such series. Whenever any Securities are so surrendered for
exchange, the Issuer shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive. All Securities and Coupons surrendered upon any exchange or transfer
provided for in this Indenture shall be promptly canceled by the Trustee and
returned to the Issuer upon its written request.

                             All Registered Securities presented for
registration of transfer, exchange, redemption or payment shall (if so required
by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a
written instrument or instruments of transfer in form satisfactory to the Issuer
and the Trustee duly executed by, the Holder or his attorney duly authorized in
writing.

                             The Issuer may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any exchange or registration of transfer of Securities. No service charge
shall be made for any such transaction.

                             The Issuer shall not be required to exchange or
register a transfer of (a) any Securities of any series for a period of 15 days
next preceding the first mailing of notice of redemption of Securities of such
series to


                                       10

<PAGE>   18



be redeemed, (b) any Securities selected, called or being called for redemption,
in whole or in part, except, in the case of any Security to be redeemed in part,
the portion thereof not so to be redeemed, or (c) any Securities if the holder
thereof has exercised his right, if any, to require the Issuer to repurchase
such Securities in whole or in part, except the portion of such Securities not
required to be repurchased.

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

                             Notwithstanding anything herein or in the terms of
any series of Securities to the contrary, neither the Issuer nor the Trustee
(upon notice from the Issuer in, and in reliance on, an Opinion of Counsel)
shall be required to exchange any Unregistered Security for a Registered
Security if such exchange would result in adverse United States federal income
tax consequences to the Issuer (such as, for example, the inability of the
Issuer to deduct from its income, as computed for Federal income tax purposes,
the interest payable on the Unregistered Securities) under then applicable
United States Federal income tax laws.

                             SECTION 2.9 MUTILATED, DEFACED, DESTROYED, LOST AND
STOLEN SECURITIES. In case any temporary or definitive Security or any Coupon
appertaining to any Security shall become mutilated, defaced or be destroyed,
lost or stolen, the Issuer in its discretion may execute, and upon the written
request of any officer of the Issuer, the Trustee shall authenticate and
deliver, a new Security of the same series, maturity date, interest rate and
Original Issue Date, bearing a number or other distinguishing symbol not
contemporaneously outstanding, in exchange and substitution for the mutilated or
defaced Security, or in lieu of and substitution for the Security so destroyed,
lost or stolen with Coupons corresponding to the Coupons appertaining to the
Securities so mutilated, defaced, destroyed, lost or stolen, or in exchange or
substitution for the Security to which such mutilated, defaced, destroyed, lost
or stolen Coupon appertained, with Coupons appertaining thereto corresponding to
the Coupons so mutilated, defaced, destroyed, lost or stolen. In every case the
applicant for a substitute Security or Coupon shall furnish to the Issuer and to
the Trustee such security or indemnity as may be required by them to indemnify
and defend and to save each of them harmless and, in every case of destruction,
loss or theft, evidence to their satisfaction of the destruction, loss or theft
of such Security or Coupon and of the ownership thereof and in the case of
mutilation or defacement shall surrender the Security and related Coupons to the
Trustee.

                             Upon the issuance of any substitute Security or
Coupon, the Issuer may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith. In case any Security or Coupon which has matured or is about to
mature or has been called for redemption in full shall become mutilated or
defaced or be destroyed, lost or stolen, the Issuer may instead of issuing a
substitute Security, pay or authorize the payment of the same or the relevant
Coupon (without surrender thereof except in the case of a mutilated or defaced
Security or Coupon), if the applicant for such payment shall furnish to the
Issuer and to the Trustee such security or indemnity as may be required by them
to save them harmless, and, in every case of destruction, loss or theft, the
applicant shall also furnish to the Issuer and the Trustee evidence to their
satisfaction of the destruction, loss or theft of such Security or Coupon and of
the ownership thereof.

                             Every substitute Security or Coupon of any series
issued pursuant to the provisions of this Section by virtue of the fact that any
such Security or Coupon is destroyed, lost or stolen shall constitute an
additional contractual obligation of the Issuer, whether or not the destroyed,
lost or stolen Security or Coupon shall be at any time enforceable by anyone and
shall be entitled to all the benefits of (but shall be subject to all the
limitations of rights set forth in) this Indenture equally and proportionately
with any and all other Securities or Coupons of such series duly authenticated
and delivered hereunder. All Securities and Coupons shall be held and owned upon
the express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, defaced or destroyed, lost or stolen Securities and Coupons and shall
preclude any and all other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement or
payment of negotiable instruments or other securities without their surrender.

                             SECTION 2.10 CANCELLATION OF SECURITIES;
DESTRUCTION THEREOF. All Securities and Coupons surrendered for payment,
redemption, registration of transfer or exchange, or for credit against any
payment in respect of a sinking or analogous fund, if surrendered to the Issuer
or any agent of the Issuer or the Trustee, shall be


                                       11

<PAGE>   19



delivered to the Trustee for cancellation or, if surrendered to the Trustee,
shall be canceled by it; and no Securities or Coupons shall be issued in lieu
thereof except as expressly permitted by any of the provisions of this
Indenture. The Trustee shall return canceled Securities and Coupons held by it
to the Issuer upon its written request. If the Issuer shall acquire any of the
Securities or Coupons, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Securities or Coupons
unless and until the same are delivered to the Trustee for cancellation.

                             SECTION 2.11 TEMPORARY SECURITIES. Pending the
preparation of definitive Securities for any series, the Issuer may execute and
the Trustee shall authenticate and deliver temporary Securities for such series
(printed, lithographed, typewritten or otherwise reproduced, in each case in
form satisfactory to the Trustee). Temporary Securities of any series shall be
issuable as Registered Securities without Coupons, or as Unregistered Securities
with or without Coupons attached thereto, of any authorized denomination, and
substantially in the form of the definitive Securities of such series but with
such omissions, insertions and variations as may be appropriate for temporary
Registered Securities, all as may be determined by the Issuer with the
concurrence of the Trustee as evidenced by the execution and authentication
thereof. Temporary Securities may contain such reference to any provisions of
this Indenture as may be appropriate. Every temporary Security shall be executed
by the Issuer and be authenticated by the Trustee upon the same conditions and
in substantially the same manner, and with like effect, as the definitive
Securities. Without unreasonable delay the Issuer shall execute and shall
furnish definitive Securities of such series and thereupon temporary Registered
Securities of such series may be surrendered in exchange therefor without charge
at each office or agency to be maintained by the Issuer for that purpose
pursuant to Section 3.2 and in the case of Unregistered Securities, at any
agency maintained by the Issuer for such purpose as specified pursuant to
Section 2.3, and the Trustee shall authenticate and deliver in exchange for such
temporary Securities of such series a like aggregate principal amount of
definitive Securities of the same series of authorized denominations and, in the
case of Unregistered Securities, having attached thereto any appropriate
Coupons. Until so exchanged, the temporary Securities of any series shall be
entitled to the same benefits under this Indenture as definitive Securities of
such series. The provisions of this Section are subject to any restrictions or
limitations on the issue and delivery of temporary Unregistered Securities of
any series that may be established pursuant to Section 2.3 (including any
provision that Unregistered Securities of such series initially be issued in the
form of a single global Unregistered Security to be delivered to a depositary or
agency of the Issuer located outside the United States and the procedures
pursuant to which definitive Unregistered Securities of such series would be
issued in exchange for such temporary global Unregistered Security).

                             SECTION 2.12 MEDIUM-TERM NOTES. Notwithstanding any
contrary provision herein, the Issuer may establish in or pursuant to a Board
Resolution or, if so authorized by Board Resolutions, by Officers' Certificate
or by one or more supplemental indentures, prior to the issuance of the
Securities of any series which have maturities from nine months to thirty years
from the Original Issue Date and certain other terms to be determined in the
manner herein contemplated, the form and terms of the Securities of such series
of which the principal amount and the terms described in clauses (3), (4), (5),
(7), (8), (12), (13) and (17) of Section 2.3 of each Security of such series may
be established by such agents of the Issuer and communicated in such manner and
at such times before the issuance thereof as shall be provided in or pursuant to
such Board Resolution, Officers' Certificate or supplemental indenture and as
shall be reasonably satisfactory to the Trustee, without certifying or
delivering to the Trustee any record of action by such agents or delivering any
Issuer Order, Officers' Certificate or Opinion of Counsel (other than such
communication as shall be so provided and satisfactory), PROVIDED that, prior to
the initial issuance of any Security or Securities of such series, the Issuer
Order, Officers' Certificate and Opinion of Counsel described in Sections 2.1,
2.3 and 2.4 with respect to the Securities of such series, with such changes in
each case as shall be necessary in respect of the future determination of terms
and as shall be reasonably satisfactory to the Trustee, shall be delivered to
the Trustee.

                             SECTION 2.13 GLOBAL SECURITIES. If the Issuer shall
establish pursuant to Section 2.3 that the Securities of a particular series are
to be issued in whole or in part in the form of one or more Global Securities,
then the Issuer shall execute and the Trustee shall, in accordance with Section
2.4, authenticate and deliver such Global Security or Securities, which (i)
shall represent, shall be denominated in an amount equal to the aggregate
principal amount of, and shall have the same terms as, the Outstanding
Securities of such series to be represented by such Global Security or
Securities, (ii) shall be registered in the name of the Depositary or its
nominee, (iii) shall be delivered by the Trustee to the Depositary or pursuant
to the Depositary's instruction and (iv) shall bear a legend substantially to
the following effect: "Unless and until it is exchanged in whole or in part for
the individual Securities represented hereby, this Global Security may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a


                                       12

<PAGE>   20



nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any such nominee to a successor Depositary or a nominee
of such successor Depositary."

                             Notwithstanding any other provision of Section 2.8
or of this Section 2.13, unless the terms of a Global Security expressly permit
such Global Security to be exchanged in whole or in part for individual
Securities, a Global Security may be transferred, in whole but not in part, only
to a nominee of the Depositary, or by a nominee of the Depositary to the
Depositary, or to a successor Depositary for such Global Security selected or
approved by the Issuer or to a nominee of such successor Depositary.

                             If at any time the Depositary for a Global Security
notifies the Issuer that it is unwilling or unable to continue as Depositary for
such Global Security or if at any time the Depositary for the Global Security
shall no longer be eligible or in good standing under the Exchange Act, or other
applicable statute or regulation, the Company shall appoint a successor
Depositary with respect to such Global Security. If a successor Depositary for
such Global Security is not appointed by the Issuer within 20 days after the
Company receives such notice or becomes aware of such ineligibility, the
Company's election pursuant to Section 2.3(17) hereof shall no longer be
effective with respect to such Global Security and the Issuer shall execute, and
the Trustee, in accordance with instructions of the Depositary, shall
authenticate and deliver, individual Securities of such series of like tenor and
terms in definitive form in an aggregate principal amount equal to the principal
amount of the Global Security in exchange for such Global Security.

                             The Issuer may at any time and in its sole
discretion determine that all Outstanding (but not less than all) Securities of
a series issued or issuable in the form of one or more Global Securities shall
no longer be represented by such Global Securities. In such event the Issuer
shall execute, and the Trustee, upon receipt of an Issuer Order for the
authentication and delivery of individual Securities in exchange for such Global
Security, shall authenticate and deliver individual Securities of like tenor and
terms in definitive form in an aggregate principal amount equal to the principal
amount of such Global Security or Securities in exchange for such Global
Security or Securities, in accordance with instructions of the Depositary.

                             In any exchange provided for in any of the
preceding two paragraphs, the Company will execute and the Trustee will
authenticate and deliver individual Securities in definitive registered form in
authorized denominations. Upon the exchange of a Global Security for individual
Securities, such Global Securities shall be canceled by the Trustee. Securities
issued in exchange for a Global Security pursuant to this Section shall be
registered in such names and in such authorized denominations as the Depositary
for such Global Security, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee and the Issuer and the
Trustee may conclusively rely on, and shall be protected in relying upon, such
instructions. The Trustee shall deliver such Securities to the Depositary for
delivery to the persons in whose names such Securities are so registered, or if
the Depositary shall refuse or be unable to deliver such Securities, the Trustee
shall deliver such Securities to the persons in whose names such Securities are
registered, unless otherwise agreed upon between the Trustee and the Issuer.

                             Neither the Issuer, the Trustee, any authenticating
agent nor any paying agent will have any responsibility or liability for any
aspect of the records relating to, or payments made on account of, beneficial
ownership interests of a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest. Pursuant
to the provisions of this subsection, at the option of the Trustee and upon 30
days' written notice to the Depositary, the Depositary shall be required to
surrender any two or more Global Securities which have identical terms,
including, without limitation, identical maturities, interest rates and
redemption provisions (but which may have differing Original Issue Dates) to the
Trustee, and the Issuer shall execute and the Trustee shall authenticate and
deliver to, or at the direction of, the Depository, a Global Security in
principal amount equal to the aggregate principal amount of, and with all terms
identical to, the Global Securities surrendered thereto and that shall indicate
each applicable Original Issue Date and the principal amount applicable to each
such Original Issue Date. The exchange contemplated in this subsection shall be
consummated at least 30 days prior to any interest payment date applicable to
any of the Global Securities surrendered to the Trustee. Upon any exchange of
any Global Security with two or more Original Issue Dates, whether pursuant to
this Section or pursuant to Section 2.6, the aggregate principal amount of the
Securities with a particular Original Issue Date shall be the same before and
after such exchange, giving effect to any retirement of Securities and the
Original Issue Dates applicable to such Securities occurring in connection with
such exchange.



                                       13

<PAGE>   21



                             SECTION 2.14 COMPUTATION OF INTEREST. Except as
otherwise specified by the terms of the Security, interest on the Securities of
each series shall be computed on the basis of a 360-day year of twelve 30-day
months.

                             SECTION 2.15 CUSIP NUMBERS. The Issuer in issuing
the Securities may use "CUSIP" numbers (if then generally in use), and, if so,
the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience
to Holders; PROVIDED that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Issuer will promptly notify the Trustee of any change in the "CUSIP"
numbers.

                                  ARTICLE THREE

                             COVENANTS OF THE ISSUER

                             SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The
Issuer covenants and agrees for the benefit of each series of Securities that it
will duly and punctually pay or cause to be paid the principal of, and interest
on, each of the Securities of such series (together with any additional amounts
payable pursuant to the terms of such Securities) at the place or places, at the
respective times and in the manner provided in such Securities and in the
Coupons appertaining thereto and in this Indenture. The interest on Securities
with Coupons attached (together with any additional amounts payable pursuant to
the terms of such Securities) shall be payable only upon presentation and
surrender of the several Coupons for such interest installments as are evidenced
thereby as they severally mature. The interest on any temporary Unregistered
Securities (together with any additional amounts payable pursuant to the terms
of such Securities) shall be paid, as to the installments of interest evidenced
by Coupons attached thereto, if any, only upon presentation and surrender
thereof, and, as to the other installments of interest, if any, only upon
presentation of such Securities for notation thereon of the payment of such
interest. The interest on Registered Securities (together with any additional
amounts payable pursuant to the terms of such Securities) shall be paid by
mailing checks for such interest payable to or upon the written order of such
Holders at their last addresses as they appear on the security register or, if
the provisions of the Securities provide for a different method of payment, in
accordance with the provisions of the Securities.

                             SECTION 3.2 OFFICES FOR PAYMENTS, ETC. The Issuer
will maintain in the Borough of Manhattan, The City of New York, an agency where
the Registered Securities of each series may be presented for payment, an agency
where the Securities of each series may be presented for exchange as is provided
in this Indenture and, if applicable, pursuant to Section 2.3 an agency where
the Registered Securities of each series may be presented for registration of
transfer as is provided in this Indenture.

                             Whenever Unregistered Securities are issued and
outstanding, the Issuer will maintain one or more agencies in a city or cities
located outside the United States (including any city in which such an agency is
required to be maintained under the rules of any stock exchange on which the
Securities of such series are listed) where the Unregistered Securities of each
series and Coupons, if any, appertaining thereto may be presented for payment.
No payment on any Unregistered Security or Coupon will be made upon presentation
of such Unregistered Security or Coupon at an agency of the Issuer within the
United States nor will any payment be made by transfer to an account in, or by
mail to an address in, the United States unless pursuant to applicable United
States laws and regulations then in effect such payment can be made without
adverse tax consequences to the Issuer. Notwithstanding the foregoing, payments
in Dollars on Unregistered Securities of any series and Coupons appertaining
thereto which are payable in Dollars may be made at an agency of the Issuer
maintained in the Borough of Manhattan, The City of New York if such payment in
Dollars at each agency maintained by the Issuer outside the United States for
payment on such Unregistered Securities is illegal or effectively precluded by
exchange controls or other similar restrictions.

                             The Issuer will maintain in the Borough of
Manhattan, The City of New York, an agency where notices and demands to or upon
the Issuer in respect of the Securities of any series, the Coupons appertaining
thereto or this Indenture may be served. The Issuer will give to the Trustee
written notice of the location of each such agency and of any change of location
thereof. In case the Issuer shall fail to maintain any agency required by this
Section to be located in the Borough of Manhattan, The City of New York, or
shall fail to give such notice of the location or of


                                       14

<PAGE>   22



any change in the location of any of the above agencies, presentations and
demands may be made and notices may be served at the Corporate Trust Office of
the Trustee.

                             The Issuer may from time to time designate one or
more additional agencies where the Securities of a series and Coupons
appertaining thereto may be presented for payment, where the Securities of that
series may be presented for exchange as provided in this Indenture and pursuant
to Section 2.3 and where the Registered Securities of that series may be
presented for registration of transfer as provided in this Indenture, and the
Issuer may from time to time rescind any such designation, as the Issuer may
deem desirable or expedient; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve the Issuer of its obligation to maintain
the agencies provided for in the immediately preceding paragraphs. The Issuer
will give to the Trustee prompt written notice of any such designation or
rescission thereof.

                             SECTION 3.3 APPOINTMENT TO FILL A VACANCY IN OFFICE
OF TRUSTEE. The Issuer, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee with respect to each
series of Securities hereunder.

                             SECTION 3.4 PAYING AGENTS. Whenever the Issuer
shall appoint a paying agent other than the Trustee with respect to the
Securities of any series, it will cause such paying agent to execute and deliver
to the Trustee an instrument in which such agent shall agree with the Trustee,
subject to the provisions of this Section,

                             (a) that it will hold all sums received by it as
                         such agent for the payment of the principal of or
                         interest on the Securities of such series in trust for
                         the benefit of the holders of the Securities of such
                         series, or Coupons appertaining thereto, or of the
                         Trustee,

                             (b) that it will give the Trustee notice of any
                         failure by the Issuer to make any payment of the
                         principal of or interest on the Securities of such
                         series when the same shall be due and payable, and

                             (c) that at any time during the continuance of any
                         such failure, upon the written request of the Trustee
                         it will forthwith pay to the Trustee all sums so held
                         in trust by such paying agent.

                             The Issuer will, prior to each due date of the
principal of or interest on the Securities of such series, deposit with the
paying agent a sum sufficient to pay such principal or interest so becoming due,
and (unless such paying agent is the Trustee) the Issuer will promptly notify
the Trustee of any failure to take such action.

                             If the Issuer shall act as its own paying agent
with respect to the Securities of any series, it will, on or before each due
date of the principal of or interest on the Securities of such series, set
aside, segregate and hold in trust for the benefit of the holders of the
Securities of such series or the Coupons appertaining thereto a sum sufficient
to pay such principal or interest so becoming due. The Issuer will promptly
notify the Trustee of any failure to take such action.

                             Anything in this Section to the contrary
notwithstanding, the Issuer may at any time, for the purpose of obtaining a
satisfaction and discharge with respect to one or more or all series of
Securities hereunder, or for any other reason, pay or cause to be paid to the
Trustee all sums held in trust for any such series by the Issuer or any paying
agent hereunder, as required by this Section, such sums to be held by the
Trustee upon the trusts herein contained.

                             Anything in this Section to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this Section
is subject to the provisions of Sections 10.3 and 10.4.

                             SECTION 3.5 WRITTEN STATEMENT TO TRUSTEE. The
Issuer shall deliver to the Trustee on or before May 15 in each year (beginning
with 1998) a written statement, signed by two of its officers one of which shall
be the principal executive, principal financial or principal accounting officer
of the Issuer (which need not comply with Section 11.5), stating that in the
course of the performance of their duties as officers of the Issuer they would
normally have knowledge of any default by the Issuer in the performance or
fulfillment of any covenant, agreement or condition


                                       15

<PAGE>   23



contained in this Indenture, without regard to notice requirements or periods of
grace, stating whether or not they have knowledge of any such default and, if
so, specifying each such default of which the signers have knowledge and the
nature thereof.

                             The Issuer shall deliver to the Trustee, as soon as
possible and in any event within five days after the Issuer becomes aware of the
occurrence of any Event of Default or an event which, with notice or the lapse
of time or both, would constitute an Event of Default, an Officers' Certificate
setting forth the details of such Event of Default or default and the action
which the Issuer proposes to take with respect thereto.

                             SECTION 3.6 LUXEMBOURG PUBLICATIONS. In the event
of the publication of any notice pursuant to Section 5.11, 6.8(b), 6.10(a),
6.11, 8.2, 10.4, 12.2 or 12.5, the party making such publication in the Borough
of Manhattan, The City of New York and London shall also, to the extent that
notice is required to be given to Holders of Securities of any series by
applicable Luxembourg law or stock exchange regulation, as evidenced by an
Officers' Certificate delivered to such party, make a similar publication in
Luxembourg.

                             SECTION 3.7 LIMITATION ON LIENS. (a) The Issuer
will not itself, and will not permit any Domestic Subsidiary to, incur, issue,
assume or guarantee any indebtedness for money borrowed evidenced by notes,
bonds, debentures or other similar evidences of indebtedness (such notes, bonds,
debentures or other similar evidences of indebtedness being hereinafter in this
Article called "Debt"), secured by a mortgage on any Principal Manufacturing
Property of the Issuer or any Domestic Subsidiary, or any shares of stock or
Debt of any Domestic Subsidiary which owns a Principal Manufacturing Property,
without effectively providing that the Securities shall be secured equally and
ratably with (or prior to) such secured Debt, so long as secured Debt shall be
so secured; PROVIDED, HOWEVER, that this Section shall not apply to, and there
shall be excluded from secured Debt in any computation under this Section, Debt
secured by:

                             (1) Mortgages of the Issuer or its Domestic
                          Subsidiaries existing at the time of this Indenture;

                             (2) Mortgages on property of, or on any shares of
                         stock of, any corporation existing at the time such
                         corporation becomes a Domestic Subsidiary;

                             (3) Mortgages on property or shares of stock of a
                         Domestic Subsidiary existing at the time of acquisition
                         thereof (including acquisition through merger or
                         consolidation) or to secure the payment of all or any
                         part of the purchase price or construction cost thereof
                         or to secure any Debt incurred prior to, at the time
                         of, or within 180 days after, the acquisition of such
                         property or shares or the completion of any such
                         construction and commencement of full operation of such
                         property for the purpose of financing all or any part
                         of the purchase price or construction cost thereof;

                             (4) Mortgages in favor of the Issuer or any
                          Domestic Subsidiary;

                             (5) Mortgages in favor of the United States of
                         America, any State of the United States of America, or
                         any subdivision, agency, department or other
                         instrumentality thereof, to secure partial, progress,
                         advance or other payments pursuant to any contract or
                         provision of any statute; and

                             (6) any extension, renewal or replacement (or
                         successive extensions, renewals or replacements), as a
                         whole or in part, of any Debt secured by any mortgage
                         referred to in the foregoing clauses (1) to (5),
                         inclusive; PROVIDED, that (i) such extension, renewal
                         or replacement mortgage shall be limited to all or a
                         part of the same property or shares of stock that
                         secured the mortgage extended, renewed or replaced
                         (plus improvements on such property) and (ii) the Debt
                         secured by such mortgage at such time is not increased.

                             (b) Notwithstanding the limitations on liens
described in Section 3.7(a), the Issuer or any Domestic Subsidiary may incur,
issue, assume or guarantee any Debt secured by a mortgage on any Principal
Manufacturing Property of the Issuer or its Domestic Subsidiaries or any shares
of stock or Debt of any


                                       16

<PAGE>   24



Domestic Subsidiary which owns a Principal Manufacturing Property, in addition
to that permitted above and without any obligation to secure the Securities,
provided that at the time of such incurrences, issuance, assumption or guarantee
of such Debt, and after giving effect thereto, Exempted Debt does not exceed 15%
of the Consolidated Net Tangible Assets of the Issuer and its Subsidiaries,
taken as a whole.

                             SECTION 3.8 LIMITATION ON SALE AND LEASE-BACK. (a)
The Issuer will not itself, and it will not permit any Domestic Subsidiary to,
enter into any arrangement with any bank, insurance company or other lender or
investor (not including the Issuer or any Domestic Subsidiary) or to which any
such lender or investor is a party, providing for the leasing by the Issuer or
such Subsidiary for a period, including renewals, in excess of three years of
any Principal Manufacturing Property of the Issuer or any Domestic Subsidiary
which has been or is to be sold or transferred, more than 180 days after the
later of (i) the acquisition thereof, (ii) the completion of construction
thereof or (iii) the commencement of full operation thereof, by the Issuer or
any such Subsidiary to such lender or investor or to any person to whom funds
have been or are to be advanced by such lender or investor on the security of
such Principal Manufacturing Property (herein referred to as a "sale and
leaseback transaction") unless either:

                             (1) the Issuer or such Domestic Subsidiary could
create Debt secured by a mortgage pursuant to Section 3.7 on the Principal
Manufacturing Property to be leased back in an amount equal to the Attributable
Debt with respect to such sale and leaseback transaction without equally and
ratably securing the Securities, or

                             (2) the Issuer within 180 days after the sale or
transfer shall have been made by the Issuer or by any such Subsidiary, applies
an amount equal to the greater of (i) the net proceeds of the sale of the
Principal Manufacturing Property sold and leased back pursuant to such
arrangement or (ii) the fair market value of the Principal Manufacturing
Property so sold and leased back at the time or entering into such arrangement
(as determined by any two of the following: the Chairman, President, any Vice
President, Treasurer and Controller of the Issuer) to the retirement of Funded
Debt of the Issuer or any Domestic Subsidiary; PROVIDED, that the amount to be
applied to the retirement of Funded Debt of the Issuer or any Domestic
Subsidiary shall be reduced by (a) the principal amount of any Securities
delivered within 180 days after such sale to the Trustee for retirement and
cancellation, and (b) the principal amount of Funded Debt, other than
Securities, voluntarily retired by the Issuer within 180 days after such sale.
Notwithstanding the foregoing, no retirement referred to in this clause may be
effected by payment at maturity or pursuant to any mandatory sinking fund
payment or any mandatory prepayment provision.

                             (b) Notwithstanding the provisions of paragraph (a)
of this Section 3.8, the Issuer or any Domestic Subsidiary may enter into a sale
and lease-back transaction of a Principal Manufacturing Property of the Issuer
or any Domestic Subsidiary in addition to that permitted by paragraph (a) of
this Section 3.8 and without any obligation to retire any Securities or other
indebtedness referred to in paragraph (a) of this Section 3.8, provided that at
the time of entering into such Sale and Lease-Back Transaction and after giving
effect thereto, Exempted Debt does not exceed 15% of Consolidated Net Tangible
Assets of the Issuer and its Subsidiaries, taken as a whole.

                             SECTION 3.9 CALCULATION OF ORIGINAL ISSUE DISCOUNT.
The Issuer shall file with the Trustee promptly at the end of each calendar year
(i) a written notice specifying the amount of original issue discount (including
daily rates and accrual periods) accrued on Outstanding Securities as of the end
of such year and (ii) such other specific information relating to such original
issue discount as may then be relevant under the Internal Revenue Code of 1986,
as amended from time to time.

                                  ARTICLE FOUR

                    SECURITYHOLDERS LISTS AND REPORTS BY THE
                             ISSUER AND THE TRUSTEE

                             SECTION 4.1 ISSUER TO FURNISH TRUSTEE INFORMATION
AS TO NAMES AND ADDRESSES OF SECURITYHOLDERS. The Issuer covenants and agrees
that it will furnish or cause to be furnished to the Trustee a list in such form
as the Trustee may reasonably require of the names and addresses of the Holders
of the Securities of each series:

                             (a) semiannually and not more than 15 days after
                         each record date for the payment of interest on such
                         Securities, as hereinabove specified, as of such record
                         date and on


                                       17

<PAGE>   25



                         dates to be determined pursuant to Section 2.3 for
                         non-interest bearing securities in each year, and

                             (b) at such other times as the Trustee may request
                         in writing, within 30 days after receipt by the Issuer
                         of any such request, in which case such list shall be
                         as of a date not more than 15 days prior to the time
                         such information is furnished,

PROVIDED that if and so long as the Trustee shall be the Security registrar for
such series and all of the Securities of any series are Registered Securities,
such list shall not be required to be furnished.

                             SECTION 4.2 PRESERVATION AND DISCLOSURE OF
SECURITYHOLDERS LISTS. (a) The Trustee shall preserve, in as current a form as
is reasonably practicable, all information as to the names and addresses of the
Holders of each series of Securities (i) contained in the most recent list
furnished to it as provided in Section 4.1, (ii) received by it in the capacity
of Security registrar for such series, if so acting and (iii) filed with it
within two preceding years pursuant to Section 4.4(c) (ii). The Trustee may
destroy any list furnished to it as provided in Section 4.1 upon receipt of a
new list so furnished.

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

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

                             (ii) inform such applicants as to the approximate
                         number of holders of Securities of such series or all
                         Securities, as the case may be, whose names and
                         addresses appear in the information preserved at the
                         time by the Trustee, in accordance with the provisions
                         of subsection (a) of this Section, and as to the
                         approximate cost of mailing to such Securityholders the
                         form of proxy or other communication, if any, specified
                         in such application.

                             If the Trustee shall elect not to afford to such
applicants access to such information, the Trustee shall, upon the written
request of such applicants, mail to each Securityholder of such series or all
Securities, as the case may be, whose name and address appears in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section a copy of the form of proxy or
other communication which is specified in such request, with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Commission together with a copy of the material to
be mailed, a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of the holders of
Securities of such series or all Securities, as the case may be, or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met, and shall enter an order so declaring, the Trustee shall mail copies
of such material to all such Securityholders with reasonable promptness after
the entry of such order and the renewal of such tender; otherwise the Trustee
shall be relieved of any obligation or duty to such applicants respecting their
application.

                             (c) Each and every Holder of Securities and
Coupons, by receiving and holding the same, agrees with the Issuer and the
Trustee that neither the Issuer nor the Trustee nor any agent of the Issuer or
the Trustee shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders of Securities in
accordance with the provisions of subsection (b) of this Section, regardless of
the source from


                                       18

<PAGE>   26



which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
such subsection (b).

                             SECTION 4.3  REPORTS BY THE ISSUER.  The Issuer 
                         covenants:

                             (a) to file with the Trustee within 15 days after
                         the Issuer is required to file the same with the
                         Commission, copies of the annual reports and of the
                         information, documents, and other reports (or copies of
                         such portions of any of the foregoing as the Commission
                         may from time to time by rules and regulations
                         prescribe) which the Issuer may be required to file
                         with the Commission pursuant to Section 13 or Section
                         15(d) of the Exchange Act, or if the Issuer is not
                         required to file information, documents, or reports
                         pursuant to either of such Sections, then to file with
                         the Trustee and the Commission, in accordance with
                         rules and regulations prescribed from time to time by
                         the Commission, such of the supplementary and periodic
                         information, documents, and reports which may be
                         required pursuant to Section 13 of the Exchange Act, or
                         in respect of a security listed and registered on a
                         national securities exchange as may be prescribed from
                         time to time in such rules and regulations;

                             (b) file with the Trustee and the Commission, in
                         accordance with rules and regulations prescribed from
                         time to time by the Commission, such additional
                         information, documents and reports with respect to
                         compliance by the Issuer with the conditions and
                         covenants of this Indenture as may be required from
                         time to time by such rules and regulations, including,
                         in the case of annual reports, if required by such
                         rules and regulations, certificates or opinions of
                         independent public accountants, conforming to the
                         requirements of Section 11.5 as to compliance with
                         conditions or covenants, compliance with which is
                         subject to verification by accountants; and

                             (c) to transmit by mail to the holders of
                         Securities, in the manner and to the extent provided in
                         Section 4.4(c), such summaries of any information,
                         documents and reports required to be filed by the
                         Issuer pursuant to subsections (a) and (b) of this
                         Section as may be required to be transmitted to such
                         Holders by rules and regulations prescribed from time
                         to time by the Commission.

                             SECTION 4.4 REPORTS BY THE TRUSTEE.

                             (a) The Trustee shall transmit to Holders such
                         reports concerning the Trustee and its actions under
                         this Indenture as may be required pursuant to the TIA
                         at the times and in the manner provided pursuant
                         thereto. If required by Section 313(a) of the TIA, the
                         Trustee shall, not later than January 31 of each year,
                         beginning January 31, 1999, deliver to Holders a brief
                         report, which complies with the provisions of such
                         Section 313(a).

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

                                  ARTICLE FIVE

                   REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                               ON EVENT OF DEFAULT

                             SECTION 5.1 EVENT OF DEFAULT DEFINED; ACCELERATION
OF MATURITY; WAIVER OF DEFAULT. "Event of Default" with respect to Securities of
any series whenever used herein means each of the following events which shall
have occurred and be continuing (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):


                                       19

<PAGE>   27



                             (a) default in the payment of any installment of
                         interest upon any of the Securities of such series as
                         and when the same shall become due and payable, and
                         continuance of such default for a period of 30 days; or

                             (b) default in the payment of all or any part of
                         the principal on any of the Securities of such series
                         as and when the same shall become due and payable
                         either at maturity, upon redemption, by declaration or
                         otherwise; or

                             (c) default in the payment of any sinking fund
                         installment as and when the same shall become due and
                         payable by the terms of the Securities of such series;
                         or

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

                             (e) a court having jurisdiction in the premises
                         shall enter a decree or order for relief in respect of
                         the Issuer in an involuntary case under any applicable
                         bankruptcy, insolvency or other similar law now or
                         hereafter in effect, or appointing a receiver,
                         liquidator, assignee, custodian, trustee or
                         sequestrator (or similar official) of the Issuer or for
                         any substantial part of its property or ordering the
                         winding up or liquidation of its affairs, and such
                         decree or order shall remain unstayed and in effect for
                         a period of 60 consecutive days; or

                             (f) the Issuer shall commence a voluntary case
                         under any applicable bankruptcy, insolvency or other
                         similar law now or hereafter in effect, or consent to
                         the entry of an order for relief in any involuntary
                         case under any such law, or consent to the appointment
                         of or taking possession by a receiver, liquidator,
                         assignee, custodian, trustee or sequestrator (or
                         similar official) of the Issuer or for any substantial
                         part of its property, or make any general assignment
                         for the benefit of creditors; or

                             (g) any other Event of Default provided in the
                         supplemental indenture or Board Resolution under which
                         such series of Securities is issued or in the form of
                         Security for such series.

If an Event of Default described in clauses (a), (b), (c) or (d) above (if the
event in clause (d) is with respect to less than all series of Securities then
Outstanding) occurs and is continuing, then, and in each and every such case,
unless the principal of all of the Securities of such series shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Securities of such series then Outstanding
hereunder (each such series voting as a separate class) by notice in writing to
the Issuer (and to the Trustee if given by Securityholders), may declare the
entire principal (or, if the Securities of such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms of such series) of all Securities of such series and the interest
accrued thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default described in clause (d) with respect to all series of Securities then
Outstanding occurs and is continuing, then in such case unless the principal of
all of the Securities shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount of
all the Securities then Outstanding hereunder (treated as one class), by notice
in writing to the Issuer (and the Trustee if given by Securityholders) may
declare the entire principal (or if any Securities are Original Issue Discount
Securities, such portion of the principal as may be specified in the terms
thereof) of all Securities then Outstanding and interest accrued thereon, if
any, immediately due and payable. If an Event of Default described in clause
(e) or (f) occurs and is continuing, then and in each such case, unless the
principal of all the Securities shall have already become due and payable, the
entire principal (or, if any Securities are Original Issue Discount Securities, 
such portion of the principal as may be specified in the terms thereof) of all 
Securities then outstanding and interest accrued thereon, if any, shall become 
immediately due and payable.

                             The foregoing provisions, however, are subject to
the condition that if, at any time after the principal (or, if the Securities
are Original Issue Discount Securities, such portion of the principal as may be
specified in the terms thereof) of the Securities of any series (or of all the
Securities, as the case may be) shall have been so declared due and payable, and
before any judgment or decree for the payment of the moneys due shall have been
obtained or


                                       20
<PAGE>   28



entered as hereinafter provided, the Issuer shall pay or shall deposit with the
Trustee a sum sufficient to pay all matured installments of interest upon all
the Securities of such series (or of all the Securities, as the case may be) and
the principal of any and all Securities of such series (or of all the
Securities, as the case may be) which shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments of
interest, at the same rate as the rate of interest or Yield to Maturity (in the
case of Original Issue Discount Securities) specified in the Securities of such
series, (or at the respective rates of interest or Yields to Maturity of all the
Securities, as the case may be) to the date of such payment or deposit) and such
amount as shall be sufficient to cover reasonable compensation to the Trustee,
its agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee except as a result of negligence
or bad faith, and if any and all Events of Default under the Indenture, other
than the non-payment of the principal of Securities which shall have become due
by acceleration shall have been cured, waived or otherwise remedied as provided
herein, then and in every such case all defaults and their consequences with
respect to such series (or with respect to all the Securities, as the case may
be) shall be rescinded and annulled, but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default or shall impair
any right consequent thereon.

                             For all purposes under this Indenture, if a portion
of the principal of any Original Issue Discount Securities shall have been
accelerated and declared due and payable pursuant to the provisions hereof,
then, from and after such declaration, unless such declaration has been
rescinded and annulled, the principal amount of such Original Issue Discount
Securities shall be deemed, for all purposes hereunder, to be such portion of
the principal thereof as shall be due and payable as a result of such
acceleration, and payment of such portion of the principal thereof as shall be
due and payable as a result of such acceleration, together with interest, if
any, thereon and all other amounts owing thereunder, shall constitute payment in
full of such Original Issue Discount Securities.

                             SECTION 5.2 COLLECTION OF INDEBTEDNESS BY TRUSTEE;
TRUSTEE MAY PROVE DEBT. The Issuer covenants that (a) in case default shall be
made in the payment of any installment of interest on any of the Securities of
any series when such interest shall have become due and payable, and such
default shall have continued for a period of 30 days or (b) in case default
shall be made in the payment of all or any part of the principal of any of the
Securities of any series when the same shall have become due and payable,
whether upon maturity of the Securities of such series or upon any redemption or
by declaration or otherwise, then upon demand of the Trustee, the Issuer will
pay to the Trustee for the benefit of the Holders of the Securities of such
series the whole amount that then shall have become due and payable on all
Securities of such series, and such Coupons, for principal or interest, as the
case may be (with interest to the date of such payment upon the overdue
principal and, to the extent that payment of such interest is enforceable under
applicable law, on overdue installments of interest at the same rate as the rate
of interest or Yield to Maturity (in the case of Original Issue Discount
Securities) specified in the Securities of such series); and in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to the Trustee and
each predecessor Trustee, their respective agents, attorneys and counsel, and
any expenses and liabilities incurred, and all advances made, by the Trustee and
each predecessor Trustee except as a result of its negligence or bad faith.

                             In case the Issuer shall fail forthwith to pay such
amounts upon such demand, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute any action or
proceedings at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceedings to judgment or final
decree, and may enforce any such judgment or final decree against the Issuer or
other obligor upon such Securities and collect in the manner provided by law out
of the property of the Issuer or other obligor upon such Securities, wherever
situated, the moneys adjudged or decreed to be payable.

                             In case there shall be pending proceedings relating
to the Issuer or any other obligor upon the Securities under Title 11 of the
United States Code or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Issuer or its property or
such other obligor, or in case of any other comparable judicial proceedings
relative to the Issuer or other obligor upon the Securities of any series, or to
the creditors or property of the Issuer or such other obligor, the Trustee,
irrespective of whether the principal of any Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section, shall be entitled and empowered, by intervention in such
proceedings or otherwise:



                                       21

<PAGE>   29



                             (a) to file and prove a claim or claims for the
                         whole amount of principal and interest (or, if the
                         Securities of any series are Original Issue Discount
                         Securities, such portion of the principal amount as may
                         be specified in the terms of such series) owing and
                         unpaid in respect of the Securities of any series, and
                         to file such other papers or documents as may be
                         necessary or advisable in order to have the claims of
                         the Trustee (including any claim for reasonable
                         compensation to the Trustee and each predecessor
                         Trustee, and their respective agents, attorneys and
                         counsel, and for reimbursement of all expenses and
                         liabilities incurred, and all advances made, by the
                         Trustee and each predecessor Trustee, except as a
                         result of negligence or bad faith) and of the
                         Securityholders allowed in any judicial proceedings
                         relative to the Issuer or other obligor upon the
                         Securities of any series, or to the creditors or
                         property of the Issuer or such other obligor;

                             (b) unless prohibited by applicable law and
                         regulations, to vote on behalf of the holders of the
                         Securities of any series in any election of a trustee
                         or a standby trustee in arrangement, reorganization,
                         liquidation or other bankruptcy or insolvency
                         proceedings or person performing similar functions in
                         comparable proceedings; and

                             (c) to collect and receive any moneys or other
                         property payable or deliverable on any such claims, and
                         to distribute all amounts received with respect to the
                         claims of the Securityholders and of the Trustee on
                         their behalf; and any trustee, receiver, or liquidator,
                         custodian or other similar official is hereby
                         authorized by each of the Securityholders to make
                         payments to the Trustee, and, in the event that the
                         Trustee shall consent to the making of payments
                         directly to the Securityholders, to pay to the Trustee
                         such amounts as shall be sufficient to cover reasonable
                         compensation to the Trustee, each predecessor Trustee
                         and their respective agents, attorneys and counsel, and
                         all other expenses and liabilities incurred, and all
                         advances made, by the Trustee and each predecessor
                         Trustee except as a result of negligence or bad faith
                         and all other amounts due to the Trustee or any
                         predecessor Trustee pursuant to Section 6.6.

                             Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or vote for or accept or adopt
on behalf of any Securityholder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities of any series or the rights
of any Holder thereof, or to authorize the Trustee to vote in respect of the
claim of any Securityholder in any such proceeding except, as aforesaid, to vote
for the election of a trustee in bankruptcy or similar person.

                             All rights of action and of asserting claims under
this Indenture, or under any of the Securities of any series or Coupons
appertaining to such Securities, may be enforced by the Trustee without the
possession of any of the Securities of such series or Coupons appertaining to
such Securities or the production thereof on any trial or other proceedings
relative thereto, and any such action or proceedings instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, subject to the payment of the expenses, disbursements and
compensation of the Trustee, each predecessor Trustee and their respective
agents and attorneys, shall be for the ratable benefit of the holders of the
Securities or Coupons appertaining to such Securities in respect of which such
action was taken.

                             In any proceedings brought by the Trustee (and also
any proceedings involving the interpretation of any provision of this Indenture
to which the Trustee shall be a party) the Trustee shall be held to represent
all the Holders of the Securities or Coupons appertaining to such Securities in
respect to which such action was taken, and it shall not be necessary to make
any Holders of such Securities or Coupons appertaining to such Securities
parties to any such proceedings.

                             SECTION 5.3 APPLICATION OF PROCEEDS. Any moneys
collected by the Trustee pursuant to this Article in respect of any series shall
be applied in the following order at the date or dates fixed by the Trustee and,
in case of the distribution of such moneys on account of principal or interest,
upon presentation of the several Securities and Coupons appertaining to such
Securities in respect of which monies have been collected and stamping (or
otherwise noting) thereon the payment, or issuing Securities of such series in
reduced principal amounts in exchange for the presented Securities of like
series if only partially paid, or upon surrender thereof if fully paid:


                                       22

<PAGE>   30



                             FIRST: To the payment of costs and expenses
                         applicable to such series in respect of which monies
                         have been collected, including reasonable compensation
                         to the Trustee and each predecessor Trustee and their
                         respective agents and attorneys and of all expenses and
                         liabilities incurred, and all advances made, by the
                         Trustee and each predecessor Trustee except as a result
                         of negligence or bad faith, and all other amounts due
                         to the Trustee or any predecessor Trustee pursuant to
                         Section 6.6;

                             SECOND: In case the principal of the Securities of
                         such series in respect of which moneys have been
                         collected shall not have become and be then due and
                         payable, to the payment of interest on the Securities
                         of such series in default in the order of the maturity
                         of the installments of such interest, with interest (to
                         the extent that such interest has been collected by the
                         Trustee) upon the overdue installments of interest at
                         the same rate as the rate of interest or Yield to
                         Maturity (in the case of Original Issue Discount
                         Securities) specified in such Securities, such payments
                         to be made ratably to the persons entitled thereto,
                         without discrimination or preference;

                             THIRD: In case the principal of the Securities of
                         such series in respect of which moneys have been
                         collected shall have become and shall be then due and
                         payable, to the payment of the whole amount then owing
                         and unpaid upon all the Securities of such series for
                         principal and interest, with interest upon the overdue
                         principal, and (to the extent that such interest has
                         been collected by the Trustee) upon overdue
                         installments of interest at the same rate as the rate
                         of interest or Yield to Maturity (in the case of
                         Original Issue Discount Securities) specified in the
                         Securities of such series; and in case such moneys
                         shall be insufficient to pay in full the whole amount
                         so due and unpaid upon the Securities of such series,
                         then to the payment of such principal and interest or
                         Yield to Maturity, without preference or priority of
                         principal over interest or Yield to Maturity, or of
                         interest or Yield to Maturity over principal, or of any
                         installment of interest over any other installment of
                         interest, or of any Security of such series over any
                         other Security of such series, ratably to the aggregate
                         of such principal and accrued and unpaid interest or
                         Yield to Maturity; and

                             FOURTH: To the payment of the remainder, if any, to
                          the Issuer or any other person lawfully entitled
                          thereto.

                             SECTION 5.4 SUITS FOR ENFORCEMENT. In case an Event
of Default has occurred, has not been waived and is continuing, the Trustee may
in its discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.

                             SECTION 5.5 RESTORATION OF RIGHTS ON ABANDONMENT OF
PROCEEDINGS. In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to the Trustee, then and
in every such case the Issuer and the Trustee shall be restored respectively to
their former positions and rights hereunder, and all rights, remedies and powers
of the Issuer, the Trustee and the Security Holders shall continue as though no
such proceedings had been taken.

                             SECTION 5.6 LIMITATIONS ON SUITS BY
SECURITYHOLDERS. No holder of any Security of any series or of any Coupon
appertaining thereto shall have any right by virtue or by availing of any
provision of this Indenture to institute any action or proceeding at law or in
equity or in bankruptcy or otherwise upon or under or with respect to this
Indenture, or for the appointment of a trustee, receiver, liquidator, custodian
or other similar official or for any other remedy hereunder, unless such
Securityholder previously shall have given to the Trustee written notice of
default and of the continuance thereof, as hereinbefore provided, and unless
also the Securityholders of not less than 25% in aggregate principal amount of
the Securities of such series then Outstanding shall have made written request
upon the Trustee to institute such action or proceedings in its own name as
trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity shall have failed to


                                       23

<PAGE>   31



institute any such action or proceeding and no direction inconsistent with such
written request shall have been given to the Trustee pursuant to Section 5.9; it
being understood and intended, and being expressly covenanted by the taker and
Holder of every Security or Coupon with every other taker and Securityholder and
the Trustee, that no one or more Holders of Securities of any series or Coupons
appertaining to such Securities shall have any right in any manner whatever by
virtue or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of any other such Holder of Securities or Coupons
appertaining to such Securities, or to obtain or seek to obtain priority over or
preference to any other such Securityholder or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of Securities. For the protection and enforcement
of the provisions of this Section, each and every Securityholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.

                             SECTION 5.7 UNCONDITIONAL RIGHT OF SECURITYHOLDERS
TO INSTITUTE CERTAIN SUITS. Notwithstanding any other provision in this
Indenture and any provision of any Security, the right of any Holder of any
Security or Coupon to receive payment of the principal of and interest on such
Security or Coupon on or after the respective due dates expressed in such
Security or Coupon, or to institute suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.

                             SECTION 5.8 POWERS AND REMEDIES CUMULATIVE; DELAY
OR OMISSION NOT WAIVER OF DEFAULT. Except as provided in Section 5.6, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders of
Securities or Coupons is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

                             No delay or omission of the Trustee or of any
Holder of Securities or Coupons to exercise any right or power accruing upon any
Event of Default occurring and continuing as aforesaid shall impair any such
right or power or shall be construed to be a waiver of any such Event of Default
or an acquiescence therein; and, subject to Section 5.6, every power and remedy
given by this Indenture or by law to the Trustee or to the Holders of Securities
or Coupons may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the Holders of Securities or Coupons.

                             SECTION 5.9 CONTROL BY SECURITYHOLDERS. The Holders
of a majority in aggregate principal amount of the Securities of each series
affected (with each series voting as a separate class) at the time Outstanding
shall have the right to direct the time, method, and place of conducting any
proceedings for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee with respect to the Securities of such series by
this Indenture; PROVIDED that such direction shall not be otherwise than in
accordance with law and the provisions of this Indenture and PROVIDED FURTHER
that (subject to the provisions of Section 6.1) the Trustee shall have the right
to decline to follow any such direction if the Trustee, being advised by
counsel, shall determine that the action or proceeding so directed may not
lawfully be taken or if the Trustee in good faith by its board of directors, the
executive committee, or a trust committee of directors or Responsible Officers
of the Trustee shall determine that the action or proceedings so directed would
involve the Trustee in personal liability or if the Trustee in good faith shall
so determine that the actions or forebearances specified in or pursuant to such
direction would be unduly prejudicial to the interests of Holders of the
Securities of all series so affected not joining in the giving of said
direction, it being understood that (subject to Section 6.1) the Trustee shall
have no duty to ascertain whether or not such actions or forebearances are
unduly prejudicial to such Securityholders.

                             Nothing in this Indenture shall impair the right of
the Trustee in its discretion to take any action deemed proper by the Trustee
and which is not inconsistent with such direction or directions by Security
Holders.

                             SECTION 5.10 WAIVER OF PAST DEFAULTS. Prior to the
declaration of the acceleration of the maturity of the Securities of any series
as provided in Section 5.1, the Holders of a majority in aggregate principal
amount of the Securities of such series at the time Outstanding may on behalf of
the Holders of all the Securities of such series waive any past default or Event
of Default described in clause (c) of Section 5.1 (or, in the case of an event
specified in clause (d) of Section 5.1 which relates to less than all series of
Securities then Outstanding, the Holders of a majority in aggregate principal
amount of the Securities then Outstanding affected thereby (each series voting
as a


                                       24

<PAGE>   32



separate class) may waive any such default or Event of Default, or, in the case
of an event specified in clause (d) (if the Event of Default under clause (d)
relates to all series of Securities then Outstanding), (e) or (f) of Section 5.1
the Holders of Securities of a majority in principal amount of all the
Securities then Outstanding (voting as one class) may waive any such default or
Event of Default), and its consequences except a default in respect of a
covenant or provision hereof which cannot be modified or amended without the
consent of the Holder of each Security affected. In the case of any such waiver,
the Issuer, the Trustee and the Holders of the Securities of such series shall
be restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.

                             Upon any such waiver, such default shall cease to
exist and be deemed to have been cured
and not to have occurred, and any Event of Default arising therefrom shall be
deemed to have been cured, and not to have occurred for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.

                             SECTION 5.11 TRUSTEE TO GIVE NOTICE OF DEFAULT; BUT
MAY WITHHOLD IN CERTAIN CIRCUMSTANCES. The Trustee shall, within 90 days after
the occurrence of a default with respect to the Securities of any series, give
notice of all defaults with respect to that series known to the Trustee (i) if
any Unregistered Securities of that series are then Outstanding, to the Holders
thereof, by publication at least once in an Authorized Newspaper in the Borough
of Manhattan, The City of New York and at least once in an Authorized Newspaper
in London (and, if required by Section 3.6, at least once in an Authorized
Newspaper in Luxembourg), (ii) if any Unregistered Securities of that series are
then Outstanding, to all Holders thereof who have filed their names and
addresses with the Trustee pursuant to Section 4.4(c) (ii), by mailing such
notice to such Holders at such addresses and (iii) to all Holders of then
Outstanding Registered Securities of that series, by mailing such notice to such
Holders at their addresses as they shall appear in the registry books, unless in
each case such defaults shall have been cured before the mailing or publication
of such notice (the term "defaults" for the purpose of this Section being hereby
defined to mean any event or condition which is, or with notice of lapse of time
or both would become, an Event of Default); PROVIDED that, except in the case of
default in the payment of the principal of or interest on any of the Securities
of such series, the Trustee shall be protected in withholding such notice if and
so long as the board of directors, the executive committee, or a trust committee
of directors or trustees and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interests of the
Securityholders of such series.

                             SECTION 5.12 RIGHT OF COURT TO REQUIRE FILING OF
UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each Holder
of any Security or Coupon by his acceptance thereof shall be deemed to have
agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, the
filing by any party litigant (except the Trustee) in such suit of an undertaking
to pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees and expenses, against any
party litigant in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Securityholder or group of Securityholders of any series
holding in the aggregate more than 10% in aggregate principal amount of the
Securities of such series, or, in the case of any suit relating to or arising
under clause (d) of Section 5.1 (if the suit relates to Securities of more than
one but less than all series), 10% in aggregate principal amount of Securities
Outstanding affected thereby, or in the case of any suit relating to or arising
under clause (d) (if the suit under clause (d) relates to all the Securities
then Outstanding), (e) or (f) of Section 5.1, 10% in aggregate principal amount
of all Securities Outstanding, or to any suit instituted by any Securityholder
for the enforcement of the payment of the principal of or interest on any
Security on or after the due date expressed in such Security or any date fixed
for redemption.

                                   ARTICLE SIX

                             CONCERNING THE TRUSTEE

                             SECTION 6.1 DUTIES AND RESPONSIBILITIES OF THE
TRUSTEE; DURING DEFAULT; PRIOR TO DEFAULT. With respect to the Holders of any
series of Securities issued hereunder, the Trustee, prior to the occurrence of
an Event of Default with respect to the Securities of a particular series and
after the curing or waiving of all Events of Default which may have occurred
with respect to such series, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default with respect to the Securities of a series has


                                       25

<PAGE>   33



occurred (which has not been cured or waived), the Trustee shall exercise such
of the rights and powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.

                             No provision of this Indenture shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:

                             (a) prior to the occurrence of an Event of Default
                         with respect to the Securities of any series and after
                         the curing and waiving of all such Events of Default
                         with respect to such series which may have occurred:

                                                (i) the duties and obligations
                             of the Trustee with respect to the Securities of
                             any series shall be determined solely by the
                             express provisions of this Indenture, and the
                             Trustee shall not be liable except for the
                             performance of such duties and obligations as are
                             specifically set forth in this Indenture against
                             the Trustee; and

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

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

                             (c) the Trustee shall not be liable with respect to
                         any action taken or omitted to be taken by it in good
                         faith in accordance with the direction of the Holders
                         pursuant to Section 5.9 relating to the time, method
                         and place of conducting any proceeding for any remedy
                         available to the Trustee, or exercising any trust or
                         power conferred upon the Trustee, under this Indenture.

                             None of the provisions contained in this Indenture
shall require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if there shall be reasonable ground for
believing that the repayment of such funds or adequate indemnity against such
liability is not reasonably assured to it.

                             SECTION 6.2 CERTAIN RIGHTS OF THE TRUSTEE. Subject
to Section 6.1:

                             (a) the Trustee may conclusively rely and shall be
                         protected in acting or refraining from acting upon any
                         resolution, Officers' Certificate or any other
                         certificate, statement, instrument, opinion, report,
                         notice, request, consent, order, bond, debenture, note,
                         coupon, security or other paper or document reasonably
                         believed by it to be genuine and to have been signed or
                         presented by the proper party or parties;

                             (b) any request, direction, order or demand of the
                         Issuer mentioned herein shall be sufficiently evidenced
                         by an Officers' Certificate (unless other evidence in
                         respect thereof be herein specifically prescribed); and
                         any Board Resolution may be evidenced to the Trustee by
                         a copy thereof certified by the secretary or an
                         assistant secretary of the Issuer;

                             (c) the Trustee may consult with counsel of its
                         selection and any advice or Opinion of Counsel shall be
                         full and complete authorization and protection in
                         respect of any action taken, suffered or omitted to be
                         taken by it hereunder in good faith and in accordance
                         with such advice or Opinion of Counsel;


                                       26

<PAGE>   34



                             (d) the Trustee shall be under no obligation to
                         exercise any of the trusts or powers vested in it by
                         this Indenture at the request, order or direction of
                         any of the Security Holders pursuant to the provisions
                         of this Indenture, unless such Security Holders shall
                         have offered to the Trustee reasonable security or
                         indemnity against the costs, expenses and liabilities
                         which might be incurred therein or thereby;

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

                             (f) prior to the occurrence of an Event of Default
                         hereunder and after the curing or waiving of all Events
                         of Default, the Trustee shall not be bound to make any
                         investigation into the facts or matters stated in any
                         resolution, certificate, statement, instrument,
                         opinion, report, notice, request, consent, order,
                         approval, appraisal, bond, debenture, note, coupon,
                         security, or other paper or document unless requested
                         in writing so to do by the Holders of not less than a
                         majority in aggregate principal amount of the
                         Securities of all series affected then Outstanding;
                         PROVIDED that, if the payment within a reasonable time
                         to the Trustee of the costs, expenses or liabilities
                         likely to be incurred by it in the making of such
                         investigation is, in the opinion of the Trustee, not
                         reasonably assured to the Trustee by the security
                         afforded to it by the terms of this Indenture, the
                         Trustee may require reasonable indemnity against such
                         expenses or liabilities as a condition to proceeding;
                         the reasonable expenses of every such investigation
                         shall be paid by the Issuer or, if paid by the Trustee
                         or any predecessor Trustee, shall be repaid by the
                         Issuer upon demand;

                             (g) the Trustee may execute any of the trusts or
                         powers hereunder or perform any duties hereunder either
                         directly or by or through agents or attorneys not
                         regularly in its employ and the Trustee shall not be
                         responsible for any misconduct or negligence on the
                         part of any such agent or attorney appointed with due
                         care by it hereunder; and

                             (h) the Trustee shall not be deemed to have notice
                         of any default or Event of Default unless a Responsible
                         Officer of the Trustee has actual knowledge thereof or
                         unless written notice of any event which is in fact
                         such a default is received by the Trustee at the
                         Corporate Trust Office of the Trustee, and such notice
                         references the Securities and this Indenture.

                             SECTION 6.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS;
DISPOSITION OF SECURITIES OR APPLICATION OF PROCEEDS THEREOF. The recitals
contained herein and in the Securities, except the Trustee's certificates of
authentication, shall be taken as the statements of the Issuer, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Securities or Coupons. The Trustee shall not be accountable for the use or
application by the Issuer of any of the Securities or of the proceeds thereof.

                             SECTION 6.4 TRUSTEE AND AGENTS MAY HOLD SECURITIES
OR COUPONS; COLLECTIONS; ETC. The Trustee or any agent of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
or Coupons with the same rights it would have if it were not the Trustee or such
agent and, subject to Sections 6.8 and 6.13, may otherwise deal with the Issuer
and receive, collect, hold and retain collections from the Issuer with the same
rights it would have if it were not the Trustee or such agent.

                             SECTION 6.5 MONEYS HELD BY TRUSTEE. Subject to the
provisions of Section 10.4 hereof, all moneys received by the Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated from other funds except to
the extent required by mandatory provisions of law. Neither the Trustee nor any
agent of the Issuer or the Trustee shall be under any liability for interest on
any moneys received by it hereunder.

                             SECTION 6.6 COMPENSATION AND INDEMNIFICATION OF
TRUSTEE AND ITS PRIOR CLAIM. The Issuer covenants and agrees to pay to the
Trustee from time to time, and the Trustee shall be entitled to, such reasonable


                                       27

<PAGE>   35



compensation as the Issuer and the Trustee shall agree in writing (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) and the Issuer covenants and agrees to pay or
reimburse the Trustee and each successor Trustee upon its request for all
reasonable out-of-pocket expenses, disbursements and advances incurred or made
by or on behalf of it in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all agents and other persons not regularly in its employ) except
any such expense, disbursement or advance as may arise from its negligence or
bad faith. The Issuer also covenants to indemnify the Trustee and each successor
Trustee for, and to hold it harmless against, any and all loss, damage, claim,
liability or expense, including taxes (other than taxes based on the income of
the Trustee) incurred without negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of this Indenture or
the trusts hereunder and its duties hereunder, including the costs and expenses
of defending itself against or investigating any claim of liability in the
premises. The obligations of the Issuer under this Section to compensate and
indemnify the Trustee and each successor Trustee and to pay or reimburse the
Trustee and each successor Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder and shall survive the
satisfaction and discharge of this Indenture. Such additional indebtedness shall
be a senior claim to that of the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the holders of particular Securities or Coupons, and the Securities are hereby
subordinated to such senior claim.

                             When the Trustee incurs expenses or renders
services in connection with an Event of Default specified in Section 5.1(e) or
Section 5.1(f), the expenses (including the reasonable charges and expenses of
its counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable Federal or state bankruptcy,
insolvency or other similar law.

                             SECTION 6.7 RIGHT OF TRUSTEE TO RELY ON OFFICERS'
CERTIFICATE, ETC. Subject to Sections 6.1 and 6.2, whenever in the
administration of the trusts of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting any action hereunder, such matter (unless other evidence
in respect thereof be herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Trustee, be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the Trustee, and
such certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered or
omitted by it under the provisions of this Indenture upon the faith thereof.

                             SECTION 6.8 QUALIFICATION OF TRUSTEE; CONFLICTING
INTERESTS. With respect to the Securities of each series, the Trustee shall
comply with TIA Section 310(b) and in determining whether the Trustee has a
conflicting interest as defined in TIA Section 310(b) with respect to the
Securities of any series, there shall be excluded from such determination this
Indenture with respect to the Securities of any series other than such series.
Nothing herein shall prevent the Trustee from filing with the Commission the
application referred to in the second to last paragraph of TIA Section
310(b).

                             SECTION 6.9 PERSONS ELIGIBLE FOR APPOINTMENT AS
TRUSTEE. The Trustee for each series of Securities hereunder shall at all times
be a corporation organized and doing business under the laws of the United
States of America or of any state or the District of Columbia having a combined
capital and surplus of at least $1,000,000, and which is authorized under such
laws to exercise corporate trust powers and is subject to supervision or
examination by Federal, state or District of Columbia authority. Such
corporation shall have its principal place of business in the Borough of
Manhattan, The City of New York or the City of Cleveland if there be such a
corporation in such location willing to act upon reasonable and customary terms
and conditions. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 6.10.

                             SECTION 6.10 RESIGNATION AND REMOVAL; APPOINTMENT
OF SUCCESSOR TRUSTEE. (a) The Trustee, or any trustee or trustees hereafter
appointed, may at any time resign with respect to one or more or all series of
Securities by giving written notice of resignation to the Issuer and (i) if any
Unregistered Securities of a series affected are then Outstanding, by giving
notice of such resignation to the Holders thereof, by publication at least once
in an Authorized Newspaper in the Borough of Manhattan, The City of New York,
and at least once in an Authorized


                                       28

<PAGE>   36



Newspaper in London (and, if required by Section 3.6, at least once in an
Authorized Newspaper in Luxembourg), (ii) if any Unregistered Securities of a
series affected are then Outstanding, by mailing notice of such resignation to
the Holders thereof who have filed their names and addresses with the Trustee
pursuant to Section 4.4(c) (ii) at such addresses as were so furnished to the
Trustee and (iii) by mailing notice of such resignation to the Holders of then
Outstanding Registered Securities of each series affected at their addresses as
they shall appear on the registry books. Upon receiving such notice of
resignation, the Issuer shall promptly appoint a successor trustee or trustees
with respect to the applicable series by written instrument in duplicate,
executed by authority of the Board of Directors, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
trustee or trustees. If no successor trustee shall have been so appointed with
respect to any series and have accepted appointment within 60 days after the
mailing of such notice of resignation, the resigning trustee may, at the expense
of the Issuer, petition any court of competent jurisdiction for the appointment
of a successor trustee, or any Securityholder who has been a bona fide Holder of
a Security or Securities of the applicable series for at least six months may,
subject to the provisions of Section 5.12, on behalf of himself and all others
similarly situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor trustee.

                             (b) In case at any time any of the following shall
occur:

                             (i) the Trustee shall fail to comply with the
                         provisions of Section 6.8 with respect to any series of
                         Securities after written request therefor by the Issuer
                         or by any Securityholder who has been a bona fide
                         Holder of a Security or Securities of such series for
                         at least six months;

                             (ii) the Trustee shall cease to be eligible in
                         accordance with the provisions of Section 6.9 and shall
                         fail to resign after written request thereof or by the
                         Issuer or by any Securityholder; or

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

then, in any such case, the Issuer may remove the Trustee with respect to the
applicable series of Securities and appoint a successor trustee for such series
by written instrument, in duplicate, executed by order of the Board of Directors
of the Issuer, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or, subject to the provisions of
Section 5.12, any Securityholder who has been a bona fide Holder of a Security
or Securities of such series for at least six months may on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor trustee with
respect to such series. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.

                             (c) The Holders of a majority in aggregate
principal amount of the Securities of each series at the time Outstanding may at
any time remove the Trustee with respect to Securities of such series and
appoint a successor trustee with respect to the Securities of such series by
delivering to the Trustee so removed, to the successor trustee so appointed and
to the Issuer the evidence provided for in Section 7.1 of the action in that
regard taken by the Securityholders; the Trustee so removed may, at the expense
of the Issuer, petition any court of competent jurisdiction for the appointment
of a successor trustee.

                             (d) Any resignation or removal of the Trustee with
respect to any series and any appointment of a successor trustee with respect to
such series pursuant to any of the provisions of this Section 6.10 shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 6.11.

                             SECTION 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR
TRUSTEE. Any successor trustee appointed as provided in Section 6.10 shall
execute and deliver to the Issuer and to its predecessor trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor trustee with respect


                                       29

<PAGE>   37



to all or any applicable series shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all rights, powers, duties and obligations with respect to such series of its
predecessor hereunder, with like effect as if originally named as trustee for
such series hereunder, but, nevertheless, on the written request of the Issuer
or of the successor trustee, upon payment of its charges then unpaid, the
trustee ceasing to act shall, subject to Section 10.4, pay over to the successor
trustee all moneys at the time held by it hereunder and shall execute and
deliver an instrument transferring to such successor trustee all such rights,
powers, duties and obligations. Upon request of any such successor trustee, the
Issuer shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim
upon all property or funds held or collected by such trustee to secure any
amounts then due it pursuant to the provisions of Section 6.6.

                             If a successor trustee is appointed with respect to
the Securities of one or more (but not all) series, the Issuer, the predecessor
Trustee and each successor trustee with respect to the Securities of any
applicable series shall execute and deliver an indenture supplemental hereto
which shall contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the predecessor
Trustee with respect to the Securities of any series as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee,
and shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such trustees as co-trustees of
the same trust and that each such trustee shall be trustee of a trust or trusts
under separate indentures.

                             No successor trustee with respect to any series of
Securities shall accept appointment as provided in this Section 6.11 unless at
the time of such acceptance such successor trustee shall be qualified under the
provisions of Section 6.8 and eligible under the provisions of Section 6.9.

                             Upon acceptance of appointment by any successor
trustee as provided in this Section 6.11, the Issuer shall mail notice thereof
(a) if any Unregistered Securities of a series affected are then Outstanding, to
the Holders thereof, by publication of such notice at least once in an
Authorized Newspaper in the Borough of Manhattan, The City of New York and at
least once in an Authorized Newspaper in London (and, if required by Section
3.6, at least once in an Authorized Newspaper in Luxembourg), (b) if any
Unregistered Securities of a series affected are then Outstanding, to the
Holders thereof who have filed their names and addresses with the Trustee
pursuant to Section 4.4(c) (ii), by mailing such notice to such Holders at such
addresses as were so furnished to the Trustee (and the Trustee shall make such
information available to the Issuer for such purpose) and (c) to the Holders of
Registered Securities of each series affected, by mailing such notice to such
Holders at their addresses as they shall appear on the registry books. If the
acceptance of appointment is substantially contemporaneous with the resignation,
then the notice called for by the preceding sentence may be combined with the
notice called for by Section 6.10. If the Issuer fails to mail such notice
within ten days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Issuer.

                             SECTION 6.12 MERGER; CONVERSION; CONSOLIDATION OR
SUCCESSION TO BUSINESS OF TRUSTEE. Any corporation into which the Trustee may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation succeeding to all or substantially all the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, PROVIDED that such corporation shall be qualified under the
provisions of Section 6.8 and eligible under the provisions of Section 6.9,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding.

                             In case at the time such successor to the Trustee
shall succeed to the trusts created by this Indenture any of the Securities of
any series shall have been authenticated but not delivered, any such successor
to the Trustee may adopt the certificate of authentication of any predecessor
Trustee and deliver such Securities so authenticated; and, in case at that time
any of the Securities of any series shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor Trustee; and in all
such cases such certificate shall have the full force which it is anywhere in
the Securities of such series or in this Indenture provided that the certificate
of the Trustee shall have; PROVIDED, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Securities of any
series in the name of any predecessor Trustee shall apply only to its successor
or successor by merger, conversion or consolidation.


                                       30

<PAGE>   38



                             SECTION 6.13 PREFERENTIAL COLLECTION OF CLAIMS
AGAINST THE ISSUER. If and when the Trustee shall be or become a creditor of the
Issuer (or any other obligor upon the Securities), the Trustee shall be subject
to the provisions of the TIA regarding the collection of claims against the
Issuer (or any such other obligor).

                             SECTION 6.14 APPOINTMENT OF AUTHENTICATING AGENT.
With the consent of the Issuer, the Trustee may appoint one or more
Authenticating Agents (including, without limitation, the Issuer with respect to
one or more series of Securities) which shall be authorized on behalf of the
Trustee in authenticating Securities of such series in connection with the
issue, delivery, registration of transfer, exchange, partial redemption or
repayment of such Securities, and Securities so authenticated shall be entitled
to the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent must be a
corporation organized and doing business under the laws of the United States,
any state thereof or the District of Columbia, having a combined capital surplus
of at least $1,000,000, being authorized under such laws to do a trust business
and subject to supervision or examination by federal or state authorities or the
equivalent foreign authority in the case of an Authenticating Agent who is not
organized and doing business under the laws of the United States, any State
thereof or the District of Columbia. If such Authenticating Agent publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Authenticating Agent shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition as published. If at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.

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

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

                             The Issuer agrees to pay to each Authenticating
Agent from time to time reasonable compensation for its services under this
Section.

                             The provisions of Sections 2.9, 2.10, 6.1, 6.3 and
6.4 shall be applicable to any Authenticating Agent.

                             Pursuant to each appointment made under this
Section, the Securities of each series covered by such appointment may have
endorsed thereon, in lieu of the Trustee's certificate of authentication, an
alternate certificate of authentication in substantially the following form:

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


                             The Bank of New York, as Trustee


                                       31

<PAGE>   39





                         By:
                            ------------------------------
                                                                            As
Authenticating Agent




                         By:
                            ------------------------------

                                   Authorized Officer


                                  ARTICLE SEVEN

                         CONCERNING THE SECURITYHOLDERS

                             SECTION 7.1. EVIDENCE OF ACTION TAKEN BY
SECURITYHOLDERS. Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by a
specified percentage in principal amount of the Securityholders of any or all
series may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such specified percentage of
Securityholders in person or by agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee. Proof of execution
of any instrument of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Sections 6.1 and 6.2) conclusive
in favor of the Trustee and the Issuer, if made in the manner provided in this
Article.

                             SECTION 7.2 PROOF OF EXECUTION OF INSTRUMENTS AND
OF HOLDING OF SECURITIES. Subject to Sections 6.1 and 6.2, the execution of any
instrument by a Securityholder or his agent or proxy may be proved in the
following manner:

                             (a) The fact and date of the execution by any
                         Holder of any instrument may be proved by the
                         certificate of any notary public or other officer of
                         any jurisdiction authorized to take acknowledgments of
                         deeds or administer oaths that the person executing
                         such instruments acknowledged to him the execution
                         thereof, or by an affidavit of a witness to such
                         execution sworn to before any such notary or other such
                         officer. Where such execution is by or on behalf of any
                         legal entity other than an individual, such certificate
                         or affidavit shall also constitute sufficient proof of
                         the authority of the person executing the same. The
                         fact of the holding by any Holder of an Unregistered
                         Security of any series, and the identifying number of
                         such Security and the date of his holding the same, may
                         be proved by the production of such Security or by a
                         certificate executed by any trust company, bank, banker
                         or recognized securities dealer wherever situated
                         satisfactory to the Trustee, if such certificate shall
                         be deemed by the Trustee to be satisfactory. Each such
                         certificate shall be dated and shall state that on the
                         date thereof a Security of such series bearing a
                         specified identifying number was deposited with or
                         exhibited to such trust company, bank, banker or
                         recognized securities dealer by the person named in
                         such certificate. Any such certificate may be issued in
                         respect of one or more Unregistered Securities of one
                         or more series specified therein. The holding by the
                         person named in any such certificate of any
                         Unregistered Securities of any series specified therein
                         shall be presumed to continue for a period of one year
                         from the date of such certificate unless at the time of
                         any determination of such holding (1) another
                         certificate bearing a later date issued in respect of
                         the same Securities shall be produced, or (2) the
                         Security of such series specified in such certificate
                         shall be produced by some other person, or (3) the
                         Security of such series specified in such certificate
                         shall have ceased to be Outstanding. Subject to
                         Sections 6.1 and 6.2, the fact and the date of the
                         execution of any such instrument and the amount and
                         numbers of Securities of any series held by the person
                         so executing such instrument and the amount and numbers
                         of any Security or Securities for such series may also


                                       32

<PAGE>   40



                         be proven in accordance with such reasonable rules and
                         regulations as may be prescribed by the Trustee for
                         such series or in any other manner which the Trustee
                         for such series may deem sufficient.

                             (b) In the case of Registered Securities, the
                         ownership of such Securities shall be proved by the
                         security register or by a certificate of the security
                         registrar.

                             SECTION 7.3 HOLDERS TO BE TREATED AS OWNERS. The
Issuer, the Trustee and any agent of the Issuer or the Trustee may deem and
treat the person in whose name any Security shall be registered upon the
security register for such series as the absolute owner of such Security
(whether or not such Security shall be overdue and notwithstanding any notation
of ownership or other writing thereon) for the purpose of receiving payment of
or on account of the principal of and, subject to the provisions of this
Indenture, interest on such Security and for all other purposes; and neither the
Issuer nor the trustee nor any agent of the Issuer or the Trustee shall be
affected by any notice to the contrary. The Issuer, the Trustee and any agent of
the Issuer or the Trustee may treat the Holder of any Unregistered Security and
the Holder of any Coupon as the absolute owner of such Unregistered Security or
Coupon (whether or not such Unregistered Security or Coupon shall be overdue)
for the purpose of receiving payment thereof or on account thereof and for all
other purposes and neither the Issuer, the Trustee, nor any agent of the Issuer
or the Trustee shall be affected by any notice to the contrary. All such
payments so made to any such person, or upon his order, shall be valid, and, to
the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Security or Coupon.

                             SECTION 7.4  Reserved.
                                          --------

                             SECTION 7.5 RIGHT OF REVOCATION OF ACTION TAKEN. At
any time prior to (but not after) the evidencing to the Trustee, as provided in
Section 7.1, of the taking of any action by the Holders of the percentage in
aggregate principal amount of the Securities of any or all series, as the case
may be, specified in this Indenture in connection with such action, any Holder
of a Security the serial number of which is shown by the evidence to be included
among the serial numbers of the Securities the Holders of which have consented
to such action may, by filing written notice at the Corporate Trust Office and
upon proof of holding as provided in this Article, revoke such action so far as
concerns such Security. Except as aforesaid any such action taken by the Holder
of any Security shall be conclusive and binding upon such Holder and upon all
future Holders and owners of such Security and of any Securities issued in
exchange or substitution therefor or on registration of transfer thereof,
irrespective of whether or not any notation in regard thereto is made upon any
such Security. Any action taken by the Holders of the percentage in aggregate
principal amount of the Securities of any or all series, as the case may be,
specified in this Indenture in connection with such action shall be conclusively
binding upon the Issuer, the Trustee and the Holders of all the Securities
affected by such action.

                                  ARTICLE EIGHT

                             SUPPLEMENTAL INDENTURES

                             SECTION 8.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT
OF SECURITYHOLDERS. The Issuer and the Trustee may from time to time and at any
time enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the TIA as in force at the date of the execution
thereof) for one or more of the following purposes:

                             (a) to convey, transfer, assign, mortgage or pledge
                          to the Trustee as security for the Securities of one
                          or more series any property or assets;

                             (b) to evidence the succession of another
                         corporation to the Issuer, or successive successions,
                         and the assumption by the successor corporation of the
                         covenants, agreements and obligations of the Issuer
                         pursuant to Article Nine;

                             (c) to add to the covenants of the Issuer such
                         further covenants, restrictions, conditions or
                         provisions as its Board of Directors and the Trustee
                         shall consider to be for the protection of the Holders
                         of Securities or Coupons, and to make the occurrence,
                         or


                                       33

<PAGE>   41



                         the occurrence and continuance, of a default in any
                         such additional covenants, restrictions, conditions or
                         provisions an Event of Default permitting the
                         enforcement of all or any of the several remedies
                         provided in this Indenture as herein set forth;
                         PROVIDED, that in respect of any such additional
                         covenant, restriction, condition or provision such
                         supplemental indenture may provide for a particular
                         period of grace after default (which period may be
                         shorter or longer than that allowed in the case of
                         other defaults) or may provide for an immediate
                         enforcement upon such an Event of Default or may limit
                         the remedies available to the Trustee upon such an
                         Event of Default or may limit the right of the Holders
                         of a majority in aggregate principal amount of the
                         Securities of such series to waive such an Event of
                         Default.

                             (d) to cure any ambiguity or to correct or
                         supplement any provision contained herein or in any
                         supplemental indenture which may be defective or
                         inconsistent with any other provision contained herein
                         or in any supplemental indenture, or to make any other
                         provisions as the Board of Directors may deem necessary
                         or desirable, PROVIDED that no such action shall
                         adversely affect the interests of the Holders of the
                         Securities or Coupons;

                             (e) to establish the form or terms of Securities of
                         any series or of the Coupons appertaining to such
                         Securities as permitted by Sections 2.1 and 2.3; and

                             (f) to evidence and provide for the acceptance of
                         appointment hereunder by a successor trustee with
                         respect to the Securities of one or more series and to
                         add to or change any of the provisions of this
                         Indenture as shall be necessary to provide for or
                         facilitate the administration of the trusts hereunder
                         by more than one trustee, pursuant to the requirements
                         of Section 6.11.

                             The Trustee is hereby authorized to join with the
Issuer in the execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be therein contained and to
accept the conveyance, transfer, assignment, mortgage or pledge of any property
thereunder, but the Trustee shall not be obligated to enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

                             Any supplemental indenture authorized by the
provisions of this Section may be executed without the consent of the Holders of
any of the Securities at the time outstanding, notwithstanding any of the
provisions of Section 8.2.

                             SECTION 8.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF
SECURITYHOLDERS. With the consent (evidenced as provided in Article Seven) of
the Holders of not less than a majority in aggregate principal amount of the
Securities at the time Outstanding of all series affected by such supplemental
indenture (voting as one class), the Issuer and the Trustee may, from time to
time and at any time, enter into an indenture or indentures supplemental hereto
(which shall conform to the provisions of the TIA as in force at the date of
execution thereof) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Securities of each such series or of the Coupons appertaining to such
Securities; PROVIDED, that no such supplemental indenture shall (a) extend the
final maturity of any 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 thereof, or make the principal thereof (including
any amount in respect of original issue discount), or interest thereon payable
in any coin or currency other than that provided in the Securities and Coupons
or in accordance with the terms thereof, or reduce the amount of the principal
of an Original Issue Discount Security that would be due and payable upon an
acceleration of the maturity thereof pursuant to Section 5.1 or the amount
thereof provable in bankruptcy pursuant to Section 5.2, or alter the provisions
of Section 11.11, or impair or affect the right of any Securityholder to
institute suit for the payment thereof or, if the Securities provide therefor,
any right of repayment at the option of the Securityholder without the consent
of the Holder of each Security so affected, or (b) reduce the aforesaid
percentage of Outstanding Securities of any series, 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.



                                       34

<PAGE>   42



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

                             Upon the request of the Issuer and upon the filing
with the Trustee of evidence of the consent of Securityholders as aforesaid and
other documents, if any, required by Section 7.1, the Trustee shall join with
the Issuer in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.

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

                             Promptly after the execution by the Issuer and the
Trustee of any supplemental indenture pursuant to the provisions of this
Section, the Issuer shall prepare and mail or cause the Trustee to mail a notice
thereof (i) to the Holders of then Outstanding Registered Securities of each
series affected thereby, by mailing a notice thereof by first-class mail to such
Holders at their addresses as they shall appear on the Security register, (ii)
if any Unregistered Securities of a series affected thereby are then
Outstanding, to the Holders thereof who have filed their names and addresses
with the Trustee pursuant to Section 4.4(c) (ii), by mailing a notice thereof by
first-class mail to such Holders at such addresses as were so furnished to the
Trustee and (iii) if any Unregistered Securities of a series affected thereby
are then Outstanding, to all Holders thereof, by publication of a notice thereof
at least once in an Authorized Newspaper in the Borough of Manhattan, The City
of New York and at least once in an Authorized Newspaper in London (and, if
required by Section 3.6, at least once in an Authorized Newspaper in
Luxembourg), and in each case such notice shall set forth in general terms the
substance of such supplemental indenture. Any failure of the Issuer to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.

                             SECTION 8.3 EFFECT OF SUPPLEMENTAL INDENTURE. Upon
the execution of any supplemental indenture pursuant to the provisions hereof,
this Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Issuer and the Holders
of Securities of each series affected thereby shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.

                             SECTION 8.4 DOCUMENTS TO BE GIVEN TO TRUSTEE. The
Trustee, subject to the provisions of Sections 6.1 and 6.2, may receive an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article 8 complies with the
applicable provisions of this Indenture.

                             SECTION 8.5 NOTATION ON SECURITIES IN RESPECT OF
SUPPLEMENTAL INDENTURES. Securities of any series authenticated and delivered
after the execution of any supplemental indenture pursuant to the provisions of
this Article may bear a notation in form approved by the Trustee for such series
as to any matter provided for by such supplemental indenture or as to any action
taken by Securityholders. If the Issuer or the Trustee shall so determine, new
Securities of any series so modified as to conform, in the opinion of the
Trustee and the Issuer, to any modification of this Indenture contained in any
such supplemental indenture may be prepared by the Issuer, authenticated by the
Trustee and delivered in exchange for the Securities of such series then
outstanding.

                                  ARTICLE NINE

                    CONSOLIDATION, MERGER, SALE OR CONVEYANCE

                             SECTION 9.1 ISSUER MAY CONSOLIDATE; MERGE; ETC.; ON
CERTAIN TERMS. The Issuer covenants that it will not merge or consolidate with
any other corporation or sell or convey (including by way of lease) all or
substantially all of its assets to any Person, unless (i) either the Issuer
shall be the continuing corporation, or the


                                       35

<PAGE>   43



successor corporation or the Person which acquires by sale or conveyance
substantially all the assets of the Issuer (if other than the Issuer) shall be a
corporation or entity organized under the laws of the United States of America
or any state thereof and shall expressly assume the due and punctual payment of
the principal of and interest on all the Securities and Coupons, according to
their tenor, and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed or observed by the
Issuer, by supplemental indenture satisfactory to the Trustee, executed and
delivered to the Trustee by such corporation or entity, and (ii) the Issuer or
such successor corporation or entity, as the case may be, shall not, immediately
after such merger or consolidation, or such sale or conveyance, be in default in
the performance of any such covenant or condition.

                             SECTION 9.2 SUCCESSOR ISSUER SUBSTITUTED. In case
of any such consolidation, merger, sale or conveyance, and following such an
assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Issuer, with the same effect as if it had
been named herein. Such successor corporation may cause to be signed, and may
issue either in its own name or in the name of the Issuer prior to such
succession any or all of the Securities issuable hereunder, together with any
Coupons appertaining thereto, which theretofore shall not have been signed by
the Issuer and delivered to the Trustee; and, upon the order of such successor
corporation instead of the Issuer and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities, together with any Coupons appertaining thereto,
which previously shall have been signed and delivered by the officers of the
Issuer to the Trustee for authentication, and any Securities, together with any
Coupons appertaining thereto, which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All of the
Securities so issued, together with any Coupons appertaining thereto, shall in
all respects have the same legal rank and benefit under this Indenture as the
Securities and Coupons theretofore or thereafter issued in accordance with the
terms of this Indenture as though all of such Securities and Coupons had been
issued at the date of the execution hereof.

                             In case of any such consolidation, merger, sale,
lease or conveyance such changes in phraseology and form (but not in substance)
may be made in the Securities and Coupons thereafter to be issued as may be
appropriate.

                             In the event of any such sale or conveyance (other
than a conveyance by way of lease) the Issuer or any successor corporation which
shall theretofore have become such in the manner described in this Article shall
be discharged from all obligations and covenants under this Indenture and the
Securities and may be liquidated and dissolved.

                             SECTION 9.3 OPINION OF COUNSEL TO TRUSTEE. The
Trustee, subject to the provisions of Sections 6.1 and 6.2, may receive an
Opinion of Counsel, prepared in accordance with Section 11.5, as conclusive
evidence that any such consolidation, merger, sale, lease or conveyance, and any
such assumption, and any such liquidation or dissolution, complies with the
applicable provisions of this Indenture.

                                   ARTICLE TEN

                    SATISFACTION AND DISCHARGE OF INDENTURE;
                                UNCLAIMED MONEYS

                             SECTION 10.1 SATISFACTION AND DISCHARGE OF
INDENTURE. If at any time (a) the Issuer shall have paid or caused to be paid
the principal of and interest on all the Securities of any series Outstanding
hereunder and all unmatured Coupons appertaining thereto (other than Securities
of such series and Coupons appertaining thereto which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section 2.9) as
and when the same shall have become due and payable, (b) the Issuer shall have
delivered to the Trustee for cancellation all Securities of any series
theretofore authenticated and all unmatured Coupons appertaining thereto (other
than any Securities of such series and Coupons appertaining thereto which shall
have been destroyed, lost or stolen and which shall have been replaced or paid
as provided in Section 2.9) or (c) in the case of any series of Securities when
the exact amount of principal of, and interest due on, which can be determined
at the time of making the deposit referred to below, the Issuer shall have
delivered to the Trustee an Opinion of Counsel that the Holders of such
Securities will not recognize income, gain or loss for federal income tax
purposes as a result thereof and the Issuer shall have irrevocably deposited or
caused to be deposited with the Trustee as trust funds (i) cash, (ii) in the
case of any series of Securities the payments on which may be made in Dollars,
U.S. Government Obligations, maturing as to principal and interest in such


                                       36

<PAGE>   44



amounts and at such times as will insure the availability of cash or (iii) in
the case of any series of Securities the payments on which may be made in
Dollars, a combination of (i) and (ii), sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof addressed to the Trustee, to pay the principal of
and each installment of principal of and interest on all Securities of such
series Outstanding and Coupons appertaining thereto (other than any Securities
of such series and Coupons appertaining thereto which shall have been destroyed,
lost or stolen and which shall have been replaced or paid as provided in Section
2.9 and those theretofore delivered to the Trustee for cancellation) on the date
that such principal or interest is due and payable and any mandatory sinking
fund payments or analogous payments applicable to the Securities of such
Outstanding series on the date on which such payments are due and payable in
accordance with the terms of this Indenture and of such Securities, then this
Indenture shall cease to be of further effect with respect to Securities of such
series (except as to (i) rights of registration of transfer and exchange of
Securities of such series, and of Coupons appertaining thereto, and the Issuer's
right of optional redemption, (ii) substitution of mutilated, defaced,
destroyed, lost or stolen Securities or Coupons, (iii) rights of Holders of
Securities and Coupons appertaining thereto to receive payments of principal
thereof and interest thereon, upon the original stated due dates therefor (but
not upon acceleration) and remaining rights of Holders to receive mandatory
sinking fund payments, if any, (iv) the rights and immunities of the Trustee
hereunder and the Trustee's obligations under Sections 10.2 and 10.4, (v) the
rights of the holders of Securities of such series and Coupons appertaining
thereto as beneficiaries hereof with respect to the property so deposited with
the Trustee payable to all or any of them and (vi) the obligations of the Issuer
under Section 3.2 and the Trustee, on demand of the Issuer, shall execute proper
instruments acknowledging such satisfaction of and discharging this Indenture
with respect to such series.

                             SECTION 10.2 APPLICATION BY TRUSTEE OF FUNDS
DEPOSITED FOR PAYMENT OF SECURITIES. Subject to Section 10.4, all moneys
deposited with the Trustee (or other trustee) pursuant to Section 10.1 shall be
held in trust and applied by it to the payment, either directly or through any
paying agent (including the Issuer acting as its own paying agent), to the
Holders of the particular Securities of such series and of Coupons appertaining
thereto for the payment or redemption of which such moneys have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest; but such money need not be segregated from other funds except to the
extent required by law.

                             SECTION 10.3 REPAYMENT OF MONEYS HELD BY PAYING
AGENT. In connection with the satisfaction and discharge of this Indenture with
respect to Securities of any series, all moneys then held by any paying agent
under the provisions of this Indenture with respect to such series of Securities
shall, upon demand of the Issuer, be repaid to it or paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.

                             SECTION 10.4 RETURN OF MONEYS HELD BY TRUSTEE AND
PAYING AGENT UNCLAIMED FOR TWO YEARS. Moneys paid by the Issuer and held by the
Trustee for the payment of the principal of or interest on any Securities 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) shall be repaid to the Issuer, upon its written request. 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 such Securities as the
same shall become due; PROVIDED, HOWEVER, that the Trustee, before being
required to make any such repayment with respect to moneys deposited with it for
any payment (a) in respect of Registered Securities of any series, shall at the
expense of the Issuer, mail by first-class mail to Holders of such Securities at
their addresses as they shall appear on the Security register, and (b) in
respect of Unregistered Securities of any series, shall at the expense of the
Issuer cause to be published once, in an Authorized Newspaper in the Borough of
Manhattan, The City of New York and once in an Authorized Newspaper in London
(and if required by Section 3.6, once in an Authorized Newspaper in Luxembourg),
notice, that such moneys remain and that, after a date specified therein, which
shall not be less than 30 days from the date of such mailing or publication, any
unclaimed balance of such money then remaining will be repaid to the Issuer.

                             SECTION 10.5 INDEMNITY FOR U.S. GOVERNMENT
OBLIGATIONS. The Issuer shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 10.1 or the principal or interest received in
respect of such obligations.




                                       37

<PAGE>   45
                                 ARTICLE ELEVEN

                            MISCELLANEOUS PROVISIONS

                             SECTION 11.1 INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS OF ISSUER EXEMPT FROM INDIVIDUAL LIABILITY. No recourse under or
upon any obligation, covenant or agreement contained in this Indenture, or in
any Security, or because of any indebtedness evidenced thereby, shall be had
against any incorporator, as such or against any past, present or future
stockholder, officer or director, as such, of the Issuer, either directly or
through the Issuer, under any rule or law, statute or constitutional provision
or by the enforcement of any assessment or by any legal or equitable proceeding
or otherwise, all such liability being expressly waived and released by the
acceptance of the Securities and the Coupons appertaining thereto by the holders
thereof and as part of the consideration for the issue of the Securities and the
Coupons appertaining thereto.

                             SECTION 11.2 PROVISIONS OF INDENTURE FOR THE SOLE
BENEFIT OF PARTIES AND HOLDERS OF SECURITIES AND COUPONS. Nothing in this
Indenture, in the Securities or in the Coupons appertaining thereto, expressed
or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and their successors and the Holders
of the securities or Coupons, if any, any legal or equitable rights remedy or
claim under this Indenture or under any covenant or provision herein contained,
all such covenants and provisions being for the sole benefit of the parties
hereto and their successors and of the Holders of the Securities or Coupons, if
any.

                             SECTION 11.3 SUCCESSORS AND ASSIGNS OF ISSUER BOUND
BY INDENTURE. All the covenants, stipulations, promises and agreements in this
Indenture contained by or in behalf of the Issuer shall bind its successors and
assigns, whether so expressed or not.

                             SECTION 11.4 NOTICES AND DEMANDS ON ISSUER, TRUSTEE
AND HOLDERS OF SECURITIES AND COUPONS. Any notice or demand which by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the Holders of Securities or Coupons to or on the Issuer may
be given or served by being deposited postage prepaid, first-class mail (except
as otherwise specifically provided herein) addressed (until another address of
the Issuer is filed by the Issuer with the Trustee) to The Timken Company, 1835
Dueber Avenue S.W., Canton, Ohio 44706-2798, Attention: Secretary. Any notice,
direction, request or demand by the Issuer or any Holder of Securities or
Coupons to or upon the Trustee shall be deemed to have been sufficiently given
or made, for all purposes, if given or made at the Corporate Trust Office,
Attention: Corporate Trust Trustee Administration.

                             Where this Indenture provides for notice to
Holders, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder entitled thereto, at his last address as it appears in the security
register. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.

                             In case, by reason of the suspension of or
irregularities in regular mail service, it shall be impracticable to mail notice
to the Issuer when such notice is required to be given pursuant to any provision
of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.

                             SECTION 11.5 OFFICERS' CERTIFICATES AND OPINIONS OF
COUNSEL; STATEMENTS TO BE CONTAINED THEREIN. Upon any application or demand by
the Issuer to the Trustee to take any action under any of the provisions of this
Indenture, the Issuer shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent provided for in this Indenture relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent have been
complied with, except that in the case of any such application or demand as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or demand, no
additional certificate or opinion need be furnished.

                             Each certificate or opinion provided for in this
Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall include (a) a
statement that the


                                       38
<PAGE>   46



person making such certificate or opinion has read such covenant or condition,
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based, (c) a statement that, in the opinion of such
person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with and (d) a statement as to whether or not in the
opinion of such person, such condition or covenant has been complied with.

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

                             Any certificate, statement or opinion of an officer
of the Issuer or of counsel may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of or representations by an accountant or
firm of accountants in the employ of the Issuer, unless such officer or counsel,
as the case may be, knows that the certificate or opinion or representations
with respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.

                             Any certificate or opinion of any independent firm
of public accountants filed with and directed to the Trustee shall contain a
statement that such firm is independent.

                             SECTION 11.6 PAYMENTS DUE ON SATURDAYS, SUNDAYS,
AND HOLIDAYS. Unless otherwise provided by a Security, if the date of maturity
of interest on or principal of the Security of any series or any Coupons
appertaining thereto or the date fixed for redemption or repayment of any such
Security or Coupon shall not be a Business Day, then payment of interest or
principal 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 date of maturity
or the date fixed for redemption, and no interest shall accrue for the period on
or after such date.

                             SECTION 11.7 CONFLICT OF ANY PROVISION OF INDENTURE
WITH TRUST INDENTURE ACT OF 1939. If and to the extent that any provision of
this Indenture limits, qualifies or conflicts with another provision included in
this Indenture which is required to be included herein by any of Sections 310 to
317, inclusive, of the TIA, such required provision shall control.

                             SECTION 11.8 NEW YORK LAW TO GOVERN. This Indenture
and each Security and Coupon shall be deemed to be a contract under the laws of
the State of New York without regard to principles of conflicts of law, and for
all purposes shall be construed in accordance with the laws of such state,
except as may otherwise be required by mandatory provisions of law.

                             SECTION 11.9 COUNTERPARTS. This Indenture may be
executed in any number of counterparts, each of which shall be an original; but
such counterparts shall together constitute but one and the same instrument.

                             SECTION 11.10 EFFECT OF HEADINGS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.

                             SECTION 11.11 SECURITIES IN A FOREIGN CURRENCY OR
IN ECUS. Unless otherwise specified in an Officers' Certificate delivered
pursuant to Section 2.3 of this Indenture with respect to a particular series of
Securities, whenever for purposes of this Indenture any action may be taken by
the Holders of a specified percentage in aggregate principal amount of
Securities of all series or all series affected by a particular action at the
time Outstanding and, at such time, there are Outstanding Securities of any
series which are denominated in a coin or currency other than Dollars (including
ECUs), then the principal amount of Securities of such series which shall be


                                       39

<PAGE>   47



deemed to be Outstanding for the purpose of taking such action shall be that
amount of Dollars that could be obtained for such amount at the Market Exchange
Rate. For purposes of this Section 11.11, Market Exchange Rate shall mean the
noon Dollar buying rate for that currency for cable transfers quoted in The City
of New York as certified for customs purposes by the Federal Reserve Bank of New
York; PROVIDED, HOWEVER, in the case of ECUs, Market Exchange Rate shall mean
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 (such publication or any successor publication, the "Journal"). If
such Market Exchange Rate is not available for any reason with respect to such
currency, the Trustee shall use, in its sole discretion and without liability on
its part, such quotation of the Federal Reserve Bank of New York or, in the case
of ECUs, the rate of exchange as published in the Journal, as of the most recent
available date, or quotations or, in the case of ECUs, rates of exchange from
one or more major banks in The City of New York or in the country of issue of
the currency in question, which for purposes of the ECU shall be Brussels,
Belgium, or such other quotations or, in the case of ECU, rates of exchange as
the Trustee shall deem appropriate. The provisions of this paragraph shall apply
in determining the equivalent principal amount in respect of Securities of a
series denominated in a currency other than Dollars in connection with any
action taken by Holders of Securities pursuant to the terms of this Indenture.

                             All decisions and determinations of the Trustee
regarding the Market Exchange Rate or any alternative determination provided for
in the preceding paragraph shall be in its sole discretion and shall, in the
absence of manifest error, be conclusive for all purposes and irrevocably
binding upon the Issuer and all Holders.

                             SECTION 11.12 JUDGMENT CURRENCY. The Issuer agrees,
to the fullest extent that it may effectively do so under applicable law, that
(a) if for the purpose of obtaining judgment in any court it is necessary to
convert the sum due in respect of the principal of or interest on the Securities
of any series (the "Required Currency") into a currency in which a judgment will
be rendered (the "Judgment Currency"), the rate of exchange used shall be the
rate at which in accordance with normal banking procedures the Trustee could
purchase in The City of New York the Required Currency with the Judgment
Currency on the day on which final unappealable judgment is entered, unless such
day is not a New York Banking Day, then, to the extent permitted by applicable
law, the rate of exchange used shall be the rate at which in accordance with
normal banking procedures the Trustee could purchase in The City of New York the
Required Currency with the Judgment Currency on the New York Banking Day
preceding the day on which final unappealable judgment is entered and (b) its
obligations under this Indenture to make payments in the Required Currency (i)
shall not be discharged or satisfied by any tender, or any recovery pursuant to
any judgment (whether or not entered in accordance with subsection (a)), in any
currency other than the Required Currency, except to the extent that such tender
or recovery shall result in the actual receipt, by the payee, of the full amount
of the Required Currency expressed to be payable in respect of such payments,
(ii) shall be enforceable as an alternative or additional cause of action for
the purpose of recovering in the Required Currency the amount, if any, by which
such actual receipt shall fall short of the full amount of the Required Currency
so expressed to be payable and (iii) shall not be affected by judgment being
obtained for any other sum due under this Indenture. For purposes of the
foregoing, "New York Banking Day" means any day except a Saturday, Sunday or a
legal holiday in The City of New York or a day on which banking institutions in
The City of New York are authorized or required by law or executive order to
close.

                                 ARTICLE TWELVE

                   REDEMPTION OF SECURITIES AND SINKING FUNDS

                             SECTION 12.1 APPLICABILITY OF ARTICLE. The
provisions of this Article shall be applicable to the Securities of any series
which are redeemable before their maturity or to any sinking fund for the
retirement of Securities or a series except as otherwise specified as
contemplated by Section 2.3 for Securities of such series.

                             SECTION 12.2 NOTICE OF REDEMPTION; PARTIAL
REDEMPTIONS. Notice of redemption to the Holders of Registered Securities of any
series to be redeemed as a whole or in part at the option of the Issuer shall be
given by mailing notice of such redemption by first class mail, postage prepaid,
at least 30 days and not more than 60 days prior to the date fixed for
redemption to such Holders of Securities of such series at their last addresses
as they shall appear upon the registry books. Issuer shall give notice to the
Trustee of such intended redemption 60 days prior to the date of mailing of
notice to the Holders. Notice of redemption to the Holders of Unregistered
Securities to be redeemed as a whole or in part, who have filed their names and
addresses with the Trustee pursuant to Section 4.4(c) (ii), shall be given by
mailing notice of such redemption, by first class mail, postage prepaid, at
least 30 days and not more than 60 prior to the date fixed for redemption, to
such Holders at such addresses as were so furnished to the Trustee (and, in the


                                       40

<PAGE>   48



case of any such notice given by the Issuer, the Trustee shall make such
information available to the Issuer for such purpose). Notice of redemption to
all other Holders of Unregistered Securities shall be published in an Authorized
Newspaper in the Borough of Manhattan, The City of New York and in an Authorized
Newspaper in London (and, if required by Section 3.6, in an Authorized Newspaper
in Luxembourg), in each case, once in each of three successive calendar weeks,
the first publication to be not less than 30 nor more than 60 days prior to the
date fixed for redemption. Any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the Holder receives the notice. Failure to give notice by mail, or any defect in
the notice to the Holder of any Security of a series designated for redemption
as a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security of such series.

                             The notice of redemption to each such Holder shall
identify the Securities to be redeemed (including CUSIP numbers) and shall
specify the principal amount of each Security of such series held by such Holder
to be redeemed, the date fixed for redemption, the redemption price, the place
or places of payment, that payment will be made upon presentation and surrender
of such Securities and, in the case of Securities with Coupons attached thereto,
of all Coupons appertaining thereto maturing after the date fixed for
redemption, that such redemption is pursuant to the mandatory or optional
sinking fund, or both, if such be the case, that interest accrued to the date
fixed for redemption will be paid as specified in such notice and that on and
after said date interest thereon or on the portions thereof to be redeemed will
cease to accrue. In case any Security of a series is to be redeemed in part only
the notice of redemption shall state the portion of the principal amount thereof
to be redeemed and shall state that on and after the date fixed for redemption,
upon surrender of such Security, a new Security or Securities of such series in
principal amount equal to the unredeemed portion thereof will be issued.

                             If at the time of the mailing of any notice of
redemption the Issuer shall not have irrevocably directed the Trustee to apply
funds deposited with the Trustee or held by it and available to be used for the
redemption of Securities to redeem all the Securities called for redemption,
such notice shall state that it is subject to the receipt of the redemption
moneys by the Trustee before the date fixed for redemption and that such notice
shall be of no effect unless such moneys are so received before such date.

                             The notice of redemption of Securities of any
series to be redeemed at the option of the Issuer shall be given by the Issuer
or, at the Issuer's request, by the Trustee in the name and at the expense of
the Issuer.

                             On or before the redemption date specified in the
notice of redemption given as provided in this Section, the Issuer will deposit
with the Trustee or with one or more paying agents (or, if the Issuer is acting
as its own paying agent, set aside, segregate and hold in trust as provided in
Section 3.4) an amount of money sufficient to redeem on the redemption date all
the Securities of such series so called for redemption at the appropriate
redemption price, together with accrued interest to the date fixed for
redemption.

                             If less than all the Securities of a series are to
be redeemed, the Trustee shall select, in such manner as it shall deem
appropriate and fair, Securities of such Series to be redeemed in whole or in
part. Securities may be redeemed in part in multiples equal to the minimum
authorized denomination for Securities of such series or any multiple thereof.
The Trustee shall promptly notify the Issuer in writing of the Securities of
such series selected for redemption and, in the case of any Securities of such
series selected for partial redemption, the principal amount thereof to be
redeemed. For all purposes of this Indenture unless the context otherwise
requires, all provisions relating to the redemption of Securities of any series
shall relate, in the case of any Security redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security which has been or
is to be redeemed.

                             SECTION 12.3 PAYMENT OF SECURITIES CALLED FOR
REDEMPTION. If notice of redemption has been given as above provided, the
Securities or portions of Securities specified in such notice shall become due
and payable on the date and at the place stated in such notice at the applicable
redemption price, together with interest accrued to the date fixed for
redemption, and on and after said date (unless the Issuer shall default in the
payment of such Securities at the redemption price, together with interest
accrued to said date) interest on the Securities or portions of Securities so
called for redemption shall cease to accrue, and the unmatured Coupons, if any,
appertaining thereto shall be void, and, except as provided in Sections 6.5 and
10.4, such Securities shall cease from and after the date fixed for redemption
to be entitled to any benefit or security under this Indenture, and the Holders
thereof shall have no right in respect of such Securities except the right to
receive the redemption price thereof and unpaid interest to the date fixed for
redemption. On presentation and surrender of such Securities at a place of
payment specified in said notice, together


                                       41

<PAGE>   49



with all Coupons, if any, appertaining thereto maturing after the date fixed for
redemption, said Securities or the specified portions thereof shall be paid and
redeemed by the Issuer at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption; that payment of
interest becoming due on or prior to the date fixed for redemption shall be
payable in the case of Securities with Coupons attached thereto, to the bearers
of the Coupons for such interest upon surrender thereof, and in the case of
Registered Securities, to the Holders of such Registered Securities registered
as such on the relevant record date subject to the terms and provisions of
Sections 2.3 and 2.7 hereof.

                             If any security called for redemption shall not be
so paid upon surrender thereof for redemption, the principal shall, until paid
or duly provided for, bear interest from the date fixed for redemption at the
rate of interest or Yield to Maturity (in the case of an Original Issue Discount
Security) borne by the Security.

                             If any Security with Coupons attached thereto is
surrendered for redemption and is not accompanied by all appurtenant Coupons
maturing after the date fixed for redemption, the surrender of such missing
Coupon or Coupons may be waived by the Issuer and the Trustee, if there be
furnished to each of them such security or indemnity as they may require to save
each of them harmless.

                             Upon presentation of any Security redeemed in part
only, the Issuer shall execute and the Trustee shall authenticate and deliver to
or on the order of the Holder thereof, at the expense of the Issuer, a new
Security or Securities of such series, of authorized denominations, in principal
amount equal to the unredeemed portion of the Security so presented.

                             SECTION 12.4 EXCLUSION OF CERTAIN SECURITIES FROM
ELIGIBILITY FOR SELECTION FOR REDEMPTION. Securities shall be excluded from
eligibility for selection for redemption if they are identified by registration
and certificate number in an Officers' Certificate delivered to the Trustee at
least 40 days prior to the last date on which notice of redemption may be given
as being owned of record and beneficially by, and not pledged or hypothecated by
either (a) the Issuer or (b) an entity specifically identified in such written
statement as directly or indirectly controlling or controlled by or under direct
or indirect common control with the Issuer.

                             SECTION 12.5 MANDATORY AND OPTIONAL SINKING FUNDS.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment." The date on which a sinking fund payment is to be made is herein
referred to as the "sinking fund payment date."

                             In lieu of making all or any part of any mandatory
sinking fund payment with respect to any series of Securities in cash, the
Issuer may at its option (a) deliver to the Trustee Securities of such series
theretofore purchased or otherwise acquired (except upon redemption pursuant to
the mandatory sinking fund) by the Issuer or receive credit for Securities of
such series (not previously so credited) theretofore purchased or otherwise
acquired (except as aforesaid) by the Issuer and delivered to the Trustee for
cancellation pursuant to Section 2.10, (b) receive credit for optional sinking
fund payments (not previously so credited) made pursuant to this Section, or (c)
receive credit for Securities of such series (not previously so credited)
redeemed by the Issuer through any optional redemption provision contained in
the terms of such series. Securities so delivered or credited shall be received
or credited by the Trustee at the sinking fund redemption price specified in
such Securities.

                             On or before the 60th day next preceding each
sinking fund payment date for any series, the Issuer will deliver to the Trustee
an Officers' Certificate (which need not contain the statements required by
Section 11.5) (a) specifying the portion of the mandatory sinking fund payment
to be satisfied by payment of cash and the portion to be satisfied by credit of
Securities of such series and the basis for such credit, (b) stating that none
of the Securities of such series has theretofore been so credited, (c) stating
that no defaults in the payment of interest or Events of Default with respect to
such series have occurred (which have not been waived or cured) and are
continuing and (d) stating whether or not the Issuer intends to exercise its
right to make an optional sinking fund payment with respect to such series and,
if so, specifying the amount of such optional sinking fund payment which the
Issuer intends to pay on or before the next succeeding sinking fund payment
date. Any Securities of such series to be credited and required to be delivered
to the Trustee in order for the Issuer to be entitled to credit therefor as
aforesaid which have not theretofore been delivered to the Trustee shall be
delivered for cancellation pursuant to Section 2.10 to the Trustee with such


                                       42

<PAGE>   50



Officers' Certificate. Such Officers' Certificate shall be irrevocable and upon
its receipt by the Trustee the Issuer shall become unconditionally obligated to
make all the cash payments or payments therein referred to, if any, on or before
the next succeeding sinking fund payment date. Failure of the Issuer, on or
before any such 60th day, to deliver such Officers' Certificate and Securities
specified in this paragraph, if any, shall not constitute a default but shall
constitute, on and as of such date, the irrevocable election of the Issuer (i)
that the mandatory sinking fund payment for such series due on the next
succeeding sinking fund payment date shall be paid entirely in cash without the
option to deliver or credit Securities of such series in respect thereof and
(ii) that the Issuer will make no optional sinking fund payment with respect to
such series as provided in this Section.

                             If the sinking fund payment or payments (mandatory
or optional or both) to be made in cash on the next succeeding sinking fund
payment date plus any unused balance of any preceding sinking fund payments made
in cash shall exceed $50,000 or the equivalent thereof in foreign currency or
foreign currency units (or a lesser sum if the Issuer shall so request) with
respect to the Securities of any particular series, such cash shall be applied
on the next succeeding sinking fund payment date to the redemption of Securities
of such series at the sinking fund redemption price together with accrued
interest to the date fixed for redemption. If such amount shall be $50,000 or
less and the Issuer makes no such request then it shall be carried over until a
sum in excess of $50,000 is available. The Trustee shall select, in the manner
provided in Section 12.2, for redemption on such sinking fund payment date a
sufficient principal amount of Securities of such series to absorb said cash, as
early as may be, and shall (if requested in writing by the Issuer) inform the
Issuer of the serial numbers of the Securities of such series (or portions
thereof) so selected. Securities shall be excluded from eligibility for
redemption under this Section if they are identified by registration and
certificate number in an Officers' Certificate delivered to the Trustee at least
60 days prior to the sinking fund payment date as being owned of record and
beneficially by, and not pledged or hypothecated by either (a) the Issuer or (b)
an entity specifically identified in such Officers' Certificate as directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Issuer. The Trustee, in the name and at the expense of the
Issuer (or the Issuer, if it shall so request the Trustee in writing) shall
cause notice of redemption of the Securities of such series to be given in
substantially the manner provided in Section 12.2 (and with the effect provided
in Section 12.3) for the redemption of Securities of such series in part at the
option of the Issuer. The amount of any sinking fund payments not supplied or
allocated to the redemption of Securities of such series shall be added to the
next cash sinking fund payment for such series and, together with such payment,
shall be applied in accordance with the provisions of this Section. Any and all
sinking fund moneys held on the stated maturity date of the Securities of any
particular series (or earlier, if such maturity is accelerated), which are not
held for the payment or redemption of particular Securities of such series shall
be applied, together with other moneys, if necessary, sufficient for the
purpose, to the payment of the principal of, and interest on, the Securities of
such series at maturity.

                             On or before each sinking fund payment date, the
Issuer shall pay to the Trustee in cash or shall otherwise provide for the
payment of all interest accrued to the date fixed for redemption on Securities
to be redeemed on the next following sinking fund payment date.

                             The Trustee shall not redeem or cause to be
redeemed any Securities of a series with sinking fund moneys or mail any notice
of redemption of Securities for such series by operation of the sinking fund
during the continuance of a default in payment of interest on such Securities or
of any Event of Default except that, where the mailing of notice of redemption
of any Securities shall theretofore have been made, the Trustee shall redeem or
cause to be redeemed such Securities, provided that it shall have received from
the Issuer a sum sufficient for such redemption. Except as aforesaid, any moneys
in the sinking fund for such series at the time when any such default or Event
of Default shall occur, and any moneys thereafter paid into the sinking fund,
shall, during the continuance of such default or Event of Default, be deemed to
have been collected under Article Five and held for the payment of all such
Securities. In case such Event of Default shall have been waived as provided in
Section 5.10 or the default cured on or before the 60th day preceding the
sinking fund payment date in any year, such moneys shall thereafter be applied
on the next succeeding sinking fund payment date in accordance with this Section
to the redemption of such Securities.

                                ARTICLE THIRTEEN

                        MEETINGS OF HOLDERS OF SECURITIES

                             SECTION 13.1 PURPOSES FOR WHICH MEETINGS MAY BE
CALLED. A meeting of Holders of Securities of any series may be called at any
time and from time to time pursuant to this Article to make, give or take any


                                       43

<PAGE>   51



request, demand, authorization, direction, notice, consent, waiver or other act
provided by this Indenture to be made, given or taken by Holders of Securities
of such series.

                             SECTION 13.2 CALL, NOTICE AND PLACE OF MEETINGS.

                             (a) The Trustee may at any time call a meeting of
Holders of Securities of any series for any purpose specified in Section 13.1,
to be held at such time and such place in the Borough of Manhattan, New York,
New York, or, if securities of such series were issued as Unregistered
Securities, in London, as the Trustee shall determine. Notice of every meeting
of Holders of Securities of any series, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be given, not less than 21 or more than 180 days prior to the
date fixed for the meeting.

                             (b) In case at any time the Issuer, or the Holders
of at least 10% in principal amount of the Outstanding Securities of any series
shall have requested the Trustee to call a meeting of the Holders of Securities
of such series for any purpose specified in Section 13.1, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have made the first publication of the notice
of such meeting within 21 days after receipt of such request or shall not
thereafter proceed to cause the meeting to be held as provided herein, then the
Issuer or the Holders of Securities of such series in the amount above
specified, as the case may be, may determine the time and the place in the
Borough of Manhattan, New York, New York, or in London for such meeting and may
call such meeting for such purposes by giving notice thereof as provided in
subsection (a) of this Section.

                             SECTION 13.3 PERSONS ENTITLED TO VOTE AT MEETINGS.
To be entitled to vote at any meeting of Holders of Securities of any series, a
Person shall be (1) a Holder of one or more Outstanding Securities of such
series, or (2) a Person appointed by an instrument in writing as proxy for a
Holder or Holders of one or more Outstanding Securities of such series by such
Holder or Holders. The only Persons who shall be entitled to be present or to
speak at any meeting of Holders of Securities of any series shall be Persons
entitled to vote at such meeting and their counsel, any representatives of the
Trustee and its counsel and any representatives of the Issuer and its counsel.

                             SECTION 13.4 QUORUM; ACTION. The Persons entitled
to vote a majority in principal amount of the Outstanding Securities of a series
shall constitute a quorum for a meeting of Holders of Securities of such series;
PROVIDED, HOWEVER, that if any action is to be taken at such meeting with
respect to a consent or waiver which this Indenture expressly provides may be
given by the Holders of not less than 66 2/3% in principal amount of the
Outstanding Securities of a series, the Persons entitled to vote 66 2/3% in
principal amount of the Outstanding Securities of such series shall constitute a
quorum. In the absence of a quorum within 30 minutes of the time appointed for
any such meeting, the meeting shall, if convened at the request of Holders of
Securities of such series, be dissolved. In the absence of a quorum in any other
case, the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10 days
as determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 13.2(a), except that such notice need be given only
once not less than five days prior to the date on which the meeting shall state
expressly the percentage, as provided above, of the principal amount of the
Outstanding Securities of such series that shall constitute a quorum. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage, as
provided above, of the principal amount of the Outstanding Securities of such
series which shall constitute a quorum.

                             Except as limited by the proviso to Section 8.2,
any resolution presented to a meeting or adjourned meeting duly reconvened at
which a quorum is present as aforesaid may be adopted only by the affirmative
vote of the Holders of a majority in principal amount of the Outstanding
Securities of that series; PROVIDED, HOWEVER, that if any action is to be taken
at such meeting with respect to a consent or waiver which this Indenture
expressly provides may be given by the Holders of not less than 66 2/3% in
principal amount of the Outstanding Securities of a series may be adopted at a
meeting or an adjourned meeting duly reconvened and at which a quorum is present
as aforesaid only by the affirmative vote of Holders of 66 2/3% in principal
amount of the Outstanding Securities of that series; and PROVIDED, HOWEVER,
that, except as limited by the proviso in Section 8.2, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other act which this Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage, which is less than a majority
in principal amount of the Outstanding


                                       44

<PAGE>   52



Securities of a series may be adopted at a meeting or an adjourned meeting duly
reconvened and at which a quorum is present as aforesaid by the affirmative vote
of the Holders of such specified percentage in principal amount of the
Outstanding Securities of that series.

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

                             SECTION 13.5 DETERMINATION OF VOTING RIGHTS;
CONDUCT AND ADJOURNMENT OF MEETINGS.

                             (a) Notwithstanding any other provision of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders of Securities of any series in regard to
proof of the holding of Securities of such series and of the appointment of
proxies and in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of the
right to vote, and such other matters concerning the conduct of the meeting as
it shall deem appropriate. Except as otherwise permitted or required by any such
regulations, the holding of Securities shall be proved in the manner specified
in Section 7.1 and the appointment of any proxy shall be proved in the manner
specified in Section 7.1 or, in the case of Unregistered Securities, by having
the signature of the person executing the proxy witnessed or guaranteed by any
trust company, bank or banker authorized by Section 7.1 to certify to the
holding of Unregistered Securities. Such regulations may provide that written
instrument appointing proxies, regular on their face, may be presumed said and
genuine without the proof specified in Section 7.1 or other proof.

                             (b) The Trustee shall, by an instrument in writing,
appoint a temporary chairman of the meeting, unless the meeting shall have been
called by the Issuer or by Holders of Securities as provided in Section 13.2, in
which case the Issuer or the Holders of Securities of the series calling the
meeting, as the case may be, shall in like manner appoint a temporary chairman.
A permanent chairman and a permanent secretary of the meeting shall be elected
by vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.

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

                             (d) Any meeting of Holders of Securities of any
series duly called pursuant to Section 13.2 at which a quorum is present may be
adjourned from time to time by Persons entitled to vote a majority in principal
amount of the Outstanding Securities of such series represented at the meeting;
and the meeting may be held as so adjourned without further notice.

                             SECTION 13.6 COUNTING VOTES AND RECORDING ACTION OF
MEETINGS. The vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or of
their representatives by proxy and the principal amounts and serial numbers of
the Outstanding Securities of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in triplicate of all votes cast at the meeting. A record, at least in
triplicate, of the proceedings of each meeting of Holders of Securities of any
series shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 13.2 and, if
applicable, Section 13.4. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Issuer, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.



                                       45

<PAGE>   53



                             IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed all as of the date first written above.


                                       THE TIMKEN COMPANY




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

                              Title:



                         THE BANK OF NEW YORK, TRUSTEE




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

                              Title:



                                       46

<PAGE>   54




REGISTERED
NO. FXR                                                                Exhibit A
                                                                       ---------



                             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 Depository 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.



<TABLE>
<CAPTION>
=================================== ====================================== ========================================== ==============
Original Issue Date:                Initial Redemption Date:               Interest Rate:                             Maturity
                                                                                                                      Date:

<S>                                 <C>                                    <C>                                        <C>
=================================== ====================================== ========================================== ==============
Interest Accrual                    Initial Redemption                     Interest Payment Dates:
Date:                               Percentage:                               February 15
                                                                              August 15

=================================== ====================================== ========================================== ==============
Total Amount of OID:                Annual Redemption                      Applicability of Modified                  Specified
                                    Percentage Reduction:                  Payment Upon Acceleration:                 Currency:

=================================== ====================================== ========================================== ==============
Original Yield To Maturity:         Optional Repayment                     If yes, state Issue Price:
                                    Date(s):
=================================== ====================================== ========================================== ==============
Initial Accrual Period OID:

=================================== ====================================== ========================================== ==============
</TABLE>



<PAGE>   55

                                                                               2


TRUSTEE'S CERTIFICATE
OF AUTHENTICATION


This is one of the Notes referred 
to in the within-mentioned Indenture.



THE BANK OF NEW YORK,
    as Trustee



BY:
   -------------------------
     Authorized Signatory




<PAGE>   56


                                                                              3

                               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, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which banking institutions are authorized or required by
law or regulation to close in The City of New York and (i) if this Note is
denominated in a Specified Currency other than U.S. dollars or European Currency
Units ("ECUs"), is also a business day in the principal financial center of the
country of the Specified Currency and (ii) if this Note is denominated in ECUs,
that is an ECU clearing day, as determined by the ECU Banking Association in
Paris.

                             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


<PAGE>   57


                                                                               4

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.



                         THE TIMKEN COMPANY


[SEAL]

                         By:
                            -----------------------------
                         Name: Gene E. Little

                         Title: Senior Vice President - Finance



<PAGE>   58


                                                                               5

                             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 February __, 1998 (the "Indenture") between the Issuer
and The Bank of New York, as Trustee (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 Optional 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
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 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.



<PAGE>   59


                                                                               6

                             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



<PAGE>   60


                                                                               7

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 defaced, 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
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, (b) if an Event of Default due to the default in the performance of
any other covenant or agreement contained in the Indenture applicable to all
Outstanding Securities shall have occurred and be continuing, either the
Trustee or the Holders of 25% in principal amount of the Outstanding Securities
(treated as one class) may declare the principal (or, if the Securities are 
Original Discount Securities, such portion of the principal amount as may be 
specified in the terms of such series) of all Securities and interest accrued 
thereon to be due and payable immediately and (c) if an Event of Default due to
certain events of bankruptcy, insolvency or reorganization of the Issuer shall 
have occurred and be continuing, then the principal of all such Securities and 
interest accrued thereon shall become due and payable immediately. 

                             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



<PAGE>   61


                                                                               8

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.



<PAGE>   62


                                                                               9

                             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, without
regard to conflicts of law principles.

                             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.



<PAGE>   63


                                                                              10

                                  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 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.


<PAGE>   64


                                                                              11

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.



<PAGE>   65


                                                                              12

                            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)





Signature Guarantee:
- --------------------



<PAGE>   66




                                                                       EXHIBIT B
                                                                       ---------




                           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.



<TABLE>
<CAPTION>
================================  =============================================  =======================================
BASE RATE:                        ORIGINAL ISSUE DATE:                           MATURITY DATE:
<S>                               <C>                                            <C>
- --------------------------------  ---------------------------------------------  ---------------------------------------
INDEX MATURITY:                   INTEREST ACCRUAL DATE:                         INTEREST PAYMENT PERIOD:
- --------------------------------  ---------------------------------------------  ---------------------------------------
SPREAD (PLUS OR                   INITIAL INTEREST RATE:                         INTEREST PAYMENT DATE(S):
MINUS):
- --------------------------------  ---------------------------------------------  ---------------------------------------
ALTERNATE RATE                    INITIAL INTEREST RESET DATE:                   INTEREST RESET PERIOD:
EVENT SPREAD:
- --------------------------------  ---------------------------------------------  ---------------------------------------
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:
================================  =============================================  =======================================
</TABLE>

TRUSTEE'S CERTIFICATE


<PAGE>   67


                                        2


OF AUTHENTICATION

         This is one of the Notes referred to in the 
within-mentioned Indenture.

The Bank of New York,
as Trustee


By
  --------------------------------------
         Authorized Signatory





<PAGE>   68


                                                                               3

                               THE TIMKEN COMPANY
                         Medium-Term Floating 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, 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.



<PAGE>   69


                                                                               4

                  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.


                                         THE TIMKEN COMPANY

[SEAL]
                                         By:
                                            ---------------------------------
                                         Name: Gene E. Little
                                         Title: Senior Vice President - Finance


<PAGE>   70


                                                                               5

                  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 February __, 1998 (the "Indenture") between the Issuer and The Bank
of New York, as Trustee (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 Optional 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 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 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,


<PAGE>   71


                                                                               6

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, other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New York and
(i) if this Note bears interest calculated by reference to LIBOR that is also a
London Banking Day, (ii) if this Note is denominated in a Specified Currency
other than U.S. dollars or European Currency Units ("ECUs"), is also a business
day in the principal financial center of the country of the Specified Currency
and (iii) if this Note is denominated in ECUs, that is an ECU clearing day, as
determined by the ECU Banking Association in Paris.

                  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.



<PAGE>   72


                                                                               7

                  The "Calculation Date" pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date or if such day is not a Business Day, the next
succeeding Business Day, or (ii) the Business Day preceding the applicable
Interest Payment Date or Maturity Date, as the case may be.

                  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 an amount that is representative for a single
transaction at that time 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; PROVIDED, HOWEVER, that if the dealers selected as aforesaid
by the Calculation Agent are not quoting as mentioned in this sentence, the CD
Rate 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
caption "Commercial Paper-Nonfinancial," 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 caption "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



<PAGE>   73


                                                                               8

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 prior to 9:00 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 Federal Funds Rate 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


<PAGE>   74


                                                                               9

                  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.



<PAGE>   75


                                                                              10

                  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


<PAGE>   76


                                                                              11

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).



<PAGE>   77


                                                                              12

                  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


<PAGE>   78


                                                                              13

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 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, (b) if an
Event of Default due to the default in the performance of any other covenant or
agreement contained in the Indenture applicable to all Outstanding Securities
shall have occurred and be continuing, either the Trustee or the Holders of 25%
in principal amount of the Outstanding Securities (treated as one class) may 
declare the principal (or, if the Securities are Original Discount Securities, 
such portion of the principal amount as may be specified in the terms of such 
series) of all Securities and interest accrued thereon to be due and payable 
immediately and (c) if an Event of Default due to certain events of bankruptcy,
insolvency or reorganization of the Issuer, shall have occurred and be 
continuing then the principal of all such Securities and interest accrued 
thereon shall become due and payable immediately. 

                  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.


<PAGE>   79


                                                                              14

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


<PAGE>   80


                                                                              15

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, without regard to
conflicts of law principles.

                  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.


<PAGE>   81


                                                                              16

                                  ABBREVIATIONS

                  The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:

                  TEN COM-as tenants in common 

                  TEN ENT-as tenants by the entireties

                  JT TEN-as joint tenants with right of survivorship
                         and not as tenants in common

                  UNIF GIFT MIN ACT - ...........Custodian.............
                                          (Cust)              (Minor)

                  Under Uniform Gifts to Minors Act ...................
                                                           (State)

                  Additional abbreviations may also be used though not in the
above list.

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

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto

[PLEASE INSERT SOCIAL SECURITY OR OTHER
         IDENTIFYING NUMBER OF ASSIGNEE]

                                            !
- --------------------------------------------
                                            !
                                            !
- --------------------------------------------------------------------------------

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

[PLEASE PRINT OR TYPE NAME AND ADDRESS INCLUDING ZIP CODE,
         OF ASSIGNEE]


- --------------------------------------------------------------------------------
the within 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:
      -------------------


<PAGE>   82


                                                                              17

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.




<PAGE>   83


                                                                              18

                            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)



Signature Guarantee:
- --------------------




<PAGE>   1




                                                                     Exhibit 5.1





                                February 9, 1998




The Timken Company
1835 Dueber Avenue, S.W.
Canton, Ohio  44706-2798

                  Re:      $300,000,000 Aggregate Amount of Senior Debt
                           Securities of the Timken Company
                           --------------------------------------------

Gentlemen:

                  We are acting as counsel for The Timken Company, an Ohio
corporation (the "Company"), in connection with the creation and authorization
of the issuance and sale of up to $300,000,000 aggregate amount of Senior Debt
Securities (the "Securities"), to be issued pursuant to an Indenture (the
"Indenture") to be entered into between the Company and The Bank of New York, as
Trustee (the "Trustee").

                  We have examined such documents, records and matters of law as
we have deemed necessary for purposes of this opinion, and based thereupon, but
subject to the assumptions and qualifications set forth below, we are of the
opinion that:

                  1. The Indenture, when duly executed and delivered by the
Company and the Trustee, will constitute a valid and binding instrument of the
Company.

                  2. The Securities have been duly authorized and, when duly
executed, authenticated and delivered to and paid for by the purchasers thereof
in accordance with the terms of such Securities and the Indenture, will be valid
and binding obligations of the Company and will be entitled to the benefits of
the Indenture.

                  In rendering the foregoing opinions we have also assumed that
(i) the definitive information, including, without limitation, the definitive
terms of the Securities, remaining to be completed in the form of Indenture
relating to the Securities as filed as Exhibit 4.10 to the Registration
Statement filed by the Company to effect registration of the Securities under
the Securities Act of 1933 (the "Registration Statement"), will be so completed
and the Indenture and Securities will be duly authorized by the Board of
Directors of the Company or its designee in such form with such completions, and
(ii) the Distribution Agreement will be executed and delivered by the Company
and the Underwriters in substantially the form filed as Exhibit 1.1 to the
Registration Statement.

                  We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement on Form S-3 filed by the Company to effect
registration of the Securities under the


<PAGE>   2


The Timken Company
Page 2
February 9, 1998



Securities Act of 1933 and to the reference to us under the caption "Legal
Matters" in the Prospectus constituting a part of such Registration Statement.


                                   Very truly yours,

                                   /s/ Jones, Day, Reavis & Pogue

                                   Jones, Day, Reavis & Pogue




<PAGE>   1



                                                                    Exhibit 12.1

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES





<TABLE>
<CAPTION>
                                              NINE MONTH
                                             PERIOD ENDED
                                               SEPTEMBER                         Year Ended December 31
                                        --------------------- ------------------------------------------------------------

                                           1997       1996       1996         1995        1994        1993         1992
                                        ----------------------------------------------------------------------------------
                                                                     (Dollars in Thousands)


<S>                                     <C>         <C>         <C>         <C>         <C>         <C>          <C>     
Income (loss) before income taxes,
   extraordinary item and cumulative
   effect of accounting changes         $194,943    $163,782    $225,259    $180,174    $111,323    $(20,919)    $ 13,431
Amortization of capitalized interest       1,643       1,496       1,999       2,013       1,693       2,014        1,900
Interest expense                          16,295      12,406      17,899      19,813      24,872      29,619       28,660
Interest portion of rental expense         1,966       1,888       2,627       2,934       2,355       2,107        2,513
                                        ----------------------------------------------------------------------------------

Earnings                                $214,847    $179,572    $247,784    $204,934    $140,243    $ 12,821     $ 46,504
                                        ==================================================================================

Interest                                $ 17,499    $ 13,799    $ 19,700    $ 21,713    $ 28,017    $ 31,319     $ 30,889
Interest portion of rental expense         1,966       1,888       2,627       2,934       2,355       2,107        2,513
                                        ----------------------------------------------------------------------------------

Fixed charges                           $ 19,465    $ 15,687    $ 22,327    $ 24,647    $ 30,372    $ 33,426     $ 33,402
                                        ==================================================================================

Ratio of earnings to fixed charges         11.04       11.45       11.10        8.31        4.62         .38         1.39
                                        ==================================================================================
</TABLE>



<PAGE>   1



                                                                    Exhibit 23.1












                         Consent of Independent Auditors


We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333-xxxxx) and related Prospectus of The
Timken Company for the registration of $300,000,000 of Medium-Term Notes, Series
A and to the incorporation by reference therein of our report dated February 6,
1997, with respect to the consolidated financial statements and schedule of The
Timken Company included in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.




                                                           /s/ ERNST & YOUNG LLP



Canton, Ohio
February 4, 1998




<PAGE>   1
                                                                    Exhibit 24.1


                            DIRECTORS AND OFFICERS OF
                               THE TIMKEN COMPANY

                             REGISTRATION STATEMENT

                                POWER OF ATTORNEY

         The undersigned directors and officers of The Timken Company ("Timken")
hereby constitute and appoint W. R. Timken, Jr., Joseph F. Toot, Jr., Larry R.
Brown, Gene E. Little and Lyle G. Ganske, or any of them, with full power of
substitution and resubstitution, as attorneys or attorney of the undersigned, to
sign and file under the Securities Act of 1933, as amended, a Registration
Statement on Form S-3 or any other appropriate form relating to the registration
of debt securities of Timken of up to $300,000,000 aggregate principal amount
(or its equivalent if other than in U.S. currency), and any and all amendments
and exhibits thereto, including post-effective amendments, and any and all
applications or other documents to be filed with the Securities and Exchange
Commission pertaining to such registration, with full power and authority to do
and perform any and all acts and things whatsoever required and necessary to be
done in the premises, hereby ratifying and approving the acts of said attorneys
and any of them and any such substitute.

         EXECUTED THIS 7 day of November, 1997.


<TABLE>
<S>                                          <C>                                         <C>
 /s/ W. R. Timken, Jr.                        /s/ Gene E. Little                          /s/ Martin D. Walker
- -------------------------------------------  ------------------------------------------  ---------------------
W. R. Timken, Jr., Director and              Gene E. Little, Senior Vice President -     Martin D. Walker, Director
Chairman, President and Chief                Finance and Treasurer
Executive Officer

 /s/ Joseph F. Toot, Jr.                      /s/ Robert W. Mahoney                       /s/ Charles H. West
- -------------------------------------------  ------------------------------------------  ---------------------
Joseph F. Toot, Jr., Director                Robert W. Mahoney, Director                 Charles H. West, Director

 /s/ Robert Anderson                          /s/ Jay A. Precourt                         /s/ Alton W. Whitehouse
- -------------------------------------------  ------------------------------------------  ---------------------
Robert Anderson, Director                    Jay A. Precourt, Director                   Alton W. Whitehouse, Director

 /s/ Stanley C. Gault                         /s/ John M. Timken, Jr.
- -------------------------------------------  ------------------------------------------
Stanley C. Gault, Director                   John M. Timken, Jr., Director

 /s/ J. Clayburn La Force, Jr.                /s/ Ward J. Timken
- -------------------------------------------  ------------------------------------------
J. Clayburn La Force, Jr., Director          Ward J. Timken, Director and Vice
                                             President
</TABLE>



<PAGE>   1



                                                                    Exhibit 25.1

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


                                    FORM T-1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

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

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

                              THE BANK OF NEW YORK
               (Exact name of trustee as specified in its charter)


New York                                                13-5160382
(State of incorporation                                 (I.R.S. employer
if not a U.S. national bank)                            identification no.)

48 Wall Street, New York, N.Y.                          10286
(Address of principal executive offices)                (Zip code)


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


                               THE TIMKEN COMPANY
               (Exact name of obligor 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
(Address of principal executive offices)                (Zip code)

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

                                 Debt Securities
                       (Title of the indenture securities)


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



<PAGE>   2





1.       GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE 
         TRUSTEE:

         (a)      NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
                  WHICH IT IS SUBJECT.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                  Name                                                                  Address
- ------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                     <C>
         Superintendent of Banks of the State of                                        2 Rector Street, New York,
         New York                                                                       N.Y.  10006, and Albany,
                                                                                        N.Y. 12203

         Federal Reserve Bank of New York                                               33 Liberty Plaza, New
                                                                                        York, N.Y.  10045

         Federal Deposit Insurance Corporation                                          Washington, D.C.  20429

         New York Clearing House Association                                            New York, N.Y.   10005
</TABLE>

         (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

         Yes.

2.       AFFILIATIONS WITH OBLIGOR.

         IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
         AFFILIATION.

         None.

16.      LIST OF EXHIBITS.

         EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
         ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
         RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
         C.F.R. 229.10(d).

         1.       A copy of the Organization Certificate of The Bank of New York
                  (formerly Irving Trust Company) as now in effect, which
                  contains the authority to commence business and a grant of
                  powers to exercise corporate trust powers. (Exhibit 1 to
                  Amendment No. 1 to Form T-1 filed with Registration Statement
                  No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
                  Registration Statement No. 33- 21672 and Exhibit 1 to Form T-1
                  filed with Registration Statement No. 33-29637.)

         4.       A copy of the existing By-laws of the Trustee. (Exhibit 4 to
                  Form T-1 filed with Registration Statement No. 33-31019.)

         6.       The consent of the Trustee required by Section 321(b) of the 
                  Act.  (Exhibit 6 to Form T-1 filed with Registration Statement
                  No. 33-44051.)

         7.       A copy of the latest report of condition of the Trustee
                  published pursuant to law or to the requirements of its
                  supervising or examining authority.


                                       -2-

<PAGE>   3





                                    SIGNATURE



         Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 2nd day of February, 1998.


                                          THE BANK OF NEW YORK



                                          By:     /S/VAN K. BROWN
                                              ---------------------------------
                                              Name:  VAN K. BROWN
                                              Title: ASSISTANT VICE PRESIDENT



                                       -3-

<PAGE>   4



                                                                       Exhibit 7

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


                       Consolidated Report of Condition of

                              THE BANK OF NEW YORK

                     of 48 Wall Street, New York, N.Y. 10286
                     And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.

<TABLE>
<CAPTION>
                                                              Dollar Amounts
ASSETS                                                          in Thousands
<S>                                                              <C>
Cash and balances due from depos-
  itory institutions:
  Noninterest-bearing balances and
  currency and coin ..................                           $ 5,004,638

  Interest-bearing balances ..........                             1,271,514
Securities:
  Held-to-maturity securities ........                             1,105,782
  Available-for-sale securities ......                             3,164,271
Federal funds sold and Securities pur-
chased under agreements to resell......                            5,723,829
Loans and lease financing
  receivables:
  Loans and leases, net of unearned
    income .................34,916,196
  LESS: Allowance for loan and
    lease losses ..............581,177
  LESS: Allocated transfer risk
    reserve........................429
    Loans and leases, net of unearned
    income, allowance, and reserve                                34,334,590
Assets held in trading accounts ......                             2,035,284
Premises and fixed assets (including
  capitalized leases) ................                               671,664
Other real estate owned ..............                                13,306
Investments in unconsolidated
  subsidiaries and associated
  companies ..........................                               210,685
Customers' liability to this bank on
  acceptances outstanding ............                             1,463,446
Intangible assets ....................                               753,190
Other assets .........................                             1,784,796
                                                                 -----------
Total assets .........................                           $57,536,995
                                                                 ===========

LIABILITIES
Deposits:
  In domestic offices ................                           $27,270,824
  Noninterest-bearing ......12,160,977
  Interest-bearing .........15,109,847
  In foreign offices, Edge and
  Agreement subsidiaries, and IBFs ...                            14,687,806
  Noninterest-bearing .........657,479
  Interest-bearing .........14,030,327
Federal funds purchased and Securities
  sold under agreements to repurchase.                             1,946,099
</TABLE>


<PAGE>   5




<TABLE>
<S>                                                              <C>
Demand notes issued to the U.S.
  Treasury ...........................                               283,793
Trading liabilities ..................                             1,553,539
Other borrowed money:
  With remaining maturity of one year
    or less ..........................                             2,245,014
  With remaining maturity of more than
one year through three years..........                                     0
  With remaining maturity of more than
    three years .........................                             45,664
Bank's liability on acceptances exe-
  cuted and outstanding ..............                             1,473,588
Subordinated notes and debentures ....                             1,018,940
Other liabilities ....................                             2,193,031
                                                                 -----------
Total liabilities ....................                            52,718,298
                                                                 -----------

EQUITY CAPITAL
Common stock ........................                              1,135,284
Surplus .............................                                731,319
Undivided profits and capital
  reserves ..........................                              2,943,008
Net unrealized holding gains
  (losses) on available-for-sale
  securities ........................                                 25,428
Cumulative foreign currency transla-
  tion adjustments ..................                           (    16,342)
                                                                ------------
Total equity capital ................                              4,818,697
                                                                 -----------
Total liabilities and equity
  capital ...........................                            $57,536,995
                                                                 ===========
</TABLE>


      I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.

                                                            Robert E. Keilman

      We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.

                                    -
         J. Carter Bacot            |
         Thomas A. Renyi            |
         Alan R. Griffith           |     Directors
                                    -

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




© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission